Concept of Glocalization and Its Relation to the Standardization-Adaptation Debate - Assignment Example

Critically assess the concept of Glocalization and discuss how it relates to the standardization-adaptation debate that prevails in Marketing literature

Introduction

This report aims to critically assess the concept of ‘Glocalization’ and discuss how it relates to the ‘standardization-adaptation debate’ that prevails in Marketing literature. Based on the literature review presented in the first part of the report there will be presented analysis and discussion of the extent to which two successful global companies operating in food retail industry: McDonald’s and Starbucks use a ‘glocal strategy’.

Part 1: Critical Review of Relevant Literature

Globalization vs. Glocalization

The term and definition of “global strategy” has many different interpretations, which greatly vary in terms of the context applied. Very often, the term is used with reference to the global strategy approach, whereas companies are referred to as either international or multinational. However, the term is often connected with any business activity carried out outside the home market (Svenson, 2001). Nowadays, many companies strive to pursue global strategies, which allow them to achieve economies of scales, economies of scope, strengthen brand, and diversify potential risks. The strategy of globalisation involves adoption of unified marketing strategies as if the world is a single market (Prakash and Singh, 2011). It means that companies use standardized marketing mix across all countries in which it operates. In other words, the companies employ the standard products, prices, promotion strategies and distribution channels making no adjustments to the local contexts (Prakash and Singh, 2011). However, while the markets become more globalized, the companies operating in the foreign markets still have to consider the unique socio-cultural characteristics of each host market (Jain et al., 2012). Both marketers and academic acknowledge that national culture, behavior, values, norms and beliefs play an important role in consumer’s perception of the product/brand and their purchase decision making (Jain et al., 2012).

In order to refine the terms ‘global strategy’ and ‘globalisation’ there also were introduced the terms of ‘glocal strategy’ and ‘glocalization’ (Robertson, 2012). According to the Oxford Dictionary of New Words (1991:134), the term “glocalization” is “formed by telescoping global and local to make a blend”. Historically, this concepts was developed in Japan, whereas farmers adapted different agricultural techniques to the local conditions (Robertrson, 2012).

This new concept emerged as an alternative to the global-local dispute. The glocal strategy is based on the increasingly popular approach among the MNCs “think globally, act locally” (Wing, 1986). By developing this concept, academics strived to address the concerns related to the obvious gaps in the global strategy and necessity to adjust products/services to the local environment (Jain et al., 2012). While Segal-Horn (1996: 13) questions if “global companies” at all should “design, market, and deliver standard products and services across national boundaries”, the proponents of the glocal strategy have no doubts about importance of adaptation.

According to Svenson (2001), glocal strategy represents a more appropriate concept compared to the global strategy, which reinforces homogenization and standardization of business operations and fails to address the local market conditions. This statement is supported by numerous cases when companies that achieved complete standardisation of business activities faced with various operational challenges and suffered from poor performance (Jain et al., 2012). Great example is Coca-Cola, which in 1990s attempted to adopt global strategy with making no adjustments to the local markets. In result, the company had limited flexibility in host markets and suffered from poorer performance (Jain, et al., 2012). The glocal strategy promotes the harmony and balance between the global and local contexts, between the homogenization and the tailoring, between the standardization and adaptation (Svenson, 2011). Therefore, while the firms adopt global strategies they still recognize the importance and inevitable necessity to adapt to the local conditions and country-specific factors (Svenson, 2011).

International Marketing Standardization vs. Adaptation

Standardisation as an international marketing concept has been developed in result of increasing homogeneousity and globalisation of markets. The supporters of this theory believed that the firm’s ability to standardize products and services predetermined its survival and growth in the global market (Vrontis et al., 2009). In fact, this strategy is quite workable for the markets where consumers’ needs, expectations, and requirements to do not vary greatly across nations (Vrontis et al., 2009). Thus, the company is able to achieve economies of scales in terms of both production and marketing activities. However, the company pursuing standardization strategy may either benefit from it or incur losses. According to Kotler (1986), these outcomes depend on the circumstances under which the company can sell its products in a host market without adjusting its marketing mix. Sometimes, the strategy of standardizing the marketing mix can “lead to competitive advantages that support the overall global strategy” (Porter, 1986:17). However, sometimes the company might fail to take into consideration unique local dimensions and thus, to generate limited sales (Vrontis et al., 2009).

Thus, the proponents of adaptation strategy reinforce the importance of market adaptation and tailoring to fit the local context (Vrontis et al., 2009). While adapting the products, marketers should consider a set of macro-environmental factors, including: race, culture, society, topography, climate law, demographic, etc. (Vrontis et al., 2009). Adaptation strategy enables firms to better adapt products/services to the needs and expectations of the local consumers. However, there also exist some drawbacks of this strategy. One of the major drawbacks is associated with the costs incurred in result of marketing mix adaptation. The international companies aim to achieve the economies of scales while going globally. Adaptation strategy may incur significant costs and make the company less profitable/price-competitive (Jain et al., 2012).

