International Expansion Mistakes: Lessons from 7 Companies
Boosting revenue, leaving a home market that is overly competitive or overcrowded, breaking into a new and profitable market, and utilizing domestic resources in a neighboring nation are common goals. However, there is no guarantee of success when expanding internationally; the business world is rife with failures.
Regrettably, companies that are eager to expand frequently take on or even create difficulties for which they are not prepared.
This could imply:
- Releasing a product before its readiness for sale.
- Launching a product whose production isn’t sustainable.
- Entering a delicate market.
- Obtaining a loan without having a plan for repaying it.
- Obtaining facilities that exceed your needs in terms of size and cost.
- Into uncharted territory and growing.
Most of the time, the outcome is a lack of cash flow and/or long-term harm to your reputation and relationships with customers. It may also lead to unneeded stress for you and your staff and even lead to layoffs. Put otherwise, untimely expansion might have negative effects on your employees, clients, and company.
Not surprisingly, given all those possible problems, a large number of new firms fail. Not just in the first year or two, when you would think they would be most vulnerable, but even years afterward. Indeed, just thirty percent of newly established companies fail in the first two years. However, two thirds fail during the first ten years, and half fail within five.
Does anything here ring familiar to you? So, stay with us. In addition to examining several instances of businesses that have already made similar errors and learnt from them, we’ll also lay down some guidelines that should assist you avoid making the same expansion mistakes.
The Crumbs Bake Shop Expansion Mistake
In 2003, Crumbs Bake Shop opened. They were purchased by a holding firm in 2011 for $66 million. Following that, the business went public at a $13 share price. In June 2014, barely three years later, Crumbs’ share price had dropped to a pitiful $0.15. Hurt. It shuttered all 48 of its stores that summer, but three months later it reopened half of them. However, it was simply a reprieve from death. All surviving Crumbs locations were permanently closed in December 2016.
A significant contributing element to Crumbs’ ascendancy and later decline was their narrow-minded concentration on a lone, vogue item: cupcakes. Crumbs made the decision to aggressively invest in pricey retail real estate. Easily the size of a four-bedroom house, one of their stores was enormous, spanning 3,300 square feet and situated close to Chicago.
KIND Snacks
KIND Snacks is a firm that specializes in nutritious snacks and is situated in New York. Sales in 2012 were close to $120 million, and their products are currently available in almost 80,000 outlets nationwide.
Daniel Lubetzky, the creator of Kind, had trouble making ends meet during the company’s early years, earning only $24,000. In the beginning, Lubetzky “put a lot of effort into expanding and taking on big orders that were difficult to fulfill,” he has acknowledged. “He desired to grow very quickly.”
Wise Acre Frozen Treats
The history of Wise Acre started in a school kitchen in March 2006. They hired their first employee after eighteen months. They had a 3,000-square-foot manufacturing plant and a staff of 15 by 2008. By then, their products were being supplied to several large supermarket chains and all of the natural food stores on the East Coast.
Wise Acre was also awarded a contract to distribute to the West Coast at this same period, but they were never able to fulfill all of the initial orders. Before the year ended, the business filed for bankruptcy.
XciteLogic Expansion Mistake
The company expanded by around 600% between 2012 and 2013, hiring 105 people instead of just 22. The business appeared to be on the rise, but in 2013, XciteLogic filed for bankruptcy after owing unsecured creditors, such as Apple and HP, about $4 million. Almost instantly, about half of the company’s employees lost their jobs.
Blockbuster
Strangely, Blockbuster’s demise was so spectacular for a video rental shop that it seemed like it belonged on the big screen. When the business reached its zenith in November 2004, it employed over 84,000 people and operated over 9,000 outlets globally. Its revenues topped $6 billion in that year. As everyone knows, things quickly got worse. They went bankrupt in 2010. The last Blockbuster location is a privately held chain in the tiny Oregonian city of Bend.
Target Canada
Target’s first foreign venture was its 2013 launch into the Canadian market. The big-box retailer chose to close all 133 of its locations nationwide in 2015 due to a number of factors, including significant refurbishment requirements, a deficient merchandising system, a constrained timeline, and insufficient leadership.
Aldo USA Expansion Mistake
When Aldo first entered the US market in 1993, it quickly established company-owned stores all over the nation on the advice of consulting firm McKinsey (Strauss, 2010). But before entering the American market, Aldo established itself by supplying shoes to the entertainment sector. “Necessary based on the impact of the Covid-19 pandemic, as well as historic profitability challenges and the unprecedented collapse in retail spending in the US and globally,” an Aldo spokeswoman stated.
