How do global companies adapt to local markets?
In today’s fast-paced business world, two terms stand out: globalization and localization. While some firms chase the expansive dream of a global footprint, others find strength in catering to the unique tastes and preferences of local markets. But as straightforward as these concepts may sound, the real-world application is layered with complexities. Whether you’re a budding startup or an established giant, the key is understanding where your product or service fits best. It’s not just about market size; it’s about market rightness. Let’s dive deeper into these terms and see how various sectors harness their power.
Globalization Vs Localization
At its basics, both globalization and localization revolve around how companies approach and adapt to different markets. However, the manner and depth of that adaptation can significantly diverge, directly influencing a company’s success.
Globalization
When we talk about globalization, we’re referring to companies spreading their wings, aiming to reach as many corners of the world as possible. The goal is straightforward: to capture a slice of the vast global market. Yet, achieving this is anything but simple.
Apple, with its presence in over 100 countries, is a testament to a successful globalization strategy. They don’t just ship iPhones globally; they navigate tariffs, local competition, and consumer preferences in multiple territories. The motivation behind such extensive expansion? The global middle class, projected to swell to 5.4 billion by 2030, is too tempting a market to ignore. A chance to capture even a fragment of this segment means an exponential increase in revenue.
Localization
Localization is about more than mere translation. It’s the art and science of reshaping a product or service to gel with a particular market’s culture, habits, and preferences. It’s about acknowledging that each region or country possesses a unique tapestry of tastes, values, and customs. Thus, successful localization ensures that a brand speaks the ‘local language’ in every sense — not just linguistically but also emotionally, culturally, and functionally.
Take Starbucks, with its impressive presence in 77 countries and over 30,000 outlets. While these numbers are formidable, Starbucks’ journey wasn’t without missteps. Their entry into China, historically a tea-centric culture, raised eyebrows. But instead of stubbornly pushing their standard model, they adapted. They transformed their outlets into communal hubs, merging their brand’s identity with China’s social dynamics, and introduced flavors like the ‘Green Tea Frappuccino’. Now, China sees a new Starbucks roughly every 15 hours, a testament to their adaptability and understanding of the market.
Breaking into local markets
Through language and semiotics
Language is the bedrock of communication, but when businesses branch out internationally, it takes on an even more pivotal role. It’s not merely about translating words but capturing the essence and sentiment of what’s being conveyed. Beyond language, there’s semiotics: the study of signs and symbols and their use or interpretation. In the business context, it concerns how cultural signs and symbols are embedded in products and advertisements and how they are received by local audiences.
Coca-Cola, with its presence in over 200 countries, offers an insightful case. The brand name, when initially entering China, was reportedly misinterpreted in some regions as “Kekoukela”, meaning “Bite the Wax Tadpole” or “Female Horse Stuffed with Wax”. Clearly, a direct transliteration was a misstep. Recognizing this, they embarked on a thorough search, finally settling on “Kekoukele”, meaning “Tasty Fun”. A slight tweak, but with substantially better connotations.
Design, too, is paramount. Visual aesthetics can deeply influence purchasing decisions, and what’s appealing in one region may be lackluster or even off-putting in another. For instance, the color red is seen as auspicious and lucky in many Asian cultures but can denote danger or caution in Western ones. Brands need to be astute about such nuances when designing products or marketing materials for different regions.
However, embracing local semiotics doesn’t imply abandoning a brand’s core identity. It’s about finding a harmonious intersection between global brand values and local resonances. McDonald’s, a brand synonymous with burgers, offers the “McAloo Tikki” burger in India, a vegetarian burger with a spiced potato-based patty. The golden arches remain, but the menu undergoes a transformation. Here’s a look at some other countries:
- In Japan, diners can find the “Teriyaki Burger,” with a patty drenched in the rich, sweet teriyaki sauce, a local favorite.
- Over in France, the “McBaguette” introduces the beloved French bread to the McDonald’s lineup, filled with varied options like charcuterie or cheese.
- Meanwhile, in the Philippines, the “McSpaghetti,” a slightly sweetened version of spaghetti with sliced hotdogs and ground meat, caters to local pasta preferences.
The golden arches remain universal, but beneath them, the menu becomes a canvas of local flavors and tastes, reflecting the brand’s astute adaptability.
The balance between language, semiotics, and design is not just a business strategy. It’s a gesture of respect. It shows a company’s commitment to truly understanding and serving a community, rather than imposing a one-size-fits-all solution. It’s a testament to the belief that while trade is global, trust is local.
Adapting to local regulations
Entering new markets comes with its share of regulatory hoops and hurdles. Each country has its distinct set of rules, standards, and certifications. For instance, while Europe’s GDPR focuses on data protection and user consent, China’s Cybersecurity Law emphasizes data localization, requiring certain data to be stored within its borders.
