Achieving the delicate local–global balance

Each company has to find its own balance between localisation (the adaptation of its products to local markets) and the deeprooted raison d’être of globalisation, the pursuit of a competitive advantage through reduced costs. It is therefore possible to say that there is a contradiction between the need to create value – via the adaptation of products and symbols to suit a particular country, market segment and even ethnic groups, communities or individuals on a oneto- one basis – and the economic requirement of reducing costs.

As with any dilemma, every company knows there is no single solution, just progressive adaptations and even policy reviews when they have placed too much emphasis on localisation or standardisation.

Cosmetic groups (such as Estée Lauder, Shiseido and l’Oréal) and car manufacturers are in the throes of this dilemma since they are both ‘high-tech’ and ‘high-touch’. It is a well-known fact that globalisation was born of technology, and aids the diffusion of research via the ever-decreasing costs of that technology.

However, because cosmetic brands target the beauty of individual women, they must be ultra-sensitive and therefore ‘high-touch’ and, as such, adapt as far as possible to specific physiological characteristics, as well as to the basic and cultural characteristics of women in countries throughout the world.

There is no longer an overall concept of beauty, but an acceptance of the diversity of different types of beauty within the same country and between generations. The dilemma is equally acute for the car industry when a car is not simply positioned as a low-priced vehicle. A car has a special significance for individual consumers, and since each consumer is different, there is not only an expectation of diversity at brand level, but also in respect of models, line extensions and even the personalisation of the relationship with the brand.

Each to his own balance?

To take one category, cosmetics for example, it is significant that the brands positioned as ‘mass market’ have to develop their proximity much more than the so-called elitist brands. As such, they not only make greater use of directcontact marketing but also tend to adapt products and publicity much more within the well-defined framework of the brand identity, on the one hand, and the brand’s economic equation, on the other.

Thus Garnier and Maybelline adapt much more than Lancôme, and in the case of Garnier, this adaptation is automatic and built in from the outset. For example, Garnier offers the most extensive range of cosmetics to meet the demands of all skin and hair types in Europe and the United States. Depending on the country, its subsidiaries select the products best suited to their requirements, since each country develops its own market.

The same applies to the format of the packaging and labelling. The differentiation is situated at national level and not at the level of the region or zone, since the women of – albeit geographically close – countries such as Korea, Taiwan and Japan in fact have very different expectations. The Lancôme customer, on the other hand, is widely travelled and expects to be able to buy the same products in Tokyo or Paris – by being overadapted, these products would lose their status. Naturally, Lancôme develops specific skin-whitening products to meet the very strong demand among Asian women in these countries.

So how do companies reconcile this finetuned adaptation and the economic equation? By making the economic equation the criterion for the acceptance of the adaptation. Thus for l’Oréal, innovation assumes the status of a religion, with over 500 patents registered each year. This innovation can come from one of three sources:

  • one of four basic research laboratories – two in the United States, one in Europe and one in Japan;
  • from brand marketing teams throughout the world;
  • from any of the various national retail distribution subsidiaries.

Sometimes there is a strong local demand in a particular country. For example, in 1997, Brazil expressed a desire for a specific haircare product since Brazilian hair – the result of the country’s ethnic melting pot – is characteristically dry and unmanageable and needs a moisturising conditioner. Brazilian women are proud of their hair, which they regard, even more than their faces, as the symbol of their sensuality.

They therefore want it to be long and flowing, to move with their body, what the Brazilians call cacheado, or curling and wavy. So the European laboratory developed a unique formula and then l’Oréal considered the economic equation. Could enough of this new product be sold in Brazil and, of course, elsewhere in the world? It was called Elsève Hydramax and soon became the most popular haircare product in Brazil before being extended to other countries.

