The Marketing Concept of Glocalization - Coursework Example

The pace of globalization has been accelerated by advanced technologies such as the internet and modern transportation systems. This rapid pace of globalization has also had an effect on brands, so that they now signify more than just products with familiar logos. Nowadays, the success of brands depends on whether they also offer consumers the opportunity for self-expression. It is an uphill task for a global brand to adapt to the tastes and preferences of a local market and still maintain entrenched identities and personalities that make it recognizable worldwide. This necessity led to invention of a new concept in international marketing known as glocalization. The marketing concept of glocalization emphasizes that a products globalization is likely to be more successful if it is also adapted to the culture of its target market. It seeks a balance between localizing a global product such that it meets local preferences and tastes, and globalizing a local product for worldwide acceptance. This essay will provide a literature review on glocalization, discussing its relation to globalization and the standardization vs. adaptation strategy, and finally analyze the use of glocalization by Coca Cola and MacDonald’s in India.

The glocalization concept came into existence because of the increasing pace of globalization. No culture can exist by itself and ideally all cultures and localities of the world are interconnected in the global process. It can thus be argued that glocalization is a consequence of globalization. Robertson writes of globalization as “the interpenetration of particularization and the particularization of universalism” (1992 p. 100). This means that the processes of glocalization and globalization should be seen as interdependent (Robertson 1995, p.34). This interdependence can be better expressed through macro localization and micro globalization. Macro localization involves making local ideas, practices and institutions global and an example is the emergence of religious revivalist movements. On the other hand, micro globalization involves adoption of certain global practices in a local culture. An example of micro globalization is production or marketing techniques that are invented in a certain locality but with time spread and become adopted to various parts of the world.

Glocalization helps marketing practitioners in an increasingly globalized world to respond to universal consumer needs, wants and expectations of a product while at the same time addressing cultural differences and various unique market conditions that call for adaptation in marketing strategies (Hassan and Katsanis, 1994, pp.47-48). For success, the design of a product should be done with a global market in mind but the marketing should be customized locally in order to accommodate cultural and language differences between different markets (Shocker, Srivastava and Ruekert, 1994, pp. 150-151). Marketing managers should not apply a standardization or adaptation strategy exclusively when marketing product but should balance between the two. Over-standardization limits experimentation and initiative at the local level. On the other hand, too much adaptation can diminish the uniqueness and prestige of an international brand such that it cannot be differentiated from local brands (Taylor and Johnson 2002, pp.52-61). Carlsberg in Thailand can be cited as a case of over customization where the company tried to have the same alcohol content and price in their product as the local ones. Consumers did not have a reason to choose Carlsberg’s product over the local ones and the company had to lower its prices but the damage to its brand image had already been done.

Glocalization is an improvement of globalization. Glocalization incorporates principles of globalization while also acknowledging the importance of adapting and customizing business strategies (Lee et al. 2008, p.164). This concept includes local, international, multinational, and global strategy approaches to marketing activities. It is different from globalization because it is keen on adapting and tailoring marketing strategies to cater for the differences in language and culture between different countries (Benedict and Steenkamp 2001, p.30). Furthermore, it adds typically international and multinational issues. It also recognizes the need for a balance and harmony between the standardization versus the adaptation, and the homogenization versus the tailoring, of marketing activities. Through a glocalization strategy, a firm is able to optimize business activities (Svensson 2001, p.15).

