The Power Distance Index, created by Geert Hofstede, is designed to measure “. . . the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally.” Essentially, it measures inequality in a community and can be used to analyze consumer behavior based on the consumers’ place in the hierarchy of an organization or community. The higher the PDI, the more a community relies on a hierarchy. The lower the PDI, the greater equality between the rich and the poor.
How does a high PDI impact consumer behavior?
The market for luxury goods is particularly impacted in countries with a high PDI. With the greater disparity in social status, the drive to purchase luxury brands, like Louis Vuitton or Rolex, sky-rockets because consumers are trying to maintain or level up their social status. Luxury goods=high social status.
The direct impact of “luxury goods=high social status” is the encouragement of the counterfeit market. Almost all high-end designer brands are subject to knock-offs. Some say that counterfeit luxury purses are a pure violation of intellectual property law. However, some say that the counterfeit market actually helps luxury companies. During a lecture at Fordham Law School’s Fashion Law Bootcamp in May 2019, some speakers spoke about how luxury brands derive benefit from the counterfeit market because the designs that sell well on the street are likely the same designs that will start trending in the authentic market. Luxury brands are gaining valuable market research from a fraudulent industry, born from consumer behavior in a high PDI community.
How does a low PDI impact consumer behavior?
The inverse is true of countries with a lower PDI. Consumers in a country with a low PDI do not feel the need to buy their social status with luxury goods because the disparity between classes is so low. Consumer behavior then becomes a more intricate conversation because there is not such a huge societal gap motivating their purchases.
Thank you for reading!
Have you ever bought anything (or NOT bought something) to impact your own societal status? Let us know in the comments!
Before entering into a market, especially an international market, it is extremely important for companies to know as much as they can about how beneficial the market will be for the company to enter into. One way of ensuring that the executives are making the right decision to enter (or not) into a market is through the use of market intelligence…
Market intelligence is the use of external information by companies to make better decisions about their role in domestic or, in this case, global markets. This information could consist of things like: online resources (company websites, comments on social media, news articles, etc.) data about the population age, consumer habits on travel or spending, government laws & regulations, facilities within the target country, etc. Having and understanding this information is what gives companies and the executives that run them a “higher IQ” in regards to what will make their business successful in the global marketplace. This external market analysis goes hand in hand with something called business intelligence, which directly relates to the company’s internal information such as sales reports, shipments, returns, budgets, purchases, etc. The collection and analysis of this information is what allows businesses to make sound decisions within their own company. One could argue that business intelligence should be analyzed and understood by companies before they even start thinking about market intelligence or entering into a new market. Similarly to the famous question, “what came first, the chicken or the egg?” which do you think comes first, business intelligence or market intelligence?…
Now, lets look at some examples of how market intelligence was and was not used by companies when entering into the marketplace…
Back in 2011 and 3 years after the company had launched in the United States, Airbnb decided that it wanted to really start honing in on the UK and expand its business there. The company wanted to be swift in their decision making regarding the quickly growing market, but needed to accumulate information about it first. So, they partnered with a company called London & Partners and collected competitive environment information which helped to boost their market intelligence in order to make the right decisions when moving forward. As a result, Airbnb grew by 748% in 2012 and listed a total of 10,000 properties by the end of the year. Without market intelligence, Airbnb could have ended up making poor decisions within the UK market…
On the contrary, Blackberry did not make as good of decisions back in 2011 when they did not have enough market intelligence to understand that there was a massive change in consumer behavior. Up until that time, predominant smartphones did not have touchscreens and typically had physical keyboards on the phone itself. However, companies like Android and Apple started to pave the way for touchscreen smartphones around 2011, which left Blackberry in the dust. Blackberry saw this coming, but decided not to act until it was too late to do so. The company is not a major player anymore in the industry, but very well could have been if they had more market intelligence.
Marketing on a global scale is no simple task. Even some of the most well known and capable companies in the world have suffered from failed global marketing strategies. Below I am going to analyze 5 of the most common mistakes companies have in their global marketing strategies.