Besides regulations, technology adoption varies across regions. In parts of Africa, mobile banking via USSD codes on basic phones is more prevalent than full-fledged banking apps, given the dominance of feature phones. Conversely, in South Korea, with its ultra-fast internet speeds, businesses might be expected to offer high-quality, bandwidth-heavy digital experiences.
These differences aren’t mere footnotes; they’re central to a company’s global strategy. Uber, when expanding to India, had to integrate cash payments, and UPI into its platform, a departure from its card-centric model, because of the country’s cash-dominant economy.
Pilot Projects are a must
Before making a full-fledged entry into a new market, it’s often wise for businesses to dip their toes in the water through pilot projects. These smaller-scale ventures provide a glimpse into the market’s potential and the challenges that might arise.
Consider Netflix’s strategy when they were pondering expansion into India, a market replete with diverse languages and entertainment preferences. Before launching widely, they tested varied regional content, gauging viewership metrics and audience feedback. This initial groundwork was invaluable.
By the time they made a comprehensive push, Netflix had a clearer understanding of what resonated with the Indian audience. Shows like “Sacred Games” and “Delhi Crime” became instant hits, weaving in local narratives with universal themes.
- Netflix’s global strategy is evident in how it caters to different regions.
- In Spain, “La Casa De Papel” went from a local show to a worldwide hit.
- In Brazil, they introduced “3%”, a series reflecting local socio-economic issues.
- South Korea saw the rise of “Kingdom”, blending history with horror.
- In Germany, the success of the intricate series “Dark” encouraged more European content investments.
Pilot projects also serve as a risk-mitigation tool. If a product doesn’t resonate well during the pilot phase, companies can recalibrate without having invested excessive resources. Furthermore, these test runs provide real-world feedback that’s more telling than any market research. It’s one thing to predict how a product might be received, but observing real-time consumer interaction offers unparalleled insights.
Local Expertise is an Invaluable Asset
As companies strive onto foreign soil, having local knowledge isn’t just advantageous — it’s often indispensable. There’s a depth of understanding that comes from being entrenched in a culture, a nuance that external perspectives might miss.
IKEA in Japan offers an intriguing examination of market adaptation. The Swedish furniture giant, known for its minimalist, flat-pack furniture, first attempted to penetrate the Japanese market in the 1980s but withdrew in 1986 due to lackluster sales. Their standard European-sized furniture simply didn’t fit in the smaller Japanese homes. Plus, their DIY assembly concept was foreign to a Japanese consumer used to full-service delivery and setup.
When IKEA decided to re-enter Japan in 2006, they took a different approach. They meticulously studied the lifestyle and needs of the average Japanese household. Recognizing that Japanese apartments and homes were often smaller than their Western counterparts, IKEA introduced more compact, space-saving furniture options. They also incorporated designs that were more in sync with Japanese aesthetics, with a blend of modern Scandinavian design and traditional Japanese elements.
Beyond the product, they also modified their service approach. While DIY assembly remained a cornerstone, IKEA introduced services to assist with assembly for those customers who preferred it. They also developed city-center pick-up points for those who found their out-of-city mega-stores inconvenient, addressing the needs of urban dwellers without cars.
Their revamped strategy worked. Not only did they resonate with the Japanese audience this time around, but they also became a significant player in the Japanese furniture and home decor market. The tale of IKEA in Japan underscores the critical importance of understanding and adapting to local market nuances, even for globally recognized brands.
Local teams or partners can navigate linguistic nuances, cultural sensibilities, and bureaucratic mazes more efficiently. They bring to the table an understanding that goes beyond market research. It’s the difference between knowing a culture from the outside and feeling it from within.
Moreover, collaborations with regional entities provide an insider’s perspective. IKEA, when entering India, collaborated with local artisans to incorporate indigenous designs into their offerings. This not only appealed to local tastes but also projected respect for Indian craftsmanship.
Embracing local expertise is more than a business strategy. It signifies humility — a recognition that while a brand may be globally recognized, each market is a new beginning, a fresh chapter. Local experts act as the bridge, ensuring the story told in this new chapter is authentic and resonant.
Conclusion
In business, understanding the intricacies of global and local markets is paramount. Whether a brand chooses to spread its wings across continents or nest closely within a familiar territory, success hinges on a deep appreciation of cultural nuances, regulatory landscapes, and consumer preferences. In this dynamic interplay, continuous evaluation and adaptability are the cornerstones, underscoring the notion that while business strategies may be global or local, excellence is universally recognized.
Written by: Inchara, kubo media team.
Hey!
If you enjoyed reading this article and want more engaging content like this, don’t forget to follow our publication!
Weave is a Design Agency focused on building magical experiences through purpose-driven design. Our aim is to create products that people truly love. To know more visit weavedesign.us
