Globalising with a local flair - Essay Example

Globalising with a local flair Affiliation Email address This paper attempts to enumerate the various reasons companies that operate in overseas markets should adopt a modified globalization strategy that includes standardised products, localisation and the judicious application of arbitrage citing examples from such successful companies as Nike, Coca-Cola, McDonalds, Pringles, Sony and Inditex. The concept of a “shrinking world,” a world wherein travel, trade and communications between countries is becoming easily accessible by all, is luring more and more companies into the worldwide market thanks to significant advances in transportation, communication and a recognition of the success of libertarian marketing systems. “The globalisation of markets has certainly accelerated through almost universal acceptance of the democratic free enterprise model and new communication technologies, including satellites and the Internet” (Cateora 2005). However, many of these companies that are inexperienced in marketing overseas incorrectly assume that their products or services will be easily accepted in foreign markets. Even when remaining concentrated within a single country or when marketing their goods to countries individually, companies facing international competitors will fare better if they have a global perspective in mind. As mentioned by Cateora, all these companies are or will be affected by competitive activity in the global marketplace (2005). To illustrate this concept, Cateora relates the story of US-based General Electric Lighting, who dominated the US lighting market until its rival, Westinghouse, sold its operations to Philips Electronics of Holland. Philips was then able to come in to the US market to compete from a stronger marketing position. Based on the experiences of companies such as General Electric Lighting and others, all companies that operate in international marketing arenas should adopt a modified globalisation strategy that includes a wide range of standardized products, but remains open to small market-specific variations designed to satisfy consumer needs, wants and tastes in smaller regions. Globalisation, at its most basic, “is often presented as a strategic effort to treat the world, or a significant part of it, as a single market in which to do business” (Sharma 2004). The strategy seemed to work when first applied to Coca-Cola sales in the 1990s. The globalisation program introduced by then CEO Roberto Goizueta, “think global, act global,” treated the whole world to a standardized set of everything the company had to offer to great initial success (Ghemawat 2004). Early globalisation efforts initiated by companies such as Bozell in representing Heinz tomato ketchup saved money by utilising assets such as the same television commercial for both UK and Russian markets, with only a simple change included in the final line (Wheeler 2000) to decent effect. With such strategies, companies with strong brand identifications have been able to move into and even take over foreign markets. Strongly identified with US values and culture, the restaurant chain “McDonalds now claims to be the leading restaurant chain in France. Its French sales and profits were both up by over 9% in 2001—a year when the company saw global net profits fall by 17%” (Delicious Irony 2002). For companies such as Coca-Cola, the acceptance into the worldwide market was not so difficult. “More than 70% of our income comes from outside the U.S., but the real reason we are a truly global company is that our products meet the varied taste preferences of consumers everywhere” (Coca-Cola 2005). For these companies, the answer seems to be in successfully selling the brand. In Larry Bodine’s article on “Penetrating local markets with branding,” he quotes Richard Levick, president of Levick Strategic Communications, as indicating Burger King food scores better in taste tests than McDonald’s food, yet McDonald’s is the market leader with its dominant brand. Why? Because McDonald’s is selling an experience, a relationship (2005). For Proctor and Gamble, the entry of the Pringles potato chip brand into the global market was as easy as translating the packaging to a foreign language, but when the unique product became an instant success, meeting the demand became a liability. Rather than a market to rid themselves of surplus product, the company found it necessary to quickly obtain overseas manufacturing plants to keep up with the new demand (Smith 2001). Yet, even with the early successes, subsequent reductions in sales in recent years across several industries have indicated “a responsible and relevant globalization approach is more sustainable.” William Mougayar urges companies to work in close connections with the governments and existing corporations in each country they enter for greater economic impact (2002). In moving into other countries and other environments, companies need to take into consideration not only their own products and services, but the resources of materials and workers available in a local market as well as the individual tastes and desires of the consumers in that area that have been formed by a combination of cultural background, national identity and personal preference. In “Why global brands are not always cost-effective,” Lindsay Williams quotes Laurie Young, global head of marketing at PricewaterhouseCoopers as saying “Local culture is a powerful barrier to the success of a global brand. It really is time that we recognised the power of cultural differences and their effect on global enterprise” (Williams 2004). To help work around that barrier, US-based United Airlines opted to join Air China based in Beijing in the Star Alliance, a group of airlines reserving the ability to sell air passage tickets on each others’ planes (United 