Global Marketing: Standardization or Adaptation?

1. Global Marketing: Standardization or Adaptation? VUZF University Business Strategies Class of Prof. EvgeniEvgeniev Michele Fedor, USA International Marketing Specialist 16 November 2012

2. Globalization : the act or process of globalizing : the state of being globalized; especially: the development of an increasingly integrated global economy marked especially by free trade, free flow of capital, and the tapping of cheaper foreign labor markets

3. Globalization • The trend toward a single, integrated and interdependent world • Economists: emergence of global markets • Sociologists: convergence of lifestyles and social values • Political scientists: reduction of national sovereignty • CEO/Marketing Manager?

4. Global Business Framework

5. Global Business • EPRG Framework (Dr. Howard V. Perlmutter, Wharton) • "The more one penetrates into the living reality of an international firm, the more one finds it necessary to give serious weight to the way executives think about doing business around the world.“ • Organizational world views shaped by how company was formed, CEO's leadership style, administrative processes, myths and traditions • These orientations determine the way strategic decisions are made and relationship between headquarters and affiliates

6. Global Business • EPRG • Ethnocentric (Home Country orientation) • Domestic strategies are superior, applied to foreign markets • Polycentric (Host Country Orientation) • Decentralized management, affiliates manage their market • Geocentric (World Orientation) • Integration of worldwide marketing with no bias towards home or host country • Regiocentric (Regional Orientation) • Region viewed as a single market

7. EPRG Characteristics Ethnocentric Polycentric Regiocentric Geocentric Source: Multinational Organization Development, 1979, Perlmutter, H.D.

8. Global Business/EPRG • Does not exist in the purist form • Only geocentric organization decides on marketing adaption or standardization? • Ethnocentric with surplus product? • Regiocentric uses same ads? • Polycentric insists on branding standards?

9. Global Marketing Strategy Definitions

10. Global Marketing Strategy • Marketing Mix • 4 P’s • Product/Service • Price • Place/Distribution • Promotion

11. Global Marketing Strategy • The Oxford University Press defines global marketing as “on a worldwide scale reconciling or taking commercial advantage of global operational differences, similarities and opportunities in order to meet global objectives.” • Steps before entering a market • Assessment of the economic, political, legal & cultural environment • Selection of appropriate markets • Market entry strategy • Marketing Mix

12. Global Marketing Strategy Standardization or Adaptation?

13. Global Village • Globalization implies we are becoming more alike, one “global village”…

14. Global Village

15. Global Village • Bulgaria and Macedonia are the same? • British English and American English? • Women’s role in car buying? • Bathing suits in different countries?

16. Global Village

17. Global Village • Globalization • Does not imply homogenized markets • Does imply that we are interconnected

18. Standardization or Adaption?

19. Standardization or Adaption? • Standardization • Assumes homogenous markets and in response offers standardized products and services using a standardized marketing mix • Adaption • Takes into account the inherent diversity in the global marketplace and adapts the marketing mix to fit the local culture, preferences, laws and rules, infrastructure and competition

20. Standardization • Transfer of company’s best, proven ideas • Learning curve • Economies of scale • Production, Marketing, R&D/development • Simplification • Greater control • Consistency • Easier to maintain uniform brand identity

21. Standardization • Millward Brown study found that just over one in 10 successful ads did equally well in another country • truly cost efficient cross-border campaigns? • Marketing Science Institute study showed distribution and price sensitivity across European countries • Commodity product • More mass communication, more price sensitive • Increased distribution of high quality product effective in less economically developed areas

22. Standardization Blunders • Workers in an African port saw the “Fragile” symbol and presumed it was broken glass, threw it all in the sea • (Neil Payne, 2008, proz.com)

23. Standardization Blunders • Golf ball manufacturer packaged golf balls in packs of four; “four” in Japanese sounds like death and items in fours are unpopular • www.kwintessential.co.uk

24. Standardization Blunders • Sportswear manufacturer Umbro named a running shoe Zyklon; the same name as the lethal gas used in extermination camps in WWII • Yunker, 2002

25. Standardization Blunders • The American beer company Coors used the slogan ‘Turn It Loose’ in its marketing campaign • Translated into Spanish, it read "Suffer From Diarrhoea." • Yunker, 2002

26. Standardization Blunders • Dutch Company Neerlandia exports milk powder in tin boxes to African countries; switched to alu-packs made of aluminum foil • Local customs officials became suspicious, believing they contained illegal drugs • Customers stopped buying the product; they had been using the tins as vessels for boiling water and preparing food, and even as building material • Neerlandia reverted back to the reusable tin box packaging • http://www.deseretnews.com/article/705374644/Cultural-tastes-affect-international-food-packaging.html?pg=all

27. Adaption • Specialization • Directly address consumer preferences • Allows for consideration of cultural, legal, social, economic issues • Use local marketing knowledge • More targeted advertising • Strategize against competition • Aware of logistical opportunities

28. Adaption Blunders • In its 2013 catalog, Ikea, in a bid to “localize” for the Saudi Arabian market, removed women from its catalog • Ended up being called “sexist” and lost face

29. Standardization or Adaption?

30. Standardization or Adaption? • Under what circumstance can a company in Country X sell its product in Country Y without changing product, price, place, or promotion and earn a suitable return?

