A Localization Strategy of Macdonald's - Essay Example

Das recommends that managers apply their local insights on a global scale because world truths are unique and parochial. Global vision needs to be coupled with individual identity to nourish the individual blade of grass, i.e., the more a human being belongs to a particular place, the more s/he belongs to all places. Das contends that thinking global, acting local and thinking local, acting global, need to exist side by side because contrary to the general perception that building a brand sells it, the actual key to success is a local passion for the brand coupled with a feeling of local pride and ownership.

Examples of thinking global, acting local: 1. Retaining a clearly focused target product, so that the nature of the product was clear in the customer’s mind – Vicks was a rub for colds 2. Not growing complacent with the 20% growth that made Vicks no: 1 in India, but growing the market and benchmarking against the best in the world  2. Using an efficient, low-cost local distribution system, and 3. Using local ayurvedic medicinal products to prepare additional Vicks preparations apart from the rub for colds.

Thinking local, acting global: 1. The global strategy was to increase advertising during the winter months, but Vicks Vaporub stepped up its advertising in the monsoon months when local conditions caused more colds. 2. Positioning the 5 gm tin for the middle class and pricing a package of 4 such tins lower than a 19 gm jar, because it was specifically targeted at the middle class.  

Das and Vicks Vaporub were so successful in India because they were able to understand their consumers and act to satisfy their needs. They were able to use the existing, low-cost distribution networks perfected by traders to avoid excessive costs along the supply chain. When chemists and pharmacists across the nation came together to boycott Vicks, the Company changed its registration from Western to Indian medicine to extend this distribution network to food shops and local grocers, thus avoiding the strike altogether.

Three key lessons about the cultural context:

1. Being receptive to regional variations, i.e, suiting the product to fit opportunities available in the local market; for example, using the monsoon as an opportunity to step up advertising during summer months.
2. Understanding how to position the brand according to its market; for example, targeting the 5 gm tins for the middle class
3. Capitalizing on higher levels of sales in the South rather than trying to grab a greater share in the north Indian market.

The Macdonald case:

In a country like Russia, the economy was in a state of transition from a communist to a capitalistic system. The former system was a centrally planned command economy, built upon Government ownership and controlling of all production factors. The new system that emerged was a laissez fair capitalist economy, built upon private ownership and controlling production factors. Free market entry and exit, as well as determination of prices on the basis of supply and demand, are characteristic of a capitalistic economy, whereas levels of bureaucracy and control are much higher in a  communist economy. These aspects do impact the markets in an emerging economy because making the transition becomes difficult.

The unique challenge of doing business in an emerging market is to overcome the operational inefficiencies and the high levels of bureaucracy arising out of Government control, which cause strategic ineffectiveness. The extent to which a transition is successful will be determined by how well the Government is able to how well the government can disband its bureaucratic systems and introduce deregulation. But Macdonald was successful in Russia because it persevered against various difficulties and enormous start-up costs. Although the decision to open a Macdonald's was made during a meeting at the Olympic delegation in 1976, it took fourteen years of negotiations with the bureaucratic government before it came to pass. Macdonald's had to wait those years to allow the country to transition to a customer-driven economy so that consumer demand could push sales. A large part of its success lay in its advertising so that consumers could become aware of the products it sold, which are globally popular; hence it offered them in a standardized format that is common to all Macdonald products across the world, yet made them suit the local economy by varying its food to suit the local tastes. It also projected the impression of its products being synonymous with the freedoms of a capitalistic economy.