Toward a new global strategy - B-School Brain Trust/Advice from Anderson

Chief Executive, The, Jan, 1996 by George S. Yip

Texas Instruments now maintains a major software development in Bangalore, India, connected via satellite to a global network. American Express has consolidated much of its back-office work force in Europe from 16 regional centers in major - and expensive - cities to one suburban town in southern England. In the most extreme case of global specialization, Nike does not own any factories, but subcontracts all production to partners in Southeast Asian countries. Kodak, IBM, Hewlett-Packard, and Texas Instruments all conduct research in Japan to tap into that country's technical innovations. Conversely, Japanese companies such as Nissan and Mazda maintain design facilities in California.

Multinational companies increasingly use global marketing by taking a uniform approach to some elements of their worldwide marketing - and some have been highly successful. Consider Nestle with its brand name applied to many products in all countries, Coca-Cola with its global advertising themes, and Xerox with its global leasing policies.

Every element of the marketing mix - product design, product and brand positioning, brand name, packaging, pricing, advertising strategy, advertising execution, promotion and distribution - is a candidate for globalization. Within each element, some parts can be globally uniform and others not. For example, a "global" pack design may have a common logo and illustration in all countries, but a different background color in some countries. Recognizing the need for global uniformity in its advertising, IBM consolidated its $500 million in worldwide advertising at one advertising agency in 1994.

Not all products need a global brand name: Products that are not bought when consumers are outside their home countries or to whose advertising or packaging they are not exposed are often better off with local names. Unilever, for example, uses global advertising but local brand names for one fabric softener product.

On the other hand, pricing for products increasingly needs to be globally uniform to avoid unauthorized transhipment and gray markets. In contrast, the non-transportability of most services allows wide price variations in most categories.

Smaller companies need to choose between a local niche strategy, thereby avoiding the global giants, or going toe-to-toe in global strategy. The conventional wisdom is that smaller companies are better off playing the local game. But such an approach is self-limiting, and localization may be insufficient protection against the scale and consistency advantages of larger companies with global strategies.

Smaller companies have some advantages of their own. First, businesses with a small global market share can focus on a standardized approach to satisfy a small market segment. Mercedes-Benz automobiles, Louis Vuitton accessories, and other luxury products typify the global strategy approaches of small-share businesses. Second, smaller companies do not have the globally dispersed organizations that make it more difficult to implement global strategy. Third, smaller companies do not have the resources to fragment their efforts across a large number of local products and operations.