FAIL IN FOREIGN TRADE: ELEVEN SURE WAYS TO BURN MONEY

Whoever thinks, that a webshop is the best and maybe even only instrument, that can be able to rescue an enterprise in exceptional circumstances, makes a serious fault, as the following example illustrates:

The initial situation

Mrs. Schlau from L. runs a flourishing trade in office supplies of all kinds. From printer paper to high-quality office furniture, she has everything in her assortment. Her company is located in the middle of the border triangle of Germany, France and Switzerland. Her business activities have been extending into neighboring countries for a number of years.

Although Mrs. Schlau offers an impressive assortment of goods, her distribution is organized rather conservative. In 2019, sales representatives will still travel daily from Germany to major companies in the region, auditioning for purchases and taking orders on a large pad. And so the business goes on without any great ups and downs until - yes until - a tiny coronavirus paralyzes the entire world and pretty much throws all the efforts down that were previously considered normal and functional. The borders are closed in the first lockdown and her business brutally collapses immediately and without warning.

The wrong decision

Now, Mrs. Schlau would not be a successful entrepreneur if she was not able to react quickly to changes and look for solutions: she rounds up her senior employees and proudly declares that the company will now quickly create its own web shop. The workforce is anything but enthusiastic. The sales people are in a mild panic, as they already see themselves as victims of digitalization. The employees in merchandise management have a rough idea of what’s in store for them and are already mentally saying goodbye to their annual vacation. The IT department - consisting of only one employee - is gasping for breath. It takes a little while for everyone to come to terms with this new strategy, but eventually they all get to work, sighing.

The consequences

What follows is a string of disasters, bad luck and mishaps: The merchandise management system doesn’t want to connect to the webshop, the webshop refuses to accept orders, and the latest invoices are consistently incorrect, especially those to foreign customers, thanks to constant programming. No one can explain why the technology doesn’t do what it’s supposed to. In the meantime, the customers of the striving company are annoyed both on this side and on the other side of the border, because the shipment of the ordered items has come to a standstill due to the internally tied up resources and the faulty invoices are indignantly complained about in rows. In the face of adversity, the web shop initially becomes the most expensive order pad in the company’s history.

The reasons for failure

This story is a prime example of how - not only in international business - developments can be slept through and then reacted to in a hectic manner instead of acting in advance with “change management”. Companies make the biggest mistakes when they are doing well. Ms. Schlau’s company was very comfortable in its comfort zone until the crisis rudely jolted it out of its usual course and forced the boss to act.

Again, no one can foresee the really big events in world history, neither the Corona crisis nor the attacks of September 11, 2001, or similarly profound upheavals that affect each and every one of us. This is precisely why it is sensible and important to keep a close eye on the changes in the market and in the world and to consider the possible consequences for one’s own company. This is the only way to adapt one’s own strategy in time, if necessary, and to implement it advantageously.

Quoted from and inspired by the book by Prof. Peter Anterist "Fail in foreign trade Eleven sure ways to burn money", 3rd, revised edition, 2021, available from: www.localglobal.com

Forgoing the establishment or subsidiary when adapting a foreign market can entail considerable problems, as the following practical example shows:

The initial situation

Ms. Diener from Z. runs a building cleaning company on the German-Dutch border and employs around 200 people there. In Germany she has important customers such as Deutsche Bahn or large hotels. Her employees come from all kinds of countries, especially Eastern European countries, but they always have a valid German employment contract and are of course properly registered. Now, at a business association event, Ms. Diener comes into contact with a Dutch entrepreneur who has a hotel with over 200 beds in the Netherlands and is looking for a company to do the necessary cleaning work there. Until now, the hotel had its own cleaners and chambermaids, but the costs for staff and social security have now become so high that outsourcing this activity could well make sense.

The wrong decision

After some negotiations, an agreement is reached and Ms. Diener will provide the cleaning staff for the hotel from now on. About 15 people drive the approximately 30 km from Germany to their workplace in the neighbouring country every day. Some time passes and both business partners are very satisfied with the made connection. Ms. Diener earns good money in the Netherlands and the hotel operator is satisfied with the service provided. Everything runs perfectly.

All of it? Well, apart from the fact that Ms. Diener is providing a service abroad and pretending that this has no tax consequences. It has not even occurred to Ms. Diener that she could establish a permanent establishment in the Netherlands through her activities. She therefore diligently invoices her company’s services with German VAT and also pays tax on the income in Germany.

