Target’s botched Canadian expansion cost $7 billion and ended in the closure of more than 100 stores last year. While the scale of the failure attracted a lot of attention and coverage, it’s certainly not the first time a big brand has fumbled a major move—eBay flopped in Japan, and Starbucks couldn’t adapt to Australian coffee culture. It’s a sobering reminder for entrepreneurs that when it comes to expansion, nothing is certain—companies of all sizes can fail in a new market.
Whether you’re running a global brand or a small business with big dreams, expanding abroad is hard. Each jurisdiction has its own currency, tax laws, and legal system. There are staffing and supply-chain challenges. Add in cultural differences, time zones, and a whole lot of travelling, and the experience can quickly become overwhelming.
Of course, there are also very good reasons to expand internationally, especially beyond the U.S., the traditional second market for Canadian companies. More than 70% of the world’s purchasing power is held outside our southern neighbour.
To maximize your odds of success, ask yourself these four questions before going global.
Is it an ego trip or a business opportunity?
Every CEO wants to be able to say they run a ‘global’ business. So when someone suggested expanding the 1-800-GOT-JUNK? brand beyond North America in 2004, I leapt at the idea. Within two years, we were in Australia and the U.K.
Our Australian adventure worked out, though it took almost five years to turn a profit. But we weren’t so lucky in the British market.—our Birmingham operation shut within nine months. We were being pulled in too many directions, expanding for expansion’s sake rather than because it was the best move for us. Ego, not logic, was directing our actions.
Don’t get wrapped up in the prestige and recognition of international expansion—make sure the numbers add up before you enter a new country.
Is your brand ready to cross borders?
Brand dilution is a huge risk when you enter uncharted territory. To succeed, you need to be able to maintain the same quality and service experience, but that’s not always possible. You may not even be able to use the same company name. For example, we discovered too late that toll-free numbers in the U.K. don’t have the same number of digits as they do in North America. We had to switch to “GotJunk.com,” and suddenly our 1-800-GOT-JUNK? brand was useless.
Giant corporations have faced similar challenges. Coca-Cola’s famous name didn’t fare so well in China, where it was translated as “Bite the Wax Tadpole.” And while our brand worked in Australia, when Burger King launched there it had to take the name Hungry Jack’s because someone had already trademarked its original moniker.
Before you dive into a new coutry, ensure that what makes your brand unique can be replicated in the new cultural context without compromise.
Have you taken advantage of the potential at home?
Uber was losing $1 billion a year in China before it exited the market last year, despite the fact that plenty of North American cities still lacked a dominant ride-sharing player. The company was missing opportunities at home in favor of a risky bet on the unproven potential of an international market.
As appealing as the unconquered territory of a new country may seem, home-court advantage will always increase your odds of success. Even if you feel you’ve saturated the local market, you may be better off exploring new revenue options close at hand rather than transporting your model across the world.
We started 1-800-GOT-JUNK’s sister companies, Shack Shine, You Move Me and WOW 1 DAY PAINTING, to take advantage different areas of the North American home-services market. Today, they all contribute significantly to our bottom line, outstripping any gains we might have made from an international expansion.
Do you have an effective leader who can be your pioneer?
The sheer geographic distance between Canada and Australia meant we initially didn’t have tight enough reins on our business partners there. Eventually, we found the right leader Down Under who was able to make that market a success for us.
We weren’t so fortunate in the U.K. Across the pond, revenue was suspiciously low, so we hired a private investigator to suss things out. It turned out that the manager of our British operations wasn’t doing … anything. It simply proved too expensive and complicated to monitor on-the-ground execution in the U.K., and we had to shut down.
The experience taught us to recruit trustworthy people in new markets and to simplify our systems so they’re replicable anywhere. Google will often promote people from their head office to run international branches—when someone knows the company inside and out, and you’ve already built years of trust, there’s a strong foundation for success.
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I’ve seen both the good and the bad of international expansion. With forethought and patience, you might just be able to take your brand global. But you don’t need to cross borders to grow—as we’ve realized, you can also achieve huge success by sticking close to home and playing to your strengths.
Brian Scudamore is the founder and CEO of O2E Brands, the banner company for 1-800-GOT-JUNK?, WOW 1 DAY PAINTING, You Move Me, and Shack Shine. I’m a strong believer in ongoing personal and professional development and I like to show others how to use goal-setting to take the lead in their own business. I’m passionate about people, and I’ve created a corporate culture where we are all building something bigger, together. You can find me on Twitter, Instagram, and LinkedIn.