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Published on November 14, 2007

Author: Techy_Guy

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Localization in a Global Marketplace:  Localization in a Global Marketplace Prof Scott Hoenig Monterey Institute of International Studies Objectives:  Objectives To provide a general framework how firms can develop localization strategies for their global offerings To provide a few specifics for the localization of marketing tactics To provide specific case examples for localization of e-commerce and software industries Provide some hands-on experience for participants Overview:  Overview (1) The Localization Scene Global Companies Face Case: Matsushita (2) A Few Ideas for Localization of Marketing Tactics Case: Shanghai Volkswagen (3) The Case of E-Commerce Localization Case: Tonernow.com Overview (cont):  Overview (cont) (4) The Case of Software Localization Case: Microsoft (5) The Great Face-Off: Quest for the Best Localization Concept Globalization vs. Localization:  Globalization vs. Localization Globalization: Operating with relative constancy in a number of markets -- as if the entire world (or major regions of it) were a single entity; selling the same things in the same way everywhere (Levitt 1983) Localization: Operating in a number of countries, adjusting products and practices in each -- at a high relative cost, with a committed operating presence in the markets of other nations. The Localization Scene:  The Localization Scene Discussion Question a) Name a global product or service that has been localized successfully for a foreign market. b) In your view, what made it work? Localization Scene:  Localization Scene a) Forgotten Strategy (Ghemawat) Most of modern global strategy focuses on minimizing differences But, correctly choosing how much to adapt a business model is important to extract full value from a business Employ a strategy of differences (arbitrage) and exploitation of scale of economies Localization Scene:  Localization Scene a) Forgotten Strategy (cont) Strategy of differences: arbitrage Cultural arbitrage: Exploiting of culture to gain advantage. Ex: food, clothing, US fast-food chains Administrative Arbitrage: Exploiting legal, institutional and political differences from country to country. (ex: tax differentials) Localization Scene:  Localization Scene a) Forgotten Strategy (cont) Strategy of differences: arbitrage (cont) Geographic Arbitrage: Not as important now due to reductions in transportation costs, but can be used in areas such as telecommunications (local vs. long-distance) and distribution networks Economic Arbitrage Includes exploitation of differences in costs of labor and capital, variations in knowledge or availability of complementary products, technologies or infrastructure Reconciling differences (see table) Localization Scene (cont):  Localization Scene (cont) b) Choosing Between Globalization and Localization (Ramarpu/Timmerman) Globalization allows for: focus on market similarities upward spiraling of market share, leading to greater economies of scale lower costs through greater economies of scale lower prices for consumers Localization Scene (cont):  Localization Scene (cont) b) Globalization and Localization Localization allows for: winning specific buyers and maximizing sales not over-designing products for some countries and under-designing them for others not undermining some company networks which already exist not dampening entrepreneurial spirit Localization Scene (cont):  Localization Scene (cont) b) Globalization and Localization (cont) 3 Ps of Global Marketing triggering standardization vs localization Place Economy of the Country (prosperus vs struggling) If country can use older technology, set-up costs are lower low product modification is needed when market infrastrucuter and environmental conditions are similar (e.g., US, Canada and Western Europe) Availability of Local Partners (few vs plentiful) Competition (low vs intense) Localization Scene (cont):  Localization Scene (cont) b) Globalization and Localization (cont) 3 Ps of Global Marketing triggering standardization vs localization People Consumer Tastes (little vs high preference) (ex:: foods and fragrances) Sophistication (high vs low) Market Segments (few vs many) Localization Scene (cont):  Localization Scene (cont) b) Globalization and Localization (cont) 3 Ps of Global Marketing triggering standardization vs localization Product Product Classification (Industrial/Consumer or Consumer Non-durables) Technology of the Products (High vs low) Culturally Sensitive Products (cosmetics, foods, drinks, pharmaceuticals) (low vs high) Porduct Reputation (Sterling vs poor or unknown) Similarities of Perception of Products (ex: cigarettes or pens) (high vs low) Localization Scene (cont):  Localization Scene (cont) b) Choosing Between Globalization and Localization (cont) see Figure 1 and Table 1 Localization Scene (cont):  Localization Scene (cont) (c) Striking a Balance (Paik/Sohn) Regional headquarters structure (see Figure 1) This overcomes the potential tension between headquarters’ pull for gloal efficiency and local operating units’ push for national effectiveness Localization Scene (cont):  Localization Scene (cont) (c) Striking a Balance (cont) Toshiba’s modified regional headquarters structure (see Figure 2) Not all RHQs have the same function (see pp 355-356) Localization Scene (cont):  Localization Scene (cont) (d) Necessary Conditions for the Advancement