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Real Life Mistakes In International Business

By Edited Nov 13, 2013 0 1

Customs and beliefs is another area which create big difference for doing business in foreign countries. The customs and beliefs are surely to differ among cultures and thus understanding the foreign culture is one of the essential parts in international business. If a firm is unaware of the foreign norms and practices, they might have done something which violate the host country's customs or offend the citizens.

As for Revlon's expansion in Brazil, they faced disaster due to overlook the country's customs and beliefs. Following the practices in Brazil, the Camellia flower is for funeral purpose. Unconscious about this practice, Revlon launched a perfume with the aroma of Camellia in the country. This perfume received gloomy respond from the market as the Camellia is only meant for funeral intention to the Brazilians. Revlon thus have to pay for their mistake. They need to recall back their product and find other market to sell it. This not only spent extra time, effort, but also money. Revlon not only cannot make profit in Brazil but have to pay extra expenses. Moreover, their brand name has been infected by this incident as they are being viewed as disrespecting the culture.

Revlon has made a mistake which MNC should not. They should have avoided from making this error by learning the idea of Cultural Intelligence (CQ). CQ is the ability to adapt and work effectively and respectfully with people from other culture, while simultaneously maintaining your own identity. If Revlon practice the idea of CQ, they will realize the dos and don'ts of a culture and act accordingly. They will recognize the meaning behind the Camellia flower and perhaps launched other type of perfume.

What is legal in one country might not be legal in another. Firms have to deal with the laws of different countries if they wish to expand their business over there. Therefore, firms must first research the laws of the particular country, such as tax laws, customs laws, labor laws, liability laws, and the producer or distributor liability provisions. It is important to understand and obey the laws of the foreign country in order to make sure our business operations are going smoothly over the time.

According to China's top trade union, some foreign fast-food chains, including McDonald's, KFC and Pizza Hut, are found to have violated China's labor laws because they underpay part-time workers in the southern city of Guangzhou. Guangzhou's minimum wage is 97 US cents per hours for part-time workers, but according to the newspaper's undercover investigation, McDonald's pays only 52 US cents, KFC pays 61 US cents, and Pizza Hut pays 65 US cents, per hour for part-time workers. These issues have seriously damaged their reputation, and it will be affecting the joining of new staff in future. Lack of staffs may cause reduction in customer satisfaction, and then in the end, this will affect the sales and profit of those companies.

Rule-based theories can be applied as a solution in these cases. These theories are emphasizing on duty, obligation, and rights. For example, an employee has an obligation to ensure the task that being assigned to him/her is not illegal or harmful to other person. In these cases, managers of those fast-food chains have an obligation to disagree on the low-wages policies as it is illegal and protecting those employees and companies from loses.

According to the American Marketing Association (AMA), a brand is defined as a name, term, sign, symbol, or design which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. A brand is a thing that we own and nobody can take away from us. It creates a lasting value above and beyond all the other elements of the business. Brand stands for company's reputation. Maintaining a reputation will promise a long lasting profit.

Company brand is a promise they made to its customers. A promise that Kmart made to its consumers was great prices on branded goods, with the tradeoff that service would be of lower quality than at higher-priced stores. However, Kmart failed to manage its brand to keep up with its rival, the Wal-Mart, who offers lower prices and better service. Thus, Kmart had lost its competitive advantage to Wal-Mart. Kmart's brand had lost its value and no longer trusted because it had failed to fulfill its promise. Eventually, Kmart went bankrupt.

Business strategy is what exactly needed by Kmart to avoid its bankruptcy. The business strategy that identified by Porter consist of cost leadership, differentiation, and a focus strategy. Cost leadership emphasize on tight cost control, efficient operations, low overhead, and leveraging the benefits of a well managed supply chain in keeping costs low, therefore it can help Kmart to achieve lowest selling price of goods. Besides the lower price of goods, Kmart should create a different value in its brand to be different from Wal-Mart. Focus means choosing a narrow niche in an industry and tailoring a strategy to serve clients in this niche. Kmart should focus on the value behind its brand name, which is to serve low price items, and focus on developing low price strategy.

Companies usually start their businesses in home country before expanding to overseas. Similarly, after our triumph in Malaysia, we want to move out of the country. What we have done in Malaysia has brought us success but will it be the same if we do it the same way in foreign countries? The answer is usually doubtful and shows to be false as we will have to modify our product to adapt to foreign needs and market. If we failed to do so, our product will not work and sell in foreign countries.

For instance, the Apple Computer Inc. is considered as naïve when first sell their computer to the Japanese. The company is a U.S. based company and when entering the Japan market, they bring their U.S. model into the host country, with the hope that entering the market faster than their rival, the IBM, will bring them big prosperity. Nevertheless, the reality proved that Apple is wrong. The Japanese cannot accept the U.S. style product with totally no adaptation to their requirement, not even translating the user's manual into Japanese. Apple thus lost their advantage of being the first mover and their market share to their rival after IBM entered the country with customized approach. Realizing their mistake after the rival's success is too late as all the effort which Apple has done previously benefits only the competitor.

Apple should have done culture mapping before expanding their business to Japan. It is a useful tool for company to understand the facts and information about a particular culture. Through the Cultural Orientations Framework by Kluckhohn and Strodtbeck, the company can gain an insight on the Japanese society like their relationship to the environment and people, their mode of activity, their use of time and space, and etc. These understanding can avoid the company from doing the mistake above and help them in adapting their product.



Sep 16, 2010 3:44am
Good example of Apple's failure to adapt to Japan's market.
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