Globalisation along with other factors like technological advancement and increasing role of internet has changed the ways businesses are conducted dramatically and irreversibly. Nowadays, any company with an innovative product or service, right price and effective marketing strategy has an opportunity to lead its market globally employing hundreds of thousands employees and generating annual revenues to be counted in tens of billions of pounds.
This is possible because today “no country or group can shut itself off from others” (Beck, 2000, p.10) in terms of their economic activities in general, and export to the country in particular. However, implementing the same approach in various markets in terms of pricing, marketing, packaging and other aspects of the product may not work well due to cultural and other differences associated with each particular market.
This article is a critical analysis of the approach of “Think Globally, Act Locally” and analyses the need for multinational companies to adapt to the characteristics of each individual market they are operating in. The paper starts with the discussion regarding the importance of the approach “Think Globally, Act Locally” followed by the analyses of application of this concept by some of the famous multinational companies. Then, difficulties associated with the need for multinational businesses to adapt to local markets are explained in great detail referring to the works of international businesses researchers and practitioners.
Lastly, recommendations are also provided within the paper regarding how multinational companies already operating in multiple markets, as well as companies trading locally, but with the expansions plans on a global level can achieve successful operations across borders and continents through to their local markets, thus effectively attracting local customers.
- The Importance of “Think Globally, Act Locally” Approach
- Real –Life Examples of “Think Globally, Act Locally” Concept Implementation
- Difficulties Associated with the Adaptation to Local Needs
- Recommendations Regarding the Successful Implementation of “Think Globally, Act Locally” Concept
The Importance of “Think Globally, Act Locally” Approach
The primary reasons of globalisation have to be reminded briefly in order to explore the topic of the paper in a more efficient way. It has to be noted that the forces of globalisation have been evolving over a long period of time, but they have dramatically intensified only during the past several decades and the reasons of globalisation to be mentioned below relate to that latter period only.
Borghoff (2005) identifies harmonisation of prices and interest rates among different countries to play an important role on the development of international trade, which in its turn is considered to be one of the biggest drivers of globalisation. Other reasons include rapid technological advancement in general and information technology, and more recently internet in particular that decreased the meaning of borders between different countries promoting economic and other cooperation.
Today, “’Globalisation’ stands out for a public, spread across the world, as one of the defining terms of contemporary society” (Scholte, 2000, p.1) and businesses in general, and major multinational corporations in particular are getting advantages by exporting their products and services all around the world.
Moreover, due to the fact that nowadays “national economies, with some exceptions, are presently much more deeply enmeshed in global systems of production and exchange than in previous historical eras, while few states, following the collapse of state socialism, remain excluded from global financial and economic markets” (Held and McGrew, 2003, p.24) the level of global competition has intensified among major multinational players that strive to enter new, previously unexplored markets with the vigour and determination that resembles a ‘gold rush’.
However, competing in the global marketplace is different from the competition within the borders of a single market in a number of ways. These differences in the competition are primarily caused by local differences that are associated with each individual market that may create both advantages, as well as disadvantages for businesses entering a new market.
Advantages within the new markets include low prices of local resources, effective geographical location and others. Moreover, “Companies that previously had to produce tens or hundreds of thousands of standardised products in a single plant to achieve minimum efficient scale now find they can distribute manufacturing among smaller national plants with little cost penalty. In this way they can respond to localised consumer preferences and national political constraints without compromising their economic efficiency” (Bartlett and Ghoshal, 2002, p.11). The disadvantages, on the other hand, include differences in local culture that form potential consumer’s preferences, behaviour, product or service value perception and a range of other important issues.
These differences in foreign markets have to be addressed in an appropriate manner if the business aims to succeed in that market.
“Think Globally, Act Locally” approach as the name implies refers to the strategy implemented by some multinational companies according to which global viewpoint is adopted in terms of formulating company vision, long-term aims and objectives and devising effective strategy in order to achieve these aims and objectives, however, adaptations are made in each market according to the culture and specifications of any specific market.
Setting global vision for a company is important due to the fact that it helps to achieve the primary objective of the businesses, which is profit maximisation, in the most effective way through intensive market expansions across countries and continents. However, the strategy any multinational company adopts in order to achieve its global vision does not have to be rigid, because different markets differ from each other on the grounds of political system, religion of people, culture, standard of life etc. and these differences find their reflection on consumer behaviour, customer expectation and other related matters.
If any multinational company tries to adopt the same strategy to all markets, even if that specific strategy was the source of competitive advantage in some markets no provision would be made for local differences of above specified nature, and this can lead to customer misunderstandings, even contradictions or anger in some extreme cases, and ultimately to failure of the company in that specific market.
Therefore, “Think Globally, Act Locally” approach is being implemented by increasing number of multinational companies, as well as medium sized companies planning for foreign market expansion that allows companies to plan for intensive foreign market entry strategy, and at the same time be able to satisfy local customers in each market they operate by devising and implementing according strategies.