of Knowledge (Ryans/Griffith/White) Field has not developed a strong underlying framework Central constructs of the argument: standardized or adapted effectiveness Somewhat operationalized but not well developed Localization Scene (cont):  Localization Scene (cont) (d) Necessary Conditions (cont) Underlying Theoretical Foundations perception of consumer homogeneity and/or movement toward homogeneity if homogeneity exists, then economies of scale may occur but, no validation of economy of scale assumption and, while empirical support exists for relationship between adaptation and performance, no information is available for the effectiveness of adaptation of marketing strategy Localization Scene (cont):  Localization Scene (cont) (d) Necessary Conditions (cont) Where do we go from here? Must develop better understanding of consumer homogeneity trends Must develop the links between homogeneity, economies of scale, and creation of value through adaptation Localization scene (cont):  Localization scene (cont) (e) Localization of Corporate Visual Identity (Melewar/Saunders) Corporate Visual Identity includes: Logotype and/or symbol, typography and color Provides visual language for projecting visual structure to company’s publics Localization Scene (cont):  Localization Scene (cont) (e) Localization of Corporate Visual Identity (cont): Question: When do firms adapt or standardize? Consider: UK Subsidiaries in Malaysia Test: Main Business, Product attributes, competition, years in business, number of countries served, total sales, market entry form, trade laws, culture (name, symbol, typography, color, slogan), nationalism, design agency use, Language (name), name translation, name pronunciation Localization Scene (cont):  Localization Scene (cont) (e) Localization of Corporate Visual Identity (cont) see Table 3 Localization Scene Case:  Localization Scene Case Matsushita Electric Industrial (MEI) Localization of Marketing Mix:  Localization of Marketing Mix a) Overview (Michell/Lynch/Alabdali) The Model (Figure 1) Look at: 82 companies operating in both the UK and Gulf States Marketing mix standardization is driven by country and firm discriminating variables Product variables more standardized while other variables more adapted (Table 5) Industry less important (Table 6) Marketing Mix...(cont):  Marketing Mix...(cont) b) Advertising (Kanso and Nelson) Sample: 193 subsidiaries in Sweden and Finland (70 American) 77% of firms use standardized messages (Table 1) Different forms of standardized messages are used (Table 2) Different cultural issues have different impact on use of standardization (Table 3) Marketing Mix...(cont):  Marketing Mix...(cont) b) Advertising (cont) Implications: Advertising theme should not be the same across countries use of similar appeals and symbols in advertising campaigns targeting foreign markets is ill advised choice of illustrations and colors must tie well with consumers’ aathetic sense integration of local communication expertise is a necessity to overcome language and cultural barriers in markets Marketing Mix....(cont):  Marketing Mix....(cont) c) Branding (Razzouk/Seitz/Vacharante) Cultural factors should impact advertising and branding: choice of advertising theme connotation of words and symbols way pictorial conventions are interpreted media selection Marketing Mix....(cont):  Marketing Mix....(cont) c) Branding (cont) Consider: 100 advertisements from 16 Thailand women’s magazines (developing country setting) Analyze for: globalization vs. localization (Tables 1 and 2) use of information cues (Table 3) evaluation criteria (information cues) (Table 4) women’s stereotypes (Table 5) Marketing Mix....(cont):  Marketing Mix....(cont) c) Branding (cont) Influence of Westernization is prevalent in Thai advertising/branding use may have similarities high use of “globalized” advertising information cues similarities in women’s roles Marketing Mix...(cont):  Marketing Mix...(cont) d) Pricing (Samli/Jacobs) Multilocal (J) vs. Global (A) companies applies to pricing practice, further broken down ito cost-oriented vvs demand oriented, and prestige vs competitive pricing are these differences related to growth or other factors? Marketing Mix...(cont):  Marketing Mix...(cont) d) Pricing (cont) Consider: 80 large American multinational firms Results: Place of Business (Table 1) Relative Growth Rates (Table 2) Different Pricing alternatives (Exhibit 2) Reasons for charging different prices (Table 3) Marketing Mix...(cont):  Marketing Mix...(cont) d) Pricing (cont) faster growth companies tend to globalize prices American companies more committed to international operations by using localized pricing appear to be enjoying substantial growth in international operations Marketing Mix Case:  Marketing Mix Case Shanghai Volkswagen The Case of E-Commerce:  The Case of E-Commerce a) Global Portal Strategy (Robles) international theory -- firm goes through stages of greater involvement and adaptation of strategy as more knowledge is acquired E-Commerce...(cont):  E-Commerce...(cont) a) Global Portal Strategy (cont) eclectic theory of international business -- three conditions explain abnormal returns:: firm must own specific assets that provide superior advantage over local firms (know-how, brand names, or other) firms must find it more advantageous to exploit these assets rather than sharing or transferring them to others firms will be able to combine competitive advantage with immobile local factors E-Commerce...