31. Reality • It is rare to find a completely standardized marketing mix • The theory of standardization works on a strategic level, often not suited for the detail required on an operational and tactical level • Standardization and adaption should be evaluated as two ends of a spectrum • Which marketing mix elements should be standardized or adapted and to what extend

32. Reality • Perspective of Contingency • Instead of total standardization or total adaptation, this perspective seeks a balance • The degree of standardization is determined by the external environment and internal organizational factors • “Companies that operate in foreign markets should have eclectic abilities to seek integration, sensitivity and learning on the global scale at the same time, and standardization and adaption should not be evaluated as approaches that cannot be coordinated.” Source: Jain, 1989; Cavusgil et al., 1993

33. Glocalization • Objective of Glocalization • Find the optimal combination of integration and rationalization of operations in a global market • Find synergies, adapt for the rest • Think Global, Act Local • Most important is to decide which strategic elements should or must be standardized or adapted and to what extent, under what conditions and when

34. Global Marketing Strategy Framework

35. Glocalization • McDonald’s offers beer in Germany, wine in France, mutton pies in Australia, Veggie McNuggets in India, Teriyaki Burger in Japan, McLaks in Norway • Nokia offers an anti-dust keypad for its phones that was made specifically for India • Proctor & Gamble offers Ariel detergent in small sachets that are affordable in the Nigerian market • PepsiCo’s most popular Lays Chips are: cheese onion in the UK, lemon in Thailand, Paprika in Germany, seafood in China

36. Glocalization - Kraft • Kraft Oreos • Brand turned 100, with $2 billion in sales in 2011 (25% increase) • Emerging markets account for half of the brand’s sales • Maintains the fun, family oriented “twist, lick, dunk” communications strategy • Product adapted to the market • http://youtu.be/QHIAHJ6nw0k

37. Glocalization - Kraft • Oreo was underperforming so badly in China, Kraft was on the verge of pulling it • Reformulated cookie to be less sweet and added flavors/wafer options and used Yao Ming in ads • Today, China is the second largest consumer of Oreo products after the U.S.

38. Glocalization - Kraft • In India, the cookie was too bitter; reformulated and added flavors, tailored ads to local consumers, Oreo India website, social networking • Lower pricing strategy (5 and 10 packs), and local distribution • Between Jan-Sept 2011, sales grew 40%

39. Glocalization - Kraft

40. Glocalization - Kraft • Showing breastfeeding • Sugary cookie in baby’s hand • Pulled off Facebook, labeled “NSFW” (not suitable for work) • Censored in other media

41. Glocalization - Mattel • Mattel’s Barbie • Sales rose in Japan from near zero to 2 million after Mattel allowed its affiliate to change Barbie’s features (closed mouth, rounder face, bigger eyes)

42. Glocalization - Mattel • Mattel’s Barbie • Flagship store opened in China in 2009 on Barbie’s 50th birthday • Ambitious marketing push into world’s most populous region • http://youtu.be/Ys3xDCEfTkc

43. Glocalization - Mattel • Mattel’s Barbie • 2 years later, the store is closed • Was it the strategy? • Mattel insists it is not giving up on Barbie; still sold in more than 1,000 retail outlets

44. Standardization or Adaption? • Reality is that pure standardization and pure adaption don’t really exist, and they shouldn’t • Global marketing is too complex for simplistic answers • Most important is to decide which strategic elements should or must be standardized or adapted and to what extent, under what conditions and when • Strategy and execution are equally important

45. Thank You! mocheafedor@yahoo.com

46. References • “Cadbury India Records 40% Growth on Aggressive Marketing Drive,” The Economic Times, January 4, 2012 • “Global Marketing :Contemporary Theory, Practices and Cases,” IlanAlon and Eugene Jaffe, 2013, McGraw Hill • “Global Standardization-Courting Danger,” Journal of Consumer Marketing, Vol 3, No 2, Spring 1986 • “The Glocal Strategy of Global Brands,” Dumitrescu and Vinerean, Studies in Business and Economics, 2010, vol. 5, issue 3, pages 147-155 • “Guidelines for Developing International Marketing Strategies,” Wind, Douglas, Perlmutter, Journal of Marketing, vol. 37 (April 1973, pp 14-23 • “Kraft Foods’s Brand New World.” Chicago Magazine, June 2011 • “Pink Escalators & Spa Can’t Save Mattel’s Barbie Megastore,” Investorplace.com, March 7, 2011 • Strategic Insights: to Standardize or Localize www.globalizationexecutive.com/articles/Chapter3.pdf • “Standardization/Adaption of Marketing Solutions in Companies Operating in Foreign Markets: An Integrated Approach,” Engineering Economics, 2008 No 1 (56) • “Standardization of International Marketing Strategy by Firms from a Developing Country,” International Marketing Review, Vol. 14 No. 2, 1997, pp. 107-123 • “To Standardize or Not to Standardize: Marketing Mix Effectiveness in Europe, Marketing Science Institute, www.msi.org • “Want Some Milk with Your Green Tea Oreos?,” Bloomberg Businessweek, May 7-May13, 2012