The consequences

Perhaps no one would have noticed or complained if the Dutch tax office had not carried out a tax audit at the hotel and found out about Ms. Diener’s company. In contrast to Ms. Diener, the Dutch tax authorities now assumed that the activity on Dutch soil constituted a permanent establishment pursuant to Art. 5 OECD-MA (Model Tax Convention) and determined a tax liability of 120,000 euros. Various

penalties and default surcharges were then added, which in the end increased the amount to around 250,000 euros. The following mail from Amsterdam hit Ms. Diener like a grenade, especially because the amount was due in full and already in two weeks. And as if all this wasn’t bad enough, Ms. Diener was also informed that the Netherlands were investigating whether she had also committed tax evasion.

The reasons for the failure

Time and again, companies conduct cross-border business and are not aware that these legal transactions give rise to a tax liability. Art.5 of the OECD Model Tax Convention regulates under which circumstances a permanent establishment arises and these regulations are becoming increasingly strict. The idea behind this is even plausible: anyone who uses the infrastructure created with taxpayers’ money in a country to conduct business must also pay tax there on the resulting income.

Anyone doing business abroad that involves the deployment of personnel and a certain degree of regularity is well advised to register at least one permanent establishment in the target country. Since this permanent establishment is roughly equivalent to a dependent branch, it should be examined whether this is sufficient or whether it even makes more sense to establish a subsidiary as a separate corporation and thus create clear demarcations from the domestic activity. Clearly defined and documented transfer prices are a helpful necessity here and prevent unpleasant discussions at the next tax audit.

Quoted from and inspired by the book by Prof. Peter Anterist "Fail in foreign trade Eleven sure ways to burn money", 3rd, revised edition, 2021, available from: www.localglobal.com

The expansion of the own company into the Chinese market became sort of a trend development in the last few years. But is this step really a good idea? The following practical example gives information:

The initial situation

Mr. Altmeier from S. makes windows that really save energy and look great, too. He´s innovative, environmentally friendly and a local patriot who creates jobs. A politician from the district had found a group of interested Chinese who wanted to go on a delegation trip to Germany to see on site what investments were possible in China or Germany with cooperation. When the Chinese visit was being prepared, Altmeier came into play. He was to be introduced to the Chinese delegation, present his factory and his products and thus represent German entrepreneurship. When the time finally came, everything happened very quickly. The Chinese arrived, were indeed taken with Altmeier’s factory and immediately took the entrepreneur in hand and invited him to China.

The wrong decision

Just three months later, Altmeier flew to China, warmly welcomed by the members of the delegation at the time. There was a lot of talking, and a lot of discussing. After three days it was clear to Altmeier that he would have to invest here in China, build a factory to sell his windows in the Cathay. For him, this was the longed-for breakthrough, the necessary step towards “Altmeier International”, the quantum leap into globalisation. Over the next few months, everything was meticulously planned. Altmeier tried to get loans, talked a lot with banks and even more with his new Chinese partners. He traveled to China once a month, found a building site, hired a construction company and finally ordered the machines that would then be needed in China to produce the windows. All of this cost a great deal of money. After one year, the time had finally come. The factory was up and running, the machines were connected, and the ceremonial act of opening the company was celebrated with a lot of emotion and hope.

The consequences

The investments made by Mr. Altmeier up to that point added up to an amount of 5.5 million euros, and these now had to be generated in the shortest possible time in order to at least achieve the ROI (return on investment) as quickly as possible. Unfortunately, there was quite a gap between desire and reality, because the sale of the windows turned out to be extremely difficult. Somehow sales did not really want to take off and the actually unbeatable arguments in favour of buying the great energy-saving windows with German technology did not seem to really take hold.

One year after the opening, Altmeier had to draw the sad balance that he had obviously thoroughly miscalculated. He had been swept along by the storm of enthusiasm for China without having questioned his commitment critically enough. But that was not enough. On the day that Altmeier had to admit to himself that his China investment had failed and that it was now only a matter of damage limitation, the tax office reported to his home in S. for a tax audit. The office demanded additional tax payments, which ultimately led to the insolvency of the company - the model entrepreneur was at the end...

