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Managing Innovation and Change

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Managing Innovation and Change Powered By Docstoc
					Localization in a Global
     Marketplace
       Prof Scott Hoenig
Monterey Institute of International
            Studies
                          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
• (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)
• (4) The Case of Software Localization
  – Case: Microsoft
• (5) The Great Face-Off: Quest for the Best
  Localization Concept
       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
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
• 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
• 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
• 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)
• 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)
• 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)
• 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)
• 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)
• 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)
• b) Choosing Between Globalization and
  Localization (cont)

• see Figure 1 and Table 1
            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)
• (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)
• (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)
• (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)
• (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)
• (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)
• (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
     Localization Scene (cont)
• (e) Localization of Corporate Visual
  Identity (cont)
  – see Table 3
           Localization Scene Case
• Matsushita Electric Industrial (MEI)
  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)
• 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)
• 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)
• 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)
• 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)
• 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)
• 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)
• 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)
• 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
• Shanghai Volkswagen
                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)
• 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)
• 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)
• 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)
• 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)
• 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)
• 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)
• 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)
• 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)
• 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)
• 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)
• 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)
• d) Cultural Content of Web Sites (cont)
  – Comparison/Results (Table III)
                 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
• Tonernow.com
                 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
• (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)
• (4) The Case of Software Localization
  – Case: Microsoft
• (5) The Great Face-Off: Quest for the Best
  Localization Concept

				
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