Therefore, in the debate adaptation vs standardisation, it is important to take into account the context and differences/similarities in markets. Hassan et al. (2003) suggests that the firms should consider three different types of markets: (1) group of countries/markets demanding similar goods/services; (2) different countries with the same goods/product; and (3) universal segments that present in many/majority of markets (Vrontis, 2009). Moreover, the abode micro- and macro- environmental factors also should be considered. Below is provided more detailed analysis of these theoretical concepts with application to two global companies operating in food industry: McDonalds and Starbucks Corporation.

3. Part 2: Analysis of the Marketing Mix of 2 Global Companies

McDonald’s Marketing Mix

McDonald’s is recognized to be one of the leading operators in the global fast food industry. The company successfully operates in different markets and continents, pursuing thus the global strategy. However, the success of the US based company is greatly attributed to the company’s strategic capability to balance two major powers: standardization and adaptation. Below is provided a more detailed analysis of the “glocalisation” strategy of McDonald’s marketing mix.

Product policy

The company offers its core menu despite the location and country-specific factors (). That is why, McDonalds is recognized globally for its hamburgers, French-fries and Coca-Cola. While on the one hand, the company offers a standardized menu items, on the other hand, it also takes into consideration local tastes and preferences while developing its products to foreign markets. The company carries out extensive market research before launching new products to the market (Yeu et al., 2012). As McDonald’s operates in markets with absolutely different cultures and eating habits, the products offered by McDonald’s are partially standardized and partially adapted (Yeu et al., 2012). The menu offers both the core products and the products adjusted to local preferences and unique consumer’s tastes in a given country/market (Crawford et al., 2015). Thus, for example, while comparing product strategy of McDonald’s in China and India, it is possible to mention the following differences: in China, such products as beef, fish, chicken and pork are common; in India, the company offers mainly chicken, as beef and pork are not common food in this culture (Yeu et al., 2012). In terms of product taste, in China products are less tasty, less spicy and less fried, while in India, the produces are very spicy (Yeu et al., 2012). For the Arabian markets, the company specifically developed the McArabia menu, offering thus to products that fit better the Arabic culture. In order to “win the hearts of French consumers” McDonalds diversified its product menu with locally sourced French cheeses such as cantal, chevre, and blue (Crawford et al., 2015). In Greece, McDonald’s offers its customers a modified version of Big Mac with Tzatziki sauce wrapped into pita. In Indonesia, McDonald’s offers a “bowl of buryam rice porridge with chicken and fried crisps”. In Brazil, the company offers to its customers the cheddar McMelt and broad variety of banana desserts (Crawford et al., 2015).

Price Policy

Pricing policy of McDonalds vary from country to country. While in China, there is no price segmentation strategy and price setup is relatively higher compared to the standard fast food restaurants, in India, McDonald’s applies pricing strategy based on market segmentation principle (branded affordability for lower segment and branded core value for prime and middle class segment (Yeu et al., 2012).

Distribution policy

The place is a critical element of the McDonald’s marketing mix. The company usually selects central and high-traffic locations that ensure significant flow of customers. All locations imply self-service concept, whereas customers make their orders/pay in front of the counter or at McDrive and then carry their orders either take-away or in the restaurant (Yeu et al., 2012). Decorations and interiors are usually standard, so that visually McDonalds’ is practically the same in the US, India, China, Russia, etc. (Yeu et al., 2012).

Promotion/Communication policy

McDonald’s recognizes the critical importance of adjusting marketing communication strategy to the local context. The company’s approach to marketing strategy is based on the principle: “brand globally and think locally” (Vignali, 2001). In order to develop a global brand image the company selects to partner with globally recognized brands such as Walt Disney and Coca-Cola (Crawford et al., 2015). On the other hand, the company chooses local partners as well for its marketing activities. Sponsorship of both global and national sporting events is another good example of McDonald’s approach to marketing “glocalization”. The marketing programs of McDonald’s very by country and depend on the cultural values of the local consumers. For promoting the brand in French market, the company made its key focus on its “Frenchness” and reference to the fact that 95% of the company’s ingredients came from France and other European countries (Crawford et al., 2015). For the Indian market, the company made focus on the Indian global image of family ties and values (Crawford et al., 2015). In Indonesian market, McDonald’ promotes the message that its halal menu has been certified by Islam religious leaders (Crawford et al., 2015). Thus, the company aims to address the specific and unique aspects of given culture playing around it in the promotion campaigns. Also, the tools and channels used for marketing activities by McDonald’s vary across countries. Thus, for example, in China, the company utilizes more Internet and network as tools for advertisement, with no investment in TV commercials (Crawford et al., 2015). In India, greater preference is given to traditional marketing channels such as printed media (Yeu et al., 2012). In China, McDonald’s targets mainly new and younger generation, while in India it targets mainly kids and children. Moreover, in order to manage consumer demand, the company has adapted its trademark logo. Thus, for example, in France, the company differentiated its standard golden color and red colors by placing the golden arches on a green field (Crawford et al., 2015).

