What’s it: Glocalization is a strategy of an international company by adapting its methods, products, or services to suit local markets. It is a combination of the words “Globalization” and “Localization.” So, in summary, it is a global strategy that involves a combination of globalization and localization. Globalization involves a worldwide marketing strategy, and localization involves adapting to local needs.
Difference between glocalization and globalization
Globalization emphasizes product standardization. Standardization means making a product for use around the world without adapting it to local tastes. Common examples of this standardization are laptops and cellphones. In whichever country these two products are located, the specifications will be similar.
Globalization leads to cultural homogenization. Take, for example, Americanization, where American culture partly evolved cultures in several countries. One way is through the spread of American products in that country.
On the other hand, glocalization is working in reverse. Although both strategies target the global market, the company adapts its products to local tastes or needs.
Take, for example, fast food like McDonald’s. The company operates restaurants around the world. Instead of creating a standard menu for everyone in different countries, it prepares the menu according to local tastes. For example, you find a unique menu available in certain countries and not in other countries.
Examples of glocalization
The worldwide presence of McDonald’s restaurants is an example of globalization. In contrast, the changes made to its restaurant chain menus, in an attempt to appeal to local tastes, are an example of glocalization. Global well-known companies such as Starbucks, KFC, Unilever also adopt this strategy.
Another example is cars sold around the world. Although most are similar, some parts are adapted to meet local criteria such as emission standards or steering position (right and left).
To be successful, often, globalization campaigns involve local culture-friendly media and advertising campaigns. It aims to encourage the acceptance of foreign products among local audiences.
How glocalization works
The basic idea of glocalization is to enter markets in different countries while adapting offerings to local consumers’ needs and preferences. Thus, the company’s offerings are more attractive to consumers in each country.
Glocalization is unsuitable for all companies. This strategy usually works best when companies have a decentralized management structure. That way, business units have more flexibility to make decisions and develop strategies according to market conditions and competition in each country.
The process can be expensive and resource-intensive. To reach markets in other countries, the company may have to set up a subsidiary. Alternatively, the company can acquire an existing company in the target market. Another strategy is through joint ventures, licensing, or franchising.
In running operations, this strategy requires:
First, understanding the market and local competition. Information about tastes, needs, preferences, culture, local consumer values, potential competitors, and competitor strategies is essential for developing an effective product and marketing strategy.
For example, when Wal-Mart entered the Japanese market, the company accommodated cultural flexibility to increase Japan’s consumer appeal. It adapts Japanese-style personalities, corporate culture, trading and operational systems, and employee practices.
Second, recruiting local talent. The company leverages local talent to gain local insights about operating a business and understanding local laws and regulations. On the other hand, governments in some countries may require the use of local labor.
Then, companies can combine it with global talents to create synergies. Local insights are essential for reducing resistance in target markets and fostering innovation and creativity in business.
Third, cooperating with local partners. When operating in different countries, companies need to synergies with local companies. It not only for the supply chain but also for other business aspects such as logistics, media, distribution, and financial institutions.
Fourth, synergizing global competences with local processes. Some strategies may be successful in the home country, but not in the target countries. Different environments, such as political, economic, socio-demographic, regulatory, competitive, and market, often require different approaches. Thus, by synergizing the best practices in the global market and in the local market, the company can achieve success.
For example, Donald’s practices standard operations and global technology while adapting to local resources and knowledge. That not only resulted in changes to McDonald’s menu but also in its marketing strategy.
The company localizes advertising campaigns to make it more friendly to local consumers. McDonald’s also sponsors not only international but also local sporting events. Such a strategy increases awareness and acceptance among local consumers.
Importances of glocalization
The need for overseas expansion is increasing in line with the mature domestic market in developed countries. Foreign markets promise more significant opportunities to support long-term growth.
And in this case, a glocalization strategy is essential to increasing the chances of a successful expansion. This strategy’s success stems from high sensitivity to local consumers’ tastes, requirements, and habits.
For destination countries, glocalization opens a new competition. It forces local companies to transform their business to be more competitive. Ultimately, it contributes to product innovation, diversity, quality, and price.
Glocalization offers some benefits, both for companies and destination countries. The following are among them:
- Increase the chances of success in entering foreign markets
- Encourage innovation in the economy of the target country
- Offer more jobs for local people
- Increase the productive capacity of the economy
- Offer better access to products and services: more abundant, cheaper, and more diverse
Increase the chances of success
Adapting to local needs allows the company’s offering more preferable. It also helps position the company to be more relevant to local market conditions. That way, the company is better prepared to compete effectively.
Not all products fit into the standardization strategy. Taste for products such as food and drink varies widely from country to country, influenced by local cultures, values , and preferences. Thus, glocalization helps to gain trust and creates more profound emotional appeal and bonding with consumers in each country.
Companies can utilize local knowledge, skills, experience, perspectives, and backgrounds to support product innovation and development. Diversity is a significant driver of innovation and an essential recipe for developing new ideas.
The successful adaptation brings more sales to the company. When local consumers like it, the company’s products become popular. The first success made it easier for the company to launch more products in the future.
More jobs for the local workforce
Companies usually employ local people to run their businesses. It may be part of the company’s strategy or the government’s requirements in the destination country.
As foreign businesses develop, they create more jobs and income for local people. That, in the end, brings prosperity to the economy.
Increase the productive capacity of the economy
Investments by foreign companies increase the accumulation of capital in the economy. The productive capacity increases and ultimately allows a country to produce more output in the future.
Also, foreign investment is a means of transferring knowledge, skills, and technology. Such benefits contribute to the improved quality of factors of production in the economy of the destination country.
Better access to products
Local consumers can enjoy a more generous supply of products. They can not only buy from local companies but also foreign companies around them.
Competition from foreign companies also contributes to lowering prices and improving product quality. Local companies must develop competitiveness to stay in the industry by pursuing cost leadership (efficiency) or product differentiation.
Glocalization brings not only a positive impact but also risks. Among the disadvantages of glocalization are:
- Requires large investment and resources
- Local market resistance
- Shutting down local businesses
Requires a large investment and resources
Companies must spend a lot of money and resources to adopt this strategy. They need to hire local people and do in-depth research on local markets and competition.
They may find it challenging to find qualified talents. The complicated bureaucracy also adds to costs apart from the costs of building production facilities and network development.
Local market resistance
In some countries, consumers may not respond positively to the presence of foreign companies. Although the company has adapted its offering to local demand, this does not necessarily increase consumer interest.
One reason is the local patriotism. Consumers prefer local products to foreign products for reasons of patriotism. They show stronger support for local businesses than foreign businesses.
Such resistance makes it difficult for the company to reach its sales target. Finally, the company failed to develop the local market and had to leave.
Shutting down local companies
Glocalization is commonly adopted by large multinational companies. Indeed, their presence increases competition and drives prices down. However, because they have bigger and better resources than local companies, they have a greater chance to dominate the local market.
For local companies, especially small businesses, increased competition raises business pressure and risk. Finally, local entrepreneurs closed their businesses because they could not compete with foreign companies.