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Internationalisation occurs when businesses try to aim beyond their home borders to expand their presence in foreign markets. However, to successfully internationalise to another country, an organisation needs to hone in on going local.
From assimilating with the locals to understanding and communicating their needs and wants, it is paramount to conduct research and gather information on a country before setting base. As such, here are some internationalisation strategies that businesses should first consider when preparing for overseas expansion.
It is imperative that organisations research on the country that they aim to expand to. Each country has its own unique political, social and economic dynamics which would directly impact an organisation’s success. As a result, marketing gurus use the PESTEL analysis to identify and assess the critical external factors that will affect an organisation in going global. The PESTEL factors stand for Political, Economical, Social, Technological, Environmental, and Legal.
Political factors revolve around government-enacted policies and legislations that affect businesses and their influence on the economic ecosystem of a country. Some of these aspects include government policies, tax policies, trade restrictions, etc.
One example would be Free Trade Agreements that ensure beneficial bilateral and multilateral trade and commerce policies between regions. Free Trade Agreements encompass different elements such as lowered tariff measures, regulations and protections to investment and market access. These policies ultimately help organisations to conduct business in an efficient and fair environment.
Economical aspects include economic growth, exchange rates, inflation, disposable income of consumers and businesses, etc. These can be categorised into macro-economic and micro-economic factors.
Macro-economic factors take on a broader perspective on the overarching influences of demand in an economy. In contrast, micro-economic factors hone in on the way capital or income is being spent and exchanged by the population.
Social focuses on a country’s demographic and psychographic elements. From identifying demographic trends to grasping attitude and lifestyle changes, these elements help marketers identify opportunities by understanding customer’s needs and wants.
Technological centres on a country’s technological advancement and development. It factors in the constant changes and progress led by the technology, automation, digitalisation, research and development landscape that will affect business operations.
Environmental refers to the surrounding ecological and social climate of a country. Through corporate social responsibility (CSR) initiatives, organisations can create positive changes to uphold sustainable environmental and social causes.
Legal constitutes the law and legislation of a country. These factors will influence and impact the way an organisation operates. Some factors include labour legislation, consumer law, health and safety regulations, among many others.
PESTEL enables an organisation to identify and penetrate markets in which potential opportunities could be explored. Subsequently, the brand would need to position and localise its products or services to fit a new target audience demographic.
Due to differences between countries, all companies need to understand the cultural nuances and sensitivities of the market that they are entering. Mishandling of cultural nuances can cause significant backlash for a business, and affect its brand reputation and sustainability.
One of the biggest flops was the Italian luxury fashion brand, Dolce & Gabbana’s 2018 advertisement in China. The advertisement, which featured a young Chinese lady trying to eat pizza with chopsticks, was called out by Chinese netizens as being racist and tone-deaf.
Chinese social media platforms subsequently went ablaze, resulting in a ripple effect which led to the boycott of Dolce & Gabbana products and the cancellation of their Shanghai fashion show. By not doing due diligence in understanding China’s robust cultural inkling, Dolce & Gabbana damaged the reputation that they had painstakingly built with Chinese audiences over time. That is the costly mistake of localising a brand haphazardly.
On the other hand, acquiring adequate knowledge on a country’s psychographics and culture could lead to better refined positioning strategies. In doing so, such strategies could positively influence perspectives of the brand among new target audiences.
During the 1970s, Nestle tried to market its instant coffee product in Japan but was met with lukewarm results. After hosting interview and research sessions, French marketing consultant, Clotaire Rapaille, found that the Japanese never had any interest in coffee due to their deep tea cultural roots.
Since there was no coffee consumption culture amongst the Japanese, Nestle had to reposition coffee in a way that integrates into the Japanese way of life. Nestle began creating coffee flavoured candies and desserts to appeal to children’s liking of sweet goodies.
The product repositioning and marketing strategy proved to be a success as kids started to accept the coffee flavour as a familiar taste well into adulthood. Today, according to Statista’s global marketing and consumer research, Japan spends $22 billion on instant coffee products, ranking them one of the largest importers of coffee in the world.
Through localisation, Nestle effectively cultivated a generation and influenced their consumption behaviour towards the acceptance of a product.
What Nestle achieved was a masterclass in localisation. The secret to their success lies in understanding cultural differences and repositioning products to garner consumer acceptance. Thus, it is important that brands understand the psychographics of a country well and use that information as a guide to aid with expansion.
For companies that intend to expand beyond its borders, do not do so in haste. When entering their desired market, it is important for brands to identify the roles they will be fulfilling while upholding its brand values. Brands that communicate with a strong understanding of local nuances and are able to resonate with consumers tend to be effective and prosper.
This article originally appeared in the Entrepreneur's Digest print edition #93 and has been edited for clarity, brevity and for the relevance of this website.
About the Author
Nafe Tong | Brand Advocate & Creative Partner | Adwright Communications
In his role at Adwright Communications, Nafe has worked with clients from MNCs and SMEs across various industries. He is dedicated to guiding and partnering clients along their respective brand journeys, giving them recommendations that will elevate their brand equity.
Nafe is a committed and passionate brand advocate. He finds joy in connecting people and sharing his experiences. Hence, he often hosts seminars to help clients understand the process of brand discovery, creation and continuation.