The Successful Internationalisation of Brands
Florian Haller, CEO of Serviceplan Group, has co-authored a Springer Gabler book with Niklas Schaffmeister, managing partner of globeone. Titled 'Successful Brand Development in the Major Emerging Markets: A Practical Guide for Targeted Brand Growth in China, India, Russia and Brazil', the publication explains how targeted brand growth can be achieved in emerging markets. Here, Florian discusses a few of the trends featured in the book.
Although emerging markets are becoming increasingly important for Western brand manufacturers, literature on the social, economic and cultural facets of emerging markets from a marketing and communications perspective is still lacking.
With our book we aim to fill a gap in the advisor market by providing in-depth background knowledge of tomorrow's markets and building our strategies on it. These markets can only be conquered if they are first understood. We are pleased to be able to provide companies with strategies geared to customer needs, as well as environmental and market conditions.
Serviceplan Group has experienced rapid international expansion in recent years and has acquired expertise in building brands in a wide variety of markets. The Group's locations include; Amsterdam, Berlin, Bogota, Bremen, Brussels, Buenos Aires, Delhi and Dubai to name a few.
As my co-author, Niklas Schaffmeister, explains: "Brand strategists are well advised to keep the major emerging markets on their radar. In 2017 alone, the MSCI Emerging Markets Index jumped over 30 percent and China and India are in the process of losing their reputation as the world's workbench. Their development into real innovation spots raises the expectations of a consumption-hungry middle class. New sales markets are about to emerge - the best conditions for brands that want to grow further."
Despite the protectionist demeanour in Washington D.C., German companies realised record investments abroad in 2017, according to the German Chambers of Commerce and Industry (DIHK). The degree to which a company is prepared to adapt to local market requirements decides which path for the market entry is chosen. In the new publication, Niklas Schaffmeister and myself present the four most important strategies;
1. Global strategy – Maximising global efficiency and centralised decision-making
In industries that are characterised by high integration pressure and short innovation cycles, a globally oriented strategy is recommended. In this case, the corporate headquarter controls the operation. Economies of scale enjoy top priority, the brands are highly standardised. However, adaptation to specific local market needs is limited, which may result in problems with local acceptance.
Example: Apple applies this strategy to its iPhones and iPads. Design, production and marketing are controlled by one single unit worldwide. Market-specific adjustments are usually limited to details such as the power cable, which must satisfy different voltages varying from county to country.
2. Multidomestic strategy – Strong decentralisation with significant product adaptations
In this strategy business models and products are strongly adapted to local consumer needs. Country units operate largely independently. Economies of scale are neglected in order to achieve a higher acceptance in local markets. However, the high degree of adaptation can turn out to be a problem when the brand has to hold its own against competitors in a highly globalised environment.
Example: US restaurant giant Yum! Brands, operator of Pizza Hut, Taco Bell and KFC, tailors its menus to local tastes and culinary specialities in every single market.
3. Transnational strategy – Combining the strengths of the first two strategies
The transnational strategy aims to combine the flexibility of the multi-domestic strategy with the efficiency gains achieved by global standardisation. This difficult undertaking is recommended when companies are equally dependent on economies of scale as well as on adaptation to local consumer needs. Despite these adjustments, brands managed under a transnational strategy can continue to use the reputation of their country of origin for their branding.
Example: The Swedish furniture group IKEA is committed to providing its global customers with a unique shopping experience that defines the global recognition value of the IKEA brand. In addition to the standardised portfolio, there are numerous local adjustments. This is why IKEA sells harder mattresses in China at a lower overall price level compared to other parts of the world.
4. Home replication strategy – Limited standardisation and little local customisation
The home replication strategy is applied when there is little or no need for flexibility or standardisation. This strategy aims to open up additional international markets without major adaptations for products primarily developed for domestic consumers. In the long run, however, this strategy includes the risk of not completely grasping local market conditions and thus losing competitiveness.
Example: Media Markt transferred its concept one-to-one to China and ultimately failed because the chain could not prevail over its local competitors with its classic concept and without major adjustments.
The choice of the right strategy will be rewarded in any case. After a short cooling interval, the emerging markets are currently registering a new dynamic. China will outperform the US as the world's leading retail market in 2018. India overtook China in GDP growth at the end of 2017.