Running headlong into hurdles – What is really core to my success when my company wants to grow ?

Why do companies so often fail when they try to enter into new markets?

The simple answer is that they are all too often victims of their own success. Once a business and its leadership has had success in one market, the tendency is to believe that that success can be reliably replicated, that the leadership has learned (often the hard way) all of the pitfalls that exist and know how to overcome them. There is a tendency to downplay the need to engage local experts and to spend the time to analyze the differences between the market a company is active in and the one they want to enter.

The reality is that businesses more often than not fail to meet expectations when they expand geographically, running headlong into hurdles instead of leaping over them, or being able to move them out of the way. One of the most painful lessons that all companies must learn when the grow geographically is that many things that they thought were core to their success, end up being unnecessary baggage that is not needed – legally, financially or culturally – in a new market. And that systems, management and processes are often very ill-suited to handle operations outside of the country where they started. This process is difficult to swallow, but over the long run can be enormously valuable to companies truly understanding what truly drives their success and what are the add-ons required for a given market.

Even markets that appear on the surface to be similar such as have major differences between. Take Colombia, Peru and Ecuador as an example. They share a common language, similar tax and legal structure and appear to have many cultural similarities. On the surface, a plan that works in one market, should work in all three. The reality is that the long and rich history of these neighbors and their different systems of government over the last decades have led to subtle but important differences between them. Anyone who is not an expert would be hard pressed to identify these differences clearly, but they are crucial to the success and failure of a business. Even when a hurdle only creates a stumble and not a fall that stumble costs time and money and can damage the reputation of a new entry into a market at the early stage when building confidence is crucial.

Unfortunately many companies downplay the need to understand these issues and plan out a way to handle them beforehand. Taking the time, and working with experts on the market can not only help minimize risks and improve chances for success it can drastically reduce the total costs to enter into a new market.

When you look at the picture at the top of this article. Some people see a beautiful tourist shot somewhere high in the Andes in Northern Argentina, Chile or Bolivia. Others see the fact that the salt may contain Potash, Borate or most promising of all, Lithium and as such may be the site of a modern day gold rush. Still others see these things and three more:

1. if it is in Argentina, huge potential with a measure of concern about the sustainability of the new governments improved fiscal and investment property
2. If it is in Chile a fiscally stable and responsible market with significant short term challenges to get mining permits due to a recent scandal in the mining industry
3. If it is Bolivia, at least for now a nice tourist shot as the government has decided to not allow the development of the world’s largest salt resources for social reasons

 When the decision is reached to expand, too many companies rush in without adequate planning and support. That is the reason why so many companies grow out of North America or Europe, only to give up after a few months or a few years. Those that take the time to plan and educate themselves are typically the ones that go from being a company with a few overseas holdings to becoming a successful multinational.

Warren Levy July 13, 2016