ASSIGNMENT

Analyse a critical failure or problem

faced by accompany during its
inter-nationalization process
Daniele Lapenna ID: 2019591196
Wisely ID: 2019190073
Sojin Paik ID: 2019190058
GROUP ESSAY: CARREFOUR
IN SOUTH KOREA
Operation and Management of MC
Index

1. A brief introduction of the background of the chosen company.............................................................2

1.1. Birth and growth of Carrefour...........................................................................................................................2

1.2. Carrefour’s Business Strategy...........................................................................................................................3

1.3. Carrefour’s Internationalization Process........................................................................................................4

1.4. Carrefour’s Internationalization Strategy.......................................................................................................5

1.4.1. Multiple Formats.............................................................................................................................................5

1.4.2. Growth through franchises and partnerships................................................................................................5

1.4.3. A global concept tailored to local conditions.................................................................................................5

2. Carrefour in South Korea Market.......................................................................................................................6

2.1 Identification of problems causing Carrefour’s failure..................................................................................7

2.1.1. Lack of localization..........................................................................................................................................7

2.1.2. Friction between management employees and suppliers.............................................................................8

2.1.3. Bad competition-management.....................................................................................................................10

3. Conclusion.................................................................................................................................................................11

3.1. Summary.............................................................................................................................................................11

3.1.1 Strategic Importance of Local Market...........................................................................................................11

3.1.2. Competitive Advantage of the Local Business.............................................................................................12

3.1.3. Partnership with local business....................................................................................................................13

3.1.4. Time to enter the Market..............................................................................................................................13

3.2. Suggestion...........................................................................................................................................................14

1
1. A brief introduction of the background of the
chosen company
1.1. Birth and growth of Carrefour

Carrefour is a chain of supermarkets and hypermarkets in France. The group was created by Marcel
Fournier and Louis Defforey. The first Carrefour supermarket opened in 1959 in France, then
became the smallest Carrefour store in the world.

Carrefour is the fourth largest retail group in the world in terms of income and sales and the second
largest in Europe, after the German Schwarz group. It is present in 30 countries, mainly in the Euro-
pean Union, Brazil and Argentina, as well as in North Africa and Asia. The sales network consists
of hypermarkets, shopping centres, food markets, own business formats, affiliated brands.

Carrefour has three main signs:

Carrefour hypermarkets serve tens of thousands

of consumers mainly living in densely popu-lated
areas. They form the heart of large shop-ping
centres located close to urban centres.

The Carrefour Market sign shops are designed

to meet the needs of frequent shopping, from
daily to weekly, within the urban perimeter of
the cities as in the small provincial centres.

Carrefour Express is the sign used for the

neigh-bourhood supermarket able to meet the
daily spending needs.

2
1.2. Carrefour’s Business Strategy

The main aspects of the business strategy of Carrefour can be summarized in six points:

1. Optimizing Resources
Carrefour’s growth is based on a multiple format setup. It was organized so as to best make
use of the Group’s local resources. The new logistic organization for supermarkets and con-
venience stores will result in significant economies of scale for both formats.

2. Positioning in Discount
Wherever the Carrefour Group does business, its stores have further moved its market po-
sitioning towards the discount end through a policy of low prices and largescale promotions.

3. Quality products
Food quality and safety are one of the Group’s ongoing priorities. This concern has resulted
in the creation of Carrefour Quality Lines supply network, ten years ago.

4. Innovation
Stimulated by low prices, stores have found effective and inventive tools to drive the sales
momentum. The Group has multiplied innovations by introducing new concepts in all of
the formats, launching new product lines.

5. Loyalty Cards
Loyalty cards continue to be increasingly used. Today, 21 million households in Europe own
a loyalty card from one of the Group’s banners. It is a tool through which Carrefour
maintains a close relationship with its customers.

6. Customers Services
Over the years, Carrefour has added numerous practical and accessible services to its offer-
ing. The Group has thus become a competitive player and the benchmark in several areas
of activity outside of its core business line.

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1.3. Carrefour’s Internationalization Process

Over its 50 years of existence, the relevance of its hypermarket concept has opened the doors
of 30 countries to the Group. Hence, Carrefour has a considerable growth margin for its two
other global business lines — the supermarket and the hard discount store. With a solid base
in 30 countries spanning four continents, in 2002 Carrefour began a new expansion phase
oriented on building upon its existing network and regionalizing its concepts. During 2002 –
the “golden year”, Carrefour opened 657 stores.

