The Seven Most Common Mistakes Coffee Companies Make When Going Global and How To Avoid Them

by Mona Pearl

In the not too distant future, businesses will be placed into one of two categories: those that skillfully entered into the global marketplace and those that sheepishly exited out of business. A wait-and-see mindset is nothing short of organizational suicide. However, a reactionary, ill-conceived global expansion is no improvement. That, too, spells disaster.

Mistake #1: Underestimating the Time Horizon for Your Product/Services

Don’t put your plans at risk by budgeting for too short a time horizon. One of the most unpleasant risks is running out of money, after so much work and time have been invested. Be prepared for doing business to take much longer than you anticipate. It always does. There is no set time one can predict and plan on for things to happen. Unless you build the necessary relationships, it can take a long time to establish the right network and channels of distribution.  If, for example, you look at the online index that shows the ease of doing business in various countries (http://www.doingbusiness.org/rankings), you can at least get the proper estimate and start planning accordingly, and be prepared to deal with the bureaucracy aspect of doing business in certain countries. It is not as simple as just moving your product or store concept from your local market to a target market. After looking at this index, you’ll need to be able to interpret the information and analyze how it affects your business plans and what may be the best ways to overcome some of the hurdles.

Mistake #2: Not Having Clear Objectives and a Roadmap

It all starts with asking the right questions. Don’t skip this critical step—you can significantly increase your chances of success by starting with researching the market and the competition, setting clear objectives, timelines, milestones and metrics. Make sure you define and target the right market(s) for your product/service. Don’t just follow the crowds. Also, choose the appropriate mode for entering a particular foreign country and/or region. Not having a good roadmap can turn out to be very costly for your company.

One coffee company has done a great job entering a saturated market in Turkey banking on the idea that it is a foreign brand. Will the trend of drinking foreign brand coffees get old? If yes, when? All this needs to be taken into account and just because it worked for one company it may not be a successful strategy for another one. What works best, locally and globally?

Mistake #3: Improperly Judging Risk

Understanding your exposure to risk – as well as time horizon and objectives—will help you better plan for success and make better strategic decisions. I don’t mean for you to become risk averse. It is about being able to assess risk and have a contingent plan.

When conducting transactions across borders, an international business must deal with government restrictions, and find ways to work within the limits imposed by specific governmental interventions in the international trade and investment system. Competition is not just the other companies in that market.  Judging risk wasn’t part of one coffee company’s expansion into a certain market, and they had to close all the stores in that country.  Their official message was that it was a business decision not a political decision.

Mistake #4: Confusing Sales with Long-Term Business Development

How you enter a market, who your partners are, and the mode you generate your first sales can have a profound implication on just how successful you will be in the long run. Begin with the end in mind. Develop the right strategy, using the right tactics and have in place relationships that are sustainable. Think about how you will position, brand and grow your business for the long run, and not just the ‘touch and go’ way.

In some countries, coffee is engraved in the everyday life and is a symbol of hospitality like in many countries in the Middle East and Latin America. We are talking black, strong coffee… In the US, coffee actually became a lifestyle statement not too long ago with Starbucks taking the market in a storm and changing habits as well as perception.

Mistake #5: Forgetting the Fundamental Importance of Cultural Differences

When venturing globally, one has to be sensitive to nuances in order to get the deal done. Many business transactions were halted or terminated due to cultural misunderstandings, or to be a bit blunt, cultural ignorance. Don’t assume. Do your homework.

Managers in an international business environment must not only be sensitive to cultural and language differences, but they must also adopt the appropriate policies and strategies for coping with them.

So how do you like your coffee? What are consumers’ habits and attitudes towards coffee? Large servings? Smaller servings? Do you want your coffee in a trendy retail environment, or standing by the counter, or is it coffee to go? When do people like to drink their coffee? Breakfast? Afternoon? After dinner? All day long? How does this triangle play out in different countries and cultures? How does your brand, supply chain and plan fit into this? How can you innovate and find and/or create the right match in markets and regions around the world?

