CASE STUDY

PRESENTED BY

JAGDEEP SINGH (4491402)

PUSHPDEEP SINGH (4508865)

DALJEET KAUR (4508595)

RIYA KALRA (4499855)

NIRALI JAYESHBHAI PARMAR (4502332)

Case study on a market expansion failure by a Compaq in the international business
context

Compaq Computer Corporation was one of the world's major computer businesses in the early
1990s. The corporation was headquartered in the United States and dominated the PC industry.
However, when it came to expanding its business into overseas markets, Compaq encountered
significant hurdles.

Compaq sought to expand its market reach into Japan in 1997 by purchasing a majority stake in
NEC-PBX, a joint venture between NEC Corporation and AT&T. The joint venture was formed
to produce PBX equipment for the Japanese market, and Compaq saw an opportunity to expand
into the fast booming Japanese IT sector at the time.

However, the growth attempt failed, and Compaq eventually sold its stake in the joint venture in
2000. Several reasons led to Compaq's failure to expand into the Japanese market. For starters,
Compaq was unfamiliar with the Japanese market and was unable to tailor its goods and services
to Japanese clients' individual demands and preferences. Customers in Japan have long favoured
domestically manufactured goods, particularly in the electronics industry. Compaq's products
were perceived as alien and unusual, making market penetration difficult.

Second, Compaq had difficulty forming ties with local enterprises, which is critical in the
Japanese market. Compaq would have benefited from local alliances in order to better
understand the Japanese market and tailor its goods and services accordingly. However, Compaq
was unable to form such alliances, limiting its capacity to compete with local competition.

Third, Compaq struggled to manage Japan's peculiar regulatory framework. Japan's regulatory
framework is famously complex, and Compaq struggled to comply with the stringent standards
that regulate the Japanese IT sector.

Finally, Compaq's products were unable to be adequately marketed in Japan. Because the
corporation failed to explain the distinctive value proposition of its products and services to
Japanese clients, its items were not perceived as enticing or valuable.
When expanding into a new foreign market, a firm may confront a number of hurdles or
fail in a variety of ways. Among these difficulties are:

1. Inadequate market research: Companies may enter a new market without completing
enough market research. This might result in a situation in which the organisation does
not have a comprehensive grasp of, among other things, market size, client preferences,
purchasing behavior, and cultural subtleties.

2. Failure to adapt to local culture and traditions: Companies that fail to adapt to a new
market's local culture or customs typically struggle to obtain market acceptability. For
example, commercial talks in some nations may take longer and need more relationship-
building than in others. Companies that are unable to adjust to cultural differences and
participate in relationship-building may struggle to establish genuine commercial
connections.

3. Regulatory challenges: Each country has its own regulatory structure, which businesses
must manage when expanding into foreign markets. Failure to comply with these
requirements can result in penalties, litigation, and reputational harm, among other
things.

4. Inadequate or localized marketing efforts: Businesses may struggle to acquire market

acceptability if their marketing efforts are not tailored to local culture, language, and
tastes. This might result in poor sales performance and difficulties in raising brand
awareness.

5. Fierce competition: When a firm enters a new market, it must compete with current
companies that already have a strong presence in the industry. This can make acquiring
market share, creating loyal consumers, and earning significant revenues challenging.

6. Geopolitical hazards: Geopolitical risks can have a detrimental influence on a company's

operations in some markets. Government instability and violence, for example, might
impede or reroute corporate activity.

Several reasons contributed to Compaq's failed market penetration in Japan, including:

1. Lack of local market knowledge: Compaq lacked basic understanding of the Japanese
market, including consumer preferences, business practices, and cultural conventions,
which hampered its ability to respond to local demand and competition.
 2. Inability to form partnerships: Compaq lacked effective collaborations with local
businesses, which may have assisted the corporation in gaining a better understanding of
the market, establishing commercial ties, and adapting its product offerings.

3. Adapting to regulatory requirements: Compaq struggled to adapt to the Japanese market's

complicated and distinctive laws. Compaq's market development attempts were hampered
further by Japan's stringent regulatory regulations for IT goods.

4. Poor marketing strategy: Compaq's marketing approach was ineffective, since it was
unable to properly advertise its products and services to Japanese consumers. The
corporation did not explain the benefits of its technology and did not adapt its
advertisements or communication tactics to Japanese audiences.

5. Competition: Compaq faced stiff competition from established worldwide businesses

such as IBM and NEC, the local market leader with a solid reputation and market share in
Japan.

Compaq may have used a variety of ways to avoid or alleviate these issues, including:

1. Conducting thorough market research: Compaq could have performed extensive market
research on the Japanese market, including customer preferences, business practices, and
cultural conventions.

2. Creating partnerships and collaborations: Compaq might have formed strategic alliances
with local businesses to obtain a better grasp of the market and create commercial
contacts. This would have also given the company the ability to tailor its products to
match local demand.

3. Adapting its products and services to local demands: Compaq might have tailored its
products and services to Japanese consumers' needs and preferences.

4. Adapting to regulatory requirement: Compaq may have gained the capacity to comply
with Japan's IT standards and regulations by adapting to regulatory needs.

5. Creating a great marketing plan: Compaq had the opportunity to create an effective and
efficient marketing strategy geared at Japanese audiences. They could have simply
 altered messages and focused on issues that mattered to the Japanese market by
employing and collaborating with local marketing specialists.

REFERENCES:

https://www.pcguide.com/news/what-happended-to-compaq/

https://history-computer.com/the-real-reason-compaq-failed-spectacularly/

https://medium.failfection.com/compaq-and-its-failure-375b2ee76be1

https://www.sciencedirect.com/science/article/abs/pii/S1044028302000352