In the Firmex.com article, Seven Epic Fails by Businesses That Tried Expanding Into Foreign Markets, Andrew Seale outlines several mega-brands that dropped the ball when going global. The following US market giants failed entering certain international segments dues to falling victim to a common, disastrous and expensive mistake: Failing to understand cultural nuances and researching consumer purchase habits and trends.
Home Depot Fails in China
Home Depot’s brand is synonymous with DIY. China’s exponential economic growth has made it an appealing international option for many retailers. However, the home improvement mega-retailer failed to get a firm grasp on consumer behavior and how the idea of home improvement differs from Eastern and Western cultures when they opened 12 doors in the Chinese Market. Home Depot is headquartered in Atlanta, Georgia; In the United States, similarly to most Western cultures, the idea of home renovation and remodeling is commonly considered a hobby. Conversely, Eastern cultures regard working on one’s home themselves as a sign of poverty. By 2012 doors were shut and the DIY powerhouse lost $160 million USD.
Walmart Fails in Germany
Mega-retailer, Walmart, made the common mistake of failing to thoroughly understand consumer behavior before entering Germany in 1997. The retail hulk opened 85 doors in the German market with the intention of capitalizing on the consumers’ prudent spending habits and the growing discount segment within the retail industry. Walmart was unsuccessful in understating the cultural differences between US and German customers. German consumers were surprised and taken back by the stores front-entrance greeters and baggers at checkout stands – something expected at US doors. These roles are unheard of in Germany, which made consumers feel uncomfortable. Walmart closed all 85 doors by 2006, taking a hit of $1 billion USD.
Starbucks Fails in Australia
Starbucks, one of the most recognized brands globally, closed 61 locations and claimed a loss of $143 million USD after failing to successfully enter the Australian market. In 2000, the iconic coffee house made the fatal mistake of assuming that Australian consumers embodied a similar profile to that of US consumers. The Australian coffee segment is largely dominated by local producers, something the mega-chain severely underestimated. When Australian coffee patrons do purchase from a bigger chain stores, Starbucks’ prices proved to be too high. Doors began to slowly close beginning in 2008 and remaining locations were handed over to local entities.
Best Buy Fails in U.K.
In 2010, tech-retailer Best Buy entered the United Kingdom market by acquiring half of the mobile phone company Carphone Warehouse for a staggering $1.3 billion USD. Best Buy’s strategy to enter the UK market planned on launching 200 locations. Unfortunately, even the down-scaled strategy did not come to fruition. By 2011, stores began to close even though the electronic mega-store closely researched acquiring Carphone Warehouse for years before making a move. Best Buy made their move during the height of one of the worst economic declines in recent history. By 2011, stores began to close. Failing to enter the UK market resulted in the company taking a hit of $318 million USD.