Business Fit Magazine October 2019 Issue 1 | Page 20

Business Offering an insight into expanding your business abroad, Maike Benner and Lilli Rohde, business consultants from MaLish, tell us about the advantages of going international and how to go about it, avoiding some of the pitfalls even the big companies have encountered. International Business Expansion A Piece of Cake or a business trap? Walking down the shopping Malls in London, Stockholm or Frankfurt we see the same boutiques, stores and brands. Thus, one could be tempted to say that business internationalisation nowadays is a piece of cake: consumer tastes have levelled, marketing campaigns work the same everywhere and foreign markets are ‘dying’ to be flooded with our products. However, what seems to be an El Dorado environment for ambitious company leaders can easily turn into a trap or money burning exercise. Some impressive examples of prominent business failures are: McDonalds in Bolivia Woolworth in Germany Starbucks in Brazil McDonalds exited Bolivia some years back after realising that the Bolivians preferred their local cuisine and never perceived McDonalds as a healthy and trustworthy alternative. At the height of business success in America, Woolworth decided to enter the German market. The great selection and customer service – like greeting customers at the door and helping them with their shopping – was perceived by the German public as ‘intruding on their privacy’ and people preferred to shop elsewhere. To this day, Starbucks is present in five Brazilian cities. Of course, the country with its 210 Million inhabitants has more than five cities but Starbucks refrained from further expansion because they struggled within the Brazilian market. Brazilians love to drink coffee – that was not the issue – but traditionally Brazilians drink “cafezinho” (Espresso with sugar). Expensive coffee drinks with a lot of milk (which is not a common foodstuff) do not sell well in Brazil. internationalisation is not impossible, however, success must be carefully planned. The first question which often arises concerning internationalisation is: Why do companies go abroad in the first place? Critics name overconfidence, ignorance and power as most common motives. Supporters see economic advantages (like economies of scale), competitive and comparative advantage and progress as the drivers. What do we mean by this? As supporters of internationalisation, we want to focus on the advantages. The bigger the production batch and the greater the specialisation, the cheaper products can be sold. A household example of this economy of scale effect is cooking two portions of rice - one for consumption, one for storing - saves time (preparation time for two portions is the same as for one) and additional energy and water use is negligible. Secondly if people, companies or nations specialise in certain products they are better equipped to produce, or if it is given by nature (e.g. Caribbean = warm weather = specialising in tourism, Saudi Arabia = natural resources = oil exploitation), and these people, companies and nations start trading with one another, then the overall economic output is greater. The third argument about comparative advantage does not imply a better product or service, it only shows the country, company, nation can offer a product or service of the same Success must be carefully planned If large companies with high budgets, huge marketing expertise, international employees and customer bases fail, what does this mean for smaller companies who decide to conquer the international market? Of course, 20 21