In marketing, practitioners must be ready to design marketing programs that are specific to each national market (Teo et al. 2011, p.2805). Due to the fact that each country has its own business traditions, regulations to govern trade, and currencies, it is important they are viewed as separate market places. International enterprises have the advantage of being able to standardize their marketing programs in the different regions they operate in (Levitt 1983, p.97). it is however vital that in development of a marketing program they determine the extent to which the elements of a marketing mix are to be standardized regionally or globally. The degree of adaptation requires equal consideration as well because it may vary from one country to the next, between the various mix elements and also depending on the product (Akram 24 and Merunka, 2010:3-4). Some elements of the marketing mix like the brand name and positioning are more likely to be standardized when compared to other elements like customer survives, distribution or advertisement (Rugman and Hodgetts 2002, pp.304-5). The standardization approach in marketing becomes an easier option for products that are non-culture bound than for those that are culture bound (Quelch and Bartlett 1998, p. 233). Successful global enterprises identify and utilize to their advantage local consumer behaviours. Though their brands are internationally recognized, they do not have the same brands in every market. Their strategies are overreaching and optimize brand effectiveness for local markets as well as international markets. An example is of multinational that customizes its marketing model is MacDonald’s. The company sells wine in the French market but sells beer in the German market (Keller 2008, pp.600- 608).

Glocalization has some advantages and drawbacks as well. It considers cultural and social practices, customs and beliefs, social taboos of the location. Glocalization can also facilitate the growth and development of economies due to benefits that come from polarization of cultures (Zdravkovic 2007, pp. 89-90). Going global helps business enterprises because expansion is important due to increased competition in domestic markets. Despite the initial benefits of globalization, it has some disadvantages for multinationals, their customers and governments. For instance, globalization has been accused of widening the gap between rich and poor countries (Griffin and Pustay,2005, p.12). Glocalization has however been used as an alternative to solve some of these problems created by globalization.

Opponents of glocalization, however, point out that the cost of customizing services and products to suit local regulations maybe restrictive to some organizations. Small countries that have many regulations maybe therefore be neglected by foreign enterprises missing out on their services. On the other hand, organizations might feel the need to adhere to the same restrictive regulations in bigger countries. In addition, though tailoring of services might be beneficial to all organizations, some might be restricted from doing so due to the financial costs of the concept (McKendrick 2001, p.309). An example of an organization that uses glocalization extensively is Google that has tailor their content at both the national and sub national level.

Standardization has helped organizations cost save. This is achieved by a manufacturer being able to spread investments in research and development over a large geographical area thus effectively bringing down the total unit cost a they have the same product (Bradley 2004, p.178). Cost saving is also enhanced by the fact that standardization reduces the cost of packaging which is a big constituent of an organizations overall costs. The second benefit of standardization is reducing consumer confusion as the brand and image is the same everywhere. This creates loyalty among consumers as they feel familiar with a certain product even when they travel outside their country (Pride, Hughes and Kapoor 2016, p.321). The final benefit is that it facilitates the spread of good marketing ideas to many countries when the same strategy is applied in every market. Standardization however has disadvantages that serve as barriers to its use. For instance, it ignores existing differences in buyer preferences and buying patterns, it inhibits local marketing initiatives and also ignores the fact that different countries have different laws for regulating business (Zou and Çavuşgil 2002, p.41).

The advantages of adaptation are that it does not ignore the importance of culture in influencing consumer behaviours. It takes into account the fact there may be a convergence in the economic systems of various countries, peoples value actually diverges (De Mooij 2000, pp.103-105). This can lead to increased profits when an organization takes advantage of these differences in its marketing strategy. Another advantage of adaptations is that in addition to culture and legal differences, it also accounts for other differences in individual markets. Adaptation however has disadvantages in that it discourages the trend towards a single global market place, reduces economies of scale in production and inhibits a centralized control of marketing which is possible in standardization (Lichtenthaler and Ernst 2006, p.368).

MacDonald’s opened its first outlet in India in October 1996 and had increased its presence to in the country to 58 store by November 2004 (Rai 2013, p.468). India became appealing to MacDonald’s due to economic reforms instituted in the country during the 90’s and also due to its large population of over 300 million potential consumers. The country had a history of preferring national products to foreign ones and the state was notorious for intervening in economic matters. The country was riddled in debt as multinational did not invest in it. However, a new government led by Prime Minister Narasimha Rao came into power in in 1991 and put in place reforms meant to decrease government control over the economy and also encourage a market based economy (Prakash 2009, p.21). Meanwhile, MacDonald’s had been monitoring the developments and though it was interested in entering the Indian market, it spend some years researching customer preferences, developing their products for the market and making arrangements for a supply chain.

