If the culture variable is combined with the availability of economies of scale, as in figure 1, we see that food has low economies of scale and is culture-bound; it is however difficult to establish global food brands. VCRs, however, do enjoy economies of scale and are culture-free, so global brands are feasible. Yet, we must look at the evidence of Coca-Cola and McDonald’s, both global brands. How it has gone in a particular case will need to be determined by analysis. What is more difficult is to predict the dynamics of change: how quickly will convergence happen, and what effect will the activities of global brand marketers have.
Country of origin We have been talking of global brands as if they were stateless. Perhaps some are, but for others their country of origin is significant. For example, many famous global brands- Coke, McDonald’s’ Levi’s, Marlboro- could only be American. Their “American-ness’ is an essential part of their appeal, and consumers are buying into a small piece of the American way of life. Likewise, luxury brands from France, both haute couture and drinks such as cognac and champagne, have a unique cachet that comes from their origin. Italian fashion brands such as Gucci would be less powerful if they came from England. German cars and industrial engineering products gain an additional value from their origin, as do Japanese consumers products such as electronics and cameras.
Some brands seem local, if they are known to b international. Many people in Britain will have thought of Ford, Vauxhall or Hoover as British, thought they are all American in origin or by takeover. This, say some, is the real challenge in the future for aspiring global brands; to have the authority of internationally acceptable brands while appearing local enough to be ” what we want here”. Arguments for a Global Strategy Going global is always going to be expensive and difficult, but seems a prize worth aiming for;the reasons are various. For many service firms whose clients are international- advertising agencies, accountants, consultants- a global network is becoming a necessity. Any firm that wants to serve the biggest clients has been forced to set up local offices around the world, or to develop alliances with other firms to provide global reach.
Competition The fact that competitors are going global is undoubtedly a challenge. A firm may have to compete on a global scale, either to defend its domestic market against global competitors with scale advantages or to take advantage of new opportunities in new markets before competitors establish themselves. Profit opportunities If successful brands cannot be transferred rapidly to as many markets as possible, profit opportunities are foregone. Procter and Gamble found that, without central control, some successful brands were not introduced into major European markets for up to 12 years after their initial launch. The first mover advantage may also be lost, leaving the firm playing catch-up in too many important countries.
Strategically, these are all very real pressures. Firms risk being left behind, caught in a cycle of increasing threats and decreasing opportunities, facing only decline. But going global is also risky. How do they know they will succeed?Sustainable competitive advantage The firm must be absolutely clear that the brand has some differentiating advantage over the competition it is likely to meet in all its markets. Making this judgment demands a high degree of objectivity, and the commitment to maintain the advantage against imitation and attack.
Economies of scale The production cost function is not always linear, that is, cost do not necessarily fall steadily at the same rate as volume increases. There are likely to be steps, where costs rise steeply in the short term as production is raised to a new level. It must be clear that when the planned- or desired- level of international sales is reached, costs will be at a level that allows the company to compete with rivals.
As it was noted above, the segment does not have to be the same size everywhere, but it must be big enough to support the brand in enough markets. Going from a multi-country to a global operation is impossible without radical changes in the organization, often consistent ones. The First Steps There is of course no magic formula for developing a global brand, but evidence suggests that some approaches offer better chances of success than others do. There will always be counterexamples of successful brands that have followed different rules- and unfortunately failures that have apparently done everything
Develop the brand strategy in one place The total shape of the strategy – essence, values, identity, point of difference, positioning, target segments, mix- must be developed. The drivers may be technological or market led, but the total brand must be taught through. This needs to be done with a concrete set of consumers in mind, and it seems to work best if it is done in one specific place. This does not mean that consumers in the global market place should be ignored; they must be kept in mind, but the lowest-common-denominator danger must be avoided.
Exactly where this should be will depend on the market. Frequently it is the company’s home market, where it ought to have most knowledge and understanding. In a global, multiproduct firm, that may not apply to all product fields, and there are two other criteria. The first is the location of the expertise: some country teams are better than others in certain product fields, and it makes sense to use that to advantage.