Maybelline provides another example. Although it is a US brand and its teams are based in New York, the Japanese laboratory discovered an innovative active ingredient that was able to meet the very specific demands of very trendy and ‘hip’ young Japanese women, typical of Tokyo’s Shibuya district, for a particular type of lipstick. These are young women with small mouths, and in Japan mother-of-pearl is very popular.

This molecule created the effect of water, giving the lipstick a ‘wet look’. After careful economic analysis, the product was developed in Japan under the name Maybelline Watershine Diamonds. In the space of a year, it made Maybelline the best-selling mass-market makeup brand in Japan, and was subsequently extended to the United States and Europe where it enjoyed a similar meteoric success.

In both these cases, the local innovations were only accepted when they were considered ‘globalisable’ with the potential for global successes. This is a far cry from the ‘think global, act local’ business model. It is more a case of ‘think local, act global’.

Competitive advantage through adaptation

Globalisation at all price has a cost: failure. On the other hand, some examples, not much publicised, show how market adaptation helps in developing a profitable business and slowly gaining market leadership.

Year after year, Nestlé has tried to compete against Kellogg’s in the cereals market. This is normal: cereals are close to the core product of Nestlé, milk. They address the same target too (children), and the same benefit: growth.

As long as Nestlé copied Kellogg’s it was unsuccessful. In addition, Nestlé had no know-how in cereals. It needed an alliance. General Mills in the United States was itself looking for a way to enter Europe, after Kellogg’s, Quaker Oats, and the private labels of strong or even dominant multiple retailers. To compete against a leader one needs an innovation. Because of Nestlé’s decentralized culture, local subsidiaries have some autonomy.

The French subsidiary identified a need so far untapped by Kellogg’s: children love chocolate. They wish to have chocolate for breakfast. Why didn’t Kellogg’s identify this need? First, it was a local need, and centralised global companies are not fitted to adapt to local needs. Second, it did not fit with the ideology of cereals for growth and health. Finally, leaders tend to defend their acquired position instead of looking for new markets (Christensen, 1997).

Also, as a chocolate brand, Nestlé had more insight into this market. The result was the launch of a local new product, thanks to the know-how of General Mills, marketed and distributed by Nestlé: Chocapic, the first cereals in chocolate. Soon this product became the market leader with a share of 11 per cent: all multiple retailers had to distribute it. This is how Nestlé fought back successfully. It innovated in a high-volume market, then Chocapic was rapidly extended to other European and world countries.

Everyone has heard about Malibu, a white rum and coconut light drink. What about Soho or Ditta, which recently passed Malibu in volume and value sales? Soho and Ditta are the two names of the same product, a mixer based on lychees. Why are there two names? Because it is not possible to sell a lychee mixer drink the same way in Japan (where it is now the number one brand) and in Europe.

In Japan, Ditta is aimed at young women who typically go to bars to chat together, a classic of Japanese social behaviour. The communication target was the bar staff who promoted imaginative new cocktails. In Europe, the brand called Soho is mostly sold off-premises, in multiple retailers, thanks to in-store wet trial campaigns. The target market is women as a basis for cocktails (with grapefruit for instance). Here again, leadership came from adaptation.

Adaptation: a necessity for growth through time

A final example is Barilla, a mainstream popular pasta brand that is number one in Italy. It decided to extend geographically in Europe, by means of a positioning very different from its own domestic positioning: it created the premium pasta market in Europe. Barilla was introduced almost as a luxury brand.

This was implemented through cartons with a specific design and the launch of a collection of forms of pasta unknown in most countries. Naturally the price was 25 per cent higher than the local leader, which itself often had an Italian name but did not play on this image dimension, having lost all links with Italy a long time ago.

Barilla’s goal is not to remain a niche player in all foreign countries, but to become the number two if not the number one. This necessitates addressing the local habits of average consumers, not elitist ones. As a consequence, the brand has to widen its range and lower its prices on new lines adapted to children and family consumption, even if this means producing products that are hardly typically Italian but represent a large part of local consumption (like noodles).

