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The migrating brand
FROM THE ECONOMIST INTELLIGENCE UNIT
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© The Economist Intelligence Unit Limited 2016 Page 1The migrating brand
When a brand seeks to extend its reach to other countries and cultures, it faces a paradox: it must alter its products and maybe even its practices to suit an entirely different environment, whilst retaining the qualities which make it unique. This process of localisation, of striking a balance between standardisation and adaptation, takes place in two stages.
First, the company needs to understand its own essence - that is to say, the core elements of its brand that it will absolutely not sacrifice. Secondly, it needs to understand the “brand”, or specific characteristics, of the country or region where it wishes to introduce its products. There are three companies - Unilever, Danone and Samsung - which have been particularly successful at striking this balance in their global expansion strategies. This article explains how they did it, and what other brands can learn from their experience.
The migrating brandWRITTEN BY THE ECONOMIST INTELLIGENCE UNIT
© The Economist Intelligence Unit Limited 2016 Page 2The migrating brand
Unilever
In 1992 Floris Maljers described Unilever, of which he was then the CEO, as transnational. “We think globally”, he wrote in the Harvard Business Review, “as well as act locally”. The company, which has headquarters in London and Rotterdam and 172,000 employees worldwide, prides itself on a managerial structure which enables decisions to be made quickly.
Martin Roll, a business and brand strategist, says Unilever has achieved this through decentralisation and careful hiring of local staff, ensuring that individual offices have a great deal of autonomy in deciding how to adapt their offerings for the target market. Unilever, notes Roll, regularly send managers and researchers into rural villages in India, to understand the evolving needs of consumers there.
David Reibstein, a professor of marketing at the Wharton School, observes that a similar approach has borne fruit for Unilever in Brazil. Here, it took to selling its Ala laundry detergent in sachets costing only a few cents, so that it would be affordable for the country’s low-wage workers. It has also adapted its Blue Band margarine so that it can now go for many days without refrigeration, for those regions where frequent power cuts are a daily reality. For a long time, too, Unilever has used subtle variation in what is essentially the same product. As pointed out by Geoffrey Jones, a professor of business history at Harvard University, Unilever has given its Mentadent toothpaste a very medicinal taste in certain countries where gum healthcare is of paramount importance. Very often, it is these small tweaks - a form of cultural “signalling” - which make all the difference.
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Danone
Tap water is widely distrusted in China, with a 2015 report by the World Health Organisation finding that water in a Beijing reservoir contained lead at twenty times the maximum safe level. Meanwhile, researchers at the University of California, Berkeley have calculated that pollution kills 1.6million people in China each year.
Danone carefully positioned its water products as a socially responsible answer to these concerns. Its bottled water has over 5% of the domestic market whilst its vitamin water range, Mizone, is aimed at young people in cities, and is one of the country’s fastest growing brands. Yet one of Danone’s greatest successes in China actually emerged from its greatest initial failure there. Danone tried to enter the Chinese market without first customising any of its dairy products or taking account of local tastes. And so Danone did not consider that many would-be customers did not own fridges, were lactose-intolerant, and mostly used chopsticks as opposed to spoons (which made the consumption of yoghurt problematic in the extreme). Danone’s recovery, to become one of the market leaders in this field, was based upon carefully-selected joint ventures with local companies who already knew the commercial terrain. These companies provided stores with free refrigeration facilities, attached spoons to the yoghurt pots, and produced a bespoke and popular range of lactose-free products. Confirming its trust in local brands, Danone has more recently increased its stake in Mengniu, a Chinese dairy giant, to almost 10%.
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Samsung
Martin Roll says that a key moment in Samsung’s global expansion was when it realised - unlike most other Asian companies at the time - that “people don’t buy products; they buy anything else. They buy design, they buy trust; they buy [the feeling of] being among like-minded people”. Samsung therefore based its entire model around design excellence and an acute understanding of consumer sentiment. As a result, it has made a substantial investment in innovation - a field in which it employs more than one in four of its workers - and has established a robust infrastructure around the world. In 2012, the South Korean company registered over 5,000 patents in the US alone, and spent almost $11billion on product creation and development (a sum equivalent to around 40% of that year’s operating profits). It has built eleven research and design centres in three continents, in which it examines the future lifestyle trends of its targeted consumers and then devises products accordingly. As a result, Samsung’s adaptation to different markets has taken various forms.
Some of these have been fairly cosmetic. For example, the company’s Brazilian website prominently featured models wearing yellow shirts, the colour of the country’s sports teams: and in China, where the colour red and the number 8 are regarded as particularly lucky, Samsung launched a range of televisions bearing both of these symbols. In other contexts, Samsung has tailored its products to open up new markets. In India, it designed a washing machine with a special “sari cycle” to stop this garment from getting tangled with other clothes, and in Africa it has rolled out a television pre-fitted with a satellite tuner, so that people living in remote regions without cable access can now watch the same popular shows as people in the cities.
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Boots on the ground
Judging by the experiences of these three companies, the key to being “transnational” is to show close and constant attention to consumer desires, married with a strong regional presence in the target markets. There is of course a paradox at play - the need to maintain brand consistency, whilst also allowing that brand (in some cases) to change almost, but not quite, beyond recognition. It is the companies which most carefully manage this dynamic that have the best chance of going, and staying, truly global.
One of the best ways of executing that is to ensure your brand adaptation is physically mirrored in your operations: as well as headquarters, you need ‘boots on the ground’ to be sufficiently embedded in a location, the better to pick up on its nuances and subtleties. A local base of operations is key to understanding consumer tastes, many of which cannot be deduced from a thousand miles away. While companies cannot build offices in every market they wish to enter, physical proximity at least to market clusters is clearly helpful, providing the kind of product development feedback loop that can help them tailor their offerings to the unique features of the local consumers. Executives must therefore invest time in picking the right location to lay down roots for new regional operations – ideally, locations which offer them both the physical infrastructure to run a smooth operation and proximity to the cultural and social nuance they need to tailor their business.
Economist Intelligence Unit
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