Not Specifying Markets – Often when expanding to a new market, companies will group areas into broad regional markets such as “Europe” or “Asia” and this can be very costly. When markets are broad like this, often the cultural diversity in those regions is underestimated. People identify at a national level and most countries have their own currency, laws, culture, and business practices. Companies must break up their market segments into specific countries and have specific goals and do specific market research for each country’s market so that they can truly understand who they are selling to and how to position their product in a way that drives success in each country they operate in.
Forgetting About the Internal Side of Things – When companies are planning a global expansion, there is so much to consider from who you will be competing with to how you will get your product in the hands of the consumer, that it can be easy to forget about everything else going on in the company. Often when companies have a heavy focus on global expansion, they get so distracted that their operations and quality of service back at home often begin to suffer. Such can be said for companies such as OYO. It is important to remember what put the company in this position in the first place while devising a global marketing strategy.
Not Adapting Product to New Markets – Many companies have one main product that makes up a large portion of their sales. This same product in a different market may have zero sales because they are selling their product to two different markets who have different customers with different preferences. Software, for example, may have a major market in one country, but another country they market to may not have much experience with the product so they need a more basic version.
Not Including Locals on Global Marketing Team – No one knows a market better than a local. Companies who fail to include locals on the global marketing plan often have issues with relating to locals or things get lost in translation. There is nothing worse than having a mixup such as Ford introducing the Pinto to Brazil, or as they know it as “men with small genitals.” Yikes. I can’t emphasize enough how important it is to include true market experts on the global marketing team. It could save a great deal of embarrassment and it could greatly benefit the marketing success in new markets.
Not Adjusting Marketing Channels – Companies who attack new markets with the same plan they had in their domestic market are either in trouble or about to be in trouble. The way that the West conducts business is not the same as everywhere else in the world. For example, some countries place a significant cultural emphasis on relationships. An American company cannot just arrive to every country for a business partnership, have their two meetings and leave. Additionally, different countries communicate in different ways and different modes of communication are used all over the world, resulting in a necessity for unique use of marketing channels in every country that a company enters.
What Differentiates a ‘Global’ Marketing Strategy?
Many companies have a thorough understanding of the marketing tactics used to strategize in their home country, but what happens when the decision is made to pursue business across foreign borders? The development of a successful global marketing strategy involves a series of choices and careful analyses of the local region, which can be simplified into the following steps:
Identify the market you wish to enter: Conduct thorough research on the potential global marketplaces in which you may choose to expand your product. You will want to forecast the likelihood of successful growth in this market, the long-term sustainability of your product or service in this environment, and the overall potential demand for your business in the area.
Design your strategy: Once you have identified an international region with suitable demand and promising growth, you can begin to develop your global marketing strategy. This is where the complexity of the global aspect comes into play – your company must do more than enter a foreign market and translate your existing marketing practices into their language. You must develop an in-depth understanding of the culture, values, and preferences of the locale. Depending upon your goals as an organization, and how these cultural nuances align with your existing practices, you may choose some variation of the following 3 global strategies as discussed in Pankaj Ghemawat’s framework.
Adaptation: A strategy that seeks to adapt to regional preferences, changing some aspects of the business in the process.
Aggregation: A standardization strategy that finds synergies amongst global markets, allowing for the creation of expansive economies of scale.
Arbitrage: A cost reduction strategy that aims to optimize each element of the supply chain, often locating different parts in different areas that best utilize the unique economies and offerings of the region.
Strategy implementation: Once you’ve selected an approach to global marketing strategy that best suits your business’s needs and the preferences in the global market, you are ready not only to begin developing a plan to implement your strategy, but also to analyze its success. I find it important to determine KPIs, or key performance indicators, that will allow you to benchmark the success of your global marketing strategy relative to your projected goals. Through consistent monitoring of consumer responsiveness to your global marketing techniques, you can develop a comprehensive understanding of whether you selected the best global marketing strategy for your needs, as well as if there are any areas that can be improved upon to further propel your company’s international success.
Our Top Picks: Best of Global Marketing Strategies
We’ve rounded up 3 companies that we think have done an outstanding job at creating and implementing unique, effective global marketing strategies. These companies can serve as both references and inspirations when developing your own global marketing strategy.
