Cases of study
Summary and Recommendations
Professor S. Paul VERLUYTEN
MAASTRICHT SCHOOL OF MANAGEMENT
OCTOBER 11, 2010
How harder could it be to get in into a retailing business in a new country with a culture and style completely different than yours?
The following case tries to answer this question givingsome valuable culture advises which are important before entering international markets in the retail business. It is essential to understand the environment of the international market in order to succeed in this attempt.
This is the case of the biggest retailer Warehouse Company in the World: Home Depot which went through an expansion plan in Chile, after being completely successful in Canada.They believed in Chilean market due to its stable economy and fair conditions for foreign investments. The Chilean Home improvement retailing market was very attractive with sale’s estimations of US 4 Million in 2001. However, they failed in their attempt. Why could this have happened?
Causes of the Failure of Home Depot in Chile
1. The Home Depot’s Competitors: Home Depot ignored thepowerful competitors they had in Chile: Sodimac, Construmart and Cencosud. The competitors prepared themselves training their employees, opening new stores and improving their logistics and service. On the order hand, Home Depot CEO also restricted their executives to share information with the competitors which is a common business practice in Chile
2. Consumer behavior: the customers in Chilewere less willing to improve their houses themselves for two reasons: the low labor cost of hiring a house worker. and the long working hours in Chile.
3. Consumer target market: Men often are the main important consumers in this industry. However, in Chile men usually went to Home Depot with their wifes who didn’t like the store’s atmosphere and their products. Therefore they preferredto go to the competitors where they could find better atmosphere and products specializing for women (home products, decoration products).
4. The importance of Partnership: Home Depot wasted the opportunity to learn about Falabella’s knowledge of the Chilean market not allowing Falabella to take part in their meetings and their decisions.
5. The relationship with the suppliers: HomeDepot tried to obtain the best supply conditions regarding its big size. However, they didn’t have good relationships with their supplier so they preferred to negotiate with their competitors.
6. Interpersonal Relationships: Home Depot paid no attention to the opportunity to integrate with the management network in Chile which values to frequent similar conferences, places, vacations resorts,clubs, and meetings with families and collages.
Being an observer
The most important thing in order to get to know a culture to be an observer, to recognize the differences and to act accordingly. Even more so if There are clear intentions of starting out a business in an international environment. In this circumstances is applicable the famous proverb that says “When in Rome,do as the Romans do” . In the Home’s Depot Case the executives clearly ignored cultural differences between Chile and the US and therefore they lost the opportunity to obtain a good piece of the market. The first thing that Home Depot’s executives should have considered before expanding to The Chilean market was to get to know the Chilean culture, its negotiation style, the local market and theLocal’s necessities and to build a marketing strategy that should have adapted to local customs and preferences. Likewise, they should have considerated training their executives in Intercultural skills. This is a matter of adaptation in a globalized market:
“Tapping the power of global brands often requires acknowledging country differences and respecting local norms, thus, strengthening...