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(Lowe, R. and Marriott, S., 2006) suggest that most entrepreneurs require ‘certain qualities’ and experience for surviving in a new and hostile environment.
Hofstede, G. (1980) has also differentiated culture in four dimensions: level of power distance, individualism - collectivism, masculinity - femininity and uncertainty avoidance.
Doole and Lowe (2004) show 3 essential components of culture: Beliefs reflecting knowledge and assessments of particular situations and activities, Values regarded what is considered to be appropriate behaviour and Customs concerning behaviour in certain situations.
They further explain components like language, religion, education, social organisations, law and politics, response to technology, values and attitudes, etc.
- Considering from the above indications, the advantages for SMEs moving to markets psychologically and geographically close to them are many-fold. Advantages include:
- Better understanding of the culture: The region in which an entrepreneur lives or is born in, is often close to him/her, both emotionally and socially. S/he better understands the locale’s culture, religion, language, customs and beliefs as s/he is brought up in that particular area. S/he also knows the customers and use effective means to satisfy their needs.
- Government and politics: The entrepreneur successfully understands the rules and regulations, government and political structure, their policies and may also gain government contacts and methods to know better about the local economy of a particular location and its neighbouring places. Knowing the legal procedures/matters and local employee management and their culture is quite easy.
- Local networks: The entrepreneur recognises and makes profitable relationships and contacts thereby, increasing professional networks subsequently. Family, friends and other social networks also support him/her emotionally and financially.
M.A. Yusuff Ali, CEO and founder of Lulu Hypermarkets: An Indian-born founder, who migrated to the Middle East four decades ago but remains an Indian citizen. After gaining experience, understanding how UAE’s economy works and doing hard work, he opened the first store in Abu Dhabi in 1995. By the year 2000, his hypermarkets expanded to 11 stores in the rest of UAE. The hypermarkets now expand to more than 25 stores across the Middle East. Alongside his Middle East success, Yusuff Ali has been building business ties back home in India [Source: (Karmali, N., 2013), Forbes.com and Wikipedia]. In April 2013, Lulu Group ‘has launched their operations in the UK with the inauguration of a logistics and packaging centre under the Y International name’. (Trade Arabia, 2013)
Another example is of Charlie Marshall, founder of the bed brand Loaf. He was asked in an interview about the idea of internationalisation. He replies that even though his company grew rapidly in his home market, "the UK market is enormous and although we’re building a strong and loyal customer following, we haven’t even scratched the surface. We want to get it right here first and do what we’re doing really, really well on all levels. Once we’ve done that, we’ll look to expand into other markets." [Source: http://www.londonlovesbusiness.com/entrepreneurs/fast-growing-businesses-and-sme/meet-the-loafer-whos-built-a-20m-bed-business-in-five-years/7414.article]
- Some challenges faced by SMEs moving to markets that are geographically or psychologically distant:
- Culture challenges: It is quite difficult to understand a distant market’s cultural arrangement. Barriers could include understanding language, culture, religion, customs, beliefs, values, etc. The ‘adjustability trait’ should also be harnessed to overcome these challenges and at an enterprise level, entrepreneur should normalise culture differences and conflicts (while valuing and respecting individual cultures) to create an effective communication and understanding throughout the enterprise. S/he should also create and follow policies that protect employees from all kinds of discrimination (especially during the recruitment and hiring process).
- Other challenges include over relying and trusting contacts as the SME may have limited knowledge of the new region, its economy, legal and political functions and bureaucracy. Also, facing discrimination or ‘less attention’ from the foreign government as compared to the local businesses (in form of barriers or inhibitors) also poses challenges.
I believe that the product/manufacturing sector faces more of these (above mentioned) issues. Service (especially internet and B2B) sectors face less issues. Because services provided are intangible and less culture dependant.
Some enterprises actually modify their products/manufacturing processes to adapt to the culture. This includes different packaging, ingredients, advertisements, and techniques for different targeted regions’ customers.
For the product/manufacturing sector, lets again take the example of B&Q (Example taken from A1):
"The stores were a huge success and the Beijing store now boasts the highest average customer spend of any store in the world (over £50). But it is the cultural similarities and differences and how they affected the retailer that are really interesting. The stores look very similar to those in the UK, although they are usually considerably bigger. At 20 000 sq.
ft., the Beijing Golden Four Season store is the largest of its kind in the world. Like their UK counterparts, staff wear orange overalls. The products offered are also very similar, although the space devoted to garden products is considerably smaller and the Chinese B&Q also sells soft furnishings. But the big difference is that Chinese customers do not want to ‘do-it’ themselves at all, they prefer to get others to do it for them. The Chinese customers are typically middle class and wealthy. They come to the store to select what they want and get it installed by a professional. The reasons for this are partly cultural and partly economic… …B&Q therefore started to offer more services to customers – designers and contractors to install its products." (B&Q case study).
From the above example, it is clear that B&Q didn’t learn about their customers’ culture that they do not like to install DIY products themselves. Rather due to cheap availability of labours and other factors, they like the furnishings to be installed by the professional employees. But B&Q learnt this soon enough to help them adapt to this change and eventually satisfy and retain customers.
Lowe, R. and Marriott, S., (2006) Enterprise: Entrepreneurship and Innovation: Concepts, Contexts and Commercialisation, 1st ed., Taylor and Francis [Online] Available at http://capitadiscovery.co.uk/derby-ac/items/884805 (Accessed: April 12th 2014)
Hofstede, G. (1980) ‘Motivation, leadership and organization: do American theories apply abroad?’, Organizational Dynamics, Vol. 9 No. 1, pp. 42-63 (Accessed: April 12th 2014)
Doole, I. and Lowe, R. (2004) International Marketing Strategy: Analysis, Development and Implementation, 4th edn. London: Thomson Learning
Karmali, N., 2013, ‘Middle East Retailer Yusuff Ali Emerges As Billionaire’, Forbes.com Available at http://www.forbes.com/sites/naazneenkarmali/2013/02/24/middle-east-retailer-yusuff-ali-emerges-as-billionaire/ (Accessed: April 12th 2014)
Wikipedia, Lulu Hypermarket, http://en.wikipedia.org/wiki/Lulu_Hypermarket (Accessed: April 12th 2014)
Trade Arabia, 2013 ‘LuLu opens logistics centre in Birmingham’
B&Q, Case study Available at:
Wickham, P.A. (2006), Strategic Entrepreneurship, 4th edition, Financial Times Prentice Hall [On-line] Available at: http://capitadiscovery.co.uk/derby-ac/items/884969 (Accessed: April 10th 2014)