International expansion is a tricky path to navigate for even the world’s largest brands, requiring inconceivable amounts of time and resources to achieve, and despite their efforts many companies are still not successful. This can happen for a variety of reasons, anything from lack of sufficient market research to inadequate management style. Even the most experienced companies may struggle to develop a foothold in foreign markets. In marketing this is called the global experience learning curve: a process of developing multinational business expertise over time.
There are four distinct stages in this process, though not all companies move through the stages linearly.
The first stage, companies with no foreign marketing, describes companies that do not have any formal international marketing strategy. In this first stage, they may make sales to international customers through intermediaries or limited direct contact; however, these are minimal or incidental to their total sales. They focus their main marketing and operational efforts on their home market.
Under Armour was started in Washington D.C. in 1996. 1 In the late 1990’s and early 2000’s, the athletic wear brand fit well into this first stage. They had no international marketing strategy, primarily focused on the American sportswear market with appearances in the 1999 movie Any Given Sunday and partnerships with the National Hockey League, Major League Baseball, and the National Football League throughout the early 2000’s. 2
Under Armour made a strong impression with the introduction of its footwear, capturing “23 percent share of the market in its first year and [becoming] the official footwear supplier to the NFL.” 4 Watch Under Armour’s 2006 “Click Clack” television advertisement promoting the new line of American football cleats:
Despite opening some of its first international stores in China and Canada in the early 2010’s, 5 Under Armour is still very much a U.S.-centric company. Its toughest competitors are Nike and Adidas, which have strong holds in international markets in comparison. 6
The second stage in the global experience learning curve is companies with foreign marketing. In this stage, key planning and operations including manufacturing are still done domestically, but the international customer base is growing, and the company recognizes the importance of its international sales.
Let’s take a look at Ford Motor Company.
From his first horse-powered quadricycle in 1896 to the inception of the Ford Motor Company in 1903, 7 Henry Ford was an innovative entrepreneur, and many business lessons can be gleaned from him. The Model T was the cheapest car on the market, both from production and sales perspectives, allowing Ford to effectively capture a sizeable chunk of the automobile market by reaching a new customer base that had previously not been able to purchase and maintain expensive cars. 8 Ford’s cost leadership and low pricing strategy gave them a competitive advantage over rivals like General Motors, Dodge, and Chevrolet.
Prior to 1904, they were a company in the second stage of the global experience learning curve. Manufacturing was solely located in the U.S., and the majority of sales and marketing served the U.S. market with some international sales. Ford Motor Company built its first international manufacturing plant in Ontario in 1904 and its first international sales branch in Paris in 1908. 9
At this point, Ford enters the third stage: international marketing. Companies in this stage do not simply serve customers outside of their domestic market but have established international operations as well. The Canadian branch of Ford Motor Company was established with the purpose of producing vehicles that could be sold across the British Empire. 11
With the 2015 introduction of the Ford Mustang to international markets after “50 years and more than 9 million Mustang sales,” 12 Ford realized the classic all-American sports car was quite popular with European customers with the help of Hollywood’s influence. Sales surged when Ford began selling “decked out” versions of the car overseas and setting the starting price higher than those in the U.S. 13 The Mustang’s international success can, in part, be attributed to strategic pricing and product characteristics and an understanding of market trends.
While in the second stage, products and services are the same as those sold domestically, third stage companies serve international customers by modifying products and services to meet customer trends and preferences. For example, in 1976, Ford’s European branch released the Ford Fiesta that catered to the European market very successfully with its front-wheel drive and compact hatchback style. 14
The fourth stage, global marketing, is defined by companies that recognize the world as one market with several different customer segments as opposed to third stage international marketing that mainly focuses on the domestic market and identifies other markets based on traditional borders. Many global companies earn over 50% of their revenue from international markets.
Market research is a critical component of this stage in order for management to understand economic landscape, cultural and social trends, the business environment, political and legal factors, and specific market or industry conditions. These key factors are essential to successful expansion into foreign markets, yet many brands still struggle to recognize these.
