When the global strategy is too foreign for the new local opportunity

Global doesn’t always work local

If a local business isn’t performing as expected, it’s important to evaluate why this is happening before you take drastic action. Expanding into a new territory presents exciting opportunities. But it can be littered with risk if the organization applies global strategies to the market. Relying on tried-and-tested global business strategy, with minor adjustments can lead to unrealistic growth expectations. The local teams organizational and operational capabilities could be under or over estimated. Greater understanding of local market and team strengths, can optimize success across every location.

When plans don’t translate a business often looks to the local team for the answers.

In truth the responsibility lies first with the parent company. It’s up to them to foster an in-depth understanding of how their local businesses operate.

A recent survey found that few executives fully understand their organization’s global strategy.

Consequently, underperformance may be fueled by senior management’s inability to clearly articulate the global strategy to a local unit. Without proper understanding and a compelling vision, they can move off-course and make poor strategic decisions.

Evaluate why things aren’t working before taking any drastic action.

Avoid sending in a manager from another location to solve the problem. Just because they were successful in one place doesn’t mean it can be replicated. Replicating effective strategies can lead to business failure elsewhere. A cookie-cutter approach doesn’t take into account important elements such as cultural differences. Similarly remote management isn’t the best path to success.

Factor in the local business environment.

Identifying the cultural differences at play in a new location can help understand the strengths offered to your business. It can also remove barriers to excellence that may inadvertently appear. If you don’t take into account the nuances of each location, operations can be quickly undone by local differences such as:

• A country’s size.
• Climate.
• Consumer behavior.
• Social and economic differences.
• Infrastructure (ports, roads).
• Tax legislations.

Every country will have additional localized idiosyncrasies. Success relies on knowing the location and working with the challenges it presents

By way of example, let’s consider Brazil.

Culturally, Brazilians are perceived as friendly and dedicated. But when it comes to business, they’re not known to be as open and direct as business executives from other markets. Approaches that seem normal in other markets can be seen as disrespectful.

This situation becomes more critical at the middle management level, as colleagues have less global exposure. They won’t necessarily have traveled widely or been involved in global decision-making. As a result, it’s common to find situations in which people struggle to take part in constructive debate. This leads to ineffective leadership and a lack of trust, which can prevent team members from contributing to important conversations. It can also lead colleagues to perceive the organization as hierarchical and unfairly demanding.

The case of a food company moving into Brazil demonstrates the challenges of expanding into a new market.

The food company had not sufficiently considered the market challenges. For example, leadership didn’t factor in specifics around consumer habits. Nor did they evaluate the challenges of Brazil’s infrastructure or tax differences between each region.

These oversights cost the business dearly

It impacted pricing due to poorly understood logistical challenges- good were imported from the wrong port or clearing customs in one area while holding inventory in another. This made it difficult to benefit from tax savings. Additionally, the company sold a premium product that was too sophisticated for consumers who could afford to purchase it.

Increased local insight could have saved time and money.

The organization could have found a way to operate more efficiently. In fashion that met with the global business’s expectations of the local operation. But this is easier said than done. It requires maintaining a fine line between embracing the new location and operating within global budgets and strategic controls (which are also pivotal to business success).

Developing a thriving local business relies on more than diligently future-proofing against local challenges

 It’s imperative to ‘listen to the local crowd’. Both internally, as in your top and middle management executives. And externally, your customers, suppliers and distributors.

The answers may be right in front of you — listen to the team.

One recent example demonstrates this perfectly. A salesperson at a large consumer company boosted sales by developing an in-depth understanding of the organization’s core client base. They took time to understand the differences between successful and unsuccessful clients. This enabled the team to create a clear method identifying those with the most potential.

External stakeholders offer valuable insights when expanding your business.in front of you — listen to the team.

A large European chemical conglomerate had a small-to-medium-sized Brazilian business. Although it was an uncontested market leader across most products, the unit was underperforming. It had lost market share to competitors faster than expected.

Our team conducted a detailed organizational assessment and series of workshops.

This provided a clear vision of its global strategy, which was adapted to the local market. The parent company was then able to:

• Foster the necessary company-wide understanding of the global.
• Secure understanding and buy-in to both plans from the local management team.

The local market opportunity was reassessed with the help of external stakeholders (direct clients, distributors, end-users etc).

The result? A realistic approach to achieving business growth. The local business unit then redefined its distribution model, sales organization, and commercial processes and policies to suit the market. By listening to and better understanding their clients, the unit crafted a more effective go-to-market strategy.

Remember local leaders might think they know the local market well. But they might not know everything that guarantees business success. Encourage local teams to listen and understand their market in all its intricacies. This will help them stay ahead of the game, aware of changing market conditions, new product landscape and the economic situation.

Remember, less is more.

Success goes from an organization’s headquarters all the way to the salespeople taking customer orders. So, get buy-in from everyone, at every level of your global organization. If local leaders understand their market, you’ll need less meeting time and 50-page reports to guarantee a thriving business. They’ll be more empowered to take control of their team, be accountable for their decisions, and drive growth.

About the author

Emerson Marcomini, is an Independent Consultant and an alumnus of McKinsey and Bain & Co., he brings a wealth of experience in strategic development, mergers and acquisitions (M&A), post-merger integration, go-to-market strategies, and turnaround management.