When Going Global – Don’t Forget the Context!

Even though it has, like many articles these days, a China-centric focus, the article Context and Complexity by Edward Tse over on Strategy + Business had some great advice for any multinational thinking that they can enter a new market and immediately see dramatic, exponential, expansion in their reach and consumer base.

The article points out that if you’re an executive of a multinational company looking to enter a new market in a new country as a means of achieving growth, then in addition to the classic “three Cs” of customers, company, and competition, you also need to consider “context”. Without a deep understanding of the “context” of the country in question – the nature of its social, regulatory, economic, and infrastructure environments; how they’re changing in a period of (explosive) dynamism; and how they affect one another, then you will not be able to tap the true potential of the market you plan to go after.

In a new market, you could be dealing with a heterogeneous consumer market that is changing fast, as you have in India and China, a regulatory environment under reform, as in China and parts of the EU, and a distinct culture that impacts what the consumer will, and will not, want and be attracted to. (This last comment is especially true in food service. Those who think the cow is sacred will not eat beef burgers just like those who only eat kosher will not eat pork.) Chances are you will not be able to run your business like you do in your home country, if you can even get in to run your business at all!

Furthermore, it might be necessary to extend beyond just the biggest demand centers of a country to achieve a sales volume that makes it all worth while. In other words, just opening a store or channel in the 50 biggest cities might not cut it if you have a niche, or expensive, product. In developing countries, expanding beyond the tier one markets can be difficult due to lack of infrastructure, channels, customer sophistication, consumer disposable income, and regulation. Just like developed countries often have requirements at the national, provincial, and municipal level, so do developing countries. In nations as large and complex as China and India, opening multiple retail channels in each of the major cities in each of the provinces can be quite daunting from a regulatory perspective. Plus, in a developing economy you’ll have stark cultural contrasts between a major city that is attempting to play in the global marketplace and the rural areas just a few miles beyond the municipal line.

In summary, expanding into a new market in a new country probably won’t be quick, easy, or at all what you might expect and will take a lot of work, research, and cooperation with those who have been there and done it before to pull off. It’s doable, but not overnight.