MARKET BY MARKET OFFERINGS CASE STUDIES AND BEST PRACTICES

MARKET BY MARKET OFFERINGS CASE STUDIES AND BEST PRACTICES

Four case studies of large, multinational companies that have market-by-market offerings have been provided in the following brief. In addition, two best practices and two challenges as they relate to tailoring products or services on a market-by-market basis have been provided below.

Case Studies

1. Nestle

  • Nestle is a food and drinking multinational corporation that has a global footprint in 187 countries. The company has a portfolio of over 2000 brands that range from the iconic Nescafe to local offerings like Bear Brand.
  • Nestle has different offerings across the world. The company ensures that its products are suitable for local markets as a way of respecting the national, local, cultural, and religious beliefs of consumers and their purchasing power. All the products meet the required standards; however, they vary when it comes to branding, packaging, recipe, and composition.
  • Using localization as a strategy to cater to consumers in different markets has ensured that Nestle is not adversely affected by international trade uncertainties.
  • According to the Nestle’s CEO, Mark Schneider, the company first establishes local manufacturing for most of the products that it sells in a particular market. For instance, in China, Nestle is using traditional ingredients to create new products for the market. Also, the company is making nutrient drinks from plants, such as Chinese wolfberry, gouqi, loquat, and pomegranate.
  • Nestle partners with local retailers to collect consumer feedback, which helps them tailor their products to local preferences. A majority of Nestle’s brands are locally managed, which allows the company to create a connection with consumers across all the 187 countries where it has a presence.
  • Nestle’s strategy is effective since a majority of the company’s revenue comes from international markets. In 2019, the company made $31.57 billion in the US and $68.51 billion from the rest of the world. Revenue from Switzerland, where the company has its headquarters, was $1.27 billion.
  • Nestle also reported organic growth of 2.8% for the quarter ending 30 June 2020.
  • One of the challenges of Nestle’s strategy is when a region is affected by a natural disaster or pandemic. For instance, Nestle has experienced challenges with production as a result of COVID-19, which has led to logistics limitations, lower employee presence due to illness or social distancing measures, and increased safety protocols. These changes have made it difficult for the company to hit its normal production levels.

2. McDonald’s

  • McDonald’s is the largest fast-food restaurant chain in the world with over 37,000 restaurants across more than 100 countries. The company is a pioneer in the fast-food industry and has maintained consistent growth by providing fast service, affordable prices, and constantly changing its menu offerings.
  • McDonald’s restaurants have a uniform menu; however, there are geographic variations that cater to local consumer tastes and preferences. Some of its global offerings based on location include the Chicken McMuffin with Egg from Asia, Mighty Angus Burger from Canada, Manhattan Salad from France, Bacon and Cheesy Deluxe Potatoes from Spain, and Baco McFlurry from Italy. McDonald’s has the offerings in addition to its classic menu items, which are the Big Mac, Chicken McNuggets, Quarter Pounder with Cheese, McFlurry deserts, McCafe beverages, and McDonald’s Fries.
  • The company creates value for its consumers in different markets by taking into account their tastes and preferences and including local ingredients in the menu offerings.
  • McDonald’s franchises and runs McDonald’s restaurants, which have locally-relevant offerings. As of 2019, 93% of McDonald’s restaurants were franchised. Through franchising, the company is able to delivery locally relevant customer experiences.
  • McDonald’s revenue from franchising in 2019 increased to $11.66 billion from $11 billion in 2018. In addition, “global same-store sales expanded by 6.5%, the most in seven years” in the second quarter of 2019. The increase in revenue was attributed to refranchising.
  • Increased costs from recruiting, retaining, and motivating qualified employees to work in company-operated restaurants and franchisees including the costs associated with promoting job opportunities at McDonald’s restaurants could negatively impact company and franchise-operated margins.

3. Starbucks

  • Starbucks Corporation is a multinational chain of coffeehouses and roastery reserves that operates in 81 markets. Starbucks Corporation was formed in 1985 and has approximately 346,000 employees globally.
  • Starbucks focuses on providing “superior customer service and a seamless digital experience as well as clean and well-maintained stores that reflect the personalities of the communities in which they operate, thereby building a high degree of customer loyalty.”
  • Before entering a new market, Starbucks conducts extensive research on the culture, history, and taste preferences of the region. Starbucks then creates a menu to fit the needs of the locals without compromising on quality in any of their markets. The company’s localization is a mix of innovative store designs and local products.
  • In Japan, Starbucks stores are tailored to the culture and religion in the market. For instance, a Starbucks in Fukoaka was designed to give it a forest-like feel while another in Megura was made to look like a traditional Japanese teahouse. In addition, the servings in Japan stores are smaller and less sweet compared to the shops in the United States.
  • To penetrate the Chinese market, Starbucks started serving tea before offering their signature products and designed their stores to appeal to the rising middle class. Starbucks has also offered different products in other markets such as France where it introduced Vienesse coffee and Saudi Arabia where it was forced to change its logo since the topless mermaid was considered offensive.
  • Starbucks’ strategy has proven to be effective given its penetration in China, which makes up 40% of its total market in Asia. In addition, the company achieved a sales growth of 3% from international markets in 2019.
  • One of the challenges Starbucks experiences with its localized strategy is balancing the need for autonomy and flexibility from local management and the need to be consistent with company goals, standards, and philosophy.