2003), thereby retaining their local brand draw while gaining a more globalised reach. Although early predictions held that the world would be highly globalised in a short period of time, “experience has shown that companies need not always create one-size-fits-all global brands just because the world appears to be shrinking. Indeed, firms should recognize that adapting brands to local conditions will on many occasions be the best approach, and at times the only approach, because local conditions will leave them no other choice” (Managing brands 2005). Inditex, the parent company of the popular Zara clothing stores, achieved its success through a unique company structure in which all design, prototyping, decision-making, supply procurement, planning, production and delivery schedules are done in a single room while reports stream in daily from each of the more than 650 stores located in more than 50 countries, keeping the company in touch with the wants, needs and desires of localised regions (Harkness 2003). Without some of these tools, or wishing to make more of a global splash upon their venture into the waters, new companies have developed that specialize mainly in helping other companies to globalise through constantly evolving research methodologies (Whitney 2003). To address some of the technical demands of a differing world market, companies such as Lionbridge have sprung up to help large corporations adapt their products to more localised specifications such as software programs and computer hardware compatibility (Lionbridge 2000). The need to localise within the global corporation is just as important as localising without it, as Pastore indicates through his conversation with Kevin Keohane, director of user experience for the Intranet Benchmarking Forum — “In Keohane’s experience, global corporations tend to have an umbrella group in their home country that will update company news that impacts everyone involved. There are intranet groups in certain regions around the world that add their own personality for local employees” (2005). Yet even turning to a mostly localised strategy is not always enough to ensure success. While most companies recently are gravitating toward more localisation and less standardisation, analysts such as Ghemawat propose these firms should focus more on arbitrage, or the strategy of difference. “In fact, many forms of arbitrage offer relatively sustainable sources of competitive advantage, and as some opportunities for arbitrage disappear, others spring up (Ghemawat 2004). According to Galbraith, “In most industries, customers prefer fewer suppliers and closer, longer-term relationships with them” (2001). An example of such attention to local conditions can be seen in the growing number of multinational entrepreneurships such as that of Ismail Karaoglu, who recognized the fine leather and high quality accessories he could obtain in Italy to fashion into wallets and other goods in Istanbul to sell in Russia and other former Soviet republics (Karra and Phillips 2004). More and more of the larger corporations are also starting to see some of the advantages of playing to the strengths of individual economies. “For instance, Rupert Murdochs News Corporation has its chief markets in the UK, the US and Australia but places its acquisitions in these countries in holding companies headquartered in the Cayman Islands, which does not tax corporate income. The result is an average tax rate of 10% on Murdochs companys profits, whereas competitors such as Disney are paying close to official tax rates of 30 to 35%. The advantage has allowed Murdoch to expand further into the United States, growing the company and driving up employment” (Ghemawat 2004). Other companies, such as Dutch-based Phillips Electronics, have managed to make their brand both local and global at the same time. “’Today,’ says Dawar, ‘[Philips] is not just a Dutch brand that has gone international, but it is in fact a local brand. People will tell you this in Austria, Australia, India and Canada—there are a number of places around the world where Philips has gone very local.’” (Frost 2005). Capitalizing on local identity, the athletic shoe manufacturer Nike propelled itself from an average everyday tennis shoe to the worldwide giant it is today by riding on the coattails of celebrity endorsements, starting with Michael Jordan in the 1980s and continuing with golf star Tiger Woods (Tran 2004). Whether companies choose to enter the global marketplace or not, evidence has shown there is no guarantee that the globalised marketplace may not come in to compete; therefore, it would be wise for all companies to adopt a modified globalisation strategy that takes into account the use of global strategies, local interests, wants and needs and leaves room for maximizing on the strengths of a given region. Companies such as General Electric Lighting learned too late that opting out of globalisation cost them greatly in later years as stronger competition from other countries moved in while others such as Proctor and Gamble and Coca-Cola managed to find almost instant success with nothing more than a simple change in language. However, to make globalisation a success, fast-growing corporations such as Inditex have learned to keep their brand identity globalised while placing their fingers on the pulse of consumers at the local level. Companies without the ability to completely restructure have found success by forming cooperations with existing companies and governments in other countries, as is evidenced in the Star Alliance that allows airliners such as United Airlines and Air China to cross-sell. As shown in previous discussion, many of the most successful global companies have learned to change with the local climate even while maintaining a worldwide identity. 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