Developing a local strategy for success

Understanding local culture is essential to adapt products and services for sale in markets abroad.
Green tea-flavoured KitKat available in Japan
Green tea-flavoured KitKat available in Japan

Adapting products that work in one market, to the needs and whims of another, is rarely easy or linear. Take the transformation of the KitKat in Japan. For years it was a Western staple. But market testing revealed a unique set of taste buds. So the brand’s owner, Swiss consumer goods firm Nestlé, started to experiment. It now sells 15 unusual flavours of the iconic treat in the east-Asian country, ranging from grilled potato to cherry blossom and edamame bean to blueberry cheesecake.

Understanding how consumers and businesses tick in different markets is like a sedimentary layer – it builds up over time. Few companies get everything right on day one. “Entering any market, it’s safe to say that companies won’t have a perfect idea of what will and won’t work,” says Robin Pharaoh, a self-styled social anthropologist who helps companies research new markets.

Understanding the local market

One market might look like another, but be subtly different, as Tesco found to its cost when trying to sell packaged fruit to America’s touchy-feely consumers. The nuances of markets – China is a good example – may only be revealed as they become saturated, leading to a slow clear-out of weaker brands. But only by trying, and if necessary failing, can you ever get to grips with a new market.

Entering any market, it’s safe to say that companies won’t have a perfect idea of what will and won’t work

“My advice is to feel the fear and do it anyway,” says Graham Ewart, managing director of Direct Healthcare Services (DHS), a Caerphilly-based firm that exports specialty mattresses to Europe, Latin America and Asia. When entering a new country, Mr Ewart leads from the front. “It’s important to take responsibility, so I had to get out there myself and sell, sell sell,” he says.

Rarely does a genuinely strong brand need too much tweaking. It either works in a new market or it doesn’t. It is either loved and embraced by a different set of customers or it isn’t. But few brands can be replicated everywhere. The up-market crisp company Tyrrells, which generates 25 per cent of its revenue outside the UK, found that its top flavours worked everywhere. But the best sellers differed from one country to another.

“In France, our most popular flavour is lightly sea-salted; in Germany, it’s sea salt and cider vinegar,” says chief executive David Milner. In Australia, Mr Milner opted for a dual-track approach, exporting English crisps to “tap into Australia’s penchant for goods of origin”, while buying a local snack-food maker, Yarra Valley, to use as a launch pad to expand Tyrrells’ reach in Asia.

Cath Kidston’s warming, floral prints are now found worldwide on everything from backpacks to lunchboxes. Yet when Kenny Wilson joined as chief executive in 2011, with the aim of creating a truly global brand, the firm had only a handful of non-UK stores, mostly in Japan. “Our products are fun, bright and cheerful, and full of irony and English humour,” says Mr Wilson. “Those messages resonate across all our markets, from Japan and China, to Europe and the Middle East.”

But every market, and indeed every store, is different. With home help so prevalent in Thailand, tea towels proved a non-starter, as anyone with enough disposable income could afford a maid. In Japan, its lunchboxes are smaller than those sold in the UK, and come with an in-built chopsticks compartment. The firm’s central London stores are more international than those in the rest of the UK, and cater for tourists keen to buy products at source.

overseas_expansion_pitfalls

Localisation takes time

Again, this takes time to discover. Terence Brake, director of learning and innovation at business training specialist TMA World, equates the process of understanding a new business culture to the pressure-cooker process of learning to sail. “You can stare at maps and charts all you want, but you can’t tell what they mean until you head out to sea,” he says. Thus only by operating in Germany can you truly understand the country’s aversion to risk. Likewise the infectious individualism that pervades many Indian corporates or the obsessively consensual nature of Japan where team-think trumps personal opinion.

Social anthropologist Mr Pharaoh links this group-oriented Japanese ethos, which is based on the ancient concept of wa or societal balance, can be seen in the problems encountered by Airbnb. The home-renting service struggled to catch on in a culture still bemused by foreigners and wary of living in close quarters to them. “People still live in communities there,” says Mr Pharaoh. “They didn’t want to disrupt their relationships with neighbours, which could happen in little ways, such as foreigners leaving gates open.”

Most companies can get a head start in a new market by employing the right personnel. “Hiring and retaining the best calibre of talent is paramount to global expansion,” believes Cath Kidston’s Mr Wilson. He points to the head of the firm’s Tokyo operations, Mike Ikeda, a Japanese national who worked with him at Levi Strauss.

How other cultures tick

“You need people who know the territory and understand cultural nuance. You don’t want to parachute in people who know the brand, but have never ridden the underground to work in Tokyo,” says Mr Wilson. At the same time, he believes in instilling key executives with a genuine world view. “Everyone on our senior management team has lived and worked outside the UK,” he adds. “You need to understand how other cultures tick in order to grow a global business.”

Or take the challenge facing Marlon Sullivan, head of talent and development at healthcare firm Abbott. With 72,000 employees in 130 countries, Abbott faces a constant battle to secure and retain quality personnel. In large swathes of the developing world, such as Russia, China and India, the challenge is not talent, but experience and longevity. “High-quality managers are up to 12 years younger in emerging markets than in developed markets and with up to six years’ less experience on the job,” says Mr Sullivan. “So you will have leaders that have sat in fewer chairs and who cannot bring the same level of expertise to the table. That is why we are investing so heavily in securing the right personnel.”

As they grow, every company seeks a solution to this perennial challenge. IT giant Infosys opted to hot-house rising stars by training them at a tailor-made educational facility in the Indian city of Mysore. Often the best companies hire and retain the best staff by being great places to work. Ultimately the best way forward, notes DHS’ Mr Ewart, is to hire the best talent you can. “By appointing the most experienced people you can at local level, you reap the benefits of their knowledge and contacts,” he says. “This strategy has opened up the Asian and Latin American markets far faster than we ever dared possible.”

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