The reasons for the failure

It is not a good idea to let external influences and motivations guide your engagement abroad, even if the temptation to do so is omnipresent. Every entrepreneur would be well advised to base his foreign commitment exclusively on strategy and on individual assessments of his own industry. In addition, the Corona crisis has shown how difficult it can be to be able to control a distant branch at all if you can no longer even drive there. It therefore seems to be a good idea to first successfully shoot the markets in neighboring countries before following the forecasts of self-proclaimed specialists and seeking success in faraway China for a lot of money.

Quoted from and inspired by the book by Prof. Peter Anterist "Fail in foreign trade Eleven sure ways to burn money", 3rd, revised edition, 2021, available from: www.localglobal.com

To count on one single importer, who should take over the entire distribution on the target market, while adapting a foreign market, is not a good idea, as the following example illustrates:

The initial situation

Mr. Schmidt from F. produces wonderful furniture from rattan and other wicker materials. His company relies on real handicraft and exclusively “Made in Germany”. Now he went to the furniture fair in Paris last year and exhibited his precious furniture there. He knows that there is a big market for his products in France - especially the south coast of France promises fantastic potential. The fair began and Mr. Schmidt’s optimism was indeed not disappointing. Monsieur Dujardin appeared on the stand and explained that he had the ultimate concept for business success in France for him. He is a successful importer of high-quality garden furniture and the wicker furniture from Schmidt would complement his product portfolio in an excellent way.

The wrong decision

After a joint dinner in Paris, the two agreed on a deal. A contract was signed in which it was agreed, among other things, that Monsieur Dujardin would receive the sole distribution rights for France and that he would be allowed to calculate the margins himself in line with the market. In addition, he also achieved that Mr. Schmidt would supply him free of charge with furniture for a showroom to be set up near Nice and would also pay for its costs in full. Now everything was set in motion. Schmidt supplied the pieces for the showroom, rented a great and expensive shop for and with the help of Dujardin, and of course provided all his brochures in translated form. The expectations were now even higher than at the beginning. But above all, there was the conviction that in Dujardin they had found the ultimate solution for opening up the French market.

The consequences

The weeks went by, but not much happened in the French shop. Now and then an order came in, a small side table, a few chairs, sometimes a bench. June, July and August came, but sales did not increase nearly as quickly and steadily as would have been necessary to recoup the considerable initial investment. Mr. Schmidt continued to remit the store rent each month and pumped money into advertising materials, without any significant increase in sales in France. In the end, the calendar showed October 15 and the original budget was used up. Mr. Schmidt decided very quickly to pull the emergency brake and close the shop.

The reasons for the failure

At first, the importer seems like an easy and reliable way to enter a foreign market. Above all, the possibility of only having to write an invoice to one customer abroad and having someone to take care of everything locally is naturally tempting.

What at first glance solves all problems at once, often turns out to be a fatal trap afterwards. If you look at the matter without the rose-colored glasses of the optimist who believes in the honesty of people, the problem quickly becomes clear. Only one customer then also means that the entire risk is attached to a single person. If the importer does not deliver what he promises, the entire commitment tips into the red. Even if it works out at the beginning, the risk always remains, because the entire market knowledge and that about the customers lies solely with the importer.

Quoted from and inspired by the book by Prof. Peter Anterist "Fail in foreign trade Eleven sure ways to burn money", 3rd, revised edition, 2021, available from: www.localglobal.com

The foreign sales in the target country should not be underestimated. Allocating all this to an already existing field sales force could become fatal, as the following example should demonstrate clearly:

The initial situation

Mr. Pfleiderer Junior is the third generation of his family to manufacture high-quality fitted kitchens in Constance on Lake Constance, a town on the border to Switzerland. His kitchens - quality from Germany - are very popular, but expensive, which makes them virtually predestined for the Swiss market. Up to now, no major sales activities had been directed to Switzerland, but it was obvious that more and more Swiss people wanted a Pfleiderer kitchen and were therefore preparing to travel to Germany and order their kitchens there. Mr. Pfleiderer now wanted to get down to business and envisaged supplying the whole of Switzerland with his high-quality kitchens in future. He already had a tax representative in the country, because he needed one due to his assembly activities in kitchen construction.

The wrong decision

The next step, namely setting up his own Swiss branch, could therefore be carried out without any problems by the well-known local tax consultant. For reasons of cost, Mr. Pfleiderer wanted to proceed without a showroom for the time being and opted for sales via local trade fairs and exhibitions as well as a direct sales system he had developed himself. His advantage was also that he could live well with only a few orders thanks to quite high margins. So now, all this has to be transferred to Switzerland. The catalogue was left largely as it was. Only the prices were shown in Swiss francs.

