Globalisation was the watchword of the 80s, but in the customer focused
90s companies are having to think local, writes Andy Fry
With the Atlanta Olympics still fresh in our minds, it seems hard to
believe that anyone would suggest global marketing is on the retreat.
The pounds 193.5m (dollars 300m) spent on securing exclusive Olympic
sponsorship deals demonstrates that the desire for brand ubiquity is as
strong as ever.
For IBM, the Olympics anchored its ‘solutions for a small planet’
campaign, while for Budweiser it was an opportunity to invite us to ‘a
world party’. And Coca-Cola is estimated to have spent around half of
its annual pounds 839m (dollars 1.3bn) marketing budget on Olympics-
Yet still there is a lobby that claims globalisation is outdated. After
a decade during which product standardisation and centralised strategic
management were viewed as the route to economies of scale, an increasing
number of companies are developing a more focused view.
Analysts present two distinct lines of argument for this apparent
reversal in thinking. The first concerns advanced markets in which the
means of product distribution are becoming more sophisticated.
In a paper called ‘Global Reach, Local Action’, the Henley Centre took
the view that the balance of power is moving from producers to
consumers. It argued that better communications and greater competition
give customers a say in the delivery of products and services. This is
forcing manufacturers to adopt a consumer logic.
Its conclusion is that traditional notions of branding have less pulling
power and that manufacturers must concentrate on making connections with
consumers. A classic manifestation of this problem is the rising power
of retailers, which drives a wedge between brand owners and consumers.
Aggressive own-brand pricing and enlightened customer-care are areas
which manufacturers ignore at their peril.
The potential gravity of the problem was demonstrated in the Netherlands
when a supermarket’s own-brand cola entered the market with a 12.5%
share of sales, knocking the wind out of Coke and Pepsi.
The second line of argument concerns developments in emerging markets
such as the Far East and Eastern Europe. Analysts suggest that by
undercutting the role of local managers in these markets and placing
greater control in the hands of strategic business units, multinationals
lost touch with local conditions and are in danger of being outflanked
by local competition.
Multinationals are advised, in such circumstances, to reinstate
entrepreneurial country managers who are capable of handling unexpected
Both lines of argument have their merits, though the latter has long
typified economic relations with developing markets.
Yet phrasing this debate as global versus local is somewhat facile. It
shouldn’t take a marketing director to see that different products
require tailored strategies in different markets - or that product
standardisation can create the efficiencies demanded by shareholders.
In a recent interview with the McKinsey Quarterly, Nestle USA’s chairman
Joe Weller summed up the problem: ‘Try to envisage a continuum between
centralisation and decentralisation; then imagine there is a dot on the
continuum that is constantly searching for the point of optimisation.
The environment is changing fast so we must keep adjusting to be
There is an underlying recognition in Weller’s statement that the debate
is not about globalisation and localisation at all. It is about the way
companies create decision-making structures that can do both at the same
Nestle is a company that manages to do both. It has worldwide corporate
brands like Nestle, Carnation and Maggi, but it also has 7500 local
brands. Its general policy is to unify brands but sometimes it does the
Strategic business units dictate the direction of business development
from Nestle’s Swiss headquarters, but also listen to local markets. With
brands like Kit Kat, local markets have very little input because the
product and packaging is homogeneous. But that is not a general rule.
In another McKinsey Quarterly interview, Nestle’s CEO-elect Peter
Brabeck-Letmathe warns: ‘Food is extremely local. If you try to be too
global you lose efficiency in communication. I am struggling to prevent
us oversimplifying our world.’
It is an important point. Every company would rather have its money in
media budgets than ad production budgets, but a balance has to be struck
to ensure local nuances are reflected in the campaign.
The trend towards globalisation began in the early 80s, when companies
such as Procter & Gamble began to look for greater efficiencies. But in
the case of P&G that process hasn’t actually stopped.
