OPINION: Globalisation is still tethered to local variations

More than 20 years ago a Harvard Business School (HBS) professor gave an intellectual kick-start to the brave new world of globalised marketing.

In one of the most famous, and infamous, articles in marketing literature, Theodore Levitt argued that technology was helping to homogenise consumer needs around the world. He concluded that as similarities between people became more pronounced, smart global companies could sell standardised products using standardised marketing worldwide.

Anything that sounds too good to be true usually is. Even so, the article's influence was such that it led to a generation of multinational managers who believed everything could be centralised, including marketing, with huge benefits from economies of scale.

It also meant that local marketing became little more than implementation of global edicts. No wonder the past decade has seen so much angst about the marginalisation of marketing. Marketers in big companies really were becoming part of "the brochures department".

But marketing could have the last laugh. According to a recent book by David Arnold, even the best companies are underperforming in international markets because they have fallen for what he calls "the mirage of global markets". So in the face of harsh market realities, it is not surprising that more companies are ditching the belief that global approaches can override local differences.

Arnold, a former HBS professor, explored this issue with Henkel's vice-president of market research and business intelligence during a Harvard symposium on Levitt's legacy. They discussed how the company's detergent business had struggled to balance economies of scale achieved by standardisation with deep concerns about potential harm to its relationship with consumers.

Henkel's conclusion was that the consumer, not the company, must decide what can be the same across borders.

This obvious, if painful lesson, is one which has also been learned by Procter & Gamble. As its president of Western European operations, Paul Polman, told The Wall St Journal recently, European business was suffering because it had been confusing globalisation with standardisation. Rather than look outward to the consumer, the company was too busy looking inward, based on the belief that the world was converging.

Now P&G operates a unique strategy for each country. Its toothpaste brand Crest remains Blend-a-Med in Germany and AZ in Italy. And a more local approach with Pampers is paying off in Germany, where P&G claims to be one of the few consumer goods companies growing in what is considered Europe's toughest market.

Nor are consumer goods a special case. Arnold also argues that the world comprises hundreds of intensely local markets, which are becoming increasingly fragmented. So the challenge is to localise decisions on critical issues such as market entry, product mix, distribution, promotion and strategy as cost-effectively as possible.

This far more complicated marketing environment puts a question mark over Unilever's strategy of eliminating all but what it deems to be global brands. Contrast this with Nestle, often criticised for being too decentralised.

Its chief executive, Peter Brabeck, believes a large, diverse portfolio is the key to sustainable performance.

So, when it comes to globalisation of marketing, it looks as if all bets are off.

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