In past blog posts we went talked about how not being prepared can lead to incredible failures.  Specifically how a lack of research beforehand will only hinder any attempt to expand your business internationally.  In this post we’ll go over some of the bigger success stories and what we can learn from them.

This domestic fast food chain has transformed itself from a single sub shop in Bridgeport to an international powerhouse with over 44,000 locations.  Of that number, roughly 18,000 locations are located internationally.  Subway started with more manageable aspirations, targeting only 10 countries.  These countries were chosen due to strong growth, high tourism and an ability to coexist within the culture of the target country.  After making strong headway initially Subway started to open themselves up a little more.  They went back to their data and examined countries that they had looked past for expansion.  By doing this they were able to identify Russia and UAE as prime destinations for their stores.  

Subway has kept up their international growth by identifying trends and less obvious opportunities.  For example, after expanding into India, Subway began to feel a slowdown in their growth.  What they did was try to target local entrepreneurs as potential franchise establishers.  They recognized that India was not only growing, but there was a rise in small business ownership and entrepreneurial ventures.  They were able to cultivate an untapped group of partners.  

In order to stay relevant, Subway has continued to adapt with their communities.  This doesn’t mean just on a country by country basis, but even more specifically regional.  Subway tries to maintain its iconic standards, but allows for local deviations to keep the menu interesting.  They learned this lesson about brand identity through their business in Japan.  They originally decided to go all out and adapt everything to the local Japanese cuisine, so much so that an american probably wouldn’t be able to order anything familiar.  Since then they decided to go back to their consistent brand while blending local foods.   

Red Bull is another international success story.  Red Bull has accumulated so much success worldwide that most Americans would be fairly surprised to know that it was actually founded in Austria.  Red Bull was far from the mold that Subway set out, but in the last couple of decades, few other companies have matched the sales, marketing and brand prowess Red Bull currently enjoys.

They started their international trek buy establishing themselves in neighboring Germany.  The started with a meteoric rise but soon saw competitors rise up.  After years of competition, they finally reclaimed their spot and set their eyes on a wider market.  THey then aimed for England but again faced a bunch of challenges.  They were not allowed to use the term “energy drink” and thus significantly hindered their marketing efforts.  Soon after they retooled their marketing scheme to focus on nightclubs and the student market.  They would drive around in mini’s with large Red Bull cans strapped to the roofs.  This refocus allowed for England market to grow to the same size as their sales in Germany by 2000.

It wasn’t until 1997 that the product first appeared in the US.  The first test market was California and it was only a short time before Red Bull became a household name.  They learned from the failures and success in England and adapted a similar strategy in the US.  They would drive their cars ornamented with a giant can to college campuses, local beaches and nightclubs.  This marketing buzz propelled the drink across the states as a staple among party goers as an important mixer.  Bars felt the impact as they were serving Red Bull in a multitude of drinks.  The marketing machine that Red Bull had perfected was running on autopilot as they continue to see their sales and brand awareness grow consistently.  

Expanding internationally can be one of the biggest steps in the history of your business.  It marks a point when your size and growth are doing well enough to begin the next stage in your company.  It can be a milestone that marks the beginning of a new chapter of growth.  The hurdle of course is getting to that point of success.  You are welcome to celebrate immediately after, but it won’t be a very good indication as to if it was a good idea in the long run.  In fact, there are a long list of companies, large and small alike, that failed to look beyond and eventually failed in their international expansion.  These ventures can fail for a whole host of reasons, bad timing, stiff competition, too rapid expansion.  Behind all of these reasons lie a distinct lack of preparedness and knowledge of the situation.  Large companies like Target, Best Buy and Walmart have all had a significant failure in their history when trying to expand abroad.  By looking at these 3 examples we can try to see where their mistakes were and how not to follow in their footsteps.

Targets failed expansion into Canada is one of the more recent failures that we can draw upon.  Target is a retail giant that was founded in 1902 that is currently headquartered in minneapolis, minnesota.  Target is currently the second largest discount retailer in the United States.  The main competition coming from Canada, more of which i’ll have later.  The expansion was first announced in 2011 after decades of growth and success in the united states.  The retailer was expecting to extremely rapidly recoup their massive $4 billion investment into the expansion.  The hope was that store in Canada would become profitable by the year 2013, but an unbiased international analysis concluded that there was no possible way of profitability until at least 2021.  In January of 2015, Target decided to close all 133 stores in Canada.

What could have led to such a catastrophic failure?  To put it simply, their information gathered was both incorrect and incomplete.  To start off, Target decided to buy all 133 pre existing stores from Canadian retailer, Zellers.  This was a great way to cut costs, but in the end turned out to be a mistake.  This was a mistake for two reasons.  First, instead of having locations that were researched and picked out, they were stuck with whatever location the existing store was in.  On top of that, many of the stores couldn’t support that amount of merchandise and had to be renovated.  This renovation ended up being a lot more than was initially planned.  These locations weren’t always that accessible for receiving products as well.

Many of the times canadian shoppers would chose to go to a canadian target, the shelves ended up being mostly bare.  Targets problems lied in their supply chain.  They had to decided to expand so rapidly that their stores could not supply many of the items featured in their stores.  Their entrance strategy was poorly planned, but they also failed to the requisite research on their customer base.  Often times customers would find that shopping at walmart was significantly cheaper and had already had 2 years of familiarity to overcome.When Target finally leave did the market in Canada, it left over 17,000 people out of a job and created a negative ripple through the rest of their business operations.This might have been a grand failure for Target, but offers a lot of insight for the rest of us.

Best Buy is another Minnesota based company that had a negative foray into international expansion.  They had already established themselves in other international markets, such as puerto rico, mexico and canada.  In 2006 they began their efforts of expanding into china.  Their plan was to slowly acquire the chinese company, Five Star.  After a few years they finished off buying the rest of the stakeholders in Five Star and becoming the only owners of Five Stars.  Shortly after this they opened up 9 of their own stores.  Unfortunately, these stores only lasted 5 years before being forced to close.

One of the biggest points that Best Buy failed to address when researching this expansion was how stiff the competition in the chinese market really was.  With so many traditional brick and mortar stores, as well as a slew of competing e commerce, Best Buy never had a great chance of gaining a meaningful foothold.  Best Buy also didn’t do the requisite research on their perspective consumers.  At almost every point, Best Buy was seen as an expensive alternative.  They were not able to compete with established companies that had to do very little fend off  Best Buy.

The other point that  Best Buy failed to account for was the integration of Best Buy and Five Star together.  Both companies  had separate and distinct finance and IT departments as well different supply chains.  Because of this, merging both companies become a very difficult task.  This along with rampant counterfeiting made doing business in China extremely difficult for Best Buy.

Best Buy still had 184 of the Five Star locations, and after closing down the 9 Best Buys, they decided to focus on Five Star.  Just three years after this decision, the remaining Five Star locations were sold to a chinese real estate company.  After 8 years of business in the Chinese market, Best Buy had little to show for it.  Much of their problems could have been avoided with a little more foresight aided with more comprehensive research and knowledge.