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The company leaders did not seem very curious about doing additional research in other markets. Instead, they seemed more eager about following a formula and moving quickly. They also opted for relocating someone they already knew in Mexico instead of conducting a broader executive search. Perhaps this was done with the best of intentions, but it was still a risky shortcut.

Background: A common mistake when deploying go-to-market strategies across Latin America is to assume that the region is a uniform culture. But consumer preferences, when it comes to technology hard-sell or celebrity endorsements, for instance, can vary quite a bit. Among other things, Chileans are not easily enthralled by celebrities, heroic figures, charismatic leaders, because they tend to favour modesty as a core value, rather than assertiveness. They also rely a lot less on self-indulgence as a conduit to life satisfaction, which is why a cruise in the Caribbean may not sound as enticing to them as it does for the Mexicans.

The fact that the business in Chile had been run by a 3rd-generation family-owned company would have suggested that its success relied heavily on being deeply immersed within the Chilean community. Paco’s native country, Mexico, is a highly collectivist culture, therefore this would have equipped him with an important framework and skillset to do well in Chile, which shares this same trait.

Background: Chile’s culture is fairly unique in South America, in the sense that it operates under the mindset of an island country, as it is naturally “walled off” by the Andes mountains (“la cordillera”) to the east and the Pacific Ocean to the west. So in addition to being very group-oriented, Chileans tend to be self-contained and self-reliant. Not only will business deals only move forward if strong interpersonal bonds are established and successful relationships are built, but there is also an interest in building consensus - the need for listening to others’ ideas and achieving mutually beneficial solutions sets it apart from neighbouring cultures.

Though there is nothing wrong with having a consistent strategic framework, execution, in this case, merited more careful examination. The Germans failed to recognize the importance of evaluating potential differences in cultural context between countries, and the need to equip Paco with the proper cultural training to help him succeed in the new position.

Background: German culture favours individualism and is generally comfortable with giving people a vote of confidence, perhaps akin to a “sink or swim” approach (as long as one has the right credentials). Chileans, on the other hand, see things differently. They tend to focus on relationships first, before evaluating business outcomes, and they are also less comfortable with ambiguity.

Though Chile tends to skew more in the direction of a so-called “tight society” (hierarchical, conservative, orderly and uncertainty avoidant), it also favours subjective well-being over competitiveness, toughness and assertiveness. This is not to say that consumers dislike or reject technology and performance-related messages, but companies should definitely keep in mind these cultural subtleties when marketing their goods and services

Background: For a generally hard-working and disciplined society, Chileans definitely have a variety of interests beyond productivity which bring them joy in life, too. They place high value on general indicators of well-being, as expressed in their love for literature/poetry, food/wine, ecology/wildlife, and family/health.

Actually, Mexican culture is quite conservative too. Both countries share a Catholic foundation and both of them score similarly high on Uncertainty Avoidance. The most likely cultural dimension to pose a challenge for Paco is Masculinity-Femininity (competition-cooperation).

Background: Chile is very different from Paco’s native country, not just in terms of gender roles (e.g. though women are now well represented in the state/federal legislatures and in the workforce, sexism/machismo is still very present in Mexican culture), but mostly due to how people relate to success, recognition and career advancement. At the broader societal level, Chile has also become much more active in combating inequality, defending civil rights, pushing for a welfare state and fostering cooperation (rather than competition). In sum, Paco would have found himself in an environment where “machismo” has largely been curbed, or at least tamed.

Though Chile has a dynamic economy that favours free trade, investment and entrepreneurship, its culture tends to be one that prioritizes security and stability over change and innovation. Any company seeking to enter the market, or expand operations in it, must be willing to adapt to the Chilean way and work in collaboration with local business sectors to achieve a good balance between continuity and novelty.

Background: Chileans tend to be cautious, and personal failure is considered shameful. It’s important to remember that they have a low tolerance for unknown situations and therefore value expertise over experimentation, servitude over achievement, and solidarity over bravado. On the flip side, Chileans can be extremely good at implementing once they have understood what needs to be done and how.

