Excerpt
Table of Content
1 Introduction
2 Globalization and Global Companies
3 Local Marketing versus Standardized Global Marketing
3.1 The Global-Local Dilemma in Global Marketing
3.2 Local Marketing
3.2.1 The Model of Local Marketing
3.2.2 Local Marketing through the Example of McDonald’s
3.3 Standardized Global Marketing
3.3.1 The Model of Global Marketing
3.3.2 Standardized Global Marketing through the Example of Apple
3.4 Comparison of the Strategies
4 Conclusion
1 Introduction
The debate on standardization and adaptation in marketing has sparked a debate for decades. Dating back to Levitt (1983), who is one of the leading advocates of the standardization approach in marketing, many other researchers followed Levitt’s argument about the homogenization of consumer markets. However, critics of this thesis argue, that just a just a few products can be easily standardized in a global manner. Kotler (1984, p. 64) argues that national marketing can’t be simply extended to an international level as consumer behavior significantly varies depending on the country. Today, virtually every major company is forced to compete in the global market. And global marketers need to navigate through diverse cultures that go along with unpredicted rules and differences. Companies that are taking their business global and aim to successfully sell their products and services in foreign markets face many challenges. The most challenging decision in this progress is the degree of standardization or adaptation in the firm’s operations. Many companies have understood the importance of global activities. Markets that were restricted to the local market, only a few years ago, are now dominated by global businesses. The success of global companies is based on the success of national, which emerged from local companies businesses in the end of the last century. This development shall also apply for most industry sectors that stand to the rules. Those companies, which don’t comply with the challenges and chances of globalization, will be replaced by more dynamic businesses and will disappear from the market in the long-run (cf. Keegan, et al. 2002, p. 18). Having a lack of understanding for the absolute need of the right marketing approach, whether it is standardization or adaptation, many multinational firms faced costly errors when attempting to sell a product to a global audience. The question of the overall marketing approach is crucial for the company’s globalization strategy and structure (cf. Kutschker, Schmid, 2011, p. 1009 ff.). This seminar paper evaluates the dimensions of standardized global marketing and local marketing for global companies by starting with a short insight into globalization and global firms in general, followed by an illustration of the global-local dilemma, that forces a decision on the choice between selling the same product across all boundaries and the implementation of local marketing strategies in order to respond to regional differences. The term paper continues with an explanation of local and standardized global marketing, exemplified by the global players McDonald’s and Apple and concludes with a comparison of both approaches.
2 Globalization and Global Companies
Globalization has become a buzzword in the 1990s (cf. Cooper, 2004, p.152). The core message of the concept was very well received among many groups such as corpo-rations or politicians. Many academics contend that not only the integration of commodities and labor is influenced; furthermore, even capital markets in economics have to be involved (cf. Chiswick, Hatton, 2003, p. 65 ff.). In the last decades the term globalization gained in importance. Boundaries became more permeable and trade barriers, such as tariffs or trade restrictions, have been initiated. Today’s globalization has been driven by policies that opened economies domestically and internationally. It is a process impelled by international trade. Globalization is the development of a more and more integrated global economy marked especially by free trade, free flow of capital, and the tapping of cheaper foreign labor markets (cf. Merriam Webster, N.D.), therefor it is not surprising that besides opportunities for cooperation, conflicts of interests in form of competition arise among global companies, also known as global players (cf. Herkenrath, 2007, p. 5). Abbott and Snidal (2009, p. 72 f.) state that global companies possess a so-called “go-it-alone power”. These global enterprises operate on global scale with offices and/or factories in different countries. Usually one centralized and strong headquarter is responsible for the global brand strategy (cf. Investopedia, N.D.). By means of economies of scale these companies homogenize products as far as the market allows in order to keep costs low. More and more businesses are going glo-bal today and global business is no longer in the hands of a limited number of multinational giants (cf. Benton, et al. 2004, p. 302).