4. Coca-Cola

  • Coca-Cola is a beverage company that has a global footprint in more than 200 countries and territories. The company has more than 500 brands.
  • Coca-Cola strives to create refreshing drinks that are loved by people in a sustainable way that makes a difference in people’s lives and their communities. Coca-Cola achieves this goal through offering different products based on the culture and beliefs of a given region.
  • Coca-Cola tailors its offering based on location to create a deeper connection between the consumer and the brand. Consequently, the company has tailored products for different regions across the world.
  • For instance in Portugal and Spain, the company has a long history of reducing added sugar in its beverages. Coca-Cola has “reduced added sugar per liter in Spain by 50% across the total portfolio and by 37% in Portugal, both over the last 20 years.”
  • All Coca-Cola drinks are made locally. According to the company’s CEO, James Quincey, every market bottles its own drinks and distributes them to local retailers. However, some ingredients are imported.
  • Coca-Cola’s strategy saw it have an organic revenue growth of 3% in 2019. In addition, unit case volume grew by 5% and strong growth was experienced in China and India.
  • One of the challenges Coca-Cola faces with its strategy is adhering to local regulations. For instance, Coca-Cola has been reducing added sugar in markets such as Mexico, the European Union, and Australia meaning that the company was forced to change the recipes of more than 50 products. The reformulation work is costly and time-consuming.

Best Practices Related to Tailoring Products or Services on a Market-by-Market Basis

1. Hire Locally

  • Overseas hiring can be challenging as a result of immigration requirements and extra costs. Furthermore, an overseas team can have difficulty understanding the local culture of a new market. Therefore, it is advisable to have an on-site hiring team in the new market that understands the cultural differences in the region.
  • Furthermore, businesses can address communication challenges by hiring locals who understand the local language. By understanding local perspectives, a company can develop an effective marketing strategy. For instance, a local country manager will be able to ensure that a company is compliant in a new region and is utilizing funds efficiently.
  • In addition, local hires can help in communicating a company’s unique selling point in a way that is better understood by the market.
  • A multinational’s overseas team needs to have a good understanding of a new region in order to steer the company in the right direction. This requires local employees who understand the tastes and preferences of the target market.
  • All new employees must be aware of the company’s best practices especially if the cultural norms are different.
  • Coca-Cola is an example of a company that hires locally. In addition, the beverage company relies on local manufacturers, distributors, and retailers.

2. Remodeling Culturally

  • To succeed in a different market, a company must be prepared to change its business model. It is important for a company to ensure that its operational framework is in line with the economic and cultural realities of the new market.
  • New markets come with challenges and a business must be ready to change or adjust its products to meet consumer demand.
  • Communication should be localized to ensure that the target market has a good understanding of the brand. Moreover, companies should understand the cultural references and relevant events and holidays in the region to create a personalized experience.
  • An example of a brand that remodeled culturally is Starbucks. In China, Starbucks had to adjust its uniform global products to the consumer taste profile of the Chinese market. Furthermore, the company adopted ancient tea house practices, which are an important part of the Chinese culture.

Challenges Related to Tailoring Products or Services on a Market-by-Market Basis

1. Competition from Local Brands

  • Competition from smaller companies is becoming a challenge for big brands that are expanding in emerging markets. One of the primary reasons is that smaller companies have a better understanding of the local culture, tastes, and preferences of the new markets.
  • Competition can result in brands losing their market share, which has a negative impact on their revenue.
  • Brands expanding into new markets should include smaller, local brands in their product mix since they will significantly contribute to their growth. However, companies must be ready to deal with the operational complexity of having diverse product offerings.
  • One way of dealing with a complex portfolio is to use global assets to serve small, local brands. For instance, in India, Coca-Cola used its global distribution strength and research and development to quickly launch its Zico coconut water brand, leveraging localized consumer insight.

2. Packaging

  • Different markets have different rules and regulations when it comes to the packaging of products. In most cases, the packaging of new products has to be localized, which translates to additional cost due to the need for new designs and materials.
  • Packaging standards vary from country to country. For instance, companies in the US are required to use English in their packaging. However, in Europe, one is required to use multiple languages. Therefore, companies have to factor in new packaging and labeling costs when entering new markets.
  • According to the President of All In Consulting, Stanley Chao, to save time and money, companies must have local contacts that are conversant with product specifications, rules, and regulations.

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