Globalization has had a tremendous impact on businesses in general. Many theories have been proposed to highlight the good, the bad and the ugly of globalization. Over the last decade a number of countries from Asia, Middle East, Scandinavia and South America have opened their economies and have taken the first step towards open market economy. The changes, as expected, have been profound.
On one hand, the integration of these developing/emerging economies into the main stream global economy has created amazing business opportunities for global brands. On the other hand, this very phenomenon has made the global market place a highly complex and highly competitive battleground for companies vying for supremacy. Further, the sheer diversity of people, their practices, beliefs, consumption patterns, spending capabilities and so on has made this global market an extremely complicated place to do business in.
Globalization and its side effects have had a very profound effect on branding. As markets have integrated, brands have found themselves traveling beyond national borders. Whenever any brand, which was restricted till then to a national audience, enters a new country, it faces a barrage of challenges.
Culture becomes a very crucial factor that determines the brand’s success. Many global brands have dealt with cultural issues very well and have adopted their brands to suit the diverse cultural demands of different regions in which they operate. Coca-Cola, McDonald’s, BMW, LVMH, Estee Lauder, Procter & Gamble and Disney are some the more successful brands that have treaded the path of adapting to cultural demands very well.
This article looks at the impact of culture on brands and how global brands can effectively handle the challenges posed by diverse cultures in different markets.
Culture is the cumulative concept that encompasses knowledge, belief, customs, practices and any other habits acquired by people as members of society. A culture operates primarily by setting loose boundaries for individual behavior. Culture, in effect, provides the framework within which individuals and households function. A major consequence of culture is its impact on consumption patterns of individuals and institutions. Depending on the underlying cultural philosophy consumers tend to follow certain consumption patterns. Successful brands have been able to adopt their branding strategies in line with this dominant cultural philosophy and weave their brands into the cultural fiber.
One of the underlying premises of branding is its ability to reduce customers’ search cost and perceived risk by standardization of images, messages, communications, attributes and features. As such brands generally strive to maintain their defining brand identity, brand personality, brand images and brand elements across markets. This standardization which forms the fundamental building block of a brand itself poses the first challenge in cross cultural situations. Many a times, brands will need to adopt their offerings to different cultures and this violates the standardization principle. Therefore deftly handling the standardization and adoption issue become extremely crucial.
One of the biggest implications of globalization for brands seeking to expand to foreign shores is the task of balancing standardization with customization. When some of the world’s biggest brands expand beyond their home markets, they are tempted to repeat their tried and tested formula in the new market as well. In fact this has been the path followed by many brands. The assumption in such a case is that customers would be too eager to consume the great brand because of its authenticity, heritage and associations. But this tendency is gradually changing as global companies are learning about the unique needs of the customers in different markets along with the pressures of lifestyle, economic and cultural conditions.
Consider this example: A case in point is the success of global brands in the Indian market. One of the booming economies in Asia, India offers tremendous opportunities to global companies. A brief look at the Indian landscape would prove why – an estimated 1.2 million affluent households that is expanding at 20% a year. India has approximately 40 million middle income households with earnings of USD 20,000 to USD 45,000 adjusted for PPP, and they are growing at 10% a year. India has more than 110 million households with earnings of USD 7,500 to US D 20,000 (adjusted for PPP), and more than 70% of the population below the age of 36. It is no wonder then, that global brands are making a bee line to the Indian market to grab a share of the growing pie.
This alluring face of the Indian business landscape has another facet to it and that is the highly discerning and demanding customers. In spite of the booming economy and the increasing disposable income, Indian consumers are very cautious and clear in their priorities. Consumers are still not ready to splurge on branded goods at premium prices. Additionally, there are a growing number of Indian brands that offer superior quality at affordable prices. In such a scenario, global brands can win only if they attune themselves to the local conditions.
Unilever is a classic example of a global brand which has pioneered serving the locals with products that address the local sensitivities. Unilever’s Indian subsidiary Hindustan Unilever Limited (HUL) has been the leader in recognizing the tremendous opportunity lying at the bottom of the pyramid. They serve a customer base that aspires to consume products but in smaller quantities and at lesser prices. HUL literally invented the shampoo sachets – small plastic packets of shampoo for as less as INR 1 (USD 0.022). This became such a rage among the rural consumers that many other brands started offering products such as detergent, coffee and tea powder, coconut oil and tooth paste in sachets. Even though the unit price was higher, rural consumers were able to afford to purchase the smaller quantity at their convenience. It also illustrated that rural consumers are eager and ready to seek global brands, and the benefits they provide in terms of quality, value and emotional benefits.