3 Local Marketing versus Standardized Global Marketing
3.1 The Global-Local Dilemma in Global Marketing
In todays rapidly globalizing world, firms aim to operate on a global scale. In order to do so effectively, they face common challenges. By following the goal of operating globally on the one hand, they have to account for local differences on the other hand. The conduct of companies in foreign markets has been studied for decades to understand which major factors influence the choice between local marketing and standardized global marketing. The emphasis of the respective studies varied from particular elements of the marketing mix (mainly product or advertising) to the absolute marketing mix or a company`s encompassing business strategy (cf. Dow, 2005, p. 212 ff.). The core dilemma of global marketing is the choice between selling the same product across all boundaries and the implementation of local marketing strategies in order to respond to regional differences. A global product can also contain local values to give the product or service a higher grade of recognition (cf. de Mooji, 2014, p.12). By referring to the contingency approach, which states that there is no theory or method for business or marketing strategies that applies to all businesses or circumstances (Business Dictionary, N.D.), the decision of the marketing strategy, whether it is the local or global approach or a variation between, has to be fundamental. By unifying pro-ducts, prices distribution channels and promotion and sales programs, the ultimate form of standardization and thus global marketing is achieved. The assumption of an overall homogenization of needs throughout the world is the commonest used justification for global marketing, although by now many firms have learned that the standardized approach is not as effective as it was believed to be. Indeed, common needs may be generally valid, but local influences, such as religion, attitudes, and motivation, vary (cf. de Mooji, 2014, p.12). The global-local dilemma affects international businesses in many areas, although marketing may be the most important one. By standardizing the marketing mix across countries, a global strategy leads to an immense cost management advantage due to economies of scale. On the other hand, global companies have to deal with even greater pressure, by showing consideration for the significant differences in the needs of consumers and the resonance of the respective countries (cf. Cullen, Praveen Parboteeah, 2010, p. 276). De Mooji also states that global companies need to consider where along this continuum the level of adaptation, that delivers the maximum economic payoff, lies (2014, p. 12).
3.2 Local Marketing
3.2.1 The Model of Local Marketing
The principle of local marketing is very simple. It means that a successful global marketer needs the actual ability to think global while acting local. He is subject to the similarities and differences of the foreign markets and needs to intelligently combine parts of the standardization strategy and local idiosyncrasies (Keegan et al. 2002, p. 12). According to Doole and Lowe (2008, p. 7) local marketing is defined as a strategy “…where the marketing activities of an organization include activities, interests or operations in more than one country and where there is some kind of influence or control of marketing activities from outside the country in which the goods or services will actually be sold”. In today’s world, boundaries cannot simply be measured in a geographical manner; furthermore aspects like cultural differences, market structure, and several other influences have to be taken into account when deciding about the marketing strategy of a product to be pursued. By deciding to bring markets to new countries, firms need to consider how to develop its image or how to market new products in a profitable and successful way (cf. Johansson, 2009, p. 79 f.). The adaptive approach may be owed to the fact, that the marketer is exposed to a new macroeconomic environment, emerging from factors such as education, cultures, laws, society, religion and language (cf. Czinkota, Ronkainen, 2001, p. 61). The objective of marketing “… is to earn profits from the satisfaction of human wants and needs” (cf. Gillespie, Hennessy, 2016, p. 58) and to do so, it is essential to be aware of cultural influence factors. Global companies that are represented in many differing countries must also consider the effects and the potential of the marketing mix to keep up with local competitors and to suit consumer preferences as well as government regulations (cf. Kurtz, Boone, 2009, p. 389). Anheuser-Busch InBev, for example, customizes its beer to respond to local preferences. In the Middle East the firm showed consideration for the Islamic culture by launching a non-alcoholic, apple-flavored beer, which also matches the consumer’s preference for apple drinks (cf. Gillespie, Hennessy 2016, p. 316). Whereas in China, the company launched a beer with a lower alcohol content as it is a Chinese tradition to make many toasts (cf. Esterl, 2013, p. A1). Foreign Markets differ in some ways but they are similar in some other ways. The challenge is to extract these differences and similarities and to take an advantage out of them.
3.2.2 Local Marketing through the Example of McDonald’s
Since its founding in 1940, McDonald's has grown from a small restaurant to the world’s leading foodservice retailer, with more than 33,000 locations in 119 countries. With over 75 % of restaurants being operated by independent local entrepreneurs, McDonald’s is one of pioneers when talking about local marketing (McDonald’s, N.D.). Not only has McDonald’s global approach led to the term "McDonaldization" of society (cf. Ritzer, 1998, p. 1), furthermore the "Big Mac Index" is used by the Economist newspaper to compare the costs of a Big Mac's in different currencies to evaluate the purchasing power parity of a respective country (cf. Economist, 2007, p. 82). As a global fast food chain they bridge the gap between the aim of being globally successful and responding to local needs. When McDonald’s moved away from its original approach of having one lead agency being responsible for global campaigns (cf. Cardona, 2004), it expanded its marketing activities to local areas. The idea for the very famous slogan “I’m Lovin’ it”, e.g., was born at DDB’s Heye & Partner, Germany. Although the campaign, which completed the claim, was designed on a global basis, local agencies had the possibility to adapt the campaign to fit the particular national market. To make the theme