Centralization or Decentralization?
It is easy in 2005 to labor under the misconception that globalization was only invented in the 1990s. However, the concept of globalization was being hotly debated in the 1960s when the big question was "Can you standardize multi-national marketing?" and Robert Buzzell  argued that "There are significant opportunities for cost reduction via standardization in a global marketing strategy".
There was a conflicting view from the CEO of Philip Morris who was of the opinion that international marketing is purely the sum of all the individual country marketing and that this situation would remain "until we achieve 'One World'".
Standardization versus Product Customization
One of the legendary examples used to show the success of standardization is the Italian-led onslaught on the domestic appliance market at the time. In 1955, only three per cent of Italian households owned refrigerators and one in a hundred owned washing machines. Within a decade, Italian manufacturers were producing around 2.6 million refrigerators and 1.5 million washing machines and had captured a significant share of the wider European market as well as a major share of their home market.
Across Europe there were many differences in perceived consumer preferences relating to the size of kitchen and availability of hot water. The specifications for the German market were typically much higher all round. Not surprisingly, therefore, the market-leading German brands were highly priced and heavily advertised. However, the smaller, lower-priced Italian models rapidly established a 12 per cent market share, indicating that a sizable proportion of demanding German consumers were violating all expectations and buying simple, low-priced Italian machines.
In an attempt to counter this flood of Italian washing machines spilling into the market, Hoover commissioned some market research into the local product preferences then prevailing in the market. It revealed some surprising results.
The Italian Whitewash
The table below is a subset of the findings of Hoover's 1960s market research.
* 34" was being adopted as standard for work surface height in Europe.
^ Most British homes had central heating systems.
^^ West Germans preferred to launder at much higher temperatures.
The research showed that, although consumers said that they wanted certain features, they acted otherwise if the price and promotion were right. The Italians were able to successfully penetrate all the rapidly growing European markets by standardizing and reducing costs. Virtually overnight, UK consumers abandoned their doomed love affair with utilitarian, upright, top-loading, plodding agitators and succumbed to the seductive charms of the smooth, convenient and low priced Italian immigrant.
This example - and many others like it - strongly suggests that the essence of globalization is as follows:
As long as the price is more competitive and the quality acceptable, you can largely ignore calls to customize the product to suit local market needs.
As a result, the early clarion call of globalization was, notwithstanding cultural, legal and language differences, to make standardization a core aim of any potential product and marketing strategy, while maintaining product quality and driving down costs.
Promotion - the last opportunity to communicate?
But does this view hold up today? Clearly, part of the global success of products such as the Sony Walkman and the iPod has been derived from the centralization and standardization of the Product and Price. But what about the other important components of the marketing mix - Place and Promotion?
Standardization and centralization are clearly evident when considering today's channels to market - or Place. On one hand, there is the rise of direct channels, fuelled by the penetration of the Internet and the greater availability of credit cards - think Dell, Expedia or iTunes.
On the other, there is the increasingly dominant position of the retailer. It is increasingly difficult for brand owners to acquire and defend shelf-space against many own-label and other brands. Just consider the might of Wal-Mart, Tesco and Carrefour on the global retail stage.
In both these instances, communication is clearly fundamental to success, whether the aim is to reach out and drive consumers to a website or to stand out and attract consumers in a dense retail environment.
In a market so controlled by powerful and often dictatorial retailers, the last and potentially critical selling opportunity available to the product vendor is created by Promotion - advertising, product information, in-store promotions, and packaging.
This begs the question: "Is effective communication the global vendor's last chance to really influence the target customer?"
Let us examine the one element of the Promotion mix that consumers see all the time: the box or the packaging. Whether it is a laser printer, digital camera or smartphone, the packaging alone must communicate at many levels wherever the product is being sold in the world. In many countries it must carry a vast array of information from contents to environmental compliance just to get onto the shelf.
