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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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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
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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)
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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)
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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)
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Localization Scene (cont)
b) Choosing Between Globalization and
Localization (cont)
see Figure 1 and Table 1
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Localization Scene (cont)
(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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Localization Scene (cont)
(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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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
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Localization Scene (cont)
(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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Localization Scene (cont)
(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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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 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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Localization Scene (cont)
(e) Localization of Corporate Visual
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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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)
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Marketing Mix...(cont)
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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E-Commerce...(cont) a) Global Portal Strategy (cont)
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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E-Commerce...(cont) a) Global Portal Strategy (cont)
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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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
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E-Commerce...(cont) a) Global Portal Strategy (cont)
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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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
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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
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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
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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 BestLocalization Concept
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