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Going Global

 

'Almost everyone everywhere wants all the things they have heard about, seen, or experienced via the new technologies. The result is a new commercial reality—the emergence of global markets for standardized consumer products on a previously unimagined scale of magnitude'.

Over thirty years ago Harvard’s Theodore Levitt wrote this still very relevant sentence about the global expansion and demand for products worldwide.When it comes to building a global empire there is no 'one size fits all' policy that works

 

Gone are the days of the Multi National Corporations, where  firms operated in countries other than their home turf by adjusting products, practices and prices at high relative costs. With the huge changes in the global landscape Global Corporations have almost replaced the Multi National attitude, they are acting like a single entity with absolute constancy worldwide with their products/services being the exact same in all their markets.

Way back in the past Ford made this mistake for decades together, they tailored model names, manufacturing platforms and features to each country/market they operated in. This only aggravated the cost of supply chain and manufacturing which led to a huge overhead and steep increase in prices which obviously kept most potential buyers at bay. This led to a void the Japanese giant Toyota quickly filled out by pricing their automobiles optimally without compromising on any of the bells and whistles.

 

The newer crop of firms are moving away from the traditional approach of emphasising on making customized items for other markets to building globally standardized products that are fully loaded, reliable and priced as low as possible. People from various cultural preferences, standards and tastes have evolved. Inheritances have transcended into mainstream global preferences. Hyderabadi Biryani, Chinese food, pizza, rock music are everywhere. This only confirms global homogenization.

To put it simply if a company strives to cut down costs and prices while simultaneously ensuring reliable products of higher quality consumers will flock to buy their stock. National  and regional tastes and preferences have become vestiges of the past. Henry Ford steered his policies to accommodate the new world with the Model T to adapt to the quickly evolving global landscape.

 

Huge Firms don’t necessarily operate the exact same way across all their markets, or

standardize everything they produce. They often build multiple product lines in addition to their signature classics and create numerous distribution channels. This does not contradict homogenization , it only means that two market segments in different regions are fairly different. Many firms have failed miserably when they attempted to standardize their practice worldwide because they tried to export local products without accommodating change.

 

A few examples of global expansion gone wrong are:

 

 

Best Buy, China

The famous American electronics giant Best buy entered the Chinese market in 2006. They launched nine stores till 2011 when five years after entering the market space they decided to leave as it had failed to make any profit from the expansion,  it could not retain the country with the largest population on earth.

Best Buy was not equipped to face the competition in China. Chinese electronics companies such as GOME Electronics and local retailers gave them a run for their money.

Local retailers offered the same products Best Buy offered for lower prices because their running cost of business was low , they operated out of small shops in areas that did not even have car parking. Majority of the populace in China still commutes by foot, by public transport or on bikes. Best Buy missed out on a lot of consumers to these conveniently located retailers who sold significantly discounted products.

 

 

Target, Canada

When it tried to enter Canada. In 2011, Target bought 124 stores from a chain called Zellers and converted them to Target, they were hoping to start seeing profits as early as 2013 but not doing enough Market Research hurt them badly.

Within two years, Target had to shut its doors and leave after a huge loss of $4 billion USD. The biggest problem with acquiring Zellers was of locations, a majority of them were in shopping centers not conveniently accessible to the people target was targeted for . A few of the Zellers locations were in older and not so popular shopping centers which did not get a lot of traffic, others was too far from housing communities and consumers had to drive for miles in icy conditions .

 

 

Tesco, USA

The hugely popular British grocery store Tesco tried to expand westwards under the banner of “Fresh and Easy” in 2007 but it had to quit trying after six years from its inception as it never turned in any profits whatsoever.

One of the major reasons given was that it chose the worst time possible to venture out as it entered the American markets during one of the biggest recessions ever known to man in 2007-2008.  It has costed the company a loss of 1.2 billion pounds.

 

You should avoid most of these common mistake a lot of firms commit before venturing out onto foreign lands.

 

  • Avoid impulsive decisions. Conquering foreign markets needs to be well calculated and the move should be made at the right time and right place. Scrutinize all the pros and cons of any new market and understand where it can prosper and which markets are aware of it and will be willing to use the product/ service. Enough Research needs to be done about where they will manufacture , sell or operate out of , these are the key factors to determine success or failure for any upcoming products/services like in the case of Target,Canada

  • Never have Unrealistic Assumptions that the product needs zero revamping and can be sold/consumed as is. Enough ground work needs to be done before entering foreign soil , cultural differences should be accounted for  before your product/service is released out into the country and your product/service needs to be slightly tweaked to fit through the door.

  • Try and be as nimble as possible. International markets are hard enough already, if you are too rigid to accommodate the firm you are partnering with, it is not going to be a loss you can recover from. Sometimes it is more profitable to Acquire or Merge with a local firm which has enough infrastructure to support the business.

  • Do not fail to estimate the local competition. Like in the case of Best Buy, China where pop-up stores were flexible and operated on lower costs to offer a better deal on the products for consumers and were easily accessible for pedestrians and bikers.

 

Facebook, Uber, Airbnb, Amazon, Alibaba, Snapchat on the other hand are prime examples of successful global ventures as depicted below.

