blackstroke

17/05/2015

One of the biggest implications of globalization for companies seeking to expand to foreign shores is the task of balancing standardization with customization. From a branding perspective, this issue assumes even more significance. When some of the world’s biggest brands expand beyond their home markets, they are tempted to repeat their tried and tested formula in the new market as well. This has been the path followed by many brands who assume customers are eager to consume them because of their authenticity, heritage and associations.

BRANDS ARE CHANNELS OF SELF-EXPRESSION

Brands in the current globalized world signify more than just products with recognizable logos. Brands have transcended the commodity trap and have seeped into peoples’ lives in many aspects. Brands have come to signify avenues through which people tend to express their personalities, attitudes, likes and dislikes, association to groups, communities and so on. As such, brands succeed if they offer customers opportunities to express themselves. Being a global brand with an entrenched identity and personality, and still able to adapt to local demands is a Herculean task.

The following steps would facilitate brands to make a smoother transition, and become more successful when they enter the global markets:

Understand the local market: Companies do themselves a huge favour if they do not generalize the markets based on some superficial parameter. Each market has its own subtleties, unique characteristics and customer preferences. Many of these unique characteristics are deeply inspired by the cultural underpinnings of the society, and they have been refined over a long period of time – spanning decades and centuries. To understand these underlying parameters in great detail and with much attention would allow companies to effectively target customers.

A successful way to enter new markets is to be patient and take the necessary time needed to fully understand what makes the market unique, and how it may work for the brand. Far too often, companies and brands jump into new markets based on assessments which are not deep enough in details and lack local foundations.

Another mistake is that global companies and their board of directors – often based in headquarters far from new markets – make preliminary assumptions that the company could successfully expand into those markets. This decision is in many cases included in the budget planning and the financial expectations leading regional and local management to pursue new market entries with a greater and more rapid pace than may actually be ideal in order to observe and understand effectively the local markets and their unique cultures.

Finer segmentation for faster adaptation: Markets by nature are known for their multiple segments. Though segmentation is a very basic and proven exercise in marketing, it is one of the fundamental tools that can equip a company to effectively channel its resources. With emerging economies integrating into the global market, the diversity is bound to multiply. This not only offers companies a huge increase in potential customers across new emerging markets, but also an opportunity to further segment and leverage the market situation.

Based on the unique mix of the product category, product line, brand strategy and availability of channels, companies must decide on the segment they wish to target. The rise of digital technologies and the Big Data evolution, companies have more tools and insights to their disposal to make informed decisions about markets, customers and segments. Though Big Data is rapidly transforming global business, and how strategic and tactical decisions are taken, it is also a cause for concern.

There is no doubt that Big Data provides an incredible source of information linked to important metrics like customer behaviour, attitudes, values, beliefs and imagery of brands to name a few, but executives must be aware not to blindly follow what Big Data may seem to suggest as a successful path forward.

The most important aspect to observe is that Big Data, as with any other business and market insights, is always based on data describing in great detail and precision past behaviours and actions. Hence Big Data can only be indicative of the probability of certain events to happen in the future, but they may not effectively forecast fully where consumers and markets are heading. Evolving global trends, changing consumer tastes, new disruptive technologies and other forces may disrupt how the future was predicted to look like. Therefore, business executives should use Big Data and other relevant insights to make informed, calculated decisions about future strategies, but they must also ensure that they are not taken hostage by past behaviours and events.

The ability and willingness to look beyond what intelligence seems to suggest, and make decisions based on a holistic approach is what makes a successful leader.

Channels – A strategic brand component: In many markets, reaching the right customer at the right place, with the right product at the right time differentiates success from failure. In China and India, for example, channel management is the key to success. Many global brands that are used to access huge supermarket chains such as Wal-Mart, Sears, K-Mart and others tend to think in similar terms in foreign and developing markets as well. In many Asian markets, unorganized and traditional retail still dominates, and they are deeper ingrained in local culture than what most people believe. Consumers may also have strong, local preferences for channels, and it may prove hard for outsiders to successful penetrate those markets.

International supermarket retail brands have faced the challenges with entering and being successful in foreign markets. Tesco, the largest retailer in the United Kingdom, had to pull out of Japan in 2012 and out of China in 2013 after the brand struggled to find a profitable position in the tricky Japanese and Chinese markets.

The world’s largest supermarket brand Wal-Mart pulled out of South Korea in 2006 and sold its 16 retail outlets to Shinsegae, a leading department store and hypermarket chain in South Korea owned by Samsung Group. Shinsegae integrated the former Wal-Mart outlets into its highly successful E-Mart supermarket brand which caters to local Korean tastes and preferences. French supermarket retailer Carrefour has pulled out a few months before Wal-Mart and sold its outlets to local clothing-maker and distribution group Eland.

In such scenarios, global brands would succeed if they recognize the criticality of building strong channels and adapting their model to ground realities in the market they are present. But it requires a deep assessment of the market, and the drivers of future success.