Another example is of the mobile brand Nokia who once dominated the mobile phone category before Apple and Samsung disrupted the industry. Nokia recognized the growing importance of rural customers in the Indian mobile telephone market which grew from a mere 300,000 subscribers in 1996 to a whopping 55 million subscribers in 2004. Nokia introduced its dust-resistant keypad, anti-slip grip and an inbuilt flash light. These features, albeit small, appealed to a specific target of truck drivers initially and then to a broader segment of rural consumers including farmers and local shop owners. These features endeared Nokia to the Indian consumer as Nokia displayed a genuine commitment in responding to local customer needs and adapting their products accordingly.
Now look at Euro Disney’s example. Disneyland launched the Euro Disney outside Paris and maintained its standard tried and tested formula with the assumption that customers would seek the authentic Disney experience. But shortly into the launch, Euro Disney was declared a failure. Of the many reasons that were attributed to Euro Disney’s failure, the one that stood out clearly was Euro Disney’s lack of localizing the brand experience. Euro Disney followed the brand policies to the word – English-only instructions, no wine consumption on park grounds, high ticket prices, and standardized merchandise and food items. This resulted in wide spread dissatisfaction among the customers. But Euro Disney was just following the golden rule of branding – consistency in its brand elements. Euro Disney later adapted to consumer needs and cultural aspects, and finally became very successful.
These examples illustrate the consequences of culture on brands. In all the three examples, the brands were global brands with operations in multiple markets. Nokia and Unilever recognized the different customer needs and adopted the brand to the preferences of customers. Disney on the other hand followed the classic branding rule of maintaining consistency across markets. As can be seen from these examples, cultural differences mandate that brands be sensitive to different cultural facets.
Further, these brand cases offer some very important points that should be fully appreciated by any brand manager that aspires to be successful in cross cultural settings.
Cultural differences impact branding: Cultural differences are indeed a major factor that has an impact on the success or failure of a brand. As brands enter different cultures, it becomes imperative for them to carefully tread the standardization-customization continuum wherein they not only manage to retain the inherent brand identity which is the very reason for their acceptance across markets, but also adopt the brand elements (images, advertising, channels, and others) to appeal to the local tastes and preference of customers.
Weave the brand into the cultural fiber: The increasing popularity of the Internet offers brands a very powerful tool to involve customers and bring the brands closer to the local culture by providing them a platform to interact with the brand in their customer’s terms. Creation of online discussion groups, and online brand communities is a firm step towards co-creating brand value with the customers. By weaving the brand essence into the societal fibre, brands can leverage cultural differences to their advantage.
Danish toy brand LEGO runs several programs and interacts closely with the many LEGO communities around the globe. It serves two objectives: LEGO is reaching out to more stakeholders including customers, and gains invaluable feedback from the market for future adjustments and innovation purposes.
Understand the consumption patterns: Individualistic and collectivistic cultures tend to be the two ends of a continuum. Individualistic cultures supports customers to make consumption decision based on their personal choice, at an individual level. On the other hand, collectivistic cultures supports customers to make consumption decisions on a group level (family, extended family, network of friends and even community). These differences hold the key to many branding strategies when entering new markets.
Consider Louis Vuitton which has for many years been one of the most successful luxury brands in Asia. The luxury brand balances the individualistic and collectivistic consumption patterns very well. Louis Vuitton offers a long range of different products providing multiple choices for the individual. But the company has also built very strong brand equity across Asian luxury consumers through intense, premium retail presence and marketing efforts which provides an effective platform for consumption decisions on a group level – as Louis Vuitton is perceived as one of the luxury brands to have in order to fit into the collectivistic culture in Asia.
Even though globalization and integrated markets offer brands a very lucrative deal in terms of untapped market potential, greater number of customers, and broader reach, it also poses certain challenges such as cultural differences and the resulting consumption patterns.
To maximize the opportunities brands should be sensitive to the cultural subtleties and adopt accordingly. Cultural differences can be morphed from a challenge to an opportunity when brands learn from the many best practices in the industry and adopt their branding strategies to adequately reflect the consumer preferences.