 

 

It’s interesting to note that all the current crop of ‘big ideas’ / firms are services or platforms that have minimal to no infrastructure and they act as matchmaking service for buyers and sellers.  Alibaba and Amazon started off as nothing more than a place for people/ suppliers/Merchants to catalogue their stuff and buyers could pick from all the choices. Since it’s inception Amazon has never looked back and under Jeff Bezos’ leadership, it has catapulted to become one of the most reliable platforms where consumers are the top priority. It has now ventured into newer areas like cloud services , content creation , manufacturing and selling gadgets. It has been successful on all these fronts making it a true pioneer.

 

Airbnb is another example of a listing service that went global. The business model was ingenious. People could provide homestays and make money on otherwise vacant  vacation rentals. This was not groundbreakingly new but the product team marketed it into international waters very successfully. It could integrate places from around the world under one umbrella just like Amazon did.

 

Uber had a slightly different approach to things. It solved a major inconvenience to commuters- the cab services which had absolute monopoly in cities with minimal public transport - and provided reliable, trackable, digitally payable ride services which can be booked with a single tap on your smart device saving precious time you you spent earlier to even find a cab. It simultaneously allowed anyone to run their own car as an Uber at their convenience to make extra money, making it such that it’s only investment for running a ‘cab’ service was the software. For a ride service that single-handedly crumbled it’s competitor-the taxicab services- it has zero cabs of it’s own, the only investment being the software to match riders and passengers and handling payments on the app. Eight years after it was founded, it is valued at 69 billion USD.

Uber identified a long existing problem with transport and revolutionized the world of paid transport so much, so quickly that it has been promoted as a common noun now. For e.g. I will uber to you, Can you uber to the Great Lakes.

 

Sure it’s plagued by problems now, post all the #DeleteUber movement it definitely took a hit but it’s too big to fail and it checks both the boxes of the Technology acceptance model of Perceived Usefulness and Perceived Ease of Use. Uber’s global reign can only be proven by numbers, spanning across 79 countries, a staggering 40 million riders worldwide and a seemingly infinite pool of users. Uber is integrated into 32 languages- and counting, this number might not be current too. The first billion rides took 6 years but it’s second billion rides took only 6 months. Andrew Chen, head of supply growth at Uber analyzes the almost overnight growth of Uber in this diagram on his blog. The term he uses is geographic density. Bill Gurley (Benchmark Capital and on Uber’s board) explains that ‘Each marketplace is 2-sided, with riders and drivers, has its own network effects driven by pickup times, coverage density, and utilization’.

 

What Uber did right was:

 

1. Strategically plan localization specific to a market and integrated it with their own       timelines:

By choosing which countries went first and optimize the order with it’s own resources(this will make more sense when you see the timeline of Uber posted after). They designed a rubric for how this works and divided it into three tiers and put all countries into one of these categories. Major factors to make these decisions were based on population, literacy rate and internet accessibility.

 

 2. Have code/ software ready for internationalization:

Like running translations,Foreign Payment Systems set up like figuring out how the banking terrain is different than how it works back in America, building a sustainable ecosystem for the localization and formatting content to fit local protocols

 

3. Prioritize high-quality visually coherent design which is easy to use that solves commute problems for all local markets and build trust at the local level:

They had built mood boards for four cities at the time of their launches and working towards adding more.

 

 

 

 

Here is a Initial timeline of Uber from its inception

 

 

By 2017 it had expanded into many more continents and cities and another Series E funding for $1.2 Billion USD. It also expanded to provide other services apart from ride-sharing services like food delivery etc within America and it also provides more options for ridesharing based on market/country. For e.g. in India it has ride options on a bike, in Dubai it offers more elitist options like Uber Chopper , this service is available mostly sporadically though.

 

To make any business a thriving global business Uber is a good case study. Going global is not as easy as it sounds there can be a lot of complexities involved and each country is almost like rethinking the way you do business again, it can be a daunting task to reinvent the wheel if the whole roadmap is not clearly defined from the get-go

  1. As a leader of your startup, you must encourage ideas from all corners of the firm and decide on one and convince everyone to follow the vision and ensure that all of them truly believe in it.

  2. As they say the Fox knows things about everything but a Hedgehog knows everything about one thing. You should stay focussed on one major goal at a time and pursue it and execute it with utmost focus and perfection. Multi-tasking will only thin out your resources and cause too many distractions.

  3. Build team leadership and teams in the timeline of things, just enough resources to execute tasks, never underwork or overwork the work force. Resource Management is key. Bigger firms usually have hiring cycles and these are not based on project making it a huge burden on funds. Plan your resources around projects.

  4. With the dynamic market out there, Brands need to be revamped to suit the current demands. Uber did a major overhaul in 2016 it did face some backlash and they reworked everything back and fixed it according to popular demand. Conduct User Research often to understand and better the process/product/experience to tweak the business to utmost efficiency.

Before getting deep into foreign waters, always research your market and identify revenue streams- figure out if you want the business to come to you. This happens in cases where people are generally aware about your products/services. Or if there is no awareness about the product you might need to create it through conferences, cold calling and advertise vigorously.

For any business that wants to go global the trick is to start building it earlier than later and all decisions made need to be scalable wherever possible.

 

 

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