Going Worldwide: Investing in a Global Strategy

No matter where you live, you have probably heard of or even engaged with top global brands like Apple or Amazon. Whether you are in Canada or Cambodia or Croatia, your experience with these brands is more likely to be similar than different in terms of the look and feel of products, website, and mobile app. This is because global brands tend to use a standardised approach within their global strategy for international expansion. While globalisation was a key theme in the last few decades, there are risks attached to standardising when pursuing a global strategy such as low local responsiveness. This is particularly true in a world where consumers expect personalised and culturally appropriate offerings.

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What is a global strategy?

A global strategy encompasses international, multidomestic, and transnational strategies in pursuing global expansion. It is essential that companies differentiate between the three forms emerging from their current resources, capabilities and current international position. If a company is primarily focused on its domestic markets, strategies outside of these markets are considered international. For example, if a dairy company first caters to its home markets and then sells some excess products outside the home country, it would be called international.

As international activities of such companies expand, they may have forayed into a number of markets with a customised strategy to adapt to individual markets. For instance, Apple predominantly began its iPod sales in North America but expanded gradually to international markets.

A global strategy requires a company to cover the complete value chain—from lowering manufacturing costs by shifting production to building after-sales service centre networks across markets of presence.

Should you implement global business strategy?

For businesses, the question remains: will a global strategy really work for me? Here are some benefits to consider:

1. Better brand awareness: By going global, brands can achieve more recognition than staying local. Amazon, for instance, is a trusted name present across 58 countries.?
2. Greater access to resources: As a global brand, companies can have access to resources from across the globe. These resources may be leveraged at a lower cost and shipped across the world, lowering overall costs for the company. Tesla vehicles sold in China are priced much lower than the US market, owing to cheaper labour and material costs in China. This gives the automobile maker more control over pricing. Outsourcing to developing nations by many IT service providers has also led to a reduction in overheads.
3. Improved flexibility: Scaling globally allows agile supply chains and better crisis management. For instance, if raw material supply from one country is disrupted, the company has the option to source it from another market.
4. Increased revenue: Expansion in newer geographies means access to more consumers and clients and in turn, a bigger top-line number.

Choosing Your Global Business Strategy

As mentioned earlier, most brands start with an international strategy and then move to becoming a multi-domestic business. This is when companies take a local-first approach for decisions like sales, marketing, and product development. Brands such as Nestle, Johnson & Johnson, and Frito-Lay have adopted this strategy by launching products that resonate with local audiences. Many companies also operate via a transnational strategy. This comprises brands like McDonald’s and Coca-Cola, who control local subsidiaries in international markets with a head office in their home country.

Now, although a global strategy calls for greater standardisation, it doesn’t mean that one can do away with low local responsiveness. There are already many local brands who are posing stiff competition to global giants. Therefore, if you take any successful global brand like Amazon and Spotify, you will see that they focus greatly on localization. Amazon, for instance, uses cultural nuances for its promotions and holds festive sales for different cultures in different markets.

Source: Asia One

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In the era of hyper-localisation where local players have key advantages of better consumer insights and distribution, the latter will need to evolve to become more flexible rather than only focusing on standardising.

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For instance, McDonald’s changed its instantly recognisable yellow and red signs in Tel Aviv, Israel, in favour of the McDonald's name in blue and white in Hebrew with the word "kosher" alongside to adapt to the local culture. It has also launched hyper-localised menus, such as McSpicy Paneer burgers in India to cater to the taste of the locals. The result is that McDonald’s is a thriving global brand spanning decades of global presence.

?Source: ScoopWhoop

Global brands need to be mindful that as communication technologies advance, local players are becoming more sophisticated. Thanks to their deep understanding of the local market, they are quickly able to adapt to changing trends. Take the case of cosmetic brand Wardah in Indonesia, which is the country’s local answer to global cosmetic biggies. Wardah is not only meeting a specialised need among Muslim women for make-up and skin care products suited for local consumers’ skin type but also meeting halal standards.?Such nuances offer advantages to local players over global companies.

The demand for personalised products and services from end consumers also requires companies to shift their “standardised” strategies to more adaptable ones. Global brands that can cater to local needs while still maintaining their global image will continue to benefit. Companies may resort to developing more localised products/services, partner with local players, and leverage technology to offer more customised products.

Conclusion

A global, standardised brand has the privilege of being easily recognizable. Their global strategy helps them with economies of scale and delivering more efficient processes and operations. However, as local brands evolve, global companies will need to step up their game. They will have to accommodate multidomestic and transnational approaches within their global strategy to blend in with the culture and preferences of local markets as a sustainable strategy for growth.

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