Download Chapter 13 Localization Strategies: Managing Stakeholders and

Chapter 13
Localization Strategies:
Managing Stakeholders and
Supply Chains
John S. Hill
Chapter Outline
The Importance of Localization Strategies
Managing Local Stakeholder Relations
Supply Chain Management
Managing Local Supply Chains:
Management and Human Resource Issues
Introduction
 The Need for
Insider/Localization
Strategies: usually essential as
‘guests’, ambassadors and competitive
advantages
 Necessary because of slow diffusions
of technologies; xenophobia, insider
contacts, cultural dissimilarities and
dislike of westernization
 Less important for exporters;
essential for in-market investors
Managing Local Stakeholder Relations
 Building Government Relations
 Job Creation and Technology Transfer Programs
 Producing for the local market
 Establishing relationships with local educational
institutions
 Appointing local boards of directors to oversee national
operations
 Corporate philanthropy programs
 Establishing strong corporate identities
 Consistency, longevity, and commitment to local markets
Managing Local Stakeholder Relations
 Building Business Community Relations: for
supply chains, local contracts
 Environmental Groups: De-forestation, pollution
and recycling issues
 Consumerism: Organizations in developed
markets; controversies over genetically-modified
foods; inexperienced consumers
 Public Relations and the Press: proactive PR to
promote positives; avoid negative press
Supply Chain Management
 The Benefits
 Local raw material sources and
component suppliers often cheaper
and better
 Corporate learning aids innovation
 Marketing strategy localization to
counter strong national cultures &
anti-western biases; good for
competitive advantages
Supply Chain Management
 Supplier Management
 Control issues and subcontracted foreign
production: exploitation issues (child, low wages, health,
safety concerns)
 In-country supply chain management
 Financing concerns: investments often necessary
 Quality standards to maintain
 Establishing supply chain disciplines, especially for
JIT
 Establishing global standards of manufacture
 Geographic and physical infrastructure obstacles
 Patience required
Supply Chain Management
 Managing Local Manufacturing Operations
 Elevated cost structure: government taxes; unexpected
infrastructure costs
 Education / labor availability: educational
infrastructures—schools, technical
 Labor laws: hours, pay, safety, benefits
 Employee recruitment and selection: can be
problematic especially in developing markets
 Appropriate manufacturing technologies: not
always the latest and best
 Factory discipline: turnover, absenteeism
 Maintaining production efficiency levels: suppliers,
infrastructure, work ethic problems
Localizing Marketing Operations:
Multinational Strategies
 Target Markets
 Income differences: lower purchasing power in developing
markets
 Educational levels: matching product complexity with
consumer sophistication
 Geographic differences: regional tastes variable DCs and
LDCs
 Religious differences: often crucial in Middle East and
Asia
 Customer purchasing differences: cars and refrigerators;
one-stop versus daily shopping
 Urban-rural differences: magnified in developing markets
Localizing Marketing Operations:
Multinational Strategies
 Product Strategy
 Product mix decisions: product transfers much
used; custom-build products; acquisitions inherit
local lines
 Product adaptation strategies:
Either minimal to preserve brand
images; or extensive to give local
appeal
Localizing Marketing Operations:
Multinational Strategies
 Product adaptation strategies
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Measurement units (metric)
Package size: smaller or larger
sizes
Package appearance: colors
Ingredients change: cheaper
and/or better
Usage instructions: customer
sophistication
Labeling: legal requirements
Packaging protection: shelf
life; recycling
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Product features: same
or different emphasis
Product warranties:
legal requirements and
service centers
Brand name changes:
local meaning/appeal
Localizing Marketing Operations:
Multinational Strategies
 Advertising Adaptations
 Legal problems: consumer protection; false claims
 Consumer education differences: literacy, cultural
differences
 Target market changes: product positioning
 Non-meaningful message contexts: major cultural
differences & consumer sophistication
 Greater consumer impacts: message presentation
 Cultural differences: personal products; sensitive
cultures
 Media availability and popularity: legal/cultural
restrictions
Localizing Marketing Operations:
Multinational Strategies
 Sales Promotion Adaptations
 Western Europe and Germany: restrictive
 Major Latin American markets: permissive but
effectiveness of SP methods variable
 Worldwide: legal restrictions and requirements
need special attention
Localizing Marketing Operations:
