Article Summary Localization: The Revolution in Consumer Market (HBR)

Article Summary Localization: The Revolution in Consumer Market (Harvard Business Review Article )

Main Point:

This article has extensively reviewed how big giants of retailing and consumer goods companies embracing localization and customization and going away from their customization. In fact, the increasing diversity among communities, local competitors, and lack of innovation are forcing big retailers like Wal-Mart, Best Buy, 7-Eleven, etc., to localize to some extent while at the same time reaping the benefits of standardization of their marketing, supply chain, and promotional strategies. This article also presents why retail chains and consumer goods companies should customize their stores, product assortment, promotional strategies, and product lines, etc., by using the  cluster approach, centralization of decision-making, and diversity in product lines. In addition, it presents the retailers can localize their business elements and put them in three categories of “Offer,” “Location,” and “Time.”

Lessons Learned:

I have realized the fact that consumer markets once dominated by big retailers and consumer goods manufacturers having standardization in all of their major operations of sophisticated supply chains, operational strategies are now moving towards customization and localization. In fact, they have to know the strategic dimensions of localization after facing the problems of local fierce competitors, diversity in life styles, wealth pattern and ethnic groups, lack of innovation, erosion of differentiation, and increasing going towards commoditization. However, they have not altogether shifted away from standardization, as they have innovative supply chain management programs, data-mining software, and RFID technology, which allow them to efficiently control demand and supply mismatches at each store.

Managerial Implications:      

As we have observed that too much standardization makes a company stagnant and result in a decrease in market share and profitability, and on the other hand, too much customization can sufficiently increase costs and damage the real brand image, it is important for mangers to use cluster approach to choose the business elements to be localized with the help of different analytical tools like CHAID by Wal-Mart. In this way, companies can limit the level of customization in order to achieve economies of scale at the same time as it has been done by Wal Mart, Best Buy, and American Eagle Outfitters. In addition, managers of retail companies have to think about the changes that will take place along their supply chain with the localization. This impact requires managers of consumer goods companies to bring diversity in their product lines as VF has done it successfully.

Question: As localization is being embraced by big retailers and consumer goods companies, will it force them to distort their brand image?

Ans:

As the globalization phenomenon is expanding at a very rapid speed throughout the world where differentiation among products, services, and stores designs is eroding very fast and leading towards homogeneity of product and services, it can be said that it might be difficult for big retailers and consumer goods companies to have the same brand image in diverse clusters made for customization. On the other hand, sometimes local government bodies and the retail environment of the market does not allow a retailer to have the same brand image and reap the benefits of standardization as a source of achieving economies of scale as witnessed in India, where the recent entry of the world’s biggest retailer Wal-Mart faced problems of introducing only two brands, making joint-venture with Bharti Enterprises and target only institutional consumers and retailers. Here we can easily understand this forced localization might have damaged the original brand image of Wal-Mart from everyday low prices and presenting its name as “Wal-Mart Bharti.”  In addition to it, sometimes these local arrangements do not allow big retailers to centralize the local operations to avoid too much decision-making. Hence, it is important for retailers and consumer goods companies to carefully review the local market before entering and localizing their products, services, and stores in order to maintain their brand image.

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