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