The image of foreign companies penetrating domestic markets has been a bit romanticized. A general assumption is that foreign chain stores can easily make huge profits thanks to low-cost labor and strong support from the companies’ headquarters. But is this really so?

One thing which foreign companies can never shake off is their identity. Foreign chain stores—no matter what goods they have on their shelves, where their employees come from or what kind of services they provide—have always been viewed as representative of their original nations. Thus, they, may become especially vulnerable under certain unexpected and unpleasant situations, sometimes even becoming scapegoats.

One recent case that demonstrates this dynamic pertains to Carrefour, a world-renown retail seller from France. When rumors went around before the summer of the 2008 Beijing Olympics Games that a major Carrefour shareholder, LMVH, had donated large sums of money to the Dalai Lama, Carrefour saw a number of large-scale boycotts in its Chinese market. In some instances people demonstrated inside the stores. While foreign chain stores may be “localized” to a large extent, they will never get rid of what their companies’ names and headquarters’ locations suggest.

Cultural assimilation plays a fundamental role in the success of chain stores abroad. Even the world’s largest retailer, Wal-Mart met significant resistance when it tried to develop its market in India, where about 150 million small retail stores make up a gigantic retail market. Several factors, including domestic laws and policies, complicated Wal-Mart’s entry into India. Other foreign corporations, on the other hand, acutely tailored their products to domestic consumers’ preferences. When Google and Baidu, two major search engines, got into a battle for domination of China’s Internet market, Baidu, though hardly a domestic corporation itself, pretended to be one and spread messages supporting domestic industry in an attempt to win over consumers. Though there are certainly many other factors leading to Google’s failure in China, there is no denying that “domestic industry” has proven to be a magical phrase under various situations.

Chain stores need to cope with different consumer habits and cultural differences when penetrating foreign markets. Though most of them have been doing a great job, it is debatable whether the picture is as clear and rosy as what is generally assumed.

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