Banter Without Borders

Leveraging the Global Marketing Team

In an August 14, 2009, Wall Street Journal article entitled "After Early Errors, Wal-Mart Thinks Locally to Act Globally," Anthony Hucker, the executive in charge of expanding winning Wal-Mart formats globally, states: "What we have learned in the past couple of years is that one size does not fit all." Mr. Hucker's statement refers to using innovations pioneered, not in the U.S., but in various countries abroad. This sharing of information among the global teams responsible for these countries has, for example, led to adopting store formats that were found to be successful in some markets and then integrating them into other markets to better optimize local shopping habits. This global shared learning has also resulted in offering products and experiences that are more in tune with local tastes.

Such an evolved strategy contrasts dramatically with that initiated a decade ago when Wal-Mart's global expansion began. At that time, Wal-Mart's charge was to duplicate the U.S. model everywhere, while making accommodations only for local language translation. As an example, Marcelo Vienna, a Sao Paulo native who is now Wal-Mart's Brazilian chief marketing officer, had originally been sent to Wal-Mart in Branson, Mo., to translate store-management manuals into Portuguese, all the while wondering how this would play in Brazil. Coming from a culture where questioning authority is not acceptable, these direct translations were accepted and acted upon; with less than optimum results.

Furthermore, Wal-Mart's initial global expansion strategy was to export the U.S. theme "lowest everyday pricing" as its comparative advantage. This was supported by Wal-Mart achieving global purchasing advantages through leveraged negotiation with global branded manufactures, many of whom they had established relationships with domestically. This strategy, however, begins to fray when locally produced items in new markets are preferred and where, in many international markets, store brands (private label) tend to dominate branded items.

I found this out first hand in the early 90's when I addressed an audience of German retailers and manufacturers on what to expect with Wal-Mart's impending entry into the German market. Their overall reaction was interesting. Although still cautious, a number of German retailers confided that Wal-Mart could not possibly buy at lower prices from established German suppliers, given these retailers' longstanding relationships with their suppliers. Many of the attendees also commented that the traditional early morning Wal-Mart pep rallies (part of the Wal-Mart culture), would fall flat with German workers (soon to be ‘associates'). And, they opined that Wal-Mart store greeters would be seen by the German consumer as an additional cost that provided no true value. It would seem that Wal-Mart's hubris prevailed, and that their subsequent exit from the German market could have been foretold, given this entry strategy.

After a number of such early cultural gaffes, Wal-Mart has moved to a localized strategy that has been credited with helping to reverse early global expansion missteps and has resulted in current international revenue and profit growth exceeding that of the U.S. market. How could these missteps have been avoided in the first place? One way is by listening to and leveraging the knowledge of the global marketing team. As the WSJ article points out, Wal-Mart is now listening to its local market colleagues rather than lecturing them on the "Wal-Mart Way."

Wal-Mart is not alone in making blunders in their early global expansion endeavors. Luminaries like Coca Cola and McDonalds stumbled early on with their strategy of exporting the "American Way." It was not until these giants understood that there are no global consumers, and all global markets are local, that they began localizing their efforts. This came about - albeit after all else had failed - by listening to and adapting what their local marketing teams had been saying all along.

The end result for these and many other global marketing organizations is that the added cost of localizing efforts, versus the cost savings associated with globalized programs, are being offset by expanded market penetration which in turn generates commensurate gains in revenue and profit.

A more in-depth analysis of Wal-Mart's expansion stumbles can be found in Anil Gupta's book, "The Quest for Global Dominance."

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