Catriona Llanwarne: Expanding abroad all about culture

There are many Scottish companies who are focused on expanding or building their businesses overseas. We have seen a lot of success stories, as well as a few situations where things have not gone 100 per cent to plan.

Catriona Llanwarne is a Senior Associate with Burness Paull LLP

So what are the key things you need to get right to succeed in entering a new foreign market?

Market intelligence is absolutely crucial in terms of being fully prepared and ensuring your business proposition is viable. You will need to ensure you have comprehensive distribution arrangements in place, and have the right people on board. You are likely to need extra funding to enable you to expand your business, and also culture is one of the most important aspects to consider. The ability to show respect and understanding of local culture is often the difference between success and failure.

To give one example from China, you will not get far there without understanding the importance of WeChat. This app is a whole micro-universe that the Chinese use for absolutely everything from chatting to friends and contacts to researching new products to paying bills, and even to holding board meetings. Nothing that we have in the west has anything like the influence of WeChat on the lives of both consumers and businesspeople in China, and so it can be hard to get your mind around how important it is. But I have seen whole China expansion strategies fail simply as a result of a lack of appreciation of the importance of WeChat, and so it is absolutely crucial that you consider the culture of your destination market, and how things work there.

Ganten Water, partnered with Scottish company Freakworks to create advertising for its products, saw its first advert become the most watched ever in China

Having a good local partner can really help to ease the move into a new market, and make sure once you get there, you stay there. A local partnership can take many different forms, from finding a trustworthy distributor, to becoming friendly with a company you carry out specific projects with, to entering into a full joint venture. It’s really a question of building a relationship with someone on the ground who understands the market and has experience of doing business in it, and who can provide something of value to you based on the needs of your business. In China networking can only be understood properly within the complex cultural belief system of “guanxi” relating to social standing and personal relationships, which can be incredibly difficult for a new market entrant to tap into on their own.

For example, Scottish gin producer Pickering’s has been working in China with Chinese craft brewer Panda Brew. Pickering’s opened their first gin and seafood bar in Beijing in July this year, and working with Panda Brew on the project meant Pickering’s could really gain from Panda Brew’s understanding of the Chinese consumer and what they are looking for. The bar’s launch was a resounding success, and there are plans under way to roll out further bars across the country.

And then there’s Ganten Water, which has partnered with Scottish post-production film company Freakworks to create advertising for its products. This one is slightly different, in that the water company involved is Chinese, and it is marketing in China to Chinese consumers. The Ganten adverts are filmed against captivating Scottish scenes, and the first advert, set in Edinburgh, was the most watched advert ever in China. The Ganten/Freakworks example shows that while you do need to respect the culture of your destination market, you should be careful not to lose too much of Scotland in doing so. This partnership shows that a Scottish company, drawing on the best of Scotland, working together with a Chinese company that knows its market, can have an incredibly impressive and compelling impact.

It is of course very important that that you are properly protected – it’s not enough to roll out your standard confidentiality agreement and Ts & Cs, you need to make sure that what you are using is enforceable in the jurisdiction you are working in and that you have taken proper advice on protecting your rights.

So remember, if you are thinking about taking your business on to the global stage take your time, think about who you could work with, and take a long-term approach. In my experience that’s how you can unlock the really exciting international business opportunities out there.

Catriona Llanwarne is a Senior Associate with Burness Paull LLP