Authors: Florian Haller, CEO Serviceplan Group, and Niklas Schaffmeister, Managing Partner Globeone

The successful positioning of a brand is part of the high art of marketing. Based on complex factors, a concept needs to be developed that supports branding in the minds of consumers in the local target market. In the first part of our blog series we explained the most important strategies for the global expansion of brands. Against this backdrop, brands basically have the possibility to choose between a global, hybrid or local positioning. It is therefore important to determine the right degree of adaptation to the local market on the basis of suitable criteria. Following, we briefly present the four most important strategies. For more detail see the new Springer publication “Successful brand development in the major emerging markets”, written in German, by Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).

1. Product category: How much culture is in my product?

Every consumer is familiar with that: certain products are more closely linked to cultural ideas and habits than others. This becomes particularly apparent in the case of food or clothing, where local consumer perceptions have evolved over centuries. Contrary to that, products such as vehicles or electronic devices have a weak cultural component. Before deciding on a local positioning, it must therefore be clarified whether the product has a realistic chance of sufficiently reflecting the local culture and thus prevail over local competitors.

2. Status relevance: Does my product serve the right status factors?

In major growth markets, foreign brands are often used to demonstrate a certain status. Newly-rich Chinese, for example, like to display their prosperity with luxury watches. According to research, wealthy Chinese own six luxury watches on average. But be careful: too much adaptation to the local target market can dilute the global brand promise of premium brands. Against this background, they are generally better advised to play to the strengths of their country of origin image that serves the status needs of local consumers. Before entering the target market, they need to ascertain that the brand meets the local status requirements and whether this might be jeopardized by too much adjustment.

3. Consumer patriotism: How big is the political influence on purchasing decisions?

Patriots can still have a soft spot for foreign brands. In times of political tension, however, solidarity with one’s own country can be a serious obstacle against the purchase of foreign brands and thus prove to be a huge risk for a successful positioning in the target market. This risk needs to be thoroughly examined before entering the market: What kinds of conflicts are lurking, which ones can be anticipated? Traditional elites, low-income consumers and the elderly tend to be more patriotic than other social groups. In addition to conflicts that go back a long way in history, current political tensions, such as Donald Trump’s protectionist agenda, can also have a negative impact on foreign brands.

4. Income level: What can consumers afford after all?

The income level is another decisive determinant of a positioning strategy. The rule of thumb for most emerging markets is that with higher prosperity more consumers prefer foreign brands. This reflects the tendency to demonstrate one’s prosperity by buying foreign brands. Before entering a local target market, brands must therefore analyze the income level of their target groups, because the extent to which they need to adapt to local market conditions ultimately depends on that.

All four factors must be carefully weighed against each other. The most important principle is to avoid conflicting positioning goals: Once you have decided on a global or local positioning, you must carefully avoid inconsistencies. The difficulty with a hybrid positioning, on the other hand, is to separate the global brand core from those aspects that are adapted to the culture in the local target market.

Authors: Florian Haller, CEO Serviceplan Group, and Niklas Schaffmeister, Managing Partner Globeone

Despite the protectionist demeanor in Washington D.C., German companies have realized record investments abroad in 2017, according to the German Chambers of Commerce and Industry (DIHK). The degree to which a company is prepared to adapt to local market requirements decides which path for the market entry is chosen. Following, we briefly present the four most important strategies. For more detail see the new Springer publication “Successful brand development in the major emerging markets”, written in German, by Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).

1. Global strategy – Maximizing global efficiency and centralized decision-making

In industries that are characterized by high integration pressure and short innovation cycles, a globally oriented strategy is recommended. In this case, the corporate headquarter controls the operation. Economies of scale enjoy top priority, the brands are highly standardized. However, adaptation to specific local market needs is limited, which may result in problems with local acceptance.

Example: Apple applies this strategy to its iPhones and iPads. Design, production and marketing are controlled by one single unit worldwide. Market-specific adjustments are usually limited to details such as the power cable, which must satisfy different voltages varying from county to country.

2. Multidomestic strategy – Strong decentralization with significant product adaptations

In this strategy business models and products are strongly adapted to local consumer needs. Country units operate largely independently. Economies of scale are neglected in order to achieve a higher acceptance in local markets. However, the high degree of adaptation can turn out to be a problem when the brand has to hold its own against competitors in a highly globalized environment.

Example: US restaurant giant Yum! Brands, operator of Pizza Hut, Taco Bell and KFC, tailors its menus to local tastes and culinary specialties in every single market.

3. Transnational strategy – Combining the strengths of the first two strategies

The transnational strategy aims to combine the flexibility of the multidomestic strategy with the efficiency gains achieved by global standardization. This difficult undertaking is recommended when companies are equally dependent on economies of scale as well as on adaptation to local consumer needs. Despite these adjustments, brands managed under a transnational strategy can continue to use the reputation of their country of origin for their branding.

Example: The Swedish furniture group Ikea is committed to providing its global customers with a unique shopping experience that defines the global recognition value of the Ikea brand. In addition to the standardized portfolio, there are numerous local adjustments. This is why Ikea sells harder mattresses in China at a lower overall price level compared to other parts of the world.

4. Home replication strategy – Limited standardization and little local customization

The home replication strategy is applied when there is little or no need for flexibility or standardization. This strategy aims to open up additional international markets without major adaptations for products primarily developed for domestic consumers. In the long run, however, this strategy includes the risk of not completely grasping local market conditions and thus losing competitiveness.

Example: Media Markt transferred its concept one-to-one to China and ultimately failed because the chain could not prevail over its local competitors with its classic concept and without major adjustments.

The choice of the right strategy will be rewarded in any case. After a short cooling interval, the emerging markets are currently registering a new dynamic. China will outperform the US as the world’s leading retail market in 2018. India overtook China in GDP growth at the end of 2017.