Although Chileans may be less predisposed than Mexicans to think that foreign goods are better simply because they are foreign, they are still very much status-driven, and perfectly willing to pay a premium for quality goods and services. Also, the vast majority of Chile’s population is of European descent, and it is something in which citizens take pride.

Background: Germans have featured in the history of Chile since the 16th century and today there might be as many as 200,000 residents of German ancestry in the country. The majority of emigrating Germans settled in regions such as the Chilean Lakes district and Araucanía. Today, Chile’s most important cultural cities in the south, including Puerto Montt and Valdivia, owe much of their cultural heritage to German settlers, the vestiges of which can be clearly seen in the food, architecture and language.

This would not only have been a good idea but probably critical for Paco’s success. It would have given him some valuable insights into market dynamics and helped him get a head start in building his own network of contacts. Plus, it would have helped get the word out that he was willing to learn and make friends.

Background: Chile’s population is relatively small and the business community is close-knit. As in any hierarchical and collectivist culture, it is beneficial to know ‘who is who’. For a foreigner who seeks to establish themselves, it can make all the difference to show humility and reassure others of one’s disposition to work together.

Given what we know about this case, it certainly seems so. That said, it is critical to look at it from the Chilean perspective as well. Beginning to work with an outsider can be a shock for local retailers and other business stakeholders, especially after being used to dealing with an established distributor/partner whom they knew well. Moreover, the fact that Paco didn’t have prior international experience should have signalled to his superiors that he would benefit from cross-cultural management training before being sent to Chile.

Background: The company seemed to be working under the assumption that a Mexican native could adapt quickly to Chile. From a cultural perspective, however, the two countries have some very fundamental differences. For example, Chile tends to be a more egalitarian society than Mexico, which, among other things, makes people more readily suspicious of authority figures, especially if they are newcomers.

After more than a decade operating in several Latin American countries through a fragmented network of distributors, a German high-performance sports apparel manufacturer decided that it was time to attain majority ownership of the regional businesses and shift to a model of subsidiaries. In Mexico, the firm moved in aggressively to buy out the existing joint venture between three major wholesalers and consolidate the country’s operation under the leadership of very capable Mexican executives who knew the industry inside out. The transition was swift and efficient, and the big bosses in Germany were optimistic about replicating the success throughout the region over the course of the next 18 months. A task force was formed in order to identify key learnings from Mexico and outline best practices for systematically converting seven other markets to an ownership-based model. Members of the task force identified three strategic priorities to be followed in each and every market:

 
  1. Relaunch the brand through a multimedia campaign by heavily emphasizing its German origins and technological superiority
  2. Sign endorsement deals with the most prominent local athletes and other top celebrities 
  3. Invite key retailers and their spouses to a sales and marketing convention to be held during a week-long cruise in the Caribbean 
 
The company decided that Chile should be next, in part due to the country’s economic stability and high purchasing power per capita, but also because the contract with the local distributor was about to expire. This was a 3rd-generation family-owned company that had been a business partner for many years, so it was not easy to part ways with them. But the Germans were fully committed to taking over and pursuing their ambitious growth plans. Following some deliberation, and in the spirit of achieving the best possible outcome, it was decided that Mexico’s Commercial Director, Francisco “Paco” Lopez Sordo, was the person best suited to lead the Chilean transition and integration. After all, he had been instrumental in making things happen in Mexico. And if he had done well in the region’s second-largest economy, his supervisors figured, Chile would not pose much of a problem for him. They offered Paco a juicy expat deal and he was truly excited, not just for the promotion but also because this would be his first experience living and working abroad. 
 
Upon arriving in Santiago, Paco’s mandate seemed very straightforward. First, he would need to assemble a team whom he could trust. Second, he would make sure to deliver against the three strategic priorities. He was asked to report back to headquarters in six months.
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Last updated: 13.05.2022 - 11:03
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