President Obama rightfully labeled the 20th century as the “American Century”; America’s vibrant liberal economy created most of today’s technology and brands, as much as its political and military power shaped the global political landscape. US inventions and brands continue to have the most profound impact on human life. By the early 90’s, the world was becoming an American backyard; USSR defeated, the Iron curtain dissolved and Eastern Europeans and Chinese lining up for a McDonald’s or Levis jeans, as they continue to do for iPhone nowadays.
Encouraged by victory over communism, the US political and corporate decision makers had reasons to believe that they had all the answers. At a strategic level, The End of History and The Last Man by Francis Fukuyama reinforced this “we know it all” perception, which infected boardrooms and management consultancy gurus who, in most cases, are the invisible hands shaping long-term corporate strategies. Fukuyama states: “The struggle between ideologies has reached its end in the universalization of Western liberal democracy. Although its realization is still in process in the material world, the idea of Western liberalism has triumphed, as evidenced by the worldwide growth of Western consumerist culture”.
Globalization became the buzzword eventually becoming synonymous with “centralization”. That ushered the ear of Global Business Units (GBUs), Central Marketing Units (CMU’s), Centers of Excellence and so on. It all looked great on paper. In reality, it meant that the products, sales, marketing, advertising strategies and media content that worked well in the developed markets should work equally well across the world. Most multinational companies joined the bandwagon and many replaced regional and local marketing functions with junior, execution-only, thinly staffed units who reported to central units across the Atlantic.
The net effect was a growing gap between brands and the local consumers. Consumer insights remained a buzzword that was preached, but not practiced. Management by remote and process-focused culture sowed the seeds of today’s crisis that many blue-chip companies are facing: P&G, GAP, Bacardi, Diageo, Mars, and GM. Some brands, such as, Pan Am and General Foods disappeared; some like Motorola and Nokia got marginalized, or brought back to life by billions of the American taxpayer’s money.
Today, the same iconic brands that were at the forefront of globalization are suffering from what seems to be the old-age syndrome; failing to appeal to emerging market consumers, shedding jobs, destroying careers and personal lives through serial internal restructuring and eroding shareholders value. At the outset of the globalization trend, most of global corporations, FMCG brands, fast food chains, CSD’s and many other categories were growing and corporate profits were soaring. Management and marketing gurus thought that it was globalization at work. So most corporations started compromising local consumer relevance to improve operational efficiency, under the pretext of “global consumerism”.
Yet, many have overlooked the massive effect of China’s year-on-year economic growth of over nine percent; the commodity-driven growth of Organization of the Petroleum Exporting Countries (OPEC) and Brazil, Russia, India, and China (BRICS); the effect of communist block and the Chinese population joining the global pool of consumers; technology-driven productivity improvements as well as the improved efficiency derived from mergers and acquisitions. The growth coincided with globalization practices, but in reality it wasn’t fueled by globalization. The current low growth of many global FMCG brands is a testimony that either globalization was not the fuel of growth, or if it did contribute it was one of many factors.
Whatever is the case, it seems that the rise of personalization driven by social media has put an end to it. Martin Scorsese once said, “I love studying ancient history and seeing how empires rise and fall, sowing the seeds of their own destruction.” Major multinationals behaved like typical empires that sowed the seeds of today’s crisis.
Over the past few years, many major brands have failed to grow or meet the promised results to shareholders – each for a different reason. Some fail to appeal to the low-income consumers of India and Africa, others are challenged by local eating habits of emerging health conscious consumers and regulators, and many fail to justify price premium over higher quality Asian products and so on.
The poor results of many corporations triggered a revision of the globalization practices. For example, Bacardi recently announced slashing the CMO position in favor of more local expertise. P&G is going through yet another restructuring that hopefully will give back power to the local brand teams. HSBC indicated that it would move away from its global brand, albeit for different, regulatory, reasons. Coke, Pepsi, McDonald’s and many others are also going through some form of restructuring in a bid to engage more with local consumers.
In sum, globalization had its merits, but it could not replace local relevance. Local consumers and cultural insights are an invaluable requirement for brand success. What works in developed markets must be validated for local relevance. Local content and above all creative minds should be nurtured, not reduced to paper pushers or editors of global campaigns. The consumer was, and is, king and brands need to reconnect with the local consumer if they wish to remain relevant.
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