Localization Days1 2

8/3/2019 Localization Days1 2

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Localization in a Global

Marketplace

Prof Scott Hoenig

Monterey Institute of InternationalStudies


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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


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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


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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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Globalization vs. Localization Globalization:

Operating with relative constancy in a number of

markets -- as if the entire world (or major regionsof it) were a single entity; selling the same things

in the same way everywhere (Levitt 1983)

Localization:

Operating in a number of countries, adjustingproducts and practices in each -- at a high relative

cost, with a committed operating presence in the

markets of other nations.


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The Localization SceneDiscussion Question

a) Name a global product or service that hasbeen localized successfully for a foreign

market.

b) In your view, what made it work?


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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 businessEmploy a strategy of differences (arbitrage) and

exploitation of scale of economies


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Localization Scene a) Forgotten Strategy (cont)

Strategy of differences: arbitrage

Cultural arbitrage: Exploiting of culture to gainadvantage. Ex: food, clothing, US fast-food chains

Administrative Arbitrage: Exploiting legal,

institutional and political differences from country to

country. (ex: tax differentials)


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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 inareas such as telecommunications (local vs. long-

distance) and distribution networks

Economic Arbitrage Includes exploitation of

differences in costs of labor and capital, variations inknowledge or availability of complementary

products, technologies or infrastructure

Reconciling differences (see table)


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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


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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


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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)


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b) Globalization and Localization (cont)


standardization vs localization People

Consumer Tastes (little vs high preference) (ex:: foods

and fragrances)

Sophistication (high vs low) Market Segments (few vs many)


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Localization Scene (cont) b) Globalization and Localization (cont)


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)


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b) Choosing Between Globalization and

Localization (cont)

see Figure 1 and Table 1


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(c) Striking a Balance (Paik/Sohn)

Regional headquarters structure (see Figure 1)

This overcomes the potential tension betweenheadquarters pull for gloal efficiency and local

operating units push for national effectiveness


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(c) Striking a Balance (cont)

Toshibas modified regional headquarters

structure (see Figure 2) Not all RHQs have the same function (see pp 355-

356)


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(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


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(d) Necessary Conditions (cont)

Underlying Theoretical Foundations

perception of consumer homogeneity and/ormovement 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


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(d) Necessary Conditions (cont)

Where do we go from here?

Must develop better understanding of consumerhomogeneity trends

Must develop the links between homogeneity,

economies of scale, and creation of value through

adaptation


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Localization scene (cont)

(e) Localization of Corporate Visual

Identity (Melewar/Saunders)

Corporate Visual Identity includes: Logotypeand/or symbol, typography and color

Provides visual language for projecting visual

structure to companys publics


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Identity (cont):

Question: When do firms adapt or standardize?

Consider: UK Subsidiaries in Malaysia

Test: Main Business, Product attributes,

competition, years in business, number ofcountries served, total sales, market entry form,

trade laws, culture (name, symbol, typography,

color, slogan), nationalism, design agency use,

Language (name), name translation, name


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Identity (cont)

see Table 3


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Localization Scene Case

Matsushita Electric Industrial (MEI)


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Localization of Marketing Mix a) Overview (Michell/Lynch/Alabdali)

The Model (Figure 1)

Look at: 82 companies operating in both the UKand Gulf States

Marketing mix standardization is driven by

country and firm discriminating variablesProduct variables more standardized while other

variables more adapted (Table 5)

Industry less important (Table 6)


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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 areused (Table 2)

Different cultural issues have different impact

on use of standardization (Table 3)


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Marketing Mix...(cont) b) Advertising (cont)

Implications:

Advertising theme should not be the same acrosscountries

use of similar appeals and symbols in advertising

campaigns targeting foreign markets is ill advised

choice of illustrations and colors must tie well withconsumers aathetic sense

integration of local communication expertise is a

necessity to overcome language and cultural barriers

in markets


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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


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Marketing Mix....(cont) c) Branding (cont)

Consider: 100 advertisements from 16 Thailand

womens magazines (developing countrysetting)

Analyze for:

globalization vs. localization (Tables 1 and 2)

use of information cues (Table 3)

evaluation criteria (information cues) (Table 4)

womens stereotypes (Table 5)


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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 womens roles


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Marketing Mix...(cont)

d) Pricing (Samli/Jacobs)

Multilocal (J) vs. Global (A) companies

applies to pricing practice, further broken downito cost-oriented vvs demand oriented, and

prestige vs competitive pricing

are these differences related to growth or otherfactors?


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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)


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d) Pricing (cont)

faster growth companies tend to globalize prices

American companies more committed tointernational operations by using localized

pricing appear to be enjoying substantial growth

in international operations


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Marketing Mix Case

Shanghai Volkswagen


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The Case of E-Commerce a) Global Portal Strategy (Robles)

international theory -- firm goes through stages

of greater involvement and adaptation ofstrategy as more knowledge is acquired


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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 theseassets rather than sharing or transferring them to

others

firms will be able to combine competitive advantage

with immobile local factors


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integration -responsiveness framework

firms develop international strategies that respond tothe 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 oftransactions, including production marketing,

financing, pricing and promotion (see Figure 1)


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Evolution:

First decisions:which markets to enter first, which partners to use, whatfunctionalities 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 searchengines, local directories and more local content


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Drivers of Global Portal Strategy (Table 1)

Diversity of Online Markets Diversity of Regulations

Competitive challenges from regional and national

portals


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extended integration-responsiveness framework provides

starting point to understand strategy formulation (basedon 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; commonpositioning 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


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E-Commerce...(cont) b) E-Branding Strategies (Ibeh 2005)

Importance of E-branding

may enhance international growth by enlargingcustomer 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.


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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


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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)


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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


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(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


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(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


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E-Commerce... (cont) d) Cultural Content of Web Sites (cont)

Comparison/Results (Table III)


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E-Commerce... (cont) e) Addressing Taboo Topics (Wrobel)

Build Trust, Convey Competence, Invoke

Humor (Figure 2)Use Verbally and Visually Coded Texts


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E-Commerce case

Tonernow.com


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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


51/52

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


52/52

Overview (cont)

(4) The Case of Software Localization

Case: Microsoft

(5) The Great Face-Off: Quest for the BestLocalization Concept

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