Real –Life Examples of “Think Globally, Act Locally” Concept Implementation
The benefits of the “Think Globally, Act Locally” approach have been realised and the approach itself has been implemented by many international businesses around the globe to a varying degree of success. Some companies like Aldi came to appreciate the benefits of the approach through trial and error, while others were more proactive, rather than reactive in terms of implementing the approach of “Think Globally, Act Locally”.
A German-based multinational heavy discount retailer – Aldi derived its competitive advantage through offering limited range of cheap-priced products achieved through minimal marketing expenses and low-quality design and furnish of shops. However, this strategy needed to be modified in UK and Switzerland after initial period of reduced amount of sales, due to the fact that customers perceived quality, design of the shop and marketing initiatives more valuable in UK and Switzerland than the cheap prices of the products (Griffin and Pustay, 2005).
Another successful implementation of “Think Globally, Act Locally” approach relates to the case of Tesco, a UK multinational retailer. Thomson and Martin (2005) inform that while ‘Every Little Helps’ has been a global philosophy adopted by Tesco the company focuses on characteristics and specifications of local area surrounding the shop, for instance offering the range of ‘halal meat’ in areas populated by mainly Muslim people, and also increasing the range of ethnic food section in areas dominated by relevant people.
The approach of “Think Globally, Act Locally” relates not only to multinational retailers and manufacturers, some of the global service companies have also adopted the approach and thus have achieved global success. McDonald’s is a classical example for this case, and has taken the approach of “Think Globally, Act Locally” to the level of perfection. McDonald’s offers the value of cheap-priced, fast served tasty food that can be conveniently consumed globally, however, local differences in each county are reflected on the menu of restaurants serving there. Adam’s (2007) mentions Maharaja Mac in India, McDonald’s beer in Germany, McLobster in Canada, shrimp burgers in Japan, McLaks (fish) in Japan, avocado burger in Chile, and many other variations of burgers and other meals in different parts of the world.
A globally popular coffee chain Starbucks has adopted a rather different strategy of adapting to local differences. Specifically, instead of changing its menu the coffee chain has opted to design its coffee shops according to key elements of the local culture. As a result, Starbucks coffee shops in two different countries may be totally different in terms of design, but the coffee would taste the same, which is the global promise of the chain.
Although technology industry may seem distant from such issues, nevertheless some global manufacturers take into account local differences and respond accordingly. For instance, Nokia, a mobile telecommunications technology manufacturer had offered a range of mobile phones with dust-resistant keypad for a range of Arab countries where excessive amount of dust due to ecological reasons have presented problems before. Moreover, there are anti-slip grip phones available for customers in cold in rainy areas, as well as mobile phones with inbuilt flash specifically designed for truck drivers in rural India.
The above mentioned examples are mainly the cases of considerable commitments made by companies in order to adapt to local differences. However, there are many other cases where changes are undertaken only in terms of marketing communications in order to adapt to local differences. For instance, displaying human flesh and various parts of body referring to sex appeal is considered to be one of the most efficient advertising tools in Western countries. However, in some of the Eastern countries such an advertisement might be classified as offensive due to cultural differences, and therefore might result in negative creation of associations wit the product or service being advertised.
Difficulties Associated with the Adaptation to Local Needs
“Think Globally, Act Locally” is an effective approach in terms of ensuring the long-term growth of a company in the global arena. However, its practical application is associated with a range of challenges that need to be addressed affectively and efficiently. Generally, the difficulties associated with the need for companies to adapt to local differences can be categorised into three groups: cultural misunderstanding, incompetent management, and changing needs.
Cultural misunderstanding is one of the obvious reasons why some companies fail to succeed in foreign markets and “costly mistakes occur when managers miscommunicate, make mistakes in doing business due to cultural misunderstandings” (Grosse, 2000, p.325). The management may comprehend the need to adapt to local differences in order to succeed. However, unless the culture of a foreign market is learned and understood thoroughly any adaptation attempts may prove to be counter-productive, especially when a culture between home country of the company and the culture of the host country are different on the fundamental level.
Incompetent management is considered to be another issue that can have negative effect on company performance on various levels, including in its attempts of international expansion. Specifically, the company management may have an effective strategy of entering a foreign market that takes into account cultural differences and other characteristics of a new market. Still, the international expansion plan might be doomed to failure if not managed by people with necessary skills, knowledge and experience.
Sometimes managers are efficient in their duties in their home countries, which is usually the home country of the company as well. They may get promoted for this reason and appointed to manage some aspects foreign operations of the company. Apart from the difficulties associated with the cultural aspects of the issue that have been discussed above, there are also other factors that may negatively affect the performance of the manager in another country like adjustment difficulties, family issues, health issues because of weather etc. All of these are likely to result in incompetent management that is going to compromise the efficiency of adaptation to local differences, and consequently, the success of the company in the new market.
