Globalization is one of the most important phenomena of the recent past and of the future. The term “Globalization” describes an ongoing process by which regional economies, societies and cultures are becoming more integrated through a dramatically increased global network of technological, economic, political and cultural exchanges. In specifically economic contexts, the term refers to the integration of national economies into the international economy through trade, particularly trade liberalization or free trade, foreign direct investment, capital flows, migration and the spread of technology. This worldwide phenomenon of interaction among the countries is driven largely by advances in communication, transportation and legal infrastructure as well as the political choice of countries to open cross-border links in international trade and finance.
Due to many difficulties that a globalization strategy faces another term has developed in recent years called “Glocalization”. In contrast to globalization, the glocalization strategy, which means thinking globally but acting locally, is a more modern and different approach.
The term “Glocalization”, which had become a buzzword in business world in 2000, describes a historical process whereby the local is integrated into the global. This means that localities develop economic and cultural relationships to the global system through information technologies, bypassing and subverting traditional power hierarchies like national governments and markets including cultures clash with newly introduced cultural concepts, ideologies and practices. So put simply, globalization is a move toward centralization, while glocalization is a move toward decentralization.
Definition of Glocalization
Glocalization is a combination of the words “globalization” and “localization” and emphasize the idea that a product or service is developed and distributed globally is more likely to succeed if it is adapted to the specific requirements of local practices, legislation, fiscal regime, socio-political system, cultural expectations, local laws, customs and consumer preferences.
Today it is possible to understand by glocalization the intelligent adoption of concepts and ideas to the local and regional needs, instead of having exactly the same products and solutions everywhere. The concept of global localization explains the interactions between global and local dimensions in any strategy like political governance strategies, business marketing strategies, media and communication strategies and so on. Glocalization also explains the failure of some strong strategies, as they don’t consider the effect of cultural diversity and strength of local dimensions. It is more considered as creation or distribution of products or services intended for a global or trans-regional market, but customized to suit local laws or culture.
Multinational Companies and Glocalization
The increasing globalization process has altered the international competitive dynamics in the various industries. The recent changes in the global marketplace call for fundamentally different vision and strategic thinking inside all types of companies. The strategy of glocalization is becoming more and more important in all types of businesses in recent years and seems to have received wide acceptance. Especially in the food and agribusiness industry the concept of glocalization is particularly important, because of the seamless challenges this industry faces due to the typical differences that exist in the food and drinking habits of people belonging to various regions, religions and cultures across the globe. Therefore the modifications of the glocalization strategy help consumers in the host country relate with the character in a much better and effective way.
In today’s highly competitive business life a number of multinational companies currently apply glocalization strategies in an effort to build their customer bases and grow revenues. If multinational companies decide to expand their operations to a new country, they have to make a choice between following uniform business strategies as in their home country or modify their strategies to suit the host country socio-economic and political environment.
Because most of the time a company, which is doing extremely well in the global market or their home market, can fail completely in their local market or vice versa due to the problem of not being able to adapt to the local conditions, which is one of the highest priorities for successful global companies.
In order to operate successfully in their host countries, multinational companies must adopt glocal strategies in marketing, product development, advertisement etc. Therefore the companies try to be both local and global, big and small, centralized and decentralized, stable and dynamic. The main objective of these companies is to simultaneously offer standardized mass manufacturing, customized mass manufacturing and individually designed goods and services. To tackle this growing dilemma and for corporation success it is essential to maintain an appropriate balance between global homogenization and local customization.
Mini Case Study: Glocalization of Coca Cola in China
Also the successful global brand like Coca Cola, which has had a global campaign, adopted a glocal strategy. The world’s largest beverage company is the best example one could cite for a multinational company practicing glocalization. The soft drink company stands for global brand, global taste, global communication differentiated with local language.