The consequences

After one week there was already an order, after three weeks another one. But once that was the end of it, the good mood gradually disappeared. In the first crisis meeting of the sales department with the management, it became clear what the problem was: the sales employees were simply not let into their houses and apartments by the Swiss. They did come to the door when you rang the bell, but at the latest after the often somewhat awkward “Gruezi”, the sales people of Pfleiderer GmbH were turned away in a friendly but firm manner. A language course in Swiss German was considered. But it still didn’t help, the kitchens could not be sold this way. Many hours of ringing doors in vain and many kilometers driven on Swiss roads became more and more a burden on the budget.

The reasons for the failure

The management of Pfleiderer GmbH had wrongly assumed that German sales could simply be transferred one-on-one to Switzerland, with German sales representatives at that. It is often seen that German companies, especially those close to the border, make the crucial mistake of confusing two very different things: One is the popularity of German products abroad and the other is the (in)popularity of Germans themselves abroad - two things that could not be more different.

The appearance of the German sales representative at the front door of the potential Swiss customer meant that he had already lost. The Swiss did not want to let this representative from abroad, who could not even say “Gruezi” without an accent, into their home - and why should they? They were already skeptical and reserved with their own countrymen, how then with foreigners! If Mr. Pfleiderer had not spared the investment of hiring Swiss employees and training them, the success would probably have occurred.

Quoted from and inspired by the book by Prof. Peter Anterist "Fail in foreign trade Eleven sure ways to burn money", 3rd, revised edition, 2021, available from: www.localglobal.com

The language and mentality of the foreign customers on the target market must not be highly neglected or even completely left out. This is a grievous fault, as the now following example illustrates:

The initial situation

Mr. Schulz from R. is an entrepreneur and manufactures all kinds of locks. Cylinder locks and padlocks from Schulz GmbH are known for their quality and multifunctional usability. One fine day in London, Mr. Schulz notices in a locksmith’s shop that his locks would actually also be suitable for the British market. He wonders why he hasn’t noticed this before, and at the same time begins to develop a strategy for entering the market. Back in R., he gets his team together to present the new strategy of expansion into the United Kingdom.

The wrong decision

A working group is immediately set up and the ladies and gentlemen assign the various tasks internally - a powerful team of German specialists plans the market entry in the UK. In one of the following strategy discussions, colleague Karsten speaks up and asks whether it would not make sense to contact a consultant from England in order to adapt the planned marketing and sales documents to English tastes. Mr. Schulz reacts almost aggressively to this suggestion and makes it clear to his colleague Karsten that he himself has been travelling to London for years, speaks the language almost like his mother tongue and knows the English mentality by heart.

The consequences

After a few weeks, the team travels to London, where one has identified some potential sales partners by means of a German agency and various associations and has also already identified possible customers. Beforehand, colleague Karsten had thought about whether he should point out that it might be an idea to look for an English sales representative. But he preferred to remain silent so as not to get another reprimand. If he had had the opportunity to voice his concerns and had been listened to, it might have been possible to prevent what has now transpired after only a few discussions with potential business partners.

The reasons for the failure

“Business is local” - three words that have lost none of their accuracy, even when we live in a globalized world with unlimited transparency. Anyone who goes to a foreign country (even if it is in nearby Europe) must adapt to the language and mentality, in order to be regarded as a local supplier.

Mr. Schmidt took no notice of this. He had the opinion that with his certainly good English he would be fine all on his own. Unfortunately, a gross error that also lead to significant communication problems down the road. After all, the trips to London were completely unsuccessful because Mr. Schmidt’s appearance was perceived as very unprofessional.

Quoted from and inspired by the book by Prof. Peter Anterist "Fail in foreign trade Eleven sure ways to burn money", 3rd, revised edition, 2021, available from: www.localglobal.com

It is often the case that companies abandon their internationalisation after a short time because of an unrealistic idea of the success that can be achieved.

The initial situation

Mr. Anton from B. is a specialist for sausages and his factory in the heart of Germany is known for good ham. His specialities are already produced in the second generation and distributed throughout the whole country. Mr. Anton wonders every time he goes to the supermarket why the imported goods are so successful here and whether he could not also succeed in selling his products abroad. He calls his people together and presents his idea of investing into the British market in the future. The employees basically like the idea and it is unanimously decided to take action as soon as possible.

