Expansion and Locals
Internationalization is one step in a company’s life that comes with enormous benefits if it ends up being successful. However, internationalization also comes with numerous challenges that must be faced. One obstacle in particular poses a real threat when trying to expand your business outside of your home country: integration.
Integrating your business and your way of doing things into an unfamiliar place, which has its own unique culture and customers, is a factor you must consider before entering a new community. For example, Starbucks, a multinational corporation with 28,000 stores in 77 markets, took 47 years to open its first café in Italy. In order to integrate their brand with the Italian market, they needed to make many changes to their classic concept. This was necessary because Starbucks was trying to enter a community that is very tied to the local coffee culture, and resistant to companies that don’t adhere to their traditions.
Integration with new communities and competition with their local products is a challenge for all businesses, regardless of size, age or industry, but particularly so when it comes to food. One reason for this is that more and more movements are trying to push consumers to buy products made locally. In the U.S., for example, interest in locally grown foods has risen rapidly in the last few years due to the continued impact of the “locavore” movement. Supporting local producers and brands not only means that the food you consume is produced in your area, but that the money you spend goes to local farmers. Consumers are also more likely to know what kind of process the food went through while being produced, and feel confident about the type of environment in which it was grown. This is not the case with foreign products that are produced and shipped from unfamiliar locations. Locals’ productions are also more economically sustainable as they require less steps to be executed than imported products - particularly when it comes to shipping. Avoiding long-distance shipping processes also has a positive impact on the environment, as it reduces the costs and pollution involved in the logistics process. For many customers, the environmental sustainability of local products is compelling.
This is why companies interested in expanding their business need to study and gather information about the new target market, and develop a strategy that takes into consideration not only the local competitors and customers, but also if the community is curious, flexible and interested in trying and discovering less familiar products. Additionally, companies should consider the switching costs of these elements when planning their expansion. Legal and regulatory barriers can also give an idea of how much you need to adapt your product to the local market, and ultimately help you understand how easy or difficult your integration process will be.
When expanding, you have to be sure that your product is adding a unique value or meeting a specific desire of the local market in order to give the consumers a valid reason to switch from their local producers to you.