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“Expansion in global markets is an art and a science,” said Michael Moriarty, a partner of the retail practice at management consultant A.T. Kearney.
This story first appeared in the October 13, 2011 issue of WWD. Subscribe Today.
Success in global expansion requires the ability to strike that fragile balance, which, as Moriarty noted, isn’t always easy.
Instrumental on the science side of the equation is “attractiveness.” This includes whether the market makes sense for the brand to enter and how difficult it is to work in. Another element is whether the retail environment is overly saturated. Is there too much international competition?
A third factor, which Moriarty calls “urgency,” measures the relationship between the growth in a retail sector compared to the growth in the economy overall.
“This is an important measure because as the retail sector grows more rapidly than the economy as a whole, then choice locations can get snapped up, real estate prices may rise more rapidly and the infrastructure may get overtaxed,” he said, while stressing the importance of having “eyes in the marketplace.”
“Risk” is the final element to the science side, which includes identifying volatility and the “volatility of that volatility,” he said.
Keeping an eye on the social and political situation is key when looking to invest in foreign markets.
On the other side of the coin is understanding the intangible, or the “art” of expanding abroad.
“Where the science is what you know, the art is what you are — your organizational DNA,” he said. “And while you don’t make good decisions without the knowledge that science brings you, you definitely won’t enjoy real success unless you get the elements of art right.”
“Art” includes “love,” “genius,” “respect” and “self-knowledge,” he said, explaining that you have to have a “passion” for what you do, which requires resilience.
“There’s a lot of stuff that’s pretty hard to love about building success in global markets,” said Moriarty, who noted that obtaining success includes having “visionary leadership.”
Moreover, companies must respect or “appreciate the consumer,” meaning they should cater to different customers in their new market without straying from their brand’s DNA.
Moriarty underscored the importance of knowing your own capabilities and not becoming overly ambitious or arrogant, which is central to becoming a global company.
“This commands engagement and awareness of the facts, as well as the introspective appreciation of how we respond to them,” he said. “In many ways it’s the most important of the dimensions required to prepare for the journey of global market expansion, for without it, we cheat our brands.”