When planning to expand the production, the selling and the other business activities into some international markets there are many things that one should take into consideration. But not only too little information can create uncertainty, but also an excess of unuseful information can have the same effect. This is why it is important to make a plan before taking your business into the international market. In the following, we are going to concentrate more on the cultural barriers that might exist when thinking about expanding abroad.
First of all, let’s think about the motives why you could plan your business abroad. We can classify these motives into two categories: proactive and reactive. At proactive motives we could include: foreign market opportunities, profit goals, tax benefits, managerial urge, and as reactive motives we could mention the proximity to international customers (also called “ psychological distance”) or a small and saturated domestic market.
A common mistake of business people is that they don’t ask themselves first if there are any opportunities of increasing their sales in their own countries of activity before expanding the business into an international market. Internalization can result worthless and extremely expensive if the right considerations are not taken into account. Thus below are some factors which need to be taken into consideration before entering international markets
1) Trading obstacle – Protection against some products. Often criticized because of their effect on the development of the economy, trading obstacles still exist in some countries. The most important examples of free trade areas are : NAFTA, SAFTA, EU, European Free Trade Association , New West Partnership and Gulf Cooperation Council common market. An example of country which is most often affected by trade barriers is China and the affected sectors include iron, chemicals, steel, clothing and textiles.
2) The main habits of the international market Are the habits of that country ok for your products? The cultural distance should be another factor to keep in mind. As John Hooker said: “there Is no better arena for observing a culture in action than business”. Business practices are different all over the world and they are shaped by cultural attitudes regarding work, communication, trust, confidence, time and space. As business is a collaborative activity, communication plays an essential role. The most useful concept to understand cultural differences is “High and Low Context Communication”.
Let’s take for example two very different cultures: French and Danish people. When speaking about meetings and negotiations French business people try to determine the other’s side aims and demands at the beginning and only near the end, they tell what they think and what they want. French meetings are usually long. People come formally dressed and they dislike first names, or disclosure of personal and family details. Their objectives are long term and in the discussions they are trying to be logical at all times. On the other hand, Danish serious discussions are often mixed with humor. Their working hours are short and they make all their proposals seem reasonable. They are very interested in profit but they pretend it to be their secondary objective. Anyway, this is just an example which demonstrates how different you should behave in the two situations.
3) Check the reaction of the employees – You need to check your employees reaction to export in another country. Your employees know a lot about your product. Especially your sales force. And they are the ones who have to be taken into consideration before deciding on expanding in any international market. The best thing would be to take a 360 degree feedback from your employees. This will give you an idea of what percentage of your company thinks that you can expand. If you have a positive response, then you will find that you will get a similar response from employees of the other country. This also means that your company brand is strong internationally and you have the capability to expand. However, if the response from your employees is negative, then keep an eye on the 360 degree feedback and find out WHY they think you cannot expand to international markets. This can be another critical point for the improvement of your business.
4) Think about customized marketing – Tailoring a particular product to the specific needs of an individual customer. The customized marketing is generally used in those companies whose products are unique or quite expensive. This is considered to be the last form of target marketing , as the company adapts its products and marketing program with a very high degree of specificity. An example of such a company could be Starbucks.
These are just some of the things that many business people forget nowadays when deciding upon the process of internalization.
This article has been contributed by Ms Ana Maria who is studying Marketing management at the university college of Northern Denmark.