Spotify: The Swedish born music streaming platform has reached astronomical success across 17 countries by adopting an out-of-the-box global marketing strategy. They determined what most music streaming consumers had in common regardless of region, which was determined to be a desire to discover new content. In order to deliver this new content to their international markets, they thought beyond the confines of music genres, instead adapting their recommendations to things such as mood and lifestyle. This allows their service to adapt to the unique desires of consumers across various marketplaces, while maintaining one standard service.
LEGO: The iconic building blocks brand was able to use a global standardization strategy due to their primary, heartfelt belief: “Creativity and building are common to all children.” Originating from Danish origins, LEGO has proven itself to be a global phenomenon loved across cultures. Though overall products essentially remain standard, LEGO did adopt an adaptation strategy in regards to their marketing tactics when they realized that the promotional concepts they employed for their American products – such as free miniature gift packs of blocks included with the purchase of larger sets – were not garnering the same consumer receptiveness across markets.
McDonald’s: Who isn’t familiar with those famous golden arches? Thanks to McDonald’s widely-implemented global marketing strategy, they’ve developed not only an iconic and instantly recognizable brand, but also a global presence that spans every operating continent in the world. Their strategy focuses heavily on adaptation, with food selections varying to match consumer taste preferences in each region. Even outside of the continental United States, Hawaiian McDondald’s locations feature items such as spam and rice, staples of the local diet. In India, the chain focuses on offering more plant-based selections due to religious dietary restrictions that would prevent many customers from consuming McDonald’s typical range of beef products. Beyond menu items, McDonald’s also has made an effort to adapt the physical appearances of their stores to the surrounding region, for example, the French Champs-Elsysees location pictured above features an ultra-modern, black exterior with sleek minimalist furniture inside to match the high end atmosphere of the surrounding area. This exemplifies the cultural intricacies that must be studied and understood before adopting a global marketing strategy.
In today’s world, most businesses are viewed as being global; they do business all around the world. Many businesses start in a domestic market and expand globally over time. Think Amazon, Peloton, H&M. With the expansion of the businesses from a domestic market to a global one, these companies undergo the evolution of marketing. Here, I will break down the five types, or steps, of marketing.
Companies start by marketing products domestically. These products are marketed irrespective of the global environment, as they do not sell their products internationally. Target, for example, is a well-known store internationally (or at least in Canada), but yet it only operates in the US. Since they only operate in one country, taking into account the global environment would not be beneficial (having failed to expand to Canada recently, they probably won’t be trying international expansion for a while).
Some companies, however, undergo successful expansion. Potential international customers may ask the company to sell them products, moving them into the export marketing stage. Once comfortable with internationally-selling their products, they can start to create and market country-specific products. This is called international marketing. First and foremost, as mentioned in the previous post, the company must take into account the different cultures. Then, there are different government policies in every country. But if you have come this far and are successful…
Then maybe you should take the next step and realize economies of scale. These companies take on multinational marketing, bucketing different countries into regions based on similarities. These companies are smart, realizing that they do not need to treat every country as a separate entity, and are only one step away from being a global marketing company: full global integration and standardization.
“The multinational corporation knows a lot about a great many countries and congenially adapts to supposed differences….[whereas]…Global corporations knows everything about one great thing”
Theodore Levitt, The Globalization of Markets
Before getting back to the question of whether marketing is global, take a look at these seven marketing fails. These companies translated their slogans into another language without consideration of their true meaning.
So, is marketing global? In short, marketing can be global, however, I do not think it should be. In my mind, to market globally means you are not taking into account societal differences. One can try and find enough similarities between the countries, or sell products most countries are willing to buy as-is, however, the US is different from Brazil which is different from China which is different from India and Russia and the list goes on. As you saw in the above video, even language translation needs to be taken into account. So how do you market one product to all these people the same way? Isn’t it more beneficial to stay in the multinational marketing stage and make minor changes for every market to gain market share while still realizing economies of scale?
When we think of the world, we tend to associate certain traits, or behaviors, with specific countries. If you stumble upon an overly helpful/nice person, the joke can be made that they’re Canadian, or if you know any Indian “aunties”, you’ll know they’ll constantly and persistently offer you food.
Why is it that we associate specific traits, behaviors, personalities to specific countries? The answer is: culture.
