3 Embarrassing Examples of
Cross-Cultural
Business
Failures
Maybe you’ve seen this scene before while on vacation. It usually goes
something like this: a frustrated tourist tries to communicate with a
local that doesn’t speak a word of English. The tourist, baffled by the
lack of comprehension from the local, simply speaks English LOUDER
and sloooower. The same words are repeated, over and over again. Of
course, this doesn’t help with communication at all. Both the tourist
and the local end up exasperated.
It’s a ridiculous but fairly common scene. As silly as these exchange
are, similar misunderstandings and miscommunication happen on a
massive scale in the business world. Some companies, lead by the best
and brightest leaders, flush away billions of dollars due to complete
cross-cultural failures.
These following stories show why it’s critical to understand your
customers and business partners in other parts of the world. Failing to
do so leads to disaster. These examples go beyond mere
mistranslations and insensitive advertisements. Rather, they reveal
deep-rooted flaws that stem from a profound lack of cross-cultural
understanding.
Wal-Mart in Germany: A Company Culture That Didn’t Fit
Wal-Mart’s expansion in Germany was nothing short of a disaster.
Almost a decade after launching in Germany, Wal-Mart couldn’t find
anyone willing to pay a cent for its assets. Due to the high costs of
laying off workers in Germany, Wal-Mart essentially paid a
competitor in 2006 to take over its real estate and employee
liabilities.
How did Wal-Mart, who enjoyed so much success in the US, China,
and other countries, get to that point? By failing to understand the
culture of their employees and their customers. Here are a few places
where Wal-Mart dropped the ball, according to my German colleagues
who shopped at the store.
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Germans don’t like - or at least aren’t very used to - very
friendly customer service. Having a greeter at the entrance
was unsettling. Having staff smile at customers was also
strange–some male shoppers thought female employees
were flirting with them.
Team spirit is a big part of American Wal-Mart stores, with
team members doing a morning chant to motivate everyone
for the rest of the day. Chanting in Germany is best suited for
soccer matches and nowhere else, so there were reports of
employees hiding in the bathroom in horror to avoid the
morning chant.
Even in higher-end German grocery stores, it’s customary for
shoppers to bag their own groceries. No shopper wants
somebody else touching their groceries after paying. Having
Wal-Mart cashiers bag the groceries themselves was
considered a big no-no.
All those things came together to create an uncomfortable
atmosphere for both employees and customers. Of course, there were
problems beyond the culture misunderstandings. Wal-Mart simply
wasn’t as competitive on pricing compared to long-established
German discounters like Aldi. Still, syncing with German culture would
have helped as they tried to build the brand within the country.
General Mills’ Cake Mix in Japan: A Breakdown in Market
Research
General Mills was ready to succeed in Japan in the 1960s. Their line of
pre-packaged cake mixes was a huge hit in the US, where customers
valued the convenience of needing just water, eggs, and the mix to
produce a cake. Surely, that convenience would be appreciated by
busy Japanese customers. Cake might not be as ingrained into
Japanese culture as in the US, but there still seemed to be a strong
market opportunity. What could go wrong?
The product launch was a complete failure, and it had nothing to do
with whether Japanese consumers liked cake or not. The reason for the
failure was glaringly obvious after the fact: just 3 percent of Japanese
homes at the time had an oven. Realizing their market research
problem, General Mills repurposed the cake mix to work in the much
more common rice cookers. That never really caught on, so General
Mills withdrew their cake mixes from the market.
Fast Food in China: How McDonald’s Lost to KFC
No fast food company does international expansion as well as
McDonald’s. Meanwhile, competitor KFC always lagged behind the
Golden Arches, especially in Asia. When China opened up its borders
to international companies in the late 1980s, it would have been safe
to bet that McDonald’s would continue its dominance.
That never happened, however. Today, McDonald’s has half the
presence that KFC does when it comes to total stores, while losing out
to KFC in revenue per store and margin. There are a number of
reasons for KFC’s success, such as being first to the market, building a
strong supply chain, and deploying a more strategic expansion plan.
However, a big reason for KFC’s success is that it adapted to the local
culture while McDonald’s initially refused to cater to the tastes of
Chinese customers.
McDonald’s had great success with its line of American-style burgers
when expanded to Japan and other Asian countries. They stubbornly
decided to roll out the same line of product that worked in nearby
countries. The difference between those countries and China is that
the latter had no frame of reference for burgers. The country was
closed of for so long that burgers seemed too strange and fore. KFC,
meanwhile, had the advantage of offering fried chicken, which is a
familiar food for people in China. They also took active steps to
localize their menus for the Chinese market, and their wildly successful
breakfast menu featuring staples like congee is a testament to their
localization efforts.
McDonald’s has since learned from its mistakes and and enjoys a
strong position in China’s fast food market. But due to their botched
rollout, they’re still a lagging competitor to KFC’s market position. A
little localization goes a long way, especially when it’s done correctly
from the start.
Lessons Learned
Even the biggest budgets and past international success doesn’t
guarantee future results when breaking into a new market. A sense of
a hubris, however, guarantees failure. As McDonald’s, Wal-Mart, and
General Mills learned, it helps to have local experience and a full
understanding of the new markets.