In Europe, the stepped-up expansion program resulted in the opening of 17 hypermarkets and
71 supermarkets, enabling the Group to win market share in all of the countries where it oper-
ates, particularly those where it most recently entered.

In Latin America, the Group plans to add to its existing network by playing on the diversity of its
formats and targeting densely populated regions. In Argentina, the economic crisis hampered the
growth of hypermarket and supermarket names, but favoured Dia’s advance, whose con-cept
proved particularly appropriate in the tough economic and social environment. In Brazil, the
expansion in hypermarkets and supermarkets resumed. The Group was on the upswing in the rest
of Latin America with new store openings in Mexico and Colombia.

Asia accounted for 42% of new hypermarket openings. Carrefour opened a fourth hypermarket
in Japan, confirming its plans to expand into a promising market, and it stepped up its
introduc-tion in China’s major cities.

4
1.4. Carrefour’s Internationalization Strategy

In most of the countries where the Group is established, market shares are gained by either
opening new retail outlets or adding to the existing ones. Therefore, in order to achieve its
objectives and at the same time control costs, Carrefour uses various growth paths to help it to
advance while pre-serving its capital.

1.4.1. Multiple Formats

In countries with mature markets, supermarkets, hard discount stores and convenience store net-
works are the preferred paths for expansion. The long-term objective is to supplement the network of
hyper- markets by installing other formats so as to offer consumers a wide range of sales spaces and
product lines that suit their lifestyles. Expanding through multiple formats also speeds up the
penetration into a country by profiting from the complementarity of the various formats.

1.4.2. Growth through franchises and partnerships

Franchising is one of Carrefour’s means of expansion. It allows store banners to expand rapidly in a
country while boosting their purchasing power and limiting their capital expenditures. At 15% of
Carrefour’s consolidated sales, this method of operation is very well developed in Europe in all the
formats. Partnerships also let the Group introduce its concepts in other countries by drawing on its
partners’ expertise. This is why Carrefour is very successful in Romania, Tunisia and Egypt.

1.4.3. A global concept tailored to local conditions

Although Carrefour is world-class in terms of size and the resources it allocates to growth, it has
chosen to adapt its concepts to local cultures and consumer habits. In this spirit, it relies on a de-
centralized organization formed from over 50 operating units. Each one is responsible for develop-ing
a format and its product lines in one country. This operating method relies on local initiative, thereby
providing for the best possible match of store configuration with consumers’ expectations.

Over 90% of the banners’ product lines are local, if not regional. Thus, in China, rice is sold in bulk
and a special infrastructure has been set up to sell live fish, turtles, frogs and sea food. Conversely,
in Japan, all perishable goods are carefully packaged, since the Japanese have a deep aversion to
products exposed to the open air. Within a given country, the banners aim constantly at gaining a
better foothold in the local fabric. To foster this movement, Carrefour has further decentralized its
organization in France by focusing its energies on the regions.

Carrefour has traditionally been the biggest exporter of hypermarkets in the world, introducing
the concept in France as far back as in 1963, in Latin America in 1975 and in Asia in 1989. Quite
often, the arrival of a new Carrefour store enables people to discover and appreciate a new form
of com-merce by bringing them constant innovations and a choice of products that extends
beyond the local offering.

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2. Carrefour in South Korea Market
In 1989, overseas travel be common to Korean, and Korea began to embrace globalization. The
South Korean government declared globalization in 1994. This meant that the Korean economy
should be more active in reaching the world in order for Korea to continue its development amid
the growing international exchanges. Thanks to the Korean government's policy to open foreign
investment in the retail sector, Carrefour received an investment approval of $60 million from the
Finance Ministry in March 1993, and opened its first store in the Middle East in Bucheon in July
1996 at the same time as the Korean government declared the opening of its retail market in
1996. South Korea was Carrefour's second-largest advance in Asia after Taiwan.

The head of the retail industry is Carrefour, which entered Korea in 1993. Carrefour, which saw the
potential of the Korean market in the 1990s, made a massive 1.2 trillion won investment in Korea.
When Carrefour opened, discount store was unfamiliar to consumers, because the concept itself
of discount store was not well known by consumers. However, a great domestic competitor was
al-ready in Korea - E-Mart- which was operating four stores in Korea before Carrefour entered. It’s
interest to compare Carrefour, the world’s second-largest retail retailer, with E-Mart, the No. 1
player in the domestic market.

