Whether it be Walmart (WMT) - Get Report moving into China or Uber revving up its European operations, global expansions face higher failure rates than domestic ones. Robert Salomon, author of Global Vision, said the key to success is deeply understanding the new terrain ahead of time.
"The main thing is to think carefully about the political, cultural and economic hurdles that you will face in every market and then adapt your business model to those environments," said Salomon, who is a professor of international management at NYU's Stern School of Business.
Salomon said Walmart's entrance into Chinese market in 1996 is a good example of a company felled by the pitfalls of globalization. Walmart quickly discovered that China is more like multiple countries than a single one culturally, economically and politically. This hampered the retailer's ability to distribute its products nationwide so much that it did not see a positive return from China until 2008. He added that Walmart, in fact, still struggles with profitability from its Chinese operations.
"They misread the culture," said Salomon. "Customers didn't want the same things in China that they wanted in the United States and they ran into trouble with local politicians and national politicians along the way."
He said Uber is losing a billion dollars a year in China over similar expansion issues, while it also struggles to crack Europe. Uber has seen its ride-sharing service banned from France and some cities in Spain, primarily because it has tried to enter a market first using the U.S. playbook that worked so well without worrying about the ramifications.
"Rather than ask for forgiveness after entering, they should have asked for forgiveness first," said Salomon.
"Henry Schein has been very astute in entering the right markets and tailoring its products appropriately to the cultural, political and economic realities in those markets that they enter," said Salomon.