Introducing New Products/Services is vital for the growth and longevity of Multinational Companies.

 Did you know that 9 out 10 new products do not even make it to the shelf?  And that 90% of those that do are usually being introduced by Large Companies.

 To clarify matters, Why am I mixing Products and Services?

 The answer is simple:  Companies who sell Products provide Services, which we refer to as Customer Service.

 Companies who sell Services use Products, both Physical and People.  All companies provide Both.

 What happens when you take these Products & Services from the Home country, your headquarters, to a  Foreign market Overseas?  Quite a challenge, in addition to the 4P’s Domestically (Product/Place/Promotion/Price), now you have the 4P’s Overseas.  Really, 8P’s.

 The U.S. is known as “The Graveyard of British Companies”.

 

Why British Companies fail when entering the U.S.?

 Most common reason for failures is Culture.  Examples of such companies are Sainsbury’s, Marks & Spencer, WH Smith, Dixons, HMV and most recently Tesco.

 Let’s look a few examples:

 Tesco in the U.S.

Tesco invested in the US in 2006 with its Fresh & Easy brand.  By 2013, it pulled out of the U.S. having never made a profit.  U.S. shoppers were left unimpressed by self-service checkouts, shrink-wrapped fruits and vegetables, and prepared meals.

 Tesco spent two years of intensive on-the-ground research, even sending senior U.K. executives to live with Californian families to observe the way they shopped and ate. They built secret test stores and investigated the contents of Americans’ fridges.

After 2 years of researching the U.S. market, they ignored much of that research, deciding to set up the stores it wanted, rather than listening to its potential customers.  Welcome to the impact of Culture of upper management. 

For example, U.S. shoppers prefer to buy in bulk, Fresh & Easy (name of their stores) offered small pack sizes of fruits and vegetables.  They mostly carried their own private label products as opposed to the Brand names consumers are used to.

They opened small size Organic stores, Fresh & Easy, located in low-income areas as opposed to the large supermarkets U.S. consumers are used to.  It was basically a British style Tesco store instead of a U.S. style supermarket.  Opened their first stores in 2017 and left the U.S. in 2012 after closing 200 stores, and lost $ 1 Billion Dollars in the process.

 

 

 

Sainsbury’s

Purchased Shaw’s Supermarkets – New England’s second-largest groceries retailer – in 1987 with the intention of replicating its UK success with the brand.   The competition in the U.S. was difficult to handle as it was never part of doing business for them.  In 2004 Shaw’s was sold with Sainsbury’s deciding to focus on the UK market.

Marks & Spencer (M&S), entry to the U.S.

In 1988 the company acquired Brooks Brothers, an American clothing company and Kings Super Markets, a US food chain.  Both were subsequently sold off in 2001 and 2006 respectively.

Between 2001 & 2006, King’s profits shrank by 75%, and when they sold Brooks Brothers in 2001, they lost two-thirds of initial purchase price.  Both were very poor investment and managed poorly as well.

   

Wal-Mart failure in Germany

Culture and communication problems:

 When products are introduced, it is important to consider cultural factors. In this case, corporate culture played a key role. Wal-Mart’s top executives decided to operate the German locations from their offices in the United Kingdom. Thus, Wal-Mart’s “corporate language” was English.  However, many of the older Wal-Mart managers in Germany do not speak English. As a result, there were often breakdowns in communication.

 Laws & Regulations problem:

 The managers of Wal-Mart were not sufficiently familiar with the laws and regulations in Germany, as they violated them several times.

 Low profit:

 Wal-Mart began a price war to drive small German competitors out of business.  They introduced a private label called “Smart Brand” and sold most of these products below manufacturing costs.  However, the Federal Cartel Office in Germany interceded and stopped the price war because there is a law in Germany that enjoins companies from selling goods below manufacturing costs on a continuing basis.

 The volume was not as they expected due to heavy competition from large and small discount stores.  They existed Germany in 2006 (entry was in 1997).  Also, they claimed a loss of $ 1 Billion Dollars.

Best Buy

 Entered the U.K. in 2010 and exited in 2011, after opening 11 stores of the 100 stores projected.  Such a short visit to a new market, Why?