The company is rising to the challenge of own-label products with a
pricing structure which needs to be justified by efficiencies in
production and marketing. P&G’s pioneering approach to globalisation is
in stark contrast to its rival, Unilever.
It was Unilever’s inability to deal with the Persil Power catastrophe
which is viewed as the impetus for an overhaul in management structures.
Its reorganisation is instructive in getting to the root of the current
globalisation debate. In essence, the company replaced an atrophied
management structure with two tiers of responsibility.
The upper tier consists of a seven-man executive committee which is
responsible for Unilever’s strategic leadership. The lower tier is made
up of 14 business groups which divide up operational responsibilities
between them. Each group has a president who is accountable for
The restructuring acknowledges the gap between advanced and emerging
markets by creating product category divisions in Europe and North
America, whilst dividing the rest of the world into regions. In Europe,
Unilever is expected to dump under-performing brands to boost
Outgoing chairman Sir Michael Perry says the changes reflect ‘the strong
growth of developing and emerging markets and the need to consolidate
for competitive advantage in mature markets - all hastened by the
formation of new trading blocs, improved communications and information
Perry is saying the same as Weller. Clear decision-making structures are
the key to successful product management and competitive response. He is
also saying that strategy is a global function while operation is a
Down in the Unilever operations room, there is a healthy suspicion of
all things global. Lever Bros business group manager for non-fabrics,
Jerry Wright, prefers to talk about regionalisation.
Wright is responsible for, among other things, cleaning products like
Jif, and insists: ‘In our markets, very few products have ever been
globalised. The markets differ so much that the globalisation of
products is not important.’
Regionalisation, though, has cost advantages, he says. ‘There is a
critical mass in standardising hardware across ten or 15 countries.’
Marketing strategies vary from product to product. In the case of
cleansing bar Dove, Lever Bros was dealing with the standardised roll-
out of a US product.
By contrast, Wright argues that: ‘Ideas only move from one market to
another if they are relevant. People went wrong in some markets by
trying to have the same product and brand everywhere.’
Despite insisting that Lever Bros has always been decentralised, Wright
recalls a time when to gain the benefits of operating on a regional
basis you had to squeeze hard.
He believes there is more leeway currently than there was in the period
A fact of life
Pepsi-Cola International’s vice-president marketing, Mhairi McEwan, is a
contemporary of Wright’s who left Unilever in 1995. She has little doubt
that ‘globalisation of marketing is a fact of life. It’s about leverage
and scale. You make sure you are efficient and that you don’t re-invent
the wheel in every market’.
Crucially though, it’s different from the 80s, she says. ‘There are huge
global advantages to be gained.
‘This has huge implications for how information passes up and down the
company. You’ve got to have flat structures and not too many decision-
This emphasis on managerial proficiency is also taken up by Andrew Seth,
non-executive chairman of The Added Value Company. Seth is a former CEO
of Unilever who says: ‘Companies that embraced globalisation in the
early 80s are making adjustments. But the changes are never going to be
reversed. Major businesses will always drive strategy globally.’
He recalls that at Unilever ‘We got used to overstating the case for
globalisation because if we didn’t, the issue would have been
marginalised. But we were conscious at the time it was the right thing
In the current climate, he insists that it would be nonsensical to take
a backward step just because management doesn’t understand local
markets. You have to look at the sensitivity of internal processes, not
the whole philosophy of globalisation.
Seth believes Pacific Rim companies such as Sony, Canon and Honda typify
successful global strategies. ‘They developed standardised brands.
Western businesses had to struggle out of old processes. We weren’t
used to driving costs down.’
What we are witnessing is a revolution in management which has
recognised that successful global strategies are built on operational
clarity. Unilever’s chastening experience was faced by companies like
ICI, which responded to Lord Hanson’s takeover bid by unearthing Zeneca.
If this is the case, then there is an obvious irony. The companies
failing to communicate to consumers are the ones that are failing to
talk to their own staff.