Culture begins to embed in us at a very young age, and as we grow and become more perceptive of the world, we are more and more influenced by our surrounding environments. When I (Maria) first moved to California, the more I conversed with California residents, the more my English evolved and was enhanced. I no longer speak English the way they do in Lebanon – my home country. As such, I have been, according to my friends, “Americanized”.
In his TedTalk on “How Culture Drives Behavior”, Bourrelle argues that “we all see the world through cultural glasses”. This lens, or this perspective, is an inherent part of human beings.
Consequently, how does behavior drive our choices?
Power Distance Index (PDI)
A large degree of power distance indicates that societies accept a specific hierarchical order, where each entity has a “rightful place”. A low PDI indicates more distribution of power and providing equality to all. This HBR article depicts the large PDI in Malaysia, mostly attributed to the Malay feudal system. In reality, global brands operating in high PDI countries focus on the “rightful place” concept, and operate its business under that pretext so as not to disrupt the social construct of a country/area.
Individualism versus Collectivism (IDV)
This dimension tackles how people look after themselves within a society. Individualism is when a person focuses more on the immediate “I”, or “me”, which also engulfs family and close ones. On the other end, collectivism is based on communities, whereas each individual belongs to a specific group, with strong emphasis on loyalty and belonging. In reality, a collectivist society values relationship-building, after which business can be conducted, whereas in an individualist society, a person would much rather gather all the information about a product/service and be on their way.
Masculinity versus Femininity (MAS)
In masculine cultures, a male and a female’s role are different, whereas a feminine society is one where cultural roles overlap. In masculine cultures, household work is mostly handled by women. For example, in Lebanon, you will rarely see an ad for a detergent featuring a man, as that can be perceived as offensive to the traditional role a male holds in the family, or just simply because it’s not relatable.
Uncertainty Avoidance Index (UAI)
Uncertainty avoidance can be defined as “the extent to which people feel threatened by uncertainty and ambiguity and try to avoid these situations’ (de Mooji & Hofstede 2011). Countries with high UAI have a need for structure, clarity, rules and formality, and are less open to innovative or new concepts. As such, introducing technological innovations that are new (and probably not yet regulated) in a country like Greece, which has a very high UAI (roughly 100), can result in failure.
“The Greek myth about the “birth” of the world tells us a lot about high Uncertainty Avoidance: at the very beginning there was only Chaos but then Cronos (Time) came in to organize life and make it easier to manage.”
Long/Short Term Orientations (LTO)
This dimension measures the extent (or limit) to which a society thinks into the future. In long term orientation societies, the focus isn’t on imminent happiness, rather it’s pursuing a more long-term steadiness. However, in short term orientation societies, the focus is mainly on the day to day, and how to be happy or present in the moment. This would highly influence a consumer’s behavior vis-a-vis willingness to invest in a certain product, service, market etc…
Indulgence versus Restraint (IVR)
Social norms and expectations highly drive this dimension. It essentially measures how much a society gratifies itself. In Lebanon and if you’re a woman, you may find yourself in situations where you really want that extra piece of cake. If you do reach for it, brace yourself for “but you’re going to gain weight!” comments. These dynamics highly influence an individual’s indulgence, or lack of.
Before getting into these dimensions however, don’t forget about the importance of language, and don’t do what IKEA did:
With the increase of globalization around the world, organizations in almost every country have deemed it necessary and important to start operating on an international scale in hopes of increasing profits and brand awareness. Although it has become easier for companies to tap into foreign markets (with the development of technology and other resources) they still have to make crucial marketing decisions when entering into these markets and international environments in general.