(cont):  E-Commerce...(cont) a) Global Portal Strategy (cont) integration -responsiveness framework firms develop international strategies that respond to the imperatives to optimize efficiency of operations in the diversity of national markets added to this is a third dimension of “contractual completeness”, or the ability to engage in a variety of transactions, including production marketing, financing, pricing and promotion (see Figure 1) E-Commerce...(cont):  E-Commerce...(cont) a) Global Portal Strategy (cont) Evolution: First decisions:which markets to enter first, which partners to use, what functionalities of architecture should be used, what to host in the home base and abroad, how do develop local content, commerce and connectivity Stage 1: translation of content and other relevant information to language of visitor Stage 2: establish the portals through JVs, partnerships, where local partners contribute marketing, promotion, customer service, local network and connectivity, billing, securing local content and recruiting local commerce partners. Stage 3: extensive localization and local development of services and tools -- alliances with local firms to develop local language search engines, local directories and more local content E-Commerce...(cont):  E-Commerce...(cont) a) Global Portal Strategy (cont) Drivers of Global Portal Strategy (Table 1) Diversity of Online Markets Diversity of Regulations Competitive challenges from regional and national portals E-Commerce...(cont):  E-Commerce...(cont) a) Global Portal Strategy (cont) extended integration-responsiveness framework provides starting point to understand strategy formulation (based on efficiency, local responsiveness and transaction completeness) cost efficiency: consistent branding, common technology platforms, builfing a hub for synchronization of several localized versions of content, commerce and process; common positioning and shared corporate culture local responsiveness: content, commerce and connectivity platforms also, different evolutionary paths may be taken that place different importance on any of the three areas E-Commerce...(cont):  E-Commerce...(cont) b) E-Branding Strategies (Ibeh 2005) Importance of E-branding may enhance international growth by enlarging customer base, enhancing early-mover advantage, and global brand presence at lower costs but, must deal with variations in local requirements, languages, logistical and infrastructure systems, etc. E-Commerce... (cont):  E-Commerce... (cont) c) How American Brands Standardize their European Websites (Okazaki 2005) Consider: 64 American Brands (see Table II and Figure 2) Analyze for (see Figure 1, Table III): Sales transactions: ability to sell and deliver a product Brand communication Interactivity, including playfulness, choice, connectedness, information collection, reciprocal communication Relationship marketing Compare to Similarities to parent web site E-Commerce... (cont):  E-Commerce... (cont) c) American Brands Standardize Websites (cont) Summary of brand Website features (Table IV) Similarity Ratings by Country (Table V) What Causes Standardization? (Table IX) E-Commerce... (cont):  E-Commerce... (cont) d) Cultural Content of Web Sites (Singh/Zhao/Hu) Consider Websites of local Japanese (25), US (26), Indian (21) and Chinese (21) companies, 15-20 pages from each E-Commerce... (cont):  E-Commerce... (cont) d) Cultural Content of Web Sites (Singh/Zhao/Hu) Consider: Collectivism (community relations, clubs or chat rooms, newsletter, family theme, symbols and pictures of national identity, loyalty programs, links to local websites Individualism (good privacy statement, independence thee, product uniqueness, personalization Uncertainty Avoidance (customer service, guided navigation, tradition theme, local stores, local terminology, free trials or downloads, toll-free numbers E-Commerce... (cont):  E-Commerce... (cont) d) Cultural Content of Web Sites (Singh/Zhao/Hu) Consider: Power distance (company hierarchy information, pictures of CEOs, quality assurance and awards, vision statement, pride of ownership appeal, proper titles) Masculinity (quizzes and games, realism theme, product effectiveness, clear gender roles) High-context culture (politeness and indirectness, soft-sell approach, esthetics) Low-context culture (hard sell approach, use of superlatives, rank or prestige of company, terms and condition of purchase E-Commerce... (cont):  E-Commerce... (cont) d) Cultural Content of Web Sites (cont) Comparison/Results (Table III) E-Commerce... (cont):  E-Commerce... (cont) e) Addressing Taboo Topics (Wrobel) Build Trust, Convey Competence, Invoke Humor (Figure 2) Use Verbally and Visually Coded Texts E-Commerce case:  E-Commerce case Tonernow.com Objectives:  Objectives To provide a general framework how firms can develop localization strategies for their global offerings To provide a few specifics for the localization of marketing tactics To provide specific case examples for localization of e-commerce and software industries Provide some hands-on experience for participants Overview:  Overview (1) The Localization Scene Global Companies Face Case: Matsushita (2) A Few Ideas for Localization of Marketing Tactics Case: Shanghai Volkswagen (3) The Case of E-Commerce Localization Case: Tonernow.com Overview (cont):  Overview (cont) (4) The Case of Software Localization Case: Microsoft (5) The Great Face-Off: Quest for the Best Localization Concept

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