Market Share (%) Operating Profit (%)

40,00% 9,00%

35,00% 8,00%

30,00% 7,00%

6,00%
25,00%

5,00%
20,00%

4,00%
15,00%
3,00%

10,00%
2,00%

5,00% 1,00%

0,00% 0,00%
Carrefour E-Mart Carrefour E-Mart

Won in Sales (Trillion)

 E-Mart

Carrefour

₩0,00 ₩1,00 ₩2,00 ₩3,00 ₩4,00 ₩5,00 ₩6,00 ₩7,00

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2.1 Identification of problems causing Carrefour’s failure

Who is writing afford that the main reasons Carrefour failed to survive in South Korea were:

1. Lack of localization;
2. Friction between management, employees and suppliers;
3. Bad competition-management.

2.1.1. Lack of localization

When multinational enterprises enter into a foreign market, they are required to develop a
strategy for the successful settling down in the market. Carrefour took a different approach. They
launched their businesses without any local partner in Korea and have generally sent C.E.O.s or
directors to Korea. They also believed in a lower pricing strategy without much concerns for the
quality of prod-ucts and services. This strategy of theirs has been successful in their own domestic
markets. Never-theless, Carrefour was closer to the standardization in the “adaptation-
standardization” strategy spectrum. Carrefour rarely cared about localization in the Korean retail
market. The biggest problem was “lack of understanding of Korean consumers”.

Carrefour ignored the characteristics of Koreans, instead of using Korean standard, it used global
standards. The organization of the stores was also applied with the global manual. For Korean con-
sumers, Carrefour's product line was too high. The high shelves put a strain on customers' choice
of goods, and the store structure and dark lighting, which were not at first sight, felt cramped and
stuffy, making purchases uncomfortable.

Korean consumers' spending patterns have the characteristics of buying fresh food first and indus-trial
products later, and they touch and buy fresh food. Therefore, although the stores had to be
constructed around fresh food and vegetables and fish had to be operated in unpackaged condition so
that they could be checked for themselves, Carrefour did not understand this domestic market
situation. In particular, sales at discount stores in Korea are more dependent on fresh food than on
manufactured goods, but Carrefour ignored these local characteristics and made the mistake of de-
ploying products mainly based on manufactured goods as it only followed global standards.

Carrefour has applied its price competitiveness-oriented global management strategy to the Korean
market, which reduces costs and provides many goods at a lower price through minimal staffing and
service. But consumers in Korea wanted a complex shopping space that could meet the diverse val-ues
of their customers, not just a shopping mall that displayed low-priced products. Carrefour, how-ever,
failed to read Korean consumers' appetite for discount stores and operated the store under a simple
warehouse-style system that minimizes convenience facilities like in other countries.

Local consumers prefer discount stores that are close to home because they sometimes stop by
discount stores and buy small quantities of products whenever they need them, rather than
buying many at once. But Carrefour is mostly private in suburban areas, to be transferred to
passive mar-keting strategy that makes customers to find itself.

7
Local discount stores were located near residential areas, and competitively operated shuttle
buses made it easier for consumers to get there, but Carrefour was not. Carrefour's promotion
was largely dependent on banners, direct mail (DM) advertising, and was negligent in promoting
Carrefour. However, rival discount stores actively promoted their products by utilizing various
media such as TV and leaflet advertisements, as well as DMs and banners.

Carrefour was the last local discount store to introduce credit card payments. The reason was the
reduction of profits from credit card commissions. However, credit card payments account for
more than 60 percent of the total sales at local discount stores. Although other rivals scrambled to
im-prove customer convenience and improve customer loyalty by developing alliance cards and
mile-age points, Carrefour belatedly introduced a card payment system only after it lost a chance
to make a bigger profit while chasing only small profits.

While rivals aggressively pursued marketing strategies to keep the promotion and payment
systems at the consumers’ level, Carrefour was forced to be alienated from Korean consumers by
conducting minimal marketing activities in accordance with its headquarters’ strategy.

The reason that Carrefour lacked understanding of the Korean market are these:

• First, most of its corporate and branch managers were French people who did not know
about Korean affairs at the time of its advance to Korea.
• Second, they pushed for a single-pocketed project without having strategic partners who
knew the situation there.
• Therefore, Carrefour has also been forced to move slower than its competitors. For
example, when deciding major management issues in Korea, like the payment system, it requires
ap-proval from its French headquarters, not its Korean subsidiary.

After Carrefour ignored these industrial characteristics and pushed ahead with its European-style
manual, it has forced to leave the Korean market of 23 trillion won.