MacDonald’s success in India can be attributed to effective use of the pricing strategy in their marketing mix. Food prices are a sensitive issue for Indians as it is estimated that on average, each family budgets 50% of its income for buying food. The company has therefore adopted a pricing strategy that considers first a customer’s ability to pay (Venkatesan 2013, p.68). This strategy is in line with MacDonald’s country specific prices that are calculated using the Big Mac index. MacDonald’s has only been able to tap the rich and upper class market as opposed to other parts of the world where it has a market in middle class populations. Consequently, it reduced its prices on some of its products like the 2001 on shudhshakahariand the vegetable burger a strategy aimed at capturing the lower middle class segment. This pricing strategy has seen its sales volume increase due to the affordability of its products to a wider section of customers. College students and young middle class families have been attracted by this pricing strategy as well as the quick service, convenience and a no tip policy in all MacDonald’s outlets.

MacDonald’s has been culture sensitive in all its international ventures. The company has introduced local products as part of a localization strategy that appeals to the cultural values of the people in every market. In japan there is the teriyaki, in France there is the CroqueMcDo while in china there is the spicy seafood noodle(Hoyer and MacInnis 2010, p.384). India is however unique in that MacDonald’s replaced the beef based Big Mac with mutton as most of the population does not eat beef or pork. In addition, MacDonald’s strictly supervises product development and cooking so as not to offend vegetarian consumers. Separate utensils are used when cooking vegetarian and non-vegetarian dishes. They also are aware that Indians eat out more and spend more on new purchases during the festival season so they launch new products during this time(Budhwar and Varma 2010, p.58).

On location and distribution as a marketing strategy the initial stores were based in Mumbai and Delhi due to the presence of a large westernized population in these metropolitan cities. The brand recognition and affordability was likely to be high in the two cities. In addition, MacDonald’s has two of its largest distribution centres in these metropolis. MacDonald’s has strategically opened outlets in railway and bus terminus so as to take advantage of the large populations that utilize these facilities(Sidhpuria 2009, p.137). Other outlets are setup in shopping malls where film goers are the target customers.

An elaborate supply chain enables MacDonald’s to achieve pricing flexibility and also easily launch new products if need be. Materials are sourced from local suppliers after it facilitated improvement in quality by sponsoring farmers to be educated. The company has an inventory software that enables it to know which stores are running short of supplies and place orders from producers(Li 2007, p.90). They have a fleet of trucks that is equipped with freezers and are able to move supplies between outlets. There is also a data log to help track goods for efficient delivery such that food does not go bad in transit.

Coke resumed operations in India in 1993 after being forced out from the country’s market by a socialist government(Lamb 2006, p.34). They returned to find a new Indian soft drink company and a market dominated by its competitor Pepsi due to their long absence. Coke bought out the Indian company, Parle, so as to make use of their knowledge of the local market. However, competition from Pepsi was strong as the company used the youth in its promotion strategy while coke focused on an America way of life. Cokes strategy was a global strategy and sales were dismal so they had to re strategize and so after research on the Indian market they came up with a marketing strategy. The company realized that it needed a more adaptive strategy as it was competing with traditional drinks so it needed a comprehensive knowledge of local preferences.

The company adopted a pricing strategy that recognizes that affordability was a factor in the buying behaviour of most Indians. The company thus launched a 200ml returnable glass bottle at lower prices of 5 Indian rupees. On positioning and segmentation, coke realized that consumption of soft drinks was high during the festival season, weddings and outings as opposed to other countries where there is daily consumption. To decentralize operations and create a multi-local network team, native managers and advertising teams were hired as well a regional teams put in place (Fernando 2009, p.9). The diversity in languages in china was also addressed and advertisements are done in six languages that are spoken in India. The American style of adverting was replaced by a vernacular style. Black drinks especially for people from south of the country were introduced because the region has people with a dark complexion. This marketing that recognizes cultural differences saw increased sales in the rural areas of the country.