Changing needs of consumers is a challenging issue to be addressed that proves to be even more challenging in the context of global operations (Homann et al, 2007). Changing needs of customers are often associated with raising customer expectations that is caused by increasing rate of competition in many industries. Changing needs of customers may relate to the actual needs, as well as perceived needs of customers. Nevertheless, it is easier for international businesses to forecast and address the changing needs of customers in their home countries than the changing needs of customers in foreign markets. In other words, a multinational company may adopt and effectively implement “Think Globally, Act Locally” approach in relation to each foreign market the company operates in, but still the changing needs of customers in foreign markets may go unnoticed by company management due to reduced level of familiarity with local culture and this fact may undermine the whole adaptation initiatives undertaken by the company.
Recommendations Regarding the Successful Implementation of “Think Globally, Act Locally” Concept
Specific recommendations can be made to company management of any size regarding how to eliminate or at least minimise the above specified challenges to the successful implementation of “Think Globally, Act Locally” concept. The measures to be implemented for this purpose include increasing the level of cross-cultural awareness of the workforce, giving preferences to local workforce in terms of making appointments in management positions, and adopting a pro-active approach in terms of forming customer needs and preferences.
The biggest challenge to the successful implementation of the concept “Think Globally, Act Locally” can be eliminated through organising training and development programs aimed at increasing the level of cross-cultural awareness of the workforce. It is important for these programs to have a systematic character, and also each member of the workforce directly or indirectly involved in foreign operations should compulsorily participate in these programs.
The implementation of concept “Think Globally, Act Locally” will be positively aided if the management of the company gives preference to local people in foreign markets in terms of making appointments in management positions. Along with a range of other benefits such a strategy will provide detailed knowledge about the characteristics and differences of the local market that will assist in adaptation initiatives.
However, companies should avoid going to extreme in implementation of this specific recommendation by employing the local workforce in such a large quantity that it would compromise the core competencies of the business, as well as the value offered to customers due to lack of knowledge and experience in the local workforce associated with the company.
The challenge of changing needs of consumers can be effectively addressed by implementing a proactive, rather than reactive approach in terms of forming actual and perceived customer needs and preferences. This is a challenging task to complete, but if effectively conducted can assist in achieving market leadership for the company in a global market arena. Currently, the majority of businesses operate in a way that they try to identify customer needs and produce products and services in order to satisfy those needs. However, there are some companies, trend-setters that mould need in potential customers for products and services they are offering.
For instance, before the introduction of Iphone by Apple Inc, a US-based global technology manufacturer the usage of smart-phones was mainly limited to busy professionals, businessmen and technology geeks. However, Iphone created a “need” to millions of people to be able to browse internet and preferably to have a range of advanced applications in their mobile phones. This specific “need” created by Iphone was attempted to be satisfied by other companies like Samsung with the products like Samsung Galaxy, however, the important point in present context is the fact that Apple was able to create a “need” in its potential and existing customers globally, and therefore does not have to worry with changing needs of customers in each individual market the company operates in.
The benefits of globalisation are being utilised currently by many multinational and medium-sized companies around the globe. However, the degree of efficiency with which those benefits are being utilised are different between companies according to various factors including extend at which companies are able to adapt to local differences.
“Think Globally, Act Locally” is an approach implemented by some of the most successful companies in various industries according to which having global viewpoint and plans, but at the same time responding to and adapting to local differences is a best strategy a company can adopt in terms of international expansion. The efficient implementation of this strategy has brought has brought global success and market leadership for such companies as Aldi, Tesco, McDonalds, Nokia and many others.
Companies face challenges in their attempt to implement the approach of “Think Globally, Act Locally”. Main challenges are misunderstanding on cultural grounds, insufficient level of competency in management involved in foreign operations of the company, and the changing needs of customers in foreign markets.
The recommendations suggested to eliminate these challenges include organising training and development programs that focus on increasing the level of cross-cultural awareness in the workforce engaged in foreign operations, employing greater number of the workforce, including in management positions in order to get a detailed knowledge about the characteristics of the local marketplace, and adopting a proactive approach in terms of dealing with changing customer needs.
This paper is only an introductory analysis on the issue and lacks depth of research caused by the need to adhere to the specific word limit imposed for the whole work. Therefore, the implementation of “Think Globally, Act Locally” approach is analysed not taking into account additional factors that might apply in some cases. Therefore, each individual company should conduct a range of additional analyses like internal and external factors affecting the company, its financial situation, and its core competencies etc. before applying the recommendations made in this paper in practice.
- Adams. B, 2007, McDonald’s Strange Menu Around the World, Available at: http://trifter.com/practical-travel/budget-travel/mcdonald%E2%80%99s-strange-menu-around-the-world/ Accessed march 15, 2011
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