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07/02/2012

Navigating Foreign Markets

Today the race to grow internationally is becoming increasingly competitive. As retailers explore opportunities in foreign markets, they often examine merchandising, store locations and logistics but fail to take cultural differences into consideration.

Yet to be successful, retailers must be sensitive to local differences surrounding customer service, shopping habits and employee values. They also must factor in management styles that can vary drastically by culture. The definition and practice of customer service, however, varies greatly from country to country. In Germany, laws limit store and employee hours, resulting in less shopping time for customers and placing increased demands on employees to move products. The concept of a customer-service-driven business is "foreign" in some countries, especially in the Eastern Bloc, where because of the history of state-owned retail outlets, friendliness and service outreach are not expectations and might be considered inconveniences to employees.

The definition and practice of customer service varies greatly from country to country.

Assigning Responsibility

One of the greatest challenges retailers face in expanding globally is determining what leadership style works best in varying countries. In the United States, retailers often lead from the top, setting goals for the business and expecting employees to deliver results accordingly. At the same time, U.S. retailers want customer-facing employees to provide feedback on what works and what does not for meeting customer needs.

In many other countries, however, employees believe it is management's responsibility to deliver results, while employees focus on their own niche responsibilities. Open discussions between managers and employees about the business is absent as the culture often discourages these discussions. In many Asian countries, including China and Japan, discussing poor performance can result in employee humiliation. In parts of Europe, including Italy, Spain and Germany, employees focus on doing their assigned duties and following rules, and they believe this is "good enough." In Australia, historical culture has reinforced an all-for-one approach to working together, which discourages people from standing out. Management does not celebrate or recognize individuals' high performance, and individual incentive plans do not typically work well.

Different Cultures, Different Approaches

Different approaches in different countries can lead to a matrix style of management between corporate in the United States and operations in other countries. Matrix-style management can be a highly effective way to manage and benefit from multiple geographies, product lines, customer sectors and services, while delivering efficiencies and economies of scale.

While opportunities exist for companies seeking to go global, less efficient and culturally unaware retailers ultimately will fail on this platform. But for those retailers that invest in understanding cultural variation, leadership style and effective organizational strategy, the dividends of success on a global platform are boundless.

Craig Rowley is vice president and global leader of Hay Group's retail practice.