People in the West know instinctively that grocery store shelves in Italy are unlikely to hold the same items as the ones in France.
Yet why, asks Babak Hafezi, do they not apply the same instincts to the emerging world?
Companies fail when they naïvely attempt to thrust their brand and products on a new market with little if any adaptations or, worse, generalize a Spanish strategy for the entire Latin American market.
“I’ve seen too often the case of a big company not recognizing that there is actually a difference between Chile and Argentina when it comes to what customers want,” warns Hafezi, who is CEO of Hafezi Capital, a McLean, Virginia–based management consultancy that helps companies expand into emerging markets.
Even companies that understand those differences struggle with the issue of adaptation. What does it mean to adapt your product or service to a new market and how much is enough? Only with proper research can a company determine whether the adaptation requirements for a particular market will be worth the effort or investment.
Here are three ways to adapt for success when expanding into emerging markets.
Don’t just look at the numbers; immerse yourself. Companies must go further than data-based feasibility studies. Nuances emerge when executives take immersion trips. On a recent trip to a hotel in China, for example, a waiter showed up at Hafezi’s door to take a room service order. “That’s the Chinese definition of room service,” he recalls, “but if that happened in the United States, you’d say, why are you wasting my time? I could’ve placed this order over the phone!”
Consider locally sourced and locally managed goods. In Turkey, customs regulations and payment issues make purchasing items over the Internet difficult for the average consumer. Therefore, a joint venture with a website managed locally with locally sourced products that ship to the customer in a day will likely succeed where a foreign-based company won’t.
Scale expensive or complex products down. Price and complexity are directly related to the speed at which a new market adopts your products and services. A medical device maker with a $2 million product that sells well in the United States may need to scale the product down to sell at a lower price befitting a hospital in a developing country. Or, an e-commerce startup could simplify its app for a market where the Internet connection is slower and less reliable.
Above all, executives need a global mindset to truly understand and work well with people who are very different from them socially, culturally, and even politically. Says Joe Carella, managing director of executive education at Thunderbird School of Global Management in Arizona, “If there is any one-size-fits-all strategy for rapid and successful expansion, it’s that organizations need to understand and respond to local needs all the time.”
The SAP Center for Business Insight is a program that supports the discovery and development of new research-based thinking to address the challenges of business and technology executives.