2.1.2. Friction between management employees and suppliers

Failure in personnel management

Carrefour filled the employers with French locals. Communication between management staff and
Korean employees also was a serious problem. Carrefour was reluctant to hire Korean managerial
positions in the early days of its entry into Korea. Carrefour insisted on the French branch manager
system in the early stages of its entry into Korea, so communication with French and Korean em-
ployees was not smooth, and there were no experts who could understand the Korean market en-
vironment as both corporate and branch managers were French. The situation requires the Korean
employees memorize hundreds of different kinds of food, academic terms and so on in English.

However, problems in personnel management arose, with Carrefour starting salary at a low salary,
which is about the same as that of E-Mart manager, and six outside executives hired in 2000 leaving in
less than a year. In addition, under the Global Carrefour Project, distribution experts of domestic
corporations were dispatched to corporations in China and other third countries after 2001. Such
8
personnel management has made it impossible for Korea Carrefour to overtake its competitors
with distribution veterans in the lead.

Conflict with suppliers

Carrefour had the most friction with its suppliers among local rivals. In particular, conflicts with
cus-tomers were frequent and missed out on good clients due to unfair demands that cannot be
met by suppliers.

In Europe, it was customary to share advertising fees with suppliers, but in Korea it was customary
for discount stores to share them. Carrefour did not fully take into account this situation in Korea
and pushed it the way it was headquartered. Even though it is a foreign company, it has
demanded excessive dining and entertainment fees from suppliers and has even passed on the
costs incurred in making its internal payment system to suppliers.

Carrefour was difficult to sign a deal with a local buyer who could supply good fresh food by exces-
sively passing on delivery costs to its suppliers in the fresh food sector, the most important part of
the discount store, and lost its competitive edge in the market.

Frequent conflicts with employees

Carrefour has had frequent clashes between management and staff. Carrefour has been sued,
peti-tioned and sued by its employees every year for unfair dismissal, unfair telegram and breach
of various labour laws such as wage arrears.

• In June 2003, Carrefour was forced to close down its workplace due to labour disputes in
the Middle East in Bucheon. In 2005, a sexual harassment case at work led the union to file a
petition with the National Human Rights Commission against Carrefour.
• In August 2005, when the company opened its Jeonju branch, it promised to first hire local
residents and tried to convey Carrefour's image with the community. However, 90 percent of the
employees were found to belong to the service industry, not to the headquarters, which has
tarnished the image of the company due to strong protests from local residents and Jeonju City.

Carrefour has caused a lot of controversy from hiring employees, as well as conflicts with its internal
staff. Such frequent conflicts have been caused by the excessive reduction of labour costs to secure
price competitiveness of products, a key strategy of Carrefour, and also by poor communication with
foreign executives and employees who are not familiar with the characteristics of the Korean labour
market. Conflicts with employees were frequently reported in the media, leading consumers to have a
negative perception that Carrefour is a foreign company that doesn't know Korea well.

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2.1.3. Bad competition-management

Another reason that led Carrefour to failure is its wrong competition choice, especially about pre-
location. Carrefour sought aggressive management to pre-empt the market in the early days of its
advance into Korea. In fact, the first four stores opened in Bucheon, Ilsan, Dunsan in Daejeon

With land prices falling through the IMF (in 1997 Korea was faced with bankruptcy), E-Mart and
other large retailers used the currency advantages to set up a nationwide multi-store distribution

network. Otherwise, Carrefour didn’t manage to take the advantage of it. Samsung and Britain's
largest retailer Tesco joined hands to set up Homeplus in 1999, and with department store
industry starting to see maximum growth, only Carrefour stopped investing

The most important thing in the discount competition is the pre-emptive effect. You can make
money by building it in good places, first and foremost. But, since 2000, when Carrefour stock
prices began to plummet, the 2001 group's financial situation was very bad. Unfortunately,
Carrefour gave up its store and lost all of its good markets to other companies.

In conclusion, the Korean retail market has become oligopolistic. This oligopolistic market means a
more competitive market, and discount retailers should consider other strategies and expand their
business size for lower pricing. However, Carrefour generally adhered to a lower pricing strategy,
and because good locations are already taken by other competitors, it didn't succeed in finding
suit-able places to open new stores.