Multinational Strategies
 Adapting Sales Management Practices
 Effects of geography and market potential on sales
force structure: sales force specialization
 Ethnic divisions: language skills & local contacts
 National education systems: elite graduates and
business educations
 National legislation on compensation packages:
government payroll requirements; perks
 Social status influences: respect for managers
 Cultural contexts: Respectful presentations and
relationship building with clients
Localizing Marketing Operations:
Multinational Strategies
 Distribution, Logistics, and Transportation
 Latin American distribution: dominated by size, climate
and topography; improvements through infrastructure
privatization; foreign logistics firms; international
retailers and global firms
 Eastern European distribution: geography/size dominant;
modern distribution in west and more traditional and
fragmented in the east
-Tough to build corporate distribution in the east; reliance
on local partners to solve bureaucracy, corruption problems
and provide local contacts and support
Localizing Marketing Operations:
Multinational Strategies
 Asian distribution: Pacific Ocean imposes
geographic/coordination challenges; many carriers often
necessary
-Urban-rural differences problematic in major developing
markets; urban efficiencies versus rural fragmentation; but
distribution the key to rural markets: (India 700 m.; China
900 m.)
 African distribution: Urban-rural differences
dominant; modern urban shopping versus rural bazaars,
markets
Localizing Marketing Operations:
Multinational Strategies
 Pricing
 Export pricing: additional packaging, transportation,
import charges add 10-50% onto landed prices; little control
over final prices
 In-market pricing strategies: developed markets pricecompetitive; Euro sharpens price competition in the EU
 Less competitive in developing markets where
stability/employment issues take precedence; and
distribution is more traditional; rural markets haggling is
customary
Management and Human
Resource Issues
 Management Styles
 Traditional management styles: output-oriented,
autocratic; lifetime employment; loyalty, seniority
 Modern management styles: profit-oriented, participative,
but people regarded as costs, not assets
 North American management styles: modern—selfreliance, individuality, shapers of future, competitive and
merit-oriented
 Western European management styles: stakeholder
capitalism
 French: elitest, intellectual, company-oriented training
 German: numerate, lifelong employment, collegial but
hierarchical/formal
Management and Human
Resource Issues
Management Styles
 UK, Dutch and Scandinavian: more shareholder-
oriented; autocratic/participative mix; pragmatic
 Latin American: autocratic (patron); loyalty;
respect; changing as educational opportunities
increase
 Asian: employment-oriented, consensus decisionmaking; seniority, generalists, lifetime
employment-oriented
Management and Human
Resource Issues
Management Styles
 Indian: hierarchical (caste history); family-oriented,
some fatalism
 Eastern European: autocratic, output-oriented,
management-labor distrust; management education
problems; changing as western influences spread
 African management styles: “Ubuntu”: collectivistoriented; less profit orientation; consensus decision-making
Management and Human
Resource Issues
 Management—Worker Relations
 Economic and political system differences: Capitalist systems;
labor as an expense—downsizings
Western Europe: welfare and employment protection systems cushion
labor
Developing nations: provision of welfare systems to replace extended
families and lifetime employment (‘iron rice bowl’ in Asia)
 Social and cultural differences
Social class distinctions (blue-white collar jobs) present in
many nations
Collectivist orientations/paternalistic management protects
labor (Asia)
Management and Human
Resource Issues
 Education and labor market differences: Developing
nation educational infrastructures must keep pace with
industrialization to attract high tech industries
Loss of unskilled (and some skilled) jobs in developed
markets to developing countries problematic—
protectionism and labor skill upgrades the answer?
 Legal factors: National labor laws cover wages levels,
discrimination, benefits, terminations, trade union status,
health/safety issues
Constant battles between labor groups to enhance laws and
business groups to cut them back
Key Points
 Managing local market stakeholders:
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government, press
Supply chain localization benefits
Supplier management: control,
financing, disciplines
Local manufacturing systems: costs,
labor supply and laws
Multinational marketing strategies:
target markets, products, promotions,
distribution & pricing
Management styles: regional
variations
Management-worker relations:
political, economic, cultural,
educational, legal factors