From a local brand to a global brand, by Jean-Noël Kapferer

Jean-Noël KapfererHow does a brand become global? Insights from Jean-Noël Kapferer, professor at HEC and an expert in internationally renowned brands.

Apax Talks: Are all companies affected by globalisation?

Jean-Noël Kapferer:  Yes, globalisation affects all companies, large and small. It’s a source of growth and sound risk management. Globalisation started a long time ago in sourcing, production, logistics and tax optimisation. It’s only recently that companies have started looking at brand globalisation. It’s not that brands haven’t already been international for a long time, but there is a big difference between being international and being global.

AT: What is that difference?

JNK: A globalisation strategy means treating the world as one, and international borders as irrelevant dividers. It brings with it profound changes in the organisation, moving it towards more centralisation – or at least regionalisation – and requires abandoning the individual country as a decision unit, except of course for tactical decisions. Globalisation thus goes much further than internationalisation, which left each country in charge. Typically, internationalisation was represented by flags on a map of the world to indicate local presence. But this said nothing about the deep-rooted differences in the way the company approached each country, the products it sold there, at what prices, with which partners, through what kind of distribution network, using what image and even which brand. All this generated too much complexity and cost. Until recently many brands were more international than they were global, and it was hard for them to become global. To make matters worse, certain groups had grown by acquiring other companies or local brands.

AT: So how you move from several local brands to a single global brand?

JNK:  From the outset, let’s make it clear that it’s not a question of name. It would do no good to change the names of local brands and replace them with a single name if nothing else changed in the meantime. Changing a name is disorienting to local customers. Given the risk of losing market share, you need a very good reason to change a brand name, and you must explain it to customers and distributors. Becoming global first of all means honing in on a brand’s territory, its natural realm, its ambition, its mission and on the segments in which it will compete. Globalisation is a strategy of convergence to increase competitiveness. If you’ve entered one country at the top of the range and another from the entry level, you clearly won’t have the same customers or the same image. In your multi-country strategy meetings neither synergies nor mutual comprehension will be easy to find. It’s not a question of brands. A global brand means a global strategy: identical positioning, choosing the same market segments, launching the same innovations, keeping websites homogeneous, etc.

AT: But certain markets have specific characteristics. So what is the right balance between global strategy and local adaptation?

 JNK: There is no magic formula. Every company must define its own balance between local and global. The founder of IKEA talked about globalisation in the following terms: “Companies must choose between changing the product and changing the consumer.” To be a global cost killer and create high barriers to entry to keep out local competitors, IKEA chose the second option. It decided to change neither its products nor their names. The same BillyTM bookcase is sold to young couples in Shenzhen and Montevideo. Similarly, L’Occitane’s experience and retail product range are remarkably homogeneous from one country to another, even in the heart of Asia. Conversely, McDonald’s offers a broad menu of vegetarian dishes in India and a lot of chicken and duck in China. European cosmetics firms all have a range of skin tone lightening products for sale in Asia. Just as it allows products to vary, brand globalisation allows for different ownership strategies to take into account country risk. While stores might all look the same from the customer’s point of view, in some countries they will be company-owned, in others franchises, as with Lacoste. A company launching a global perfume will choose an importer in some countries, a licensed partner in others and over time maybe create a subsidiary.

 AT: What are the pitfalls to avoid to “stay in balance”?

JNK: The balance between localisation and globalisation is a personal decision, unique to each company. Anyone who has seen a pendulum knows that equilibrium is unstable and that companies often swing from one extreme to the other. Lapeyre, leveraging its success in France, wanted to grow in the 1990s by globalising its model to all of Europe. You can get anything for your home at Lapeyre and put it together yourself. But there is a difference between assembling a BillyTM bookshelf and installing window frames in your house. France is a country of do-it-yourselfers, which is what gave rise to the Lapeyre store chain. When you do it yourself, you spend much less if you don’t count your time. In Italy, there is so much undeclared work that there is always a tradesman around who will help you install your windows. But the Swiss don’t like the DIY method. You might then say that you just have to offer the Swiss a home installation option. Yes, but that changes the business modelEither installation is free and your profitability is reduced, or it’s a paid service and the price gives the impression that, when all is said and done, Lapeyre is expensive and thus less competitive.

AT: Is this balance what we call “glocalisation”?

JNK: Glocalisation is a new word that was invented to describe how products are adapted to local markets without changing their essence. Let’s take an example: Koreans don’t like espresso coffee.  The strong presence of American GIs in Korea has given them a taste for less-concentrated American coffee, to which they add milk. Nespresso has accommodated this, of course. The company markets to espresso connoisseurs, but the Krups machine itself has been adapted for milk. In addition, the sales pitch is more oriented towards design and the aesthetics of the new object destined to enter the home. Let’s take a Chinese person buying a family car as another example. Thinking that the back seat in this one-child-per-family culture is principally for children would be wrong-headed. For this reason, BMW and Mercedes have increased legroom by 10 cm to make backseat passengers more comfortable. Volkswagen has launched a locally-manufactured model specifically for the Chinese market, whose size makes this worthwhile.

AT: So, in the end, does this strategy depend on the business sector?

JNK: Largely. If I were to generalise, I would say that luxury brands tend to globalise strictly. Tourists hate to learn that their home version of a luxury product is not the same as the version found in the rest of the world. Conversely the more a brand caters for the mass market, the more it must be close to consumers and adapt to their culture. At L’Oréal, Lancôme does not adapt, but Garnier does.

Discover the other interviews of Jean-Noël Kapferer:

Play the “France” brand

Storytelling: sell your brand before your products

Subscribe

Apax Talks

NEWSLETTER

Apax Talks is a digital magazine aimed at company managers. It presents growth levers for SMEs, with a focus on TMT, consumer, healthcare and services sectors.