Importance of conducting a cross-cultural analysis before entering new foreign markets

The cost of establishing a new enterprise in a foreign land is impacted by several factors such as competition, social factors, culture of the people, among other. The capability of the multinational company to survive the market turmoil centers on the effectiveness to handle such external pressures (Silva and Collette 2012, p.89). The primary focus of any business is to draw a massive pool of customers, through the use of optimal marketing strategies. Often quoted, Rossi (2012, p.353) opines that understanding the requirements of the native customers is helpful to the management since it enables the company to offer curated selections. For a business that expands in different locations, cross-cultural analysis cannot be ignored. It’s defined as the study of the habits and trends that confine the local consumers on particular spending structure. Wal-Mart is an illustrative example of a business that has survived in some of the localities due to the guided research of what people demand.

Entering a new market exposes the company to a myriad of challenges, primarily posed by the lack of enough knowledge of the host state. One of the criticalimportance of conducting the cross-cultural study is to understand the tastes and preferences of the customers. Different people uphold varied opinions in what they consume (Fang et al. 2017, p.555). In the cases study of Wal-Mart entry into the Chinese market, it was faced with the resistive populace that was not appealed by the strategy of packing foods that were not fresh. The company had to respond, to the point of displaying the meat in an openform. Also, they installed fish tanks where the customers could fish directly. Furthermore, the management realized that Chinese were bargain hunters and the low price strategy could excel in the country. By understanding the cultural behavior of the locals, the company has expanded and overtaken similar native businesses. It is estimated that Wal-Mart has grown from 66 stores to more than 243oulets  inChina (Freeman et al. 2011, p.490).

Furthermore, cross-cultural studies enable the business to understand the right strategy of entry. According to Hicks (2015, p.114), the various channels to establish foreign markets include franchise, licensing, exports and joint ventures. Irrespective of the method chosen by the management, the critical factor is to learn about the final buyer in a new arena.  A scenario case is illustratedby the Wal-Mart entry into Britain, Germany and South Korea. In the three countries, the local brands were well established and recognized by the respective citizens. They had developed local shopping habits, which was difficult to break (Horn 2015, p.78). As opposed to China and America, the customers in these countries were not moved by the price reduction. They valued the quality of the products, which Wal-Mart failed to champion for.The overall effect was to pull out and look for developing economies, where it could change the buying culture.

Far and above, an increase in sales hence profits arerealized when the company has a good understanding of what the locals are used to doing. The central objective of proliferated expansion is to increase the returns. However, if the proper analysis is not conducted, the company might end up making loses, that could have been mitigated through appreciating the modern tools of measuring the likings of the customers. The study indicates that Wal-Mart registered a total of $400 billion in total sales in all its stores (Lewisnsohhn-Zamir 2015, p.82). Approximately $91 billion were generated from the states which are outside the U.S. The figures indicate that a significant pie of return was gathered from the U.S markets.  The strategy of low priced products works well in the U.S, which has contributed to an estimated growth of 4200 stores. The expansion of the business to the outside environment is dependent on how well the management segment customers based on preferences (Karakaya and Stahl 2015, p.209).

In the same vein, operating costs are reduced when the business has the right knowledge of the cross-cultural diversity in various states. Forcing a particular model to work in a new area could render the company unproductive (King et al. 2014, p.1043). The blue ocean strategy illustrates that taking the path of less resistance allows the company to grow(Hicks 2015,p.114). Instead of focusing on competing with the rivals in the same sector, it’s paramount to identify a gap that needs to be filled.The entry of Wal-Mart in Britan, Germany, South Korea and later pulling from the markets was accompanied by loss of assets regarding finances(Lee et al. 2014,p.87). The business was registering retrogressive moves, fundamentally failing to achieve its core objective. If a proper market analysis was conducted, the company could have evaded the setback of stiff competition from the local enterprises.

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