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A few months ago, we talked about a ricochet effect, which often happens when companies from other countries, like Brazil, want to set up a presence in Canada. A common mistake is to think that all that’s needed are two things: good contacts and information about how to get things done here.
The challenge is that, although these two things are necessary, they are not enough, and experience shows us that only about 2 to 5% of companies that have good contacts and good information end up actually conducting any significant business in Canada.
The ricochet effect occurs when things seem to go well in the beginning, but plateau after a few months and, after some time, the internationalization plan is practically abandoned. A few months ago we discussed the external factors that cause the ricochet. The external factors are related to the big differences in the business environments between Canada and Brazil.
Now, we’re going to start talking about the internal factors that cause business not to advance in Canada.
Canadians are very good at not having any type of prejudice against anybody or any organization coming from other countries. However, when people are not familiar with your background, they tend to research through the sources they have (Google for example). This sometimes does not help, because information about Brazil in the last couple of years mostly has not been positive, and this, unfortunately, may hurt the reputation of Brazilian companies by (unfair, but existent) association.
People will be too polite to say it, but they may be thinking “How can I be sure this company can generate this level of quality?”.
There may be an unspoken unfavourable reputation to be dealt with.
Internationalization brings a lot of uncertainty. Companies either donít know what to expect and assume they’re going to face similar challenges in a similar environment, or they have researched about the new environment and have their own perceptions but are not certain about what’s going to happen. Uncertainty makes business-people more reluctant to commit to resources or more skeptical about the probability of success.
The more uncertainty, the harder it is to implement a new operation abroad.
The company may have a good list of contacts raised over time through trade missions, meeting people at trade shows or being introduced to by government representatives and consultants. The challenge becomes how to meet more contacts, how to approach the markets and getting more options.
Canadians usually will politely compliment the product or service and this may cause in the Brazilian company a false sense that a deal is imminent. Without material progress, the continuous focus on a small number of contacts that are not advancing becomes frustrating for all involved. In order to increase the probability of success in the internationalization, it is fundamental to increase the number of options.
There are other factors that may cause the ricochet effect and interfere with the success in†internationalization. We will continue discussing them in our next newsletter.