Entering a new market may sound simple. Bring over your processes and adapt to the language. Unfortunately, it’s not that simple. Last week we explored the keys to ensuring speed and precision. There is a fine balance between the two and both are needed if companies want to succeed in the long-run. If you missed this blog be sure to check it out.But how do companies know how much local adaption is needed?
It sounds very simple and straight forward when you think about it, but the key to determining the right amount of local adaption is immersing yourself in the culture of the foreign market you plan on entering. Market studies are wonderful and online databases might offer a plethora of information, but some things are simply not understood until experienced. Cultural barriers need to be understood by management if a successful foreign direct investment is to be established.
To help with localization, companies might want to consider investing in locally sourced and managed goods. For example, in Turkey payment issues make purchasing items over the Internet difficult for the average consumer. In this case, a joint venture with a locally managed website could be essential for success. Not only can regulations and payment issues be a problem but many times in emerging countries customers don’t go into stores like in the west. For example, in Africa the streets are filled with street sellers. The only way to gain market share in this region is to adapt and sell on the streets as well. For example, it would be more beneficial for a paint seller to set up these street vendors across a city then set-up one shop.
Another thing to consider is to scale expensive and complex products down where possible. Many times western companies enter into foreign markets with the exact same products they sell in the west. They fail to recognize many times customers in emerging markets can’t afford the product and sometimes don’t even need all of the features. For example, Siemens saw a large demand for medical equipment in the rural areas of china. However, they knew their products where way too expensive for the region. In response, they created a smaller version of the product with less features and greatly reduced the price. This proved to be a success and both the Chinese customers and Siemens benefited immensely.
In some market cultural barriers will be vast. The key is to educate yourself about the cultural differences and to understand how business works in these foreign markets. With this know-how companies will be able to determine which processes need to be adapted to local preferences and requirements.
Have you entered an emerging market? What have you done to adapt to the local business climate?
Check back next week when we will explore IT Strategy in emerging markets.
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