Bottom of the pyramid customers: In spite of the growing global economy and increasing spending power, emerging markets and developing countries are characterized by a sizeable bottom of the pyramid segment. This segment mainly consists of customers who are gradually aspiring to integrate into the main stream. They are low on resources but high on aspirations and ambitions. This segment also shows the promise of being a very lucrative segment in the long run, but global companies and brands must be willing to invest in them to capture a long-term benefit and upside.

A majority of this segment, however, are not ready to pay high prices. Customers always look for a proper quality-price balance and the value aspect must be taken into consideration when providing planning for this segment. Customers in this segment seek products that offer considerably good quality at an affordable price, and they cannot afford more than that. This poses new challenges for global brands that are used to offering customers either a highly priced high quality products or low priced goods with an average quality. Further, with many local brands in many countries already offering products with quality comparable to global brands but with half or even one third the price, the success of global brands depends on their ability to adapt to the local conditions and respond to the local demands.

Global companies like L’Oreal, Procter & Gamble and Unilever have spent significant resources in trying to understand bottom of the pyramid segment in order to adjust their current product portfolios and to invest in new ones to successfully penetrate the promising bottom of the pyramid segments.

Local act for global brands: Developing countries are finally seeing light at the end of the tunnel, and seem to gain momentum as their economies rise. Emerging countries, especially in Asia, are in a long-term growth phase. The economies are booming, global trade has increased, technical and knowledge outsourcing has given birth to millions of jobs, disposable income is on the rise and governments have taken the lead to integrate with the global economy.

These factors have led to the emergence of customers who no longer only look to the West to build an identity for themselves. These customers are confident and satisfied with many local brands which have been growing with the rise of the emerging economies. Though these customers do like and purchase many global brands, they also have a strong preference for many local brands that have managed to provide high quality products with a distinct local feel. This, once again, compels the established global brands to balance global identities with local subtleties. Global brands needs to glocalize, and this balance will allow global brands to be successful.

THE IMPORTANCE OF GLOBALIZING SUCCESSFULLY

The above guidelines will facilitate a smoother transition for global brands into localizing part of their experience to suit the local subtleties in order to attract and retain the local customer. Further, these guidelines will also offer global companies reason to think about the possible challenges that a complete lack of localization will bring to the fore. Unilever and Nokia, two global giants have proved the point by glocalizing and winning in their respective markets.

Unilever is a classic example of a global brand which has pioneered serving the locals with products that address the local sensitivities. Unilever’s Indian subsidiary Hindustan Level Limited (HLL) has been the leader in recognizing the tremendous opportunity lying at the bottom of the pyramid. They serve a customer base that aspires to consume products but in smaller quantities and at lesser prices. HLL literally invented the shampoo sachets – small plastic packets of shampoo for as less as INR 1 (USD 0.022). This became such a rage among the rural consumers that many other brands started offering products such as detergent, coffee and tea powder, coconut oil and tooth paste in sachets. Even though the unit price was higher, rural consumers were able to afford to purchase the smaller quantity at their convenience. It also illustrated that rural consumers are eager and ready to seek global brands, and the benefits they provide in terms of quality, value and emotional benefits.

Another example is of the mobile brand Nokia who once dominated the mobile phone category before Apple and Samsung disrupted the industry. Nokia recognized the growing importance of rural customers in the Indian mobile telephone market which grew from a mere 300,000 subscribers in 1996 to a whopping 55 million subscribers in 2004. Nokia introduced its dust-resistant keypad, anti-slip grip and an inbuilt flash light. These features, albeit small, appealed to a specific target of truck drivers initially and then to a broader segment of rural consumers including farmers and local shop owners. These features endeared Nokia to the Indian consumer as Nokia displayed a genuine commitment in responding to local customer needs and adapting their products accordingly.

CONCLUSION

It is vital for global companies to instill an element of culture – local practices, customer preferences, distribution channels, local pressures and purchasing patterns – into the brand’s DNA. This process by which global brands strive to appeal to local customers in spite of maintaining their global aura is also referred to as glocalization.

Globalization is a part of the process of being culturally sensitive and observe local preferences. Global brands are usually adamant to continue their winning structure into every market they enter. After all it is these structures that have made these brands so powerful. But in the process of being dominant and refusing to budge from standardized procedures, these brands tend to ignore the underlying force that drives customers and their purchase decisions in diverse markets. Therefore, a certain adaption of current products and services together with new innovations are paramount for global brands to become successful as emerging markets are entering the global economy.

As markets integrate and customers migrate, there is a possibility of the emergence of a much similar force that is common among markets. Markets across the globe may one day become pretty similar in literally every aspect and then the global corporations would rule. But despite the confidant march of globalization across the world, markets still continue to be unique driven by local cultures and preferences.

Till such a time arrives when differences cease to exist, global brands and management teams must continue to honour local cultures and adapt their brands to such conditions in order to be successful.