In the 1990s the worldwide business development was changing and the world was demanding a greater flexibility, local responsiveness and local sensitivity and a desire for local autonomy and preservation of unique cultural identity appeared. Coca Cola recognized that speed, transparency, local sensitivity and responsibility had become essential to their success. Simultaneously the world’s largest soft drink company realised that a single global strategy and a single global campaign won’t work in different countries with different cultures in the long term. Therefore it has realised that it is important that they act according to relevant local needs, local tastes and preferences, local laws, local cultures to support global brand strategies.
As a result they developed a strategy, allowing differences in packaging, distribution and media for a specific region or country according to its cultural, regional and national uniqueness and which fits within fundamental values, policies and standards of integrity and quality of the company. Coca Cola showed that it is crucial for worldwide business activities to succeed in any foreign country, to understand and respect local culture, history, differences, to adapt to consumer needs, habits and diet, as well as local conditions, characteristics and circumstances of the market.
The best example for Coca Cola’s glocal strategy is China. China was always one of the biggest opportunities of all emerging markets with a huge potential for the Coca Cola Company. When Coca Cola first entered the Chinese market, it faced unusual problems and success did not occur in the beginning. The reason for that was that Chinese people had a historical preference for health-oriented beverages such as green tea and juices and the product was misunderstood by the people. Because of these different tastes and preferences, the Coca Cola Company adopted a glocal strategy.
This customer-based strategy was very effective for Coca Cola, because if their brand was not instantly recognizable in a variety of setting or they would have no congruence with local needs it may result in a loss of their brand’s global image or they could fail to attract potential customers. Coca Cola has overcome this problem in China by creating a glocal strategy, which enabled them to combine the best of global and local marketing to maintain their brand image. This step established a strong sense of cultural congruence with a strong focus on social responsibility.
For Coca Cola this was a really important step, because also brinking habits vary significantly across cultures and countries like in the food industry. Therefore the Coca Cola Company has to be particularly sensitive to various cultural and religious issues because challenges faced in this industry due to the cultural differences are more critical and complex as compared to the other industries.
This effective long-term business strategy of glocalizing allowed most decisions regarding developing new drinks and approving local initiatives to be determined by local subsidiaries or distributors and to establish nationwide operations, which generated a strong market presence. Coca Cola developed with this strategy a world, where local areas benefit from global resources while they are retaining their own cultural identities. In the meanwhile China is not the only country for which it has adopted a glocal strategy. Over the last decade it has taken up this approach around the world, but especially for the Asian countries, because of their diversity of cultures, which does not provide a unified consumer base.
Glocalization explores both the effective expansion of transnational companies into new markets and the ability of cultures to exert their own identity in their interplay with the global scenario. It also showed that going global might not take much effort, but going glocal means a lot of responsibility. Therefore it is important to consider glocalization in expansion plans or when a company decides to launch in different locations, because it plays an important role if a company operates successfully or not.
Summarized, it is possible to understand by glocalization a global decision, which has local impact and, at the same time, it can be a local event with global effect. So, it can be said that glocalization represents the need for multinationals to be global and local at the same time.
Advantages and Disadvantages of Glocalization
First of all glocalization makes sense when a firm faces high pressure for local responsiveness and where there are significant opportunities for leveraging valuable skills within a multinational’s global network of operations. Through glocalization international products are adapted to the local taste of the population and thereby local communities are introduced to different aspects of foreign cultures. This helps multinational companies to grow and gain trust of the people of particular regions.
So, glocalization helps in connecting with the consumers of that region on an emotional level and also leverage its global position. This is the most important aspect that leads to success of the company. Another positive aspect of glocalization is that multinational companies bring in foreign revenue and offer employment opportunities for locals. Disadvantages of this strategy can be that companies are unable to realize location economies or failure to transfer core competencies to foreign markets. Another disadvantage is that it is really difficult to implement a glocal strategy due to organizational problems. This means that glocalization doesn’t always benefit multinational companies because individuals and groups in each region or country can choose to accept or reject the products offerings or the company’s presence.