chapter 13 localization strategies: managing stakeholders and supply chains john s. hill

Chapter 13Localization Strategies:

Managing Stakeholders and Supply Chains

John S. Hill

Chapter Outline

The Importance of Localization StrategiesManaging Local Stakeholder RelationsSupply Chain ManagementManaging 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 ManagementThe 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 ManagementSupplier 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 ManagementManaging 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 brandimages; or extensive to give localappeal

Localizing Marketing Operations: Multinational Strategies

Product adaptation strategies 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

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 price-competitive; 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—self-

reliance, 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 decision-making; 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”: collectivist-oriented; 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: 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