Global Markets: How Much Do You Need to Localize?

My colleague Polly Traylor and I have been going to experts inside and outside of SAP to ask the question: How much localization in your products and services is needed for global markets, in particular, emerging markets?

More than Likes and Dislikes
People in the West know instinctively that the shelves of a grocery store in Italy are unlikely to carry the same items as one in France. Yet why do they not apply the same instincts to the emerging world?

Companies fail when they naïvely attempt to thrust their brand and products on a new market with little if any adaptations. Or worse, they generalize a “Spanish” strategy for the entire Latin American market.

“I’ve seen too often the case of a big company not recognizing that there is actually a difference between Chile and Argentina when it comes to what customers want,” said Babak Hafezi, CEO of Hafezi Capital, a McLean, Va.-based management consultancy that helps companies expand into emerging markets.

Even companies that understand those differences struggle with the issue of adaptation. Only with proper research can a company determine whether the adaptation requirements for a particular market will be worth the effort or investment.

Here are three ways to adapt for success when expanding into emerging markets:

• Don’t just look at the numbers; immerse yourself. Companies must go farther than data-based feasibility studies. The more subtle nuances emerge when they sponsor immersion trips for their executives. On a recent trip to a local hotel in China, for example, a waiter showed up at Hafezi’s door to take a room service order. “That’s the Chinese definition of room service,” he recalled. “But if that happened in the United States, you’d say, why are you wasting my time? I could’ve placed this over the phone!”
• Consider locally-sourced and locally-managed goods. In Turkey, customs regulations and payment issues make purchasing items over the Internet difficult for the average consumer. Therefore, a joint venture with a locally managed Web site offering locally sourced products that ship to the customer in a day would likely succeed where a foreign-based company wouldn’t.
• Scale expensive or complex products down. Price and complexity have a direct relationship to the speed at which a new market adopts your products and services. A medical device maker with a $2 million product that sells well in the United States may need to scale the product down to sell at a lower price befitting a hospital in a developing country. Or, an ecommerce startup could simplify its app for a market where the Internet connection is slower and less reliable.

Above all, executives need a global mindset to truly understand and work well with people who are very different from them socially, culturally and even politically.

“If there is any one-size-fits-all strategy for rapid and successful expansion, it’s that organizations need to understand and respond to local needs all the time,” said Joe Carella, managing director of executive education at Thunderbird School of Global Management in Arizona.

How does your company adapt to emerging markets?