The wrong decision

The very next day, things get on their way. The first thing to do is to conduct a market study to determine the competitive situation. A team flies to London to make test purchases and taste the products on offer there. They also think about the logistics, check the possible margins and bring the packaging to the British taste. In short: everything is going great and is heading for success. Gradually things are getting a bit tougher and Mr. Anton is getting impatient. His business plan states that ROI will be achieved after 18 months at the latest and therefore sales should be in full swing after 6 to 10 months.

The consequences

Mr. Anton looks at the process for four more weeks and then has the entire sales team, including the sales representative working in England, come back to Germany to announce that he intends to discontinue his involvement in view of the failure on the island. He has long since closed with Great Britain, although he has not even tried in the parts like Wales and Scotland. The distribution company is liquidated after only 18 months and Mr. Anton concentrates exclusively on the german market again.

The reasons for the failure

It is a common phenomenon that companies abandon their internationalization after a short period of time because they have an unrealistic idea of how long it will take to achieve success. Behind this is often the belief that the work, done in the home market, has a certain impact on the target market, which is not the case.

The question that should be asked to Mr. Anton is why he believes that after 18 months of working in the foreign market, with only one sales representative abroad, he will be successful? To put it bluntly: foreign markets are not waiting for us like a junkie for the latest dope. There is already ham in England and chocolate in South Africa. In this day and age where you can buy almost anything anywhere, it hasn’t necessarily gotten easier to get your products to the market. Here, for example, the brand image becomes a success factor, but this cannot be built up within 18 months.

Quoted from and inspired by the book by Prof. Peter Anterist "Fail in foreign trade Eleven sure ways to burn money", 3rd, revised edition, 2021, available from: www.localglobal.com

A foreign budget is nothing you should plan on the fly, or even completely exclude from your market adaption strategy, as the following example proves:

The initial situation

Mr. Sommer from F. is an entrepreneur and third generation manufacturer of welding equipment and accessories for shipbuilding. He runs a successful company. Although, of course, he has to suffer from the fact that German shipyards have come under a lot of pressure due to the strong competition in Asia. Mr. Sommer therefore decides to offer his equipment where ships are built now and in the future, namely in South Korea, where the Hyundai Heavy Industries Co. Ltd. has become the largest shipyard in the world.

The wrong decision

Captivated by the idea of doing business here, he sets up a company with the help of an international service provider and first rents an apartment for the German technician who is to work there as an “expat”, a specialist in welding with very good sales skills. First product presentations are successful and the plan is put into action. The technician receives a new employment contract with foreign allowance and moves to South Korea permanently. The devices are adapted to Korean requirements, the whole machinery starts up and the costs slowly get a remarkable size in the monthly report. As a medium-sized company, Mr. Sommer naturally does not have a CFO; like his predecessor, he uses the evaluations of his accounting department and estimates what he will have to spend. He has only ever spent the money he has earned, he has few debts to the bank and his current cash flow has so far determined his expenditures. So far...

The consequences

Within the next six months it becomes apparent that it might have made sense to think about possible costs beforehand. In the meantime, the technician had to fly back and forth several times for 35,000 euros to get problems with the converted machines under control. The apartment costs 2,500 euros per month and the salary for the technician is actually quite low at 9,000 euros per month. At the same time, in these six months of investment, still no order came in, because the devices are not so easy to use and the competition does not stand idly by as the German engineers try to establish into their market. In the meantime, a whopping 250,000 euros in costs have been incurred in only six months - and there is no order in sight. Mr. Sommer has no choice but to go to his local bank and ask for financing, which was not available for it.

The reasons for failure

Investing in and developing new markets costs money, often a lot of it. Unfortunately, the further the target market is from home, the more expensive it becomes and every entrepreneur should be aware of this at the start of their expansion plans.

Of course, it is welcomed that entrepreneurs venture into foreign markets, especially when your clientele is dying out at home and potential customers are to be found far away. But: If you want to fly across the Atlantic, you should fill up your plane beforehand and be able to afford it.