In distribution, adaptation in seen by the use of rickshaw vans, tricycles and pushcarts that are accustomed to the congestion in Indian urban areas (Mooij 2010, p.37). In addition, deliveries to the rural areas are done through an extensive network. The pushcarts enable distribution in areas that lack formal shops like parks, learning institutions and slums. The carts are also branded and wall advertisements are used as a form localized visual marketing. There is regional based advertising where campaigns that most locals can relate to are devised by local advertising companies mainly during the festive season. There is a multi-local approach as the adverts are in different local languages and are not as slick as for affluent countries (Gupta 2005, p.15). Existing traditions are also considered as coke markets the drink with a food combo to appeal to the mercantile nature of Indians.

Coca cola has also glocalized advertising in both television and print media. In one advert, guests are asked to choose between tea and coke by their host. This is an attempt to embed coca cola as a local drink along with tea. This has been achieved by comparing it with tea which is a common drink in many Indian households. This kind of a media campaign appeals not only to affluent household but also to the less affluent household due to the commonality of tea in the Indian culture.

From this analysis both organizations have used the glocalization strategy extensively. There are similarities in their glocalization strategies in that they both adapt their prices according to the economic ability of the target market. This is aimed at increasing sales volumes by widening the market that are able to purchase their products. Promotion strategies have also been adapted to local cultures where local languages as well as advertising agencies are used in adverts so as to make them more localized. Both organizations however maintain the global strategy in brand names though the products packaging may be tailored to reflect local customs. There is also a customization of products according to regional preferences within the same country as seen in MacDonald’s having different menu items for different parts of the country depending on whether the locals are vegetarians or not (Chary 2009, p.36). Coca cola also has a drink specifically tailored for the dark skinned residents of southern India.

Some differences however can be noticed in the glocal strategies of the two organizations. MacDonald’s focuses on the middle class society while coke has targeted their pricing and promotion campaigns on the rural population. While both organizations have adapted their pricing policies to the local economies, MacDonald’s has gone a step further and also localized its menu while coke’s products remain unchanged except for the packaging. Coca cola is more local when compared to MacDonald’s because it has penetrated to the passive less affluent consumers while Macdonald’s remains largely an American brand that appeals mostly to the middle class who are attracted to the western way of life(Johansson and Ronkainen 2005, p.340). Coca cola is also more local because of its intense promotion such that its brand name is recognizable even in the most rural parts of the world.

In sum, glocalization can be seen as strategy that compliments globalization. Its emphasis on a balance between adaptation and standardization for is important for the success of any multinational because even though economies of the world maybe converging, cultures and consumers’ preferences are diverging. In marketing glocalization can help break language and cultural barriers that limit sales for global enterprises in foreign markets. This strategy has helped both coca cola and Macdonald’s be successful in a foreign market. The two organizations have however implemented the glocal strategy to different levels and this goes to show that success depends on a marketing practitioner’s realization of a proper balance of which aspects of the business should be standardized and which should be adapted to local needs and preferences.

Analysis of the Standardization-Adaptation Approach for Coca Cola using a Dot Plot Table

Marketing mix

Marketing mix subcategories

Standardization

Adaptation

Product

Policy

Packaging

Price policy

Price

positioning

Consumer

prices

Distribution

Policy

Distribution system

Physical distribution

Communication policy

Brand name

Media

selection

Sales

promotion

Analysis of the Standardization-Adaptation Approach for MacDonald’s using a Dot Plot Table

Marketing mix

Marketing mix subcategories

standardization

Adaptation

Product

Policy

Packaging

Price policy

Price

positioning

Consumer

prices

Distribution

Policy

Distribution system

Physical distribution

Communication policy

Brand name

Media

selection

Sales promotion