Posted on : 2023-06-18 19:59:07
Article : Good morning, Monday Management Solution for TASK 246- In an international market, companies better take failures as a lesson in the importance of tailoring marketing planning to fit new consumers, their language and cultural terms.
Now understanding that many companies may fail in their global business expansion we continue to discuss in this part with some examples of companies that failed internationally due to a lack of social understanding and an in-depth breakdown of what really went wrong. Now understanding that many companies may fail in their global business expansion we continue to discuss in this part with some examples of companies that failed internationally due to a lack of social understanding and an in-depth breakdown of what really went wrong.
1. In 2018, Walmart brought in more than $500 billion in sales globally. Not surprisingly, 3/4 of those sales came from the U.S. But, overseas particularly in Japan things are not going so well for the American retail giant. Certain reports have shown that Walmart may be looking to exit Japan nearly 17 years after its initial expansion into the Japanese market. This expansion involved purchasing a minority stake in Seiyu - a Japanese grocery store in 2002, which then turned into a fully-owned subsidiary in 2008. Like Walmart, Seiyu uses the “Everyday Low Prices” mantra to market to their consumers.
Aeon, the top supermarket in Japan, owns 45% of the market share. Meanwhile, Walmart’s Seiyu sits at 12%. That may not sound terrible, but to put it into perspective and compare it to another U.S. supermarket Costco that has expanded into Japan with much more success. Costco only has 26 stores in Japan, but in 2017 they brought in just over $3 billion in revenue. Seiyu, on the other hand, has 331 locations and brought in $7.1 billion in revenue. So, what went wrong exactly? Well, the low-price strategy that both Walmart and Seiyu abide by is not nearly as effective in Japan as it is in the United States. While consumers in the U.S. appreciate the convenience of being able to find great deals at one central location, Japan consumers are not as concerned with this convenience, making it less of a differentiator in the Japanese market and often Japanese consumers associate low prices with cheap quality.
In addition to all of that, Japan’s retail market was already so congested with everything from stereotypical supermarket to online retailers and mom-and-pop shops by the time Walmart expanded into that region. Now, this doesn’t mean that the barriers to entry were impenetrable. It just means that to enter that market, you need to have a strong differentiator that was effective to the market. This was something that Costco did well, while Seiyu failed. Japanese consumers typically aren’t used to shopping in bulk, so going to Costco offers them a totally new shopping experience. Meanwhile, Seiyu was no different than any other supermarket that Japanese consumers were already familiar with. Last, Walmart also failed to recognize that Japanese consumers enjoy fresh, locally sourced food which is something Seiyu does not offer a lot of. It remains to be seen whether Walmart will be able to turn it around or if they’ll ultimately end up selling Seiyu. But, one thing is certain, the U.S. supermarket’s lack of understanding their consumers in Japan has set them pretty far back.
2.Starbucks from its humble roots in Seattle to becoming one of the largest coffee giants in the world, and the most successful coffee chains out there today. After its initial success in international markets, Starbucks decided to expand to Australia opening up their first shop in Sydney in 2000. By 2008, there were over 87 Starbucks locations throughout Australia. Despite this growth, things were not going so well for America’s favourite coffee. Early on in their Australian endeavours, Starbucks reported $105 million in losses.
The biggest mistake that Starbucks made when they decided to move into Australia was, that they thought they didn’t need to adjust their offerings. Australia has a rich coffee culture, where local cafe menus are dominated by complex coffee drinks as opposed to the basic offerings found in Starbucks stores. In addition to the basic drinks on Starbucks’ menus, they also have many sugary drinks, which Australians also aren’t particularly fond of. Not only did Starbucks fail to tailor their menu to fit the preferences of the Australian coffee consumer, they also failed to alter the physical stores to fit Australia’s idea of what a coffee shop should look like.
Australians see their cafes as a meeting place to talk business or to catch up with friends. The actual coffee is seen as more of a bonus to meeting there. So, cafes in Australia offer a place to socialize and drink coffee. Meanwhile, a Starbucks shop treats the coffee as the main offering, where you can get your drink and then head out as you start your day. Today, Starbucks still operates in Australia but its target market isn’t Australians, it’s tourists who are visiting Australia. Instead of having locations in various cities and suburbs throughout the continent, they are focusing on major tourist cities. The idea here is that these tourists are looking for something familiar while in a foreign city, and there are few brands that are more well-known than Starbucks.
3. Coors’ Messaging is Lost in Translation. In Spain Coors is a very successful American beer manufacturer. But they made an all-too-common mistake when it came to launching their “Turn it Loose” campaign in Spain not double-checking a slogan’s translation before going to market. When translated into Spanish, their tagline was interpreted as a common expression that means “suffer from diarrhoea.” So, not great. While this isn’t as big of a failure as the previous case studies, and Coors maintains a strong presence in the Spanish market.
End point- To avoid mistakes for companies’ international expansions and to ensure that company doesn’t fall victim to an international marketing blunder, there are a few things companies should do prior to setting up shop in a new country, region, or even state. Priority is to conduct research on target consumers, to zero in on the consumer preferences of the new target consumers, to know whether or not your offering will be valuable to them. When it comes to marketing, it is not effective to simply assume and take current campaigns to apply them without alteration in other areas of the world. People differ from city to city, country to country, and continent to continent.
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