From experience, the hidden costs, the ones that you don´t expect, are the worst, but also unavoidable. Therefore, a rather conservative planning is recommended, which also includes a “worst case” scenario as well as an exit strategy. Incidentally, this conservative planning should always be applied. Not only in the development of foreign markets, but also in the domestic market, time has shown. Also planning without taking unpredictable (or predictable after all?) events into account can lead entire industries to ruin. But if you stick to conservative planning and include the necessary reserves, then you should be well prepared for most eventualities.

Quoted from and inspired by the book by Prof. Peter Anterist "Fail in foreign trade Eleven sure ways to burn money", 3rd, revised edition, 2021, available from: www.localglobal.com

The adoption of your local marketing and the whole corporate communications in the target country is a serious mistake in foreign trade, as the following example illustrates:

The initial situation

Mr. Becker, a provider of IT services, makes the momentous decision to offer his products in the neighboring country as well. Since the neighboring country is Austria, Mr. Becker believes that communication can run just as it does in his German home market. Why not? After all, the German language is also spoken in Austria and the living standards are the same as well.

The wrong decision

No sooner said than done. Mr. Becker opens a representative office in Vienna, sends one of his German, but Austria-savvy employees and goes really far out on a limb in marketing. Of course, with a representative office you don’t have to set up your
own company in Austria, the liaison office is sufficient and you can handle and invoice everything via the German GmbH. Mr. Becker is also really going into advertising now, he is placing ads, targeting trade magazines and even putting little stickers on his German flyers with the Austrian address on them. All levers are set in motion.

The consequences

Unfortunately, only one thing remains missing: success. Somehow, nobody wants to commission Mr. Becker’s company, even though it says “Made in Germany” and German quality work is in demand all over the world. What is wrong with the Austrians? The answer is quite simple: nothing is wrong with the Austrians, they are the way they always are. And that includes a certain distance with their big neighbor Germany. The sober realization is therefore: Do everything in Austria like you do in Germany - and you’ll do everything wrong.

The reasons for the failure

One of the biggest mistakes when going abroad is to believe that communication is the same everywhere. This mistake is particularly easy to make when – as in Austria – people supposedly speak the same language.

Ergo: if you go abroad, you do not only have to adapt your products to the other market, you also have to change your communication and marketing. It is not successful to go to a neighboring country, but to remain a foreign company that also looks like this and communicates in a foreign way.

The importance of different marketing and product presentation, on the other hand, has been well understood by the French car manufacturer Renault. Renault bought the Romanian car manufacturer Dacia in 1999 in order to obtain a brand in the lower price segment. This brand was largely unknown in Western Europe, and so, cars are developed and sold under this brand that are priced extremely low. Nothing special as far as that goes. But what makes it so exciting is the fact that Renault sells these Dacia’s in Eastern Europe under the Renault name. If you walk through Moscow, you’ll see the “Renault Duster” sold in Germany or France as the “Dacia Duster”. So two brands for the same product – not product adaptation, but adaptation in brand communication.

Quoted from and inspired by the book by Prof. Peter Anterist "Fail in foreign trade Eleven sure ways to burn money", 3rd, revised edition, 2021, available from: www.localglobal.com

The market development “on the side” is unfortunately one of the most common and promises guaranteed failure. A practical example will illustrate this:

The initial situation

Mr. E. from F. builds digital control units for the so-called “Smart Home” with a focus on interfaces for controlling various household appliances. The systems are world-class technology and Mr. E., a gifted engineer, is justifiably proud of his development work. He persists in his self-confident opinion that the whole world needs his electronics and that all he really has to do is present them and people will snatch the great devices out of his hand. Active sales are unnecessary! One is already preparing to ramp up production and then only distribute.

The wrong decision

Since Mr. E. also thinks nothing of the “business of small steps”, but has read the “Think Big” by Donald Trump, sales offices are founded simultaneously in France, Hong Kong, UK, the USA, Spain, Hungary and China. I emphasize simultaneously! After all, you’d think that opening up just one market would tie up enough resources and take some time. But as I said, this problem is only faced by companies that do not have such ingenious products as our graduate engineer Ernst. So off into the big wide world. First, the subsidiaries are founded and immediately start looking for sales people. Service providers all over the world are tasked with finding the right people. These are then trained at the parent company in a rush.

The consequences

This strategy of globalization has virtually no chance of success. A new market is too complex to be developed on the side. The belief that you only need to distribute your products and not actively sell them is an incredible but persistent hubris that is guaranteed to lead to economic disaster.

