1. A highly successful US retailer expanded globally by first entering Canada, which was successful, and then Argentina. 2. The retailer's expansion into Argentina was initially very successful but eventually became unprofitable with a demotivated workforce and high employee turnover. 3. The key failure was a lack of understanding of the local Argentine culture and workforce, including not recognizing that the rural US model would not directly translate to Buenos Aires.

1. ‘Global Expansion – the good, the bad and the downright ugly!’
When companies set their eyes and ambitions on expanding abroad – what do they think
about and plan? To project numbers and plan for profit is only part of the challenge –
getting the people side right is key!
Here are some thoughts, wrapped in a true (yet disguised) case study that shows the good,
the bad and the ugly of global growth.
One of the most successful retailers in the US decides to go Global. This retailer has had
incredible growth in the last 30 year changing the rules of the industry and in the
meantime becoming one of America’s most admired companies.
First choice is Canada, seems natural, a retail chain with very similar characteristics is
bought, leadership is changed and another success.
Next choice is Argentina, now, that’s far away, and why?
Argentina in the 90’s in growing more than any other Latin-American country, the peso,
it’s currency has a fix exchange rate with the dollar minimizing currency fluctuations, but
most importantly it has one the highest dollars per square feet sales in the world. This
ratio is key for the industry, it indicates how many dollars you sell per square feet of
retail space, and those of Argentina are 3 times the US.
The decision is not to buy a company, but to start from scratch and grow organically. The
retailer sends a group of US executes that then recruit local Managers and in 2 years the
first store is opened, and WOW, sales are incredible, it’s the most successful opening in
the retailers history, consumers flow into the store buying everything the can at incredible
prices. In less than another year two more stores open, very successfully.
After two years of operation the company is exited and plans to open 10 stores a year.
The first years retailers start operations usually the do not plan profits, as they don’t have
the critical mass to absorve the overhead nor the buying power to improve their margins,
this is the case in Argentina no profits are planned for the first 3 years.
But as the years go by, what should have become a profitable business is still in the red,
and even more red than in the first years, customers are not flowing in, and most
importantly, the upbeat and excitement of employees in the first years has turned into a
very de-motivated workforce with huge turnover and employees leaving to competitors.
What went wrong?
Reasons, many:
The market and its reaction - the reaction of the mayor competitor, the reaction of
consumers, at the beginning called in by the low prices and curiosity of a new retail

2. option, but most importantly the lack of understanding of Argentina, and it’s people,
meaning employees, consumers and vendors. This speaks to the central challenge for any
large corporatation that seeks to grow in another country, what it says is:
1. Know the culture and the people.
2. Know how people think, know how people react, know what people feel – know
the ‘personality of the country’
Getting close to the local mindset
Lets start by the employees, grew out in the Us from a rural background, in it’s
headquarters based in a small town if you don’t work for them your other chance of work
is the local cafeteria or gas station. There is no competition for that workforce, and
people are very proud of the company they work for, they have shared it’s success.
But having a rural beginning with it’s headquarters’ in a small town. Having based it’s
incredibly successful growth model in opening stores in rural America, offering great
assortment and excellent prices to a population of high income, and staying out of big
cities were competition was tougher and managing workforce is much more complex;
why open your first store in Buenos Aires? Why set your headquarters there?
Buenos Aires, Argentina’s capital and largest city is a bit like New York, 12 million
people live in this huge metropolis and job opportunities, specially in the booming 90’s,
are as diverse as you can imagine. Consumers have a large range of retail options and
more important, they have different buying patterns.
But nobody thought of this. Buenos Aires just seemed the place to establish, and open the
first store.
Spotting the signs and then acting on them
So when employees from the home office, after the initial excitement and hype, started
leaving the company the question was why? That did not happen in the US?
What this case study says to large companies thinking of global growth
1. Blend your thinking and approach with the local with the global:
a. The relationship between the two entities is dynamic, there are occasions
when globalness needs to dominate – like a branding message, and other
occasions when the localness should dominate like acknowledging local
rules and customs. Practically, a real challenge a lot of companies face is
to blend the global brand message with the local culture….getting that
message just right is key.
2. Set up task force teams – steering committees, comprising of local people and
head office representatives (who should be recruited for the role and the

3. appropriately trained to be effective) to engage in the planning of the new local
enterpise:
a. These task forces are key and ultimately define whether the venture is
good, bad, or ugly! If these key people work well as a team, they will
bring success, if they do not work well together, unnecessary debate and
disagreement will slow up progress. Getting the right people in this
critical role is key too, you want someone with an open mind and natural
curiosity, not someone that is fiercely patriotic and change averse!
3. Know that you are managing change – MANAGE CHANGE and work through
the implications of what that change will bring locally and globally
a. Organizations should plan for change. From, the thinking and the
communication, through to the execution – and this should include the
emotional side of change too – e.g. what happens at the end of the
honeymoon period. Practically, setting up and managing expectations
along this cycle of change pays dividends, ensuring that there are no
surprises and people can understand each other from the center and in the
outlying offices.
4. When setting up new local organizations – build and support teams to be as
effective as soon as possible, get teams off on the right foot.
a. New organizations and new teams need to work on getting themselves off
on the right foot. Organizations that put aside time for that activity see the
results pretty quickly. These teams are about to enter a rollercoaster ride
of success and frustration - the last thing an organization wants is a team
that cannot work well in these diverse circumstances.
5 Be humble
In our experience - why organizations fall into the traps they do!
When a business model, and a workforce management approach have worked in
your local environment, and you have been so successful, you DON”T EVEN
THINK about other models or approaches , you are blinded by success.