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Therefore, the business expansion by Carrefour in Korea was not successful. The numbers of
stores of E-Mart and Samsung-TESCO have continuously increased, while the numbers of stores of
Wal-Mart and Carrefour have not

3. Conclusion
3.1. Summary

In order to sum up, we can underline three main points:

1. Strategic Importance of Local Market;

2. Competitive Advantage of Local Business;
3. Partnership with Local Business;
4. Time to enter the market.

3.1.1 Strategic Importance of Local Market

The lower the strategic importance of the local market, the more multinational companies neglect
their efforts to localize, and consequently their performance in the local market may fall. Local
mar-kets can be classified according to the strategic importance of the local market. Recognizing
the importance of multinationals to the local market, the process of developing their strengths in
the region can be detrimental to localize.

The importance of the local market can affect management's attitude and strategy toward the
local market. In this context, the attitude of the Headquarters-subsidiary relationship and the
degree of authority's influence can affect the localization strategy because of the standardization
strategy. The Company's attitude may also be referred to as a management commitment in terms
of man-agement strategy. In general, management's will or attitude is recognized as an important
variable in the establishment of management strategies or in the determination of an entity's
performance. How much management cares about the local market, and how much risk-taking
efforts they are willing to make in unfamiliar local environments, can affect the degree of
localization of multina-tionals. In Carrefour's earlier case, Carrefour appears to have failed to meet
the standards of being a multinational company in employee management and supplier
management. It seems that he has done unethical management in this field. This can be
interpreted as the result of Carrefour's weak commitment to the Korean market and weak
resource input rather than its original interpretation of an unethical management system.

Localization efforts based on the importance of the local market can also be associated with the
relationship between the headquarters and its subsidiaries or with the help of the authority of the
headquarters. Localization requires a large number of management personnel, which can be pro-cured
internally or externally. In the procurement of internal management personnel, it may be concerned
with what policies and how this company manages its subsidiaries, and it may require considerable
self-management capability for external trillions of the standardization strategy is a centralized
structure, whereas localization can be understood as a decentralized one. It may be said
11
that in order for a decentralized structure to take place, it is necessary to foster authority and
ensure autonomy in the region.

In line with the above, it is interesting to make a brief comparison between the failure of Carrefour
in South Korea and Japan. Carrefour entered South Korea market in 1996 and entered Japan
market in 2000. The failure in South Korea was caused by the lack of localization toward the local
market. On the contrary, the failure in Japan was caused by an excess of location. In fact, Japanese
consum-ers would have preferred Western-style products, other than those they were
accustomed to. The failures in these two countries was fostered by Carrefour incapable to adjust
to the consumer be-haviour of each market.

3.1.2. Competitive Advantage of the Local Business

Multinational companies' performance in the local market may be affected by the competitiveness of
their local competitors. In the Korean market, Carrefour appears to have suffered in competition with
local rivals E-mart. E-mart has a good grasp of Korean consumers, especially since the retail business is
a chaebol group, which is the most familiar in the retail market in Korea. Local companies are familiar
with consumers' preferences and distribution structure in the market, can have strong brand power
and can be supported by the nationalism of ordinary consumers.

The stronger the competition in the market, the more you feel the need to differentiate yourself
from your competitors. Differentiation can be thought of discovering unmet consumers' needs,
overcoming the limitations of the institutional environment to sell products, all of which can be
said to be efforts to localize. The competitiveness of local companies related to localization may be
of special significance if they enter emerging markets. It may be emphasized that new strategies
and products must be developed when entering emerging markets for Western multinationals.
When products popularized in Western markets are introduced into emerging markets, only the
high-in-come bracket can consume them in many cases. Products and strategies targeting middle
and low-income earners in emerging markets need to be newly developed, and companies in
emerging mar-kets can outperform multinational companies in the West that have entered if they
are well tar-geted.

Carrefour must have felt a difficulty in the infrastructure involved in the discount store business in
Korea not being the same as that of the West, and there may be a lack of support for Korea in the
process of managing its business in various countries. In addition, the Korean market itself may not
be large enough, which may have been insufficient to achieve the economies of scale. On the
other hand, the fact that E-Mart is a local distributor who is good at local affairs, that it was able to
respond quickly compared to foreign companies, and that it was able to easily imitate Wal-Mart's
strengths, such as capital, information system technology, and logistics network, may have been
the founda-tion for E-Mart's success.

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3.1.3. Partnership with local business

A representative strategy that multinational companies can pursue in case of difficulties in localiza-
tion in foreign markets is the establishment of a joint venture or partnership with the current
branch. The functions of global partnership or global co-operative can be considered, but one of
the important things is that many national enterprises receive help in their insufficient sales skills,
cor-porate image, and government relations. In Western societies such as the United States and
France, the distribution structure of Asian countries is considered very different. In case of
discount stores, there are different business environments in Korea due to differences in urban
structure, housing type, and consumer culture in terms of location and product promotion.