“Wal-Mart’s experience in Germany, where it lost hundreds of millions of dollars since 1998 [to 2006], has become a sort of template for how not to expand into a country.” 16
Walmart provides some great examples for businesses planning to expand into another country. They are hugely successful in North America, Central America, Britain, and other parts of the world with their competitive edge and business expertise. However, acquisitions of disreputable chains, corporate policies and management style, and their low-price model (to name a few issues), grossly misaligned with cultural norms in other countries, leading to their downfall in markets such as Germany and South Korea. 17
In South Korea and Japan, low prices, unappealing store design, and product packaging were attributes customers did not value in those markets. In Germany, corporate practices such as morning chants and smiling at customers as well as underestimating the close relationship between companies and labor unions were only some of the reasons Walmart Germany fell into disarray. Lack of market research led to lost sales in other markets, “selling golf clubs in Brazil, where the game is unfamiliar, or ice skates in Mexico.” 18
That is not to say they were deterred from international markets. Continuing to learn lessons from their failures and capitalize on their advantages and experience, Walmart is the world’s largest company by revenue for the ninth year in a row. 19
Under Armour, Ford, and Walmart are a few of many brands that represent the four stages of the global experience learning curve. With effective websites and international shipping partners, many companies are able to move into international markets much quicker than ever before. This process highlights the necessity for preparedness with market research, understanding cultural differences, and developing competitive marketing strategies to tackle challenges and effectively penetrate new markets.
Questions marketing managers would consider:
What factors influence a brand’s success or failure in international markets?
Do you think Under Armour’s strong association with American sports has impacted its ability to expand into other countries? Or are there other reasons?
What marketing strategies have helped Ford Motor Company be successful over time?
You are a Walmart executive, and you want to enter a new market. What do you need to do before you open new stores?
References
1 Under Armour, Inc. (n.d.). Our Story. underarmour.com. https://about.underarmour.com/brand/our-story
2 Under Armour, Inc. (n.d.). Our Story. underarmour.com. https://about.underarmour.com/brand/our-story
3 Under Armour, Inc. (n.d.). Our Story. underarmour.com. https://about.underarmour.com/brand/our-story
4 Under Armour, Inc. (n.d.). Our Story. underarmour.com. https://about.underarmour.com/brand/our-story
5 Burke, M. (17 October 2013). Under Armour’s Aggressive Plan to Expand Overseas. Forbes. https://www.forbes.com/sites/monteburke/2013/10/17/under-armours-aggressive-plan-to-expand-overseas/?sh=582b9d1d4ee9
6 Trefis Team & Great Speculations. (1 December 2017). A Look at Under Armour’s International Presence. Forbes. https://www.forbes.com/sites/greatspeculations/2017/12/01/a-look-at-under-armours-international-presence/?sh=538c3636744c
7 Ford Motor Company. (2020). Company Timeline. corporate.ford.com. https://corporate.ford.com/about/history/company-timeline.html
8 Koch, R. (11 October 2016). How Ford Created a Huge Market by Lowering its Prices. Entrepreneur Media, Inc. https://www.entrepreneur.com/growing-a-business/how-ford-created-a-huge-market-by-lowering-its-prices/282218
9 Ford Motor Company. (2020). Company Timeline. corporate.ford.com. https://corporate.ford.com/about/history/company-timeline.html
10 Ford Motor Company. (2020). Company Timeline. corporate.ford.com. https://corporate.ford.com/about/history/company-timeline.html
11 Ford Motor Company. (2020). Company Timeline. corporate.ford.com. https://corporate.ford.com/about/history/company-timeline.html
12 Stock, K. (12 March 2018). Ford’s New Mustang Is No Longer an American Car. Bloomberg. https://www.bloomberg.com/news/articles/2018-03-12/how-europeans-are-saving-the-ford-mustang?leadSource=uverify%20wall
13 Stock, K. (12 March 2018). Ford’s New Mustang Is No Longer an American Car. Bloomberg. https://www.bloomberg.com/news/articles/2018-03-12/how-europeans-are-saving-the-ford-mustang?leadSource=uverify%20wall
14 Ford Motor Company. (2020). Company Timeline. corporate.ford.com. https://corporate.ford.com/about/history/company-timeline.html
15 Corkery, M. (25 July 2022). Walmart lowers profit forecast as inflation hits customers’ wallets. The New York Times. https://www.nytimes.com/2022/07/25/business/walmart-lowers-profit-forecast-inflation.html
16 Landler, M. & Barbaro, M. (2 August 2006). Wal-Mart Finds That Its Formula Doesn’t Fit Every Culture. The New York Times. https://www.nytimes.com/2006/08/02/business/worldbusiness/02walmart.html
17 Landler, M. & Barbaro, M. (2 August 2006). Wal-Mart Finds That Its Formula Doesn’t Fit Every Culture. The New York Times. https://www.nytimes.com/2006/08/02/business/worldbusiness/02walmart.html
18 Landler, M. & Barbaro, M. (2 August 2006). Wal-Mart Finds That Its Formula Doesn’t Fit Every Culture. The New York Times. https://www.nytimes.com/2006/08/02/business/worldbusiness/02walmart.html
19 Fortune. (2022). Global 500. Fortune Media IP Limited. https://fortune.com/global500/
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