Mr. E. could also have known that. He himself built up the company and it took years until his company was really successful on the market and further years to really reach market leadership. Why then does Mr. Ernst get the funny idea that this path is not also necessary abroad? Why do so many entrepreneurs believe that you can develop a foreign market with less commitment and effort than was necessary at home? Mr. E. has more than twenty people in sales at home and more than twice as many in customer service. In France, for example, he employs only one salesperson and two technicians at the beginning - just like in the other countries where he is new on the market. France, however, is one and a half times the size of Germany in terms of surface area alone, and the manpower required would have to be at least as large as in Germany in order to successfully reach customers. With one man in sales, Mr. E. has no chance.

So it results differently than expected: Mr. E. gets carried away and his efforts fail across the board. There is no success in any of the countries and the half-hearted efforts lead to an economic disaster. Within two years, all branches are liquidated again and the financial burden even brings the parent company to the brink of insolvency. All due to using wrong strategy.

The reasons for the failure

But what exactly was Mr. E.’s entrepreneurial blunder? A combination of overestimating his own capabilities and misjudging the necessities of opening up a foreign market. Both together almost meant the downfall of the entire company. If Mr. E. had focused on one country or at most two, he probably would have succeeded. Unfortunately, many people are not aware of it: But what applies at home also applies abroad: If I need ten people in sales in my home country, then I should send out at least the same number of people abroad. Of course, you can’t do that in seven countries at the same time, and that’s why the decision not to lead one country after the other to success was also wrong. No product, no matter how good, can replace an exact analysis of the circumstances and a profound business plan.

Quoted from and inspired by the book by Prof. Peter Anterist "Fail in foreign trade Eleven sure ways to burn money", 3rd, revised edition, 2021, available from: www.localglobal.com

None of this helps. If you want to be successful abroad, you have to adapt your product to the foreign requirements. Prof. Peter Anterist, Managing Director of InterGest Worldwide, illustrates this with a fictitious company story, which, however, could very well be true.

The initial situation

Mr. Müller from R., is a third-generation ice cream manufacturer and market leader in Germany. He dominates the German market with ice cream specialities that our grandmothers would not even have dared to dream of, transforms Amaretto into melting dreams and even turns the popular Sunday cake into ice cream.

Now it's time to enrich the world with the delicious creations and what could be more obvious than to please the French in particular, who are spoilt for taste. Those who created such things as crème brulée (can you make that into ice cream?) deserve to be pampered with German ice cream.

The wrong decision

So off we go, quickly looking for a distribution partner in France and providing him with enough material for the listing talks. And the best thing is: the new packaging is ready in time for the market launch. No unnecessary outer packaging, thanks to the new way of sealing the plastic cup. And the print is now so beautifully colourful!

Thanks to an enormous budget, the frozen food shelves are also getting fast and the local competition is soon losing ground. Finally, marzipan cake turned into ice cream is also available in French supermarkets - funny that no one had this idea before.

The consequences

It comes as it must: After a sluggish start to sales, things go on more badly than well, the trend is clearly downwards rather than upwards. The ice cream lies like lead in the counters, no one wants to buy the tempting "Glace parfum tarte á la pâte d'amande".

But why? Are the French so ignorant? Don't they usually eat their sorbets? And now they finally get a dessert with lots of cream and sugar from Mr Müller. Why don't they buy it? Granted, there are no marzipan tarts in France, but that can hardly be the reason, can it? And the packaging has turned out so beautifully. And it's environmentally friendly, too.

The French sales partner explained that in France they attach great importance to the appearance of a product, but maybe he has never seen a well-designed package. He also said that the name "Lüdenheimer Eiskreationen" might not be optimal in France and that a French name would be better. As if Coca-Cola would change its name!

The reasons for the failure

Mr Müller and his team never thought about whether consumer habits in the neighbouring country might be different from those at home. And in doing so, they committed one of the most common mistakes in exporting. Every country is different and the people living there have a different culture, different traditions and different tastes.

In France, the consumer puts a lot of emphasis on attractive packaging and cares less about whether it is environmentally friendly or not. France also loves yoghurts with zero percent fat AND zero percent sugar - a reason why, for example, a major German manufacturer of sweet cream yoghurts once failed grandly on the French market.

Quoted from and inspired by the book by Prof. Peter Anterist "Fail in foreign trade Eleven sure ways to burn money", 3rd, revised edition, 2021, available from: www.localglobal.com