Not researching how your product or service needs to be localized
This is an easy trap that expats who already have entrepreneurship experience back home can walk into. They might assume that the business strategies which have been successful back home can be copy-pasted to the market of a new country. This fails to take into account that the needs of a new market can be entirely different and that the methods of winning over the trust of customers from another culture are also different.
This is a trap that not only small entrepreneurs but also large corporations have fallen into. To cite a historical case, back in the 1990s, the American retail giant Walmart failed to enter the South Korean market because it neglected the cultural perceptions of South Koreans. For instance, it failed to consider that the freshness of fish is a non-negotiable sign of quality for Koreans. The latter prefer buying fish from wet markets, corner stores and small retailers that display live seafood in aquariums. Frozen, packaged fish in Walmart did not appeal to Korean consumers – even if it was completely normal in the US.
This is why conducting culturally-sensitive market research before launching your business is important. Even if you don't have a big budget and cannot hire a professional marketing firm, the least you can do is create an online survey by yourself and have friends share it as widely as possible. It is extremely easy to create one using Google Forms. You can also have casual conversations with locals in your entourage – neighbors, regulars in your neighborhood café or bar, acquaintances you meet at parties – about their consumption habits.
Apart from your customers' culturally-influenced needs, two other things that are important to research prior to launching your business are your local competition and the local regulations. Are you offering a product/service that's rare in this country, and based on that, can you charge more for it than you would do back home? Or do you have many competitors, which would require you to add something extra (i.e., of added value) to your product to make it stand out?
If you don't want your clientele to be restricted to an expat bubble, it's crucial to consider the purchasing power of locals. Suppose you are a Spanish expat who's opened a restaurant in Mexico and charges the same prices that you did back in Madrid or Barcelona. In that case, you might soon find that your customers are mostly other expats and a small demographic of wealthy Mexicans. This small customer base might be perfect for you, or it might be too limited to sustain your business over the long term. It's always good to research how much the local middle class earns in the local currency and how much they can afford to spend. If your business seems to be out of touch with the local purchasing power and local prices, you might also get accused of gentrification and develop a bad brand reputation because of that.
When it comes to regulations, there might be unexpected, tricky business ones to navigate in this new country. It's best to consult a lawyer, get expat coaching or follow a short course in business law to avoid any pitfalls. These pitfalls might concern taxes or restrictions on the importation of certain raw materials.
Not using the local language and not hiring language professionals for that
One major part of localizing your business is, of course, language. The use of the country's local language on your website and storefront, on your pamphlets and menus, and in your catchy marketing slogan all matter. That language can be the country's official one or its most commonly spoken one. Businesses sometimes neglect or underfund this linguistic aspect, which can have catastrophic consequences.
Some corporate "translation fails" have become infamous case studies. In the 1980s, when China opened its economy to the world, Pepsi was one of the first foreign companies to implant itself in the country. Back in the US, its slogan "Come Alive! You're in the Pepsi Generation" synched well with an American ethos that celebrates youth, a zesty and energetic demeanor, and a go-getting spirit of enterprise. However, the literal translation into Chinese ( "Come Alive with Pepsi!") made it unintentionally reference ancestor worship, a core tenet of religious life in China. It was wildly inappropriate, even offensive, to hint at the resuscitation of ancestors in a commercial slogan. Pepsi had to withdraw the translated slogan. An awkward translation not only damaged their reputation but also cost them money.
This is why it's important to hire a professional, native-speaking copywriter and translator for your business abroad. Pay them a reasonable rate and give them sufficient time to come up with quality work. If you really don't have the budget for professional language services, at least entrust the job to a university student in modern languages or a native speaker with marketing experience. Do not try to do it yourself if you're not as fluent as a native speaker and have not lived for many years in that country. And definitely do not hand it over to a childhood friend who studied the language in high school or to an amateur volunteer.
In today's digitized business world, an important translated component of your business will be its website. Website localization is a whole specialization within translation. It involves not only the translation of text but also the creation of a website layout that's familiar to local users, the insertion of culturally-appropriate graphics and the use of correct units (e.g., currencies on the checkout page).
A 2012 study by the market research firm Common Sense Advisory, whose results were published in the Harvard Business Review, found that 72% of consumers spend the most time on websites in their native language and are more likely to buy a product online that comes with information in their language. Slightly over half even said they'd be willing to pay more for a product that gave them clear information in their language. This shows how proper website localization – done by a professional – can truly boost your business.
Not having a local partner and local employees in decision-making roles
To minimize the risk you're taking by starting a business in an unfamiliar country, it's wise to get a local partner. If it's an individual, which is often the case for SMEs, that partner should have a strong local network, native fluency in the official language, and familiarity with the bureaucratic procedures and cultural quirks of the country. Something like getting a loan from a local bank will be much easier with a local partner. Banks might be hesitant to trust only a foreigner with limited work experience in that country.
Partnering with a local company rather than a local individual is even safer. Ideally, look for a company that is already well-established and has the population's trust. To give a concrete example, the British supermarket chain Tesco was much more successful than Walmart in the Korean market because it partnered with Samsung. Samsung helped them successfully hire local managers and create stores that are a hybrid between Western-style hypermarkets and more intimate Korean stores (with personalized services like on-site packaging). Find a local company whose brand complements yours. For example, if you make eco-friendly artisanal soap, look for spas and hotels that are invested in ecotourism.
Tesco's case in South Korea also shows the value of hiring locals, especially in leadership roles. One reason expat-led businesses sometimes get accused of being active forces of gentrification is that some hire only or mostly other expats, especially in decision-making roles. Hiring locals shows that your business is committed to integrating into the local society and contributing to the local economy by creating jobs. In return, local employees use their insider knowledge to help their expat colleagues learn more about the local market. This synergy of expat-local collaboration is fruitful for both parties and the company as a whole. Together, they create a "glocal" brand that is both locally and internationally attuned.
Not having a fallback plan in case uncontrollable factors affect your status as an expat entrepreneur
The pandemic has shown how crucial it is to have a backup plan. What if you're forced to move the business completely online because of an economic, health, or political emergency? Can its key operations be run from home or from another country? Who will take over your position if a family crisis forces you to return to your home country? These are problems for which you must already have possible solutions when you start a business in a foreign country.
In an interview with Expat Magazine in 2020, Tamara Jacobi, an American expat who has her own eco-resort in Mexico, stressed the importance of having a fallback plan. She recommends having a financial cushion, a virtual backup plan to conduct the business fully online, as well as managerial simplicity to the business. The simpler the core managerial aspects of a small or medium business is, the easier it is to make it adapt to outside circumstances. She cited food trucks as an example of an ideal small business for expats. Because they have low overhead and are mobile, they can easily adapt to a forced change in location or an economic crisis.
