International business strategy, differentiation and the need to connect at a local level

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Personal care section. Co-op Supermarket. Phan Thiet, Vietnam.

 By Grant Hall.  Founder of League Cultural Diplomacy

This post is part of the Going Global segment of where words fail

If you’ve read some where words fail articles you’ll know that I place a high degree of importance on strategy and connecting at a cultural level with your target market when doing business abroad.  In a previous post titled Business failures in China; a failure to connect at a cultural level, I wrote about some high-profile examples of what can happen when you fail to connect with your market.

I was introduced to the video below whilst taking a unit in International Business Strategy at the University of South Australia. It’s an interview with A.G. Lafley, CEO of Proctor and Gamble (P&G). There’s plenty to learn from it about strategy and connecting with your market.

Two things you must know about to assist you in your international market venture are the importance of differentiation and of connecting with your consumer at a local level.  In the video, Lafley discusses both.

Commencing with a quick synopsis of P&G’s strategy, Lafley states:

Broadly, P&G’s strategy hasn’t changed for 175 years.  P&G is on a differentiated, consumer focused, branded product strategy.[1]

Regarding differentiation, Pankaj Ghemawat in his influential book Strategy and the Business Landscape says:

As strategists paid more attention to customer analysis, they began to reconsider the idea that attaining low costs and offering customers low prices was always the best way to compete.  Instead, they focused more closely on differentiated ways of competing that might let a business command a price premium.[2]

The video provides further insights into the role that differentiation plays in P&G’s strategy, as demonstrated by the below exchange between Lafley and the interviewer:

Lafley: “We moved the point of entry for anti-ageing from 50 to 30.  We created boutique lines of products that looked like and performed better than the prestige products and then we sold them at a price point between prestige and mass and we sold them in mass channels”

Interviewer: “So you bumped the price up really.”

Lafley: “It was unbelievable… all of a sudden we had a business that was two and a half billion dollars instead of half a billion dollars.”

But it wasn’t simply a matter of bumping up the price that improved business.  Throughout the video Lafley talks about things like understanding customer segments, turning customers into ‘brand ambassadors’, being consumer focused, understanding how consumer segments change, doing consumer homework, connecting to changing consumer bases and keeping afinger on the pulse of the local consumer.  Two of P&G’s five identified core competencies are consumer centred; developing deeper understandings of consumers and having an ability to partner with customers.

Regarding the importance of global brands to connect with the consumer at a local level, Lafley makes the following statements:

Most of the consumers make very local decisions for themselves

When you have a brand that you think has the potential to be global, you have to make sure you can connect it locally to the consumer

We were able to create products in our line, and price points and packaging offerings that appealed locally

But ensuring your product and marketing is a good fit with your target market are not the only ways of connecting.  You can use aspects of culture to forge these connections, which is what corporate cultural diplomacy (CCD) is all about.  Low cost CCD initiatives might include sponsoring a local sporting team or cultural institution; such initiatives will help you to win hearts and minds in your target market.

If you want to know more about how corporate cultural diplomacy can help your business abroad, keep reading wherewordsfailblog.com, or get in touch with me.

Be sure to check out other posts in the Going Global segment.

Endnotes and sources are listed on the next page.

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