Case Study

Entering Asian markets presents significant opportunities for European companies, but it also comes with unique challenges. This whitepaper outlines the five most common mistakes European companies make when attempting to enter the markets in India, China, and ASEAN countries.

1. Underestimating Cultural and Market Diversity

One of the most critical errors European companies make is failing to recognize the vast cultural and market diversity across Asian countries. This mistake often manifests in several ways:

a) Applying a one-size-fits-all strategy: Companies frequently attempt to use a single approach across all Asian markets, neglecting the distinct characteristics of each country.

b) Ignoring local consumer behaviors: What resonates with consumers in Europe may not have the same impact in Asian markets. For example, marketing messages that work well in Germany might fall flat in India or China.

c) Failing to adapt products: Many companies bring their European products to Asian markets without considering whether there’s a demand or if adaptations are necessary. Many case studies show this where they introduced European products without first assessing market readiness.

2. Insufficient Market Research

Inadequate market research can severely impact a company’s entry strategy and long-term success in Asian markets.

a) Lack of comprehensive analysis: Companies often rush into new markets without conducting thorough research on market dynamics, customer needs, and competitive landscapes.

b) Overestimating market size: Many international companies fall into the trap of overestimating the market size in countries like India, leading to unrealistic expectations and disappointment.

c) Neglecting competitive analysis: Underestimating local competition is a common pitfall. In India, for instance, domestic competitors are either numerous or very large and powerful, and foreign companies often fail to recognize their strength.

3. Inappropriate Market Entry Strategies

Choosing the wrong market entry strategy can significantly hinder a company’s success in Asian markets.

a) Overreliance on joint ventures: Many Western car companies, for example, have entered joint ventures in India that eventually failed, when they could have succeeded on their own with better local adaptation.

b) Limiting expansion to one entry mode: Relying solely on one market entry strategy, such as exporting, can limit a company’s growth potential. Different markets may require different approaches, such as franchising or establishing subsidiaries.

c) Neglecting alternative strategies: Companies often overlook strategies like joint ventures or direct investments, which can be particularly effective in countries with high entry barriers or complex regulatory environments.

4. Failure to Adapt Business Models and Pricing

European companies frequently struggle to adjust their business models and pricing strategies to suit Asian markets.

a) Rigid adherence to domestic business models: What works in Europe may not necessarily work in Asian countries due to differences in business practices, consumer behavior, and regulatory requirements.

b) Inflexible pricing strategies: Many foreign companies fail to be flexible with their pricing, forgetting that product value perception differs across countries. This often results in being priced out of the market or being confined to a small, super-premium niche.

c) Neglecting product adaptation: Companies sometimes introduce products without considering local preferences or needs.

5. Underestimating Regulatory and Bureaucratic Challenges

European companies often underestimate the complexity of regulatory environments and bureaucratic processes in Asian markets.

a) Bureaucratic hurdles: In India, for example, 64% of German companies surveyed consider bureaucratic hurdles to be particularly burdensome.

b) Complex tax systems: More than one in four German companies cite India’s tax system as a significant challenge.

c) Regulatory barriers: The EU notes that India’s trade regime and regulatory environment remain relatively restrictive, affecting a wide range of sectors including goods, services, public procurement, and investment.