Business Fit Magazine October 2019 Issue 2 | Page 20

Business
Offering an insight into expanding your
business abroad, Maike Benner and Lilli
Rohde, business consultants from MaLish,
tell us about the advantages of going
international and how to go about it, avoiding
some of the pitfalls even the big companies
have encountered.
International Business Expansion
A Piece of Cake
or a business trap?
Walking down the shopping Malls in London,
Stockholm or Frankfurt we see the same
boutiques, stores and brands. Thus, one could be
tempted to say that business internationalisation
nowadays is a piece of cake: consumer tastes
have levelled, marketing campaigns work the
same everywhere and foreign markets are ‘dying’
to be flooded with our products.
However, what seems to be an El Dorado
environment for ambitious company leaders can
easily turn into a trap or money burning exercise.
Some impressive examples of prominent
business failures are:
McDonalds in Bolivia
Woolworth in Germany
Starbucks in Brazil
McDonalds exited Bolivia some years back after
realising that the Bolivians preferred their local
cuisine and never perceived McDonalds as a
healthy and trustworthy alternative.
At the height of business success in America,
Woolworth decided to enter the German market.
The great selection and customer service – like
greeting customers at the door and helping
them with their shopping – was perceived by the
German public as ‘intruding on their privacy’ and
people preferred to shop elsewhere.
To this day, Starbucks is present in five Brazilian
cities. Of course, the country with its 210 Million
inhabitants has more than five cities but Starbucks
refrained from further expansion because they
struggled within the Brazilian market. Brazilians
love to drink coffee – that was not the issue – but
traditionally Brazilians drink “cafezinho” (Espresso
with sugar). Expensive coffee drinks with a lot of
milk (which is not a common foodstuff) do not
sell well in Brazil.
internationalisation is not impossible, however,
success must be carefully planned.
The first question which often arises concerning
internationalisation is: Why do companies
go abroad in the first place? Critics name
overconfidence, ignorance and power as most
common motives. Supporters see economic
advantages (like economies of scale), competitive
and comparative advantage and progress as the
drivers. What do we mean by this? As supporters
of internationalisation, we want to focus on the
advantages.
The bigger the production batch and the greater
the specialisation, the cheaper products can be
sold. A household example of this economy of
scale effect is cooking two portions of rice - one
for consumption, one for storing - saves time
(preparation time for two portions is the same
as for one) and additional energy and water use
is negligible.
Secondly if people, companies or nations
specialise in certain products they are better
equipped to produce, or if it is given by nature
(e.g. Caribbean = warm weather = specialising in
tourism, Saudi Arabia = natural resources = oil
exploitation), and these people, companies and
nations start trading with one another, then the
overall economic output is greater.
The third argument about comparative
advantage does not imply a better product or
service, it only shows the country, company,
nation can offer a product or service of the same
Success
must be
carefully
planned
If large companies with high budgets, huge
marketing expertise, international employees
and customer bases fail, what does this
mean for smaller companies who decide to
conquer the international market? Of course,
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