This leaves limited space in which to deliver the two main communication components that influence the consumer's purchasing decision - the marketing messages and technical information.
Most packaging displays persuasive marketing messages that clearly communicate product benefits and create a positive impact on the consumer. More important, though, is factual or technical information, the lack of which can have a very negative impact. For example, does the product support Windows XP or, more critically for those with a potentially fatal allergic reaction, does it contain nuts?
Not only is central control of messaging and branding essential but the articulation of the message and the brand identity must also be effectively localized to ensure clear understanding of the product benefits and local differentiation in the target audience in each country.
This can reach critical importance where an aim of the marketing strategy is to be perceived as a local (if not community) vendor rather than a huge, aggressive, soulless multi-national. For example, after the acquisition of a German Linux supplier, Novell rapidly disenchanted many customers with its corporate American approach. The consumer response was so negative that Novell was forced to carry out a remedial campaign communicating that its Linux products were still made in and supported from Germany, where they were originally developed before acquisition.
The trend towards the centralization of advertising and marketing communications
There is sufficient evidence that a high degree of standardization can benefit a global marketing strategy and that this can only be achieved if it is supported by a global marketing authority (although this does not necessarily imply a hierarchical approach, rather a focus of accountability and responsibility).
Marketing to an ever-increasing number of countries, each with different languages, attitudes and legal restrictions is never going to be easy and, by its very nature, seems to defy standardization.
Different companies adopt different marketing models and may have champions of both highly distributed and highly centralized approaches within their organizations. However, the desire to reduce time-to-market and drive down costs appears to be encouraging the trend towards centralization.A rebranding campaign for Daewoo
A recent high visibility re-branding campaign for an automotive client, Chevrolet, provides a good case study of the benefits and challenges of the centralized approach.
The campaign that was executed included TV advertising, direct mail, an interactive CD-ROM and a microsite into 11 European languages. The challenges of managing this project to the satisfaction of all of the countries were huge and there is no doubt that a campaign of this technical and logistical complexity could be a nightmare without both a high degree of centralization and co-operation between the corporate HQ, the countries and the client's agencies.
These are some of the lessons that were brought home to us during the localization of this campaign:
Is there a case for decentralization?
Despite the trend towards centralization, many companies still adopt a decentralized approach to their marketing communication. This model often stems from how the corporate structure has evolved historically and is indicative of the relative power of the country sales and marketing organizations. In either case, corporate decision-making is ceded to the country offices who then choose exactly how, when and where they will promote themselves in their domestic markets. This is the model as described by Philip Morris' CEO in the 1960s.
The typical benefits of this approach are as follows:
There are, however, a number of downsides that include:
It is also worth remembering that any international campaign is only as good as its weakest locale. While it may be possible to negotiate lower individual country costs by using local suppliers, there will still be central costs to be borne for managing the overall project direction and co-ordination if the campaign is to meet its objectives and timelines.
So why centralize?
We have found that, where the client centralizes marketing activity, it can:
Inevitably, there are some downsides to a centralized approach that include:
Like most things in life, neither approach suits everybody all of the time and many companies use a combination of both approaches depending upon the nature of the campaign, the objectives and timescale. There will always be some need to execute local sales promotions and events that cater for the specific needs of the local market.
By analyzing some of our most recent projects across the spectrum of industries, campaign type and country scope, we have identified where centralization and standardization can enhance and benefit marketing communications at a regional or global level.
The steps to centralization success
When you are at the planning stage of an international communications campaign, it is worth adhering to the advice below:
Guidelines for campaign execution
When you move into the executive phase of your international campaign, you can avoid costly repetition and duplication by:
International campaigns can be complex but we have found that the centralized approach does have a lot to offer in terms of ensuring brand consistency, evoking the correct response in the target audience and meeting tight deadlines for high visibility projects.
 Robert D. Buzzell Harvard Business Review 1968
This article was previously published by GALA: The Globalization and Localization Association (http://www.gala-global.org).
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