MarketLoop #14, October 2001

Going local- creating effective multi-country strategies

Globalisation has become a highly emotive subject. Many companies have been criticised for their approach and, on occasions, international marketing has been portrayed as the new imperialism. However, while there are arguments for and against different approaches, the fact is that there is an inevitability about globalisation. Furthermore, major companies are under an increasing level of scrutiny by consumers. The question should be posed how international marketing strategies should be optimised for greater effectiveness under this scenario.

Operating across borders has become less of an option for companies. Brands and their owners are operating in a worldwide economy and, even if they do not move into other countries, they have to face new entrants from overseas in their own national markets. New entrants can often make a market not just more competitive but also more efficient.

The drivers of globalisation are a combination of push and pull factors that have driven companies to look outside their home markets for new opportunities. These are acting to open up new economies and new markets. Liberalisation of international trade is a core force and includes deregulation of various industries that allows incumbent companies to expand but can also attract new market entrants from within and outside the home country. Furthermore, innovation in technology is impacting across a number of areas from product development to distribution and marketing communications. In addition, many companies are moving towards a global or multi-country presence through saturated or over-regulated home markets.

Different strategies

There has been a clear evolution in the nature of marketing across multiple markets. While it was once seen as offering the same product, often with little differentiation, in many countries, there are now many indications that going international is about being a "local" marketer but in a large number of countries. We are now moving towards the next level of globalisation.

In the past, companies have adopted a range of strategies for marketing on a global or multi-country basis. These may be summarised as:

• Highly centralised with one product and one set of communications. (One sight, one sound, one sell)
• Central control with limited local adaptation of products and communications.
• Central control with products and communications developed locally to fit the global template.
• Totally local offering different products and communications in different countries.

The type of strategy varies across categories with different companies preferring different options. However, there are now clear indications of a new type of strategy that involves companies becoming instantly global and then moving towards a more localised offer. This is driven by the new environment including new types of cross-border communications. This will frequently be the case with start-up companies. In addition, many companies have a global mind-set. However, it need not be limited to new companies and brands. Many established marketers are moving from a centrally-controlled strategy towards a more local approach. This strategy is far more receptive to local market sensitivities. Within the new market scenario it may be easier in many ways to be global than local. The development of a strong and effective local positioning may prove to be a greater challenge for marketers.

Opportunities in new product development

One of the dangers of taking a global view is that the desire to produce an international brand has the potential to result in a lowest common denominator approach. This means that the brand offer is effectively diluted to appeal to as broad a range of consumers as possible although it may not be ideal for any of them.

Against this, the recognition of an international market may enable a company to develop a new product or category where economies are scale of required. For example, a new category may be able to override local differences as consumers will be offered a totally new type of product or service and will not be constrained to existing usage patterns or perceptions. Here the centrally driven strategy may be the only way in which the necessary investment can be justified and funding obtained.

In addition, operations across a number of countries provide a company with a deep vein of consumer insight that can help to transfer ideas across borders. This gives the development of new products and services an additional boost and potential richness.

Where have all the borders gone?

While companies are able to source products, services and raw materials from all around the world, new distribution and communications channels already enable consumers to do the same. They can choose where and when they want to buy. This can include ways of identifying the best price across not just a series of retailers but also across a series of countries, bypassing local taxes and, sometimes, regulatory authorities. Shopping outside the national market is already common in a number of product categories and extends beyond shopping via the Web.

But what does local really mean? The first thought is that local relates to geography; local marketing means individual countries or regions. However, local could also mean getting closer to the consumer, developing an intimate understanding of similarities and differences, needs and opportunities. In the global economy there are no borders, so it could be argued that local should not mean individual countries but the focus is on the identification of consumer groups across borders that share common values, beliefs and product usage patterns. Companies tend to be structured around geographic and/or product lines but is this appropriate in today’s world?

Implications

Too often companies develop their international strategies from a supply rather than a demand perspective, even if the latter is frequently given as the reason for the approach. Consumers are primarily local and so it is imperative to develop marketing strategies that reflect this. It is important to identify the similarities across boundaries but it is vital to recognise the differences. In the same way that market segmentation will appeal to the lowest common denominator, a local approach, even if based on a central theme, will be more appropriate to the consumers and, therefore, more effective. A smart marketer will focus on the differences as much as the similarities and exploit these. An effective international strategy requires a fine balance between multi-country drivers and local sensitivities, supply versus demand. This does not mean that there is no requirement for central control. The highly focused central discipline will be even more important.

However, the similarities and differences between cities and rural areas may be equally apparent across borders as within countries. Major urban centres in different countries may have more in common with each other than with other towns and cities within the same country. They are more likely to access the same media, have the same retailers, etc. While consumers are primarily local, there is a level of convergence where they are exposed to common media, common brands and common retailers. Early adopters or opinion formers may be very similar in different countries.

Is there a conflict between globalisation and individuality? Today it is far easy to develop strategies that go way beyond this to reach the sub-segment or individual level. It will become increasingly difficult to maintain purely local brands. A launch in one country will be visible in a different country and marketing strategies that are widely dissonant will be viewed as contradictory. This can apply to cross-border media such as Web sites where communications designed for one country can be received in another where a product’s positioning and marketing strategy could be very different. For this reason there is a likelihood that multi-local marketing strategies will start to converge, even if they do become one. Some marketing processes will need to be common to ensure consistency even if the execution is locally driven. Strong discipline and balance are pre-requisites.

This leads in to how companies choose to handle international marketing internally. Traditional organisational structures tend to be built around the products and services offered or countries/sales territories. The question may be asked whether this approach is still valid. It may be more effective to focus the organisation around the consumer or consumer type so that product and service development can be aligned to recognise and exploit similarities and differences. In addition, companies will have to improve their information flows so that learning can be rapidly transferred across countries.

Our own Knowledge Development Programme has recognised that even those marketers who are viewed as primarily are moving towards a more local approach, McDonald’s adjusting its menus, Amazon.com and Yahoo! launching local sites alongside the global one. Note that in the Web examples the global site preceded the local one. Is this is a taste of things to come where a brand or company is first global and then local? Much of Through the Loop’s recent consumer work has uncovered as many differences as similarities, if not more, between consumers in different countries and this feeds into implications and recommendations for the development of marketing and communications strategy. An intimate understanding of the consumer is crucial.

Action points

• How can an international strategy address local needs and opportunities?
• What scope does the worldwide economy provide for developing innovative products?
• Local products from other countries may often have greater brand strength than multi-country products, e.g. Italian coffee, German cars.
• What competencies are required for operating in a worldwide market? Should these be acquired or gained through a joint venture?
• Are new types of organisation structure more appropriate in today’s and tomorrow’s economy?
• Globalisation should be viewed as an opportunity for consumers as well as companies.
• How can you reach an intimate consumer understanding?