One of the most constant debates in international marketing circles is the question of standardization vs. localization. Classic articles, like Ted Levitt‘s, argue that the world is becoming homogenized, leading the way to more standardized global marketing. Yet, subsequent research (and real-world attempts) show more frequently that at least some degree of localization is necessary.
Riesenbeck and Freeling (1992) point out that many of the standardization cheerleaders are working from the belief that the following assumptions are true:
- Tastes are homogenizing – the argument behind this assumption is that increases in travel and media are equalizing how consumers across the world view product choices; the assumption is also based on the concept that as incomes increase, the desire for global products increases as well. Yet, as Riesenbeck et al. note, rarely is this assumption true. They mention the simple example of ketchup – a sweet taste in the UK, vinegary in the US, and spicy in the rest of Europe – taste preferences that are unlikely to change soon.
- Economies of scale – the argument behind this assumption is that it is more cost effective to create one advertising campaign, rather than dozens or more local campaigns. And, indeed, some companies have seen substantial cost savings from using one advertising campaign worldwide (80% reduction for Levi Strauss). However, Riesenbeck et al. found that most global companies saw greater sales return on localization that more than offset the costs of localizing the ad campaigns.
- Waterfall method of international expansion – the argument behind this assumption is that a company is better served by mastering the nuances of one new market before starting on another international market. The main disadvantage of this method is that it gives competitors plenty of time to jump into your next target market while you are still making tweaks to the first market. Many companies are now using a sprinkler method, launching in several countries with similar markets at the same time – dramatically reducing the amount of time for rolling out to a significant number of new markets.
- Simplification of the global organization – the argument behind this assumption is that a standardized approach can reduce the number of people required to implement the strategy. However, Riesenbeck et al. have found that most global organizations already have “strong, profit-responsible, country-level business units.” This means that these business units will require additional levels of management to interact with the global organization, negating any organization simplification.
Riesenbeck et al. don’t deny that there are instances where a standardized approach makes the most sense. They simply caution that a standardized approach shouldn’t selected based on assumptions that may be flawed.
Riesenbeck, H. & Freeling, A. (1992). “How global are global brands?” The McKinsey Quarterly. 4, pp. 3-18.