MARKETING FOCUS: Divide and conquer

Globalisation was the watchword of the 80s, but in the customer focused 90s companies are having to think local, writes Andy Fry

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-

related activities.

Yet still there is a lobby that claims globalisation is outdated.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

local one.

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

of standardisation.

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-

making levels.’

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

to do.’

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.


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