This also entails packaging these lines in a far less premium style (no more cartons). Finally, the advertising itself should bring the brand closer to the markets: it has to stop being perceived as the brand of Italians. Positioning a brand on export markets as the one preferred by consumers in its domestic market contributes to reinforcing an alien image. Some consumers may like to imitate the choices of foreigners, but becoming a local leader means addressing the needs of this market, the first one being to be relevant for that market.

« Previous Topics
Naming Problems
Building The Brand In Emerging Countries
Coping With Local Diversity
Next Topics »
Being Perceived As Local: The New Ideal Of Global Brands?
Local Brands Can Strike Back
The Process Of Brand Globalisation

Strategic Brand Management Related Practice Tests

Strategic Management Practice Tests
Brand Equity In Question What Is A Brand? Differentiating Between Brandassets, Strength And Value Tracking Brand Equity Goodwill: The Convergence Of Finance And Marketing How Brands Create Value For The Customer How Brands Create Value For The Company Corporate Reputation And The Corporate Brand Strategic Implications Of Branding What Does Branding Really Mean? Permanently Nurturing The Difference Brands Act As A Genetic Programme Respect The Brand ‘contract’ The Product And The Brand Each Brand Needs A Flagship Product Advertising Products Through The Brand Prism Brands And Other Signs Of Quality Obstacles To The Implications Of Branding Brand And Business Building Are Brands For All Companies? Building A Market Leader Without Advertising Brand Building: From Product To Values, And Vice Versa Are Leading Brands The Best Products Or The Best Value? Understanding The Value Curve Of The Target Breaking The Rule And Acting Fast Comparing Brand And Business Models: Cola Drinks From Private Labels To Store Brands Evolution Of The Distributor’s Brand Are They Brands Like The Others? Why Have Distributor's Brands? The Financial Equation Of The Distributor’s Brand The Three Stages Of The Distributor’s Brand The Case Of Decathlon Factors In The Success Of Distributor's Brands Optimising The Dob Marketing Mix The Real Brand Issue For Distributors Competing Against Distributor's Brands Facing The Low-cost Revolution Should Manufacturers Produce Goods For Dob's? Brand Diversity: The Types Of Brands Luxury, Brand And Griffe Service Brands Brand And Nature: Fresh Produce Pharmaceutical Brands The Business-to-business Brand The Internet Brand Country Brands Thinking Of Towns As Brands Universities And Business Schools Are Brands Thinking Of Celebrities As Brands The New Rules Of Brand Management The Limits Of A Certain Type Of Marketing About Brand Equity The New Brand Realities We Have Entered The B To B To C Phase Brand Or Business Model Power? Building The Brand In Reverse? The Power Of Passions Beginning With The Strong 360° Experience Beginning With The Shop The Company Must Be More Human, More Open Experimenting For More Efficiency The Enlarged Scope Of Brand Management Licensing: A Strategic Lever How Co-branding Grows The Business Brand Identity And Positioning Brand Identity: A Necessary Concept Identity And Positioning Why Brands Need Identity And Positioning The Six Facets Of Brand Identity Sources Of Identity: Brand Dna Brand Essence Launching The Brand Launching A Brand And Launching A Product Are Not The Same Defining The Brand’s Platform The Process Of Brand Positioning Determining The Flagship Product Brand Campaign Or Product Campaign? Brand Language And Territory Of Communication Choosing A Name For A Strong Brand Making Creative 360° Communications Work For The Brand Building Brand Foundations Through Opinion Leaders And Communities The Challenge Of Growth In Mature Markets Growth Through Existing Customers Line Extensions: Necessity And Limits Growth Through Innovation Disrupting Markets Through Value Innovation Managing Fragmented Markets Growth Through Cross-selling Between Brands Growth Through Internationalisation Sustaining A Brand Long Term Is There A Brand Life