Mistake #6: Making Decisions Based Only on Widely Known Information

For example, coffee is liked around the world, but the habits of drinking coffee are pretty diverse. Do you know what sets apart coffee drinkers in the Middle East from coffee drinkers in Latin America? There is no one way of doing business, and no one way of liking your coffee. One size does not fit all. 

One has to follow a strategy that fits their product/service, business objectives and corporate culture and then match it with the appropriate country and/or region. Differences among countries require that an international business vary its practices by country. Marketing a product in Venezuela may require a different approach from marketing the product in Argentina, although one may assume that since they are both in Latin America, they should be able to sue the same strategies and tactics.

Managing US workers might require different skills than managing Egyptian workers. Maintaining close relations with a particular level of government may be very important in Mexico and irrelevant in the UK. If you disregard one component, you are sure to dramatically increase your chances for failure.

Mistake #7: Being Overconfident in Your Global Expansion Skills

Seek professional advice to navigate the unknown and use other people’s experience to help you succeed and follow a smooth road. Even if it is to just validate your approach and planned activities.

A little humility goes a long way in combating the overconfidence error. Remember that what got you to be successful in your domestic market, in most cases won’t get you there. At the most fundamental level, the differences arise from the simple fact that countries are different. Countries differ in their cultures, political systems, economic systems, legal systems, and levels of economic development. Many of these differences are very profound and enduring.

Globalization: No Longer a Choice 

Without question, the world has transformed from a collection of regional or national economies into a truly global economy as a result of advances in technology, the opening of new markets, trade agreements, lower tariffs, improved transportation and easier communication abroad. While these trends offer enormous opportunity to expand sales and partnerships into new world markets, the flip side is stronger competition abroad, which is intensifying each  day.

Although it’s tempting for companies of all sizes to focus and dwell on the many overwhelming issues of the day such as weak economic growth at home, an uncertain credit crisis, a shrinking pool of skill and talent, and increased foreign competition; the fact remains, these issues are not within the control of corporate management. Instead, corporate leadership must take one large step back and look into the global marketplace to discover new opportunities and new avenues to generate future growth. While larger corporations have more resources to invest in exploiting these new opportunities, smaller companies are more agile and readily adapt to change. Regardless of corporate size, global opportunities abound.

The Challenge

A common challenge, however, for many companies is summed up in one word: mindset. Fueled by our rugged individualistic and isolationist heritage, it’s no surprise that collaboration across international boundaries requires a significant level of reconditioning. Fortunately, with a large dose of commitment, mindset can be corrected and this challenge can be overcome. How quickly depends on how serious companies are about joining the global marketplace.

Global Success Begins with Leadership

Successful global expansion starts with leaders who think proactively, sense and foresee emerging trends and act upon them without fear. To accomplish this, leaders need a global mindset and eagerness to look for new opportunities in developing markets. Many leading companies understand that in this new world order, simply having the right product and technology will not suffice. It is the caliber of their leadership and innovation that will make the difference.

Developing a global mindset requires corporate leaders to:

Integrate the global component of strategy into their corporate strategy and change thinking patterns and strategies from a single domestic focus to a broad global focus.

Manage uncertainty and fear while constantly adapting to change and accepting it as part of a process. Also, get the right people in place with the skills necessary to focus on international expansion.

Learn how to cooperate with partners worldwide by successfully managing global teams and alliances.

Once the proper leadership focus is in force, companies can begin the process of developing a road map to measurable and sustainable growth in the international marketplace.

Focus on Opportunities, Not Obstacles

Ultimately, a successful global expansion is dependent on a company’s ability to view the world in a new way. In this increasingly complex and competitive global environment exceptional skill is then needed to evaluate the options, manage the risks and execute a winning expansion strategy. Should a company fail, it may not get a second chance. Yet, when approached with careful deliberation, cross-border expansion can be a rewarding growth strategy for any business. Instead of gazing with fear at the process, focus with excitement and starry eyes at the opportunities and, most importantly, plan for success.

Mona Pearl’s experience in international strategic development and global entrepreneurship has been vital in helping companies design and execute their global strategies. Ms. Pearl is known for her out of the box thinking and developing creative solutions to tough challenges which produce bottom line results. She is a frequent speaker at global-related conferences and has co-authored two published books, including Grow Your Business Beyond Borders.

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