A major mistake was announcing to competitors their plans of entering the market 2 years before entry, which gave them time to prepare for their reception.

  Second reason is that in the UK consumers are used to small stores in city centers, and Best Buy’s introduced their large format stores out-of-town, which made it very unattractive for shoppers used to walking to the city center.

 Consumer in the U.K. regarded Best Buy as a discount stores, and Best Buy did not succeed at changing that perception and failed in their promotion campaign to convey their Brand message.

 Location, Location, Location: 

 Competitors had 400, 500, 600 stores all over the U.K., and Best Buy was not committed to the market with just 11 shops in out-of-town locations, and failed to make an impact.

Stores Sales were way below target and expectations and they decided to closed their stores and leave the U.K.

They failed to understand the Competition and Market Dynamics.

 

 The problem here is that when a Large Company exists a market or a country, they usually do not come back.  That market is lost forever.  Tesco claims it lost $ 1 Billion Dollars in leaving the U.S., and Wal-Mart also claims they lost $ 1 Billion Dollars in existing Germany.  It seems the magical number they all agree on losing.  Simple facts they publish.

These are some examples of challenges companies face, some are self-made, when entering new markets, and introducing New Products or Services, or both which is more challenging.

 

What went Wrong?

 To start with, we have the 4P’s Domestically and then the 4P’s Globally which are different and unfortunately ignored by Companies. 

So you have to worry about both, and most times companies ignore completely the Global part due to ignorance mainly or even arrogance mostly.

 Tesco expected the U.S. to know who they are, “We are # 1 in the U.K.”, and Wal-Mart expected Germany to know who they are, “We are #1 in the U.S.”.  Very bad premises to start from.

 

What is the difference between the Retail industry in the U.S. and the Retail industry in Europe?

 Actually, the difference is the Philosophy of doing business, meaning:

  • In the U.S., Retailers in general carry 80% Brand names and 20% Private Label
  •  In Europe, Retailers in general carry 80% Private Label and 20% Brand names.
  •  80/20 Rule in the U.S., Brand vs Private Label, has to do with the massive Competition in the market. Consumers Demand quality and price, they have rights and privileges and make companies accountable as a result.
  •  80/20 Rule in Europe, Private Label vs Brand, has to do with Lack of Competition in the market, one or two Brand companies dominate the market in their industry. Consumers have very little rights and privileges and cannot sue/hold companies accountable like in the U.S.

 Completely different ways of doing business, completely different consumer expectations and a lot of problems arise from these facts that most companies do not pay attention to and attribute to Cultural Differences.

 Tesco after 2 years of intensive market research decided to open same store format as in the U.K. contrary to research results.  When we say decided, It means Upper-Management, CEO/COO decided.

 Wal-Mart decided to treat the German consumer exactly like the U.S. consumer, a major mistake, and ignored the reality of intense competition amongst German Discount stores.  A fatal mistake.

 It is crucial for Companies to Understand Clearly Who they Are, How to Compete in that Foreign country prior to Targeting that market.

 

How Can it be Fixed?

 The solution is simple, Focus on two core areas to solve above problems:

 One-

Respect Cultural Values:

    • Understand the cultural nuances of the target market.
    • Adapt your service to align with local customs, preferences, and values.
    • Do not impose your Home culture on new markets.

 Two

Develop Meaningful Partnerships:

    • Collaborate with local partners who understand the market.
    • Create strategic alliances to bridge gaps and enhance credibility.
    • Do not go it alone at first entry

 

 No Magical formula, just common sense and respect.  Being #1 back Home, is not automatically Transferrable into that Foreign market.  You have to earn it.

 

What is your process of entering Foreign Markets?

What is your process in introducing New Products/Services to your marketplace?

Do you have a Process?

Does it Align with your Strategy?  

And Do you have a Strategy?

 

Very Simple Questions and Yet Quite Important.

 

We have the expertise of Launching Products & Services Globally

 

We can help you introduce successfully New Products & Services.

 

One Simple question, What is Your Strategy?

 

We help our clients Solve their problems

and Grow their Business.

 

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