Read the full script of Module 6, Episode 5 of the Global Growth Master Class below. Want to get certified on global expansion? Simply click here to access the complete course today.

Equipped with all these findings from Market Research and Localization Discovery, what do you do with the insights you uncovered?

The next major step is to come up with a list of hypotheses (corresponding to each of the six Localization Premiums) for how the business will operate in the new market. In order to effectively do this, you have to evaluate all 6 categories of premium, and your findings, using two key filters to uncover how you will need to adapt your business to find traction, fit, and growth in a new market: Government & Regulation and Culture. Let’s explore each.

Your basis for analysis is your validated model in your initial market – looking at what worked to achieve product-market fit in your initial market, which will serve as a basis for what your model will look like in new markets. The first lens to investigate your validated model in your initial market is Government & Regulation. The success of a company's market entry is significantly impacted by government policy, local laws, and the current political environment. 

This category encompasses a wide range of factors related to the legal operation of a business in a new country, such as establishing an entity, obtaining licensing, protecting intellectual property rights, complying with product regulations, owning and storing customer data, and taxation, among others.

Government policies can range from simple regulations regarding the storage of customer data, like in Germany, to requiring a partnership with a local company or local board members to operate legally, like in India, or imposing import taxes that reduce the attractiveness of a product for locals, such as with electronics in Brazil.

Additionally, government regulations can impact market dynamics, especially in industries that receive more government attention, such as the liquor industry

For example, Carlsberg had to work closely with the Vietnamese government to enter the market due to local law requiring the government to own a controlling equity stake in local breweries. 

Therefore, selecting the right mountains to climb - country - to launch it is critical to the success or failure of a global growth initiative. Government policy can either facilitate or hinder a company's ability to operate and grow, and it can use creative means to limit a company's operating model or product features.

The impact of government policies on a company's success during market entry cannot be overstated. Establishing an entity, licensing, adhering to regulations, protecting intellectual property rights, ownership of customer data and taxation may seem like a laundry list of boxes to check, but they are really so much more.

Depending on the country, such policies may involve relatively simple regulations or more complex requirements, such as partnering with a local company or having local board members to legally operate, adhering to product regulations, or dealing with import taxes. The government's involvement in certain industries could also affect market dynamics. China’s requirement to share intellectual property has strong financial implications and has been a big concern for companies looking to enter the market. Local laws requiring a local joint venture (JV) partner instead of direct ownership, political dynamics, or an industry-specific regulation all can have a strong effect on market attractiveness.

Thus, it's crucial to choose the right country to launch in to ensure a company's profitability and success

In some cases, a disruptive government policy may be the sole reason not to enter a market. The role of public policy teams in validating and growing in new markets has become even more vital, and their focus includes navigating policies that may limit a company's profitability or prevent the use of a specific business model. For example, Vivino had to delay its expansion in Brazil due to difficulties in transferring money out of the country, and it couldn't use its primary revenue model in Russia or South Korea because selling alcohol online is illegal in these countries.

The Middle Eastern country of Oman has its “Omanization” initiative, which requires companies operating within its borders to hire only Omani nationals for some roles (like HR), while other roles, such as sales, can be filled partially by expats. At the same time, a certain percentage of company employees need to be Omani nationals for the country to grant visas for the expat employees.

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Mo Yildirim, former Managing Director of International Expansion for Talabat, explained that this created issues for Talabat since locals lacked certain skills the company needed. It slowed hiring and required the company to invest heavily in training.

Uber faced significant resistance from various governments due to its disruption of the regulated taxi and delivery markets. To address this issue, Uber developed a market segmentation strategy based on local regulations, focusing on markets with more favorable (green) regulatory environments, and less on ones that presented large obstacles (red markets). 

However, the company still faced challenges in certain markets and was even forced to exit some markets entirely. For example, the Hungarian government suspended Uber's operations in Budapest with a law that allowed the national communications authority to block all internet access to "illegal dispatcher services." In Denmark, Uber was forced to pull out of the market after the country required fare meters and seat occupancy sensors in all vehicles providing taxi services, which was not profitable for Uber to implement. Government regulations can significantly impact various aspects of a company's operations, including its business model, competitive landscape, customer data privacy, distribution channels, and ability to move cash in and out of a country.

IMPORTANT NOTE

it’s not a static one-time approach when entering a market. You still need to be aware of regulations as you consider changing your business model and strategy. Apple, for example, had recently made the decision to sell chargers for its iPhones separately across its entire global footprint. While this was easy to roll out in many markets, in Brazil a local law states that companies must include all components required to use the product it sells. 

Without a charger, an iPhone is useless after a few hours of use, meaning that users wouldn’t be able to operate it without the charger, violating the local Brazilian law. Apple had to adapt for the Brazilian market to operate legally.

When considering expanding into a new market, it is crucial to evaluate all aspects of your business based on government regulations. This approach will enable you to factor in the impact of political and regulatory factors on your market entry strategy. Successful international teams ensure that they don't waste valuable resources by accurately anticipating the adjustments required for localization in advance and establishing a positive relationship with the local government.

NOTE: Don't miss out on the next episode! If you want to continue learning about global expansion strategies and dive deeper into the course material, simply click here to access Module 6, Episode 6 of the Global Growth Master Class.