Thus, based on the analysis of McDonald’s marketing mix strategy, it is possible to claim that even though is is a global company operating throughout the world under its global standards and training processes, it still makes some local adjustments in the countries where it operates. Namely, the company adapts some of its products, food sourcing strategies, promotion techniques and targeting specific local consumer market demands (Crawford, et al., 2015). McDonald’s is a company that successfully manages the balance between global and local, standardization and adaptation (Crawford, et al., 2015).

Below is presented the Standardization-Adaptation Approach for McDonalds based on a Dot Plot Table

Marketing Mix

Subcategories of Marketing mix

Standardization

Localisation

Product

Aesthetics, packaging

Chemical, functional

Place

Distribution system

Physical distribution

Price

Consumer prices

Promotion

Sales promotion

Media seleciton

Table 1. The Standardization-Adaptation Approach for McDonald’s based on a Dot Plot

Starbucks Corporation – Marketing Mix Analysis

Starbucks Corporation is another successful US-brand operating globally across many different countries and various cultures. Similar to McDonald’ the company adopts a global strategy and promotes its worldwide. However, the company still makes some adjustments to the marketing mix strategy in accordance with the demands, culture and needs of local consumers. Below is provided a more detailed overview of Starbucks’ Marketing mix.

Product

Similar to McDonald’s strategy, Starbucks offers a menu of its core products such as the Latte, the Cappuccino, the Frapuccino, etc. However, the company also offers highly localized beverages and snacks that are tailored specifically to match the tastes of local consumers. The same as in case of McDonalds, the company has set a precedent with standardization of coffee brewing process, customer service, and overall quality (Aiello & Dickinson, 2014; Lin 2012).

Price

Pricing strategy in Starbucks is based on standardized approach, whereas company pursues premium pricing strategy. The company charges fixed prices for its beverage and cakes range. While in China and several other countries Starbucks is claimed to have higher prices, this aspect is attributed to the taxation system in the country (Huffington Post, 2013). It is also worth to mention, that prices at Starbucks greatly depend on the global prices for coffee beans.

Place

The company operates its own-branded retail stores in more than 63 countries around the world. Starbucks stores are located in central and popular locations, such as malls, busy streets, large offices, etc (Aiello & Dickinson, 2014). The visual design of stores implies references to nature through its color palettes of green and brown colors. This design is recognized to be a globally acceptable format for all Starbucks stores (Aiello & Dickinson, 2014). Starbucks is globally positioning its brand as a “third place” between home and work, where customers may enjoy communication with their friends, surf the Internet, relax, work, etc. (Lin, 2012). Interior of the Starbucks restaurants is comfortable and inviting, music is pleasant and moderate, Internet is free (Lin, 2012). Thus, place plays an integral role in the company’ product strategy, as consumers buy not just a cup of coffee or tea, but also positive experience gained at the store. Despite the standardized approach to place/distribution strategy, the company recognized the specific cultural differences in some countries. Thus, for example, in France, Starbucks restaurants have more intimate setting with tables for two and café style seating. Thus, the company recognizes the fact that French people represent more individualistic culture with high value on personal space and individual time (Roth, 1995).

Promotion

In terms of promotion efforts, Starbucks heavily utilizes mobile technology and Internet Technology. The company continuously innovates and adopts new/modified apps for its customers. In order to increase customer loyalty, Starbucks offers reward programs whereas consumers are encouraged to collect points and to earn free drinks for defined number of purchases. This promotion strategy is adapted globally, with minor adjustments to the local market (language, interface, etc.). (Starbucks, 2016).

Below is presented the Standardization-Adaptation Approach for Starbucks based on a Dot Plot Table

Marketing Mix

Subcategories of Marketing mix

Standardization

Localisation

Product

Aesthetics, packaging

Chemical, functional

Place

Distribution system

Physical distribution

Price

Consumer prices

Promotion

Sales promotion

Media seleciton

Table 2. The Standardization-Adaptation Approach for Starbucks based on a Dot Plot

4. Conclusion

Both companies, McDonald’s and Starbucks are globally operating brands that pursue the global strategy. These two organizations adopt standardization approach in terms of technology used, quality standards, and processes. However, both companies recognize the importance of adaptation of its marketing mix to the local environment. Thus, for example, McDonald’s as well a Starbucks both offer core branded-products to its customers around the world. However, products offered are diversified based on the local needs, tastes and culture. Both McDonald’s and Starbucks adopt standardization approach to it place/distribution strategy making small adjustments to interior/design attributes. Promotion strategies undergo greater adaptation efforts, as both companies strive to use the media, channels and promotional messages that would more effectively communicate with end-consumers. Thus, the experience of McDonald’s and Starbucks reinforce the importance of balancing two different concepts of adaptation and standardization in gaining and maintaining competitive advantage on the market. Still, it is possible to argue that McDonald’s implements adaptation approach in greater extent than Starbucks does.