Blog

Glocalisation: Would Ansoff Classify it as Diversification or Market development?

Jim Riley

15th October 2013

Students looking at international expansion strategies of multinationals will soon come across the term "glocalisation". It sounds similar to the idea of diversification and both are concerned with choices that businesses make about which products and services are offered and into which markets. Such choices are often analysed using the Ansoff Matrix. But is glocalisation the same as diversification? Or is it really a kind of market development?

Glocalisation is the name given to the concept and "Think Global - Act Local" is the mantra most closely associated with the concept.. The idea behind this phrase is pretty straightforward. Businesses should set their sights high and aim to reach a potential customer base around the world. But, to be successful with those potential customers, businesses need to take account of local needs and wants. Global businesses should tread carefully, being sensitive to the specific requirements (customs, tastes, traditions) of the different markets in which they want to succeed.

So, if glocalisation is partly about adapting existing products to meet the needs of new markets, where would a strategy built around glocalisation fit into the popular and important model of product and market strategy - Ansoff's Matrix? To what extent is glocalisation more like a strategy of diversification? Or is it one of market development?

The most commonly-used examples of glocalisation focus on the global expansion of Western multinational brands such as McDonald's and Starbucks. Multinationals like these have discovered that one-size certainly doesn't fit all when it comes to international expansion.

In the case of McDonalds, the global brand remains the same wherever you experience it. However, there many be subtle (and not-so-subtle) changes to the fast-food menu to take account of local tastes and traditions. McDonald's has restaurants in more than 100 different countries. Instead of offering an American-style menu in a place like India, where many residents do not eat beef, McDonald's sells mostly chicken, lamb and vegetarian offerings.

The customer experience you get in a Starbucks in London or New York is pretty similar which reflects the similar coffee-house cultures in both countries. However, step inside a Starbucks in China and the overall feel is different. A larger outlet; busier at different times of the day (there are most popular in the late afternoon) and some local Chinese favourites on the menu. But, the brand experience you get is still Starbucks and in many respects that is what the increasingly affluent Chinese consumer is looking for. Indeed, the price of a coffee at a Starbucks in China is relatively higher than comparable drinks in the USA.

I would argue that the product being offered by McDonalds and Starbucks in different geographic markets is essentially a refinement of an existing product, changed to appeal to local customer tastes. This strategy would fit nicely in the middle of the market penetration box in the Ansoff matrix.

How risky is the strategy adopted by McDonalds & Starbucks? A traditional interpretation of Ansoff might indicate that a strategy of offering modified existing products to new markets is relatively high risk. However, by definition you take on higher risk when you attempt expansion into new markets (unavoidable risk) and it is possible to argue that a modified existing product is actually more likely to succeed (less risk) than a strategy of attempting to sell un-modified existing products to new markets.

Take the example of global toy manufacturer Mattel which attempted to enter the Chinese market by opening a $30m flagship Barbie store in Shanghai. There was little if any attempt to modify the Barbie product concept as Mattel anticipated that Chinese consumers would quickly take to the brand.

This Forbes article describes the main problems that were encountered by Mattel.

http://www.forbes.com/sites/helenwang/2012/10/24/why-barbie-stumbled-in-china-and-how-she-could-re-invent-herself/

A key issue with Barbie was that the brand was not already strong in China when Mattel decided to open the Barbie store.. Barbie was not a cultural icon in the same way as it had become in the West.

Another problem, which sounds pretty fundamental to me, is that Mattel didn't understand what Chinese girls and young women wanted as toys which expressed their femininity! The existing product which had prospered for so long in developed markets simply did not resonate with Chinese consumers.

For Mattel, the chosen strategy was globalisation rather than globalisation. Their strategy of attempting to sell existing products into new markets proved very high risk and ultimately failed. Might a strategy of modifying the product, perhaps extensively been a lower risk approach?

Jim Riley

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

© 2002-2022 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.