If your company is in the process of deciding whether or not it wants to push into an international marketing environment, it must first be aware of and address the various underlying factors that will affect its business in this new environment. Failure to do so can result in project or company failure. These factors within an international marketing environment include:
The Political Environment ( How stable is the target country? Is there social unrest or active terrorism? What type of political framework does this country operate around? Will operating in this country affect trade? Etc. )
The Social/Cultural Environment ( What language does the population speak? Is your company sure that its products or services do not mean something different in the country’s native language? **More on this below**… Do your products or services align with the values of the target population? Do you know how business deals operate in this particular country? How will the colors and images in your products and advertising resonate with the target population and will they have a negative reaction to them? Etc. )
The Economic Environment ( What is the economic situation within the country and can consumers afford your products or services? Does the country impose tariffs and how will this affect your prices? Does the government directly support local business, as Japan does for local rice farmers, and will this make it difficult for you to compete? What is the exchange rate between your domestic currency and this foreign currency? Etc. )
The Technological Environment ( How developed is the technological infrastructure in this country and can it support your business? Does the population have access to technology or even electricity? What are the costs associated with setting up your business’ infrastructure? Is transportation available? Is there opportunity for local workers to be trained to use your technology or will your company send domestic employees to work? Etc. )
Of course, this list is not all-inclusive, but it is enough to adequately stimulate the minds of top-level executives and potentially reduce their chances of failure when entering into an international marketing environment…
As previously mentioned, it is very important that your company’s products, services or brand do not mean something completely different in a foreign country/language, especially countries in which you hope to do business. This article does a great job of outlining the 20 “greatest fails” by companies in regards to this topic!
In conclusion, the international marketing environment can be tricky to navigate as there are many factors that can potentially affect the success of your business operations in a foreign market. However, if your company chooses to address the key points above and take initiative in answering those types of questions, then the sky is the limit!
International marketing environments can consist of many forces and factors that can greatly affect marketing managers decisions and intentions for marketing products. The difference between cultural environments can consist of influences of religious, family values, educational and social systems within marketing systems. Failure to consider these cultural differences when creating an international marketing strategy can be a primary reason for many company’s failure.
For example, in Canada, language has a major influence on how marketing campaigns must be launched, since a product must be presented in both English and French, which directly affects product marketing and additional product costs. Colors also have different meanings in different cultures, and can change how a brand and/or marketing campaign is perceived by consumers abroad. Ultimately, every consumer’s values arise from his/her moral beliefs that are learned through experiences. Understanding these cultures on a deeper level can drastically change a brand’s strategies and marketing decisions!
Swiffer’s Failure to Launch
I remember one of the most interesting examples of how culture can affect an entire marketing strategy was Swiffer’s “Quick and Easy” branding campaign was completely shunned by women in Italy, greatly varying from it’s success in the United States. Italian women are known for keeping some of the cleanest homes around, spending on average 21 hours a week on household chores. Swiffer assumed this should make them the perfect consumer for cleaning products, especially one that is known for its convenience and ease. However, after many interviews and studies they found that Italian women believed that the amount of work they put in to keeping their house’s clean is a direct correlation to how much they love their family. Some women even referencing how using such product’s feeling like “cheating.” They want tough cleaners, NOT timesavers. Thus Proctor & Gamble had to completely re-brand and market the Swiffer product, adjusting to the new external environment. This a major insight that affected the company’s success in penetrating a new market abroad.
How Companies Can Adapt Going Into 2020
Deloitte published its first ever Global Marketing Trends report for 2020, detailing themes for marketers around the world to focus on in the coming months. Here, we’ve recapped the most important themes for your business to adopt when developing an international marketing strategy.
Consumer Participation: With the plethora of pop-ups and interactive experiences, it is no surprise that consumer participation was deemed a top global marketing trend for the upcoming year. Deloitte Global CMO Diana O’Brien states that by establishing new methods of consumer participation on a global scale, “businesses can turn willing customers into brand ambassadors, influencers, advocates, collaborators, and even innovators.” I recently encountered a relevant application of this concept as I read about Louis Vuitton’s new restaurant venture. They are expanding across international markets to create the ultimate ‘consumer participation’ in the form of a luxury restaurant located on the fourth floor of their Osaka, Japan flagship store. As they penetrate the luxury experiences category, it will be interesting to see how Louis Vuitton continues their growth within the numerous geographical markets they serve.
Experience Debt: Experience debt is a result of unintended consequences of our digital age – this includes things such as isolation and lack of personal fulfillment caused by technology. How is this relevant to international marketing? It is believed that marketers can ‘pay off’ this experience debt through increased cross-cultural human experience that reflects a common goal between businesses and consumers of various backgrounds.
Adaptation: It is essential for businesses to be readily willing and able to adapt to ever-shifting cultural environments. In a marketplace where consumers across the globe are treating brands as more ‘disposable’, marketers will need to utilize data and understand cultural intricacies to generate meaningful brand relationships that generate consumer loyalty.