Cycle? Nurturing A Perceived Difference Investing In Communication No One Is Free From Price Comparisons Branding Is An Art At Retail Creating Entry Barriers Defending Against Brand Counterfeiting Brand Equity Versus Customer Equity: One Needs The Other Sustaining Proximity With Influencers Should All Brands Follow Their Customers? Reinventing The Brand: Salomon Adapting To The Market: Identity And Change Bigger Or Better Brands? From Reassurance To Stimulation Consistency Is Not Mere Repetition Brand And Products: Integration And Differentiation Specialist Brands And Generalist Brands Building The Brand Through Coherence Defining The Core Identity Of The Brand Confirming The Presence Of Brand Core Facets In Each Product Identifying The Role Of Each Product Line In The Construction Of The Brand Graphically Representing The Overall System Of The Brand Checking The Coherence Worldwide The Three Layers Of A Brand: Kernel, Codes And Promises Respecting The Brand Dna Managing Two Levels Of Branding Growth Through Brand Extensions What Is New About Brand Extensions? Brand Or Line Extensions? The Limits Of The Classical Conception Of A Brand Why Are Brand Extensions Necessary? Building The Brand Through Systematic Extensions: Nivea Extending The Brand To Internationalize It Identifying Potential Extensions The Economics Of Brand Extension What Research Tells Us About Brand Extensions Avoiding The Risk Of Dilution Balancing Identity And Adaptation To The Extension Market Segments Assessing What Should Not Change: The Brand Kernel Preparing The Brand For Remote Extensions Keys To Successful Brand Extensions Is The Market Really Attractive? An Extension-based Business Model: Virgin How Execution Kills A Good Idea: Easycar Brand Architecture The Key Questions Of Brand Architecture Type And Role Of Brands The Main Types Of Brand Architecture The Flexible Umbrella Brand The Aligning Umbrella Brand (masterbrand) Choosing The Appropriate Branding Strategy New Trends In Branding Strategies Internationalising The Architecture Of The Brand Some Classic Dysfunctions What Name For New Products? Group And Corporate Brands Corporate Brands And Product Brands Multi-brand Portfolios Inherited Complex Portfolios From Single To Multiple Brands: Michelin The Benefits Of Multiple Entries Linking The Portfolio To Segmentation Global Portfolio Strategy The Case Of Industrial Brand Portfolios Linking The Brand Portfolio To The Corporate Strategy Key Rules To Manage A Multibrand Portfolio The Growing Role Of Design In Portfolio Management Does The Corporate Organization Match The Brand Portfolio? Auditing The Portfolio Strategically A Local And Global Portfolio – Nestlé Handling Name Changes And Brand Transfers Brand Transfers Are More Than A Name Change Reasons For Brand Transfers The Challenge Of Brand Transfers When One Should Not Switch Analysing Best Practices Transferring A Service Brand How Soon After An Acquisition Should Transfer Take Place? Managing Resistance To Change Factors Of Successful Brand Transfers Brand Turnaround And Rejuvenation The Decay Of Brand Equity The Factors Of Decline Distribution Factors When The Brand Becomes Generic Preventing The Brand From Ageing Rejuvenating A Brand Growing Older But Not Ageing Managing Global Brands The Latest On Globalisation Patterns Of Brand Globalisation Why Globalise? The Benefits Of A Global Image Conditions Favouring Global Brands The Excess Of Globalisation Barriers To Globalisation Coping With Local Diversity Building The Brand In Emerging Countries Naming Problems Achieving the delicate local–global balance Being Perceived As Local: The New Ideal Of Global Brands? Local Brands Can Strike Back The Process Of Brand Globalisation Globalising Communications: Processes And Problems Making Local Brands Converge Financial Valuation And Accounting For Brands Accounting For Brands: The Debate What Is Financial Brand Equity? Evaluating Brand Valuation Methods Brand Valuation In Practice The Evaluation Of Complex Cases What About The Brand Values Published Annually In The Press? Strategic Brand Management Interview Questions