Understanding Foreign Cultures….and Markets.

Google’s recent clashes with China bring up myriad questions about successfully managing a business in China or anywhere else around the world.

While understanding ROI, WACC, and foreign exchange risks can give one a picture of the potential profits and margins in a new foreign market, it does not tell the whole picture.

The Google case proves a company can address all the non-market factors that threaten its competitive ability and still fail. In the Google example it was a matter of understanding the consumer to whom it catered.

Entering a new country requires very careful financial analysis, assessment of the political and other non-market factors that potentially hinder acquisition of market share, and an understanding of the culture and preferences of the consumer. All of these factors must be taken into account and the information must be presented objectively and in an unbiased manner. Pizza Hut entered China in the mid 90s, and although the numbers worked out, the government was pro-American restaurant industry, and the expected profit margins were high, Pizza Hut failed to recognize it would have trouble selling cheese-covered pizzas to lactose-intolerant consumers. It quickly had to switch to lactose-free cheese.

Assessment of a foreign market requires asking fundamental questions before analyzing ROI: Can we sell this thing there? What does the consumer want? Should we sell hamburgers in India? How about smoked pork shoulder in Israel?

Finding and managing to success in foreign markets requires more than assessing profit margins. It requires understanding cultures, fulfilling needs, and doing enough homework to understand objectively what is going to work.

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One Response to “Understanding Foreign Cultures….and Markets.”

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