song “I’m Lovin’ it” more applicable to Chinese consumers, Justin Timberlake, who sang the American jingle, was replaced by Wang Leehom, who performed a Mandarin version of the campaign single (cf. Fowler, G.A., 2005). McDonald’s developed a global campaign by drawing on the know-how of local sources, which knew how to adapt the campaign in the best possible way. This is significant for McDonald’s philosophy of ‘think global, act local’). According to Vignali (2001, p. 97 ff.) “McDonald’s has realized that, despite the cost savings inherent in standardization, success can often be attributed to being able to adapt to a specific environment”. Of course, the company has global standards, such as food preparation protocols, point of purchase, signage and design, whereas pricing structures, e.g., need to be adapted in regards to socio-economic factors in the respective market. And yet, costs can be saved by offering a worldwide-standardized menu, McDonald’s understood the fundamental importance of localizing its menus to ensure long-term success. In cooperation with their on-site entities they respect cultural and religious peculiarities, as well as customs, laws and local tastes (cf. Moran, Keane, 2010, p. 45 ff.). Watson (1997, p. 24 f.) designated french fries as the “winning combination” despite the fact that they are the most standardized item on the menu, because they work with every locally featured product and appeal to practically every customer, “irrespective of their religious beliefs or political stance” (cf. Vignali, 2001, p.100). Based on McDonald’s approach on a successful penetration of the Asian market, they decided to launch a burger in Asian cities, which matches the population’s preference for rice. The common sesame roll was replaced by a “bread”, which consists out of rice. The so-called Rice Burger was born (cf. Jervoe, 2006, p. 103 f.). Knowing, that the majority of India’s population was vegetarian, the company introduced several specially designed vegetarian items (cf. Mukerjee, 2009, p. 147) such as the McAloo Tikki burger, the Veg McMuffin, the Masala Grill Veg, and the McSpicy Paneer (cf. McDonald’s India, 2016). France launched a Burger called Croque McDo, a name that refers to the popular ham and cheese sandwich “croquet monsieur” (cf. McDonald’s France, 2016) . To comply with Islamic laws of food preparation, for example, McDonald’s offers “Halal” menus in Saudi Arabia (cf. Usunier, Lee, 2009, p.134).
3.3 Standardized Global Marketing
3.3.1 The Model of Global Marketing
According to Farrell (2015 p. 2) global marketing is defined as “the systematic planning, coordination and implementation of the firm’s marketing activities across national boarder.” As all marketing activities have to be implemented globally, the firm has to rise to the challenge of managing environmental differences in terms of culture, laws, regulations, the level of economic development, and even business practices. Furthermore, by standardizing marketing across boundaries, the firm may encounter disparities regarding the needs and the purchasing behavior of consumers. Farrell also states that unfamiliar competitors and marketing channels should receive attention, as they may have a profound effect on the success of the firm. Central to the marketing approach, Gillespie and Hennessy (2016, p. 313) display that economies of scale can be realized, when a standardized product is received very well in many countries. Of course, economies of scale depend on the industry, but they all allow products to be produced more cheaply, with the consequence, that companies are able to sell their product at a cheaper price. But product’s prices do not necessarily have to vary. By keeping the prices uniformly throughout countries but achieving a greater margin, firms can increase their investment in research and development or promotion. Even though local adaptation is crucial in some cases, many firms were successful in following the standardization approach of marketing. Especially in the consumer good, industrial and high-tech segment markets seem to grow increasingly homogeneous. It is not so much the fact that globally standardized products are cheaper for consumers or the endeavor to compete with others; it’s much more that these products are often of the best value, because they offer a higher quality as well as more advanced features at better prices (cf. Johansson, 2009, p. 16).
3.3.2 Standardized Global Marketing through the Example of Apple
When Apple, Inc. was founded in 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne (cf. Isaacson, 2011, p. 62 f.), Mike Markkula, former CEO of Apple, developed a three-point marketing philosophy, (cf. Isaacson, 2011, p. 71 f.), which still remains the core element of Apple’s marketing strategy and is one of the reasons for Apple’s sustained success. The first point was empathy, with reference to the customer, declaring “we will truly understand their needs better than any other company”. The second point was focus, stating that “in order to do a good job of the things we decide to do, we must eliminate all of the unimportant opportunities”. With impute, the marketing philosophy was completed. It manifests that “people DO judge a book by its cover. We may have the best product, the highest quality, the most useful software, etc.; if we pre-sent them in a slipshod manner, they will be perceived as slipshod; if we present them in a creative, professional manner, we will impute the desired qualities” (cf. Moorman, C., 2012). Like the majority of high-tech products, Apple products require high development costs, even though the product life cycle is relatively short. Consequently, large amounts have to be sold in many markets to compensate the investment before the product becomes obsolete (cf. Gillespie, Hennessy, 2016, p. 313). That also interacts with Apples approach of focusing on a limited number of products in order to prevent a mediocrity of the products (cf. Finkle, T., Mallin, M. 2011, p. 63 ff.). That is reflecting CEO Tim Cook’s statement that “one traditional management philosophy that’s taught in many business schools is diversification. Well, that’s not us” (cf. Paroutis, et al. 2016, p. 179). In positioning its iPhone as a hip and trendy must-have and thus focusing more on a lifestyle instead of a product, Apple especially approached the segment of the young and cosmopolitan consumers, who are less attached to local traditions, but more sensitive to world trends, such as film, music, fashion, and technology, in particular.
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