In general, the advantages of cross-enterprise partnerships are as follows:

- Increasing market power;
- supplementing resources;
- acquiring social legitimacy;
- reducing environmental uncertainty.

A successful tie-up can complement scarce resources in South Korea's discount store market, and
also secure legitimacy in the local community through partnerships with local companies. This
strength is how to respond to the growing market presence and uncertain environment there.

3.1.4. Time to enter the Market

In the case of discount stores in Korea, it can be analyzed that the timing of Carrefour's entry into
the Korean market has influenced its localization and settlement. This can also be considered from
a pre-emptive strategy, which is likely to miss the opportunity of the local market if it is too late
for multinationals to successfully localize. Carrefour's relatively late entry into the Korean market
com-pared to its local unit, E-Mart, has thus been forced to lose almost all of its major commercial
dis-tricts' advantage.

There may be several inputs that determine competitors' dominance in the competitive structure
of an industry. Where these inputs are limited in supply, the preoccupation of these factors may
serve as an entry barrier for the late start-up entity. In the case of large discount stores in Korea,
the deciding factors for competitive advantage can be seen as good location and the securing of
competent purchasing professionals. E-Mart, a domestic company, is believed to have preempted
these factors by entering the market earlier than foreign companies. In the case of E-Mart, which
has the most experience in Korea's retail market, the business community is believed to have
placed first in the most advantageous position and secured many competent purchasing experts.

Accordingly, the relationship between the time of market entry and the localization strategy of
mul-tinationals can be considered from the perspective of the first mover advantage.

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3.2. Suggestion

Standardization or localization is the same dilemma that companies that go abroad always face in
establishing strategies. As the world becomes a huge market, there is a growing debate over the
conflicting attitudes of companies dealing with the global market.

The reason is that multinational companies are placed under conflicting pressures in the global en-
vironment. Contradictory pressure refers to pressure on global integration and localization. These
two pressures make multinationals face conflicting situations in deploying and coordinating the ac-
tivities of their overseas subsidiaries.

The high pressure of global integration means that the degree of standardization should be high
for products. Conversely, the high pressure of localization means that product and business
activities must be deployed and coordinated according to individual market conditions. Thus, the
establish-ment of a global strategy is a matter of choosing whether to standardize value activities
to simplify coordination of corporate activities, and whether to localize them in consideration of
local market conditions, although coordination activities are complex. Standardization enables a
single market-ing program for markets around the world, resulting in cost savings through
economies of scale. It can also deliver the same image internationally. On the other hand,
localization can maximize sales by effectively targeting the market as it can meet the needs of
consumers in individual markets in detail.

Usually, companies with competitive advantage or competitive edge in the industry will want to
operate overseas subsidiaries on a standard basis, preferably according to the headquarters
method. However, these operations often fail due to a lack of understanding of the local market.
Carrefour is an example of this.

Here are some suggestions for successful international expansion:

1. Have a clear reason for being. Firm should know exactly what they stand for and why they
are unique to the market.
2. Listen to customers and be flexible and be willing to change. Every market has a unique
local flavor, international firm needs to adapt to the local preferences in order to attract the local
customers.
3. Consider a joint venture with a local leader. Firm benefits from a local partner’s
knowledge of the host country’s competitive conditions and business systems. Firm also need to
con-sider when the development costs of opening a foreign market are high and political con-
siderations make joint ventures the only feasible entry mode.
4. Respect local culture and adapt to local customs. Marketing materials and collateral
simply need to be translated into the local language is a serious mistake. Marketing and
advertising campaigns are most successful if they originate in the local market and reflect local
values, culture, language and marketing nuances that may not be understood by domestic market-
ing resources.
5. Develop strong local management that has autonomy to respond to their market. Firm
must realize location economies and experience effects, to leverage products

14
 internationally, to transfer core competencies and skills within the company, and to simul-
taneously pay attention to pressures for local responsiveness.
6. Recognize local competition as a serious threat. The biggest advantage of local
competitors to international firm is that they understand the market conditions where they can
ade-quately benefit from it.

In order to succeed in a local market, companies and products eventually must be accepted as their
own. With the exception of products that thrive on being “imported” or whose brand is tied to an
allure of the originating country, companies should strive toward acceptance as a local brand.

15