localization the revolution summary

7/29/2019 Localization the Revolution SUMMARY

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Amat-UL Mateen Noor

UMT

Localization: The Revolution in Consumer Markets

By Darrell K. Rigby and Vijay Vishwanath

Summary:

From the era of Standardization, consumer markets are moving towards localization.

Previously Wal-Mart, Best Buy and McDonalds focused standardization of store formats,

merchandise mixes, operating and marketing processes internationally. But consumer

communities are moving towards Diversity very fast. Thats why retailers, consumer goods

companies are offering different types of stores, product lines, and alternative approaches to

pricing, marketing, staffing and consumer services to local markets. Standardization

discourages experiments and is easy to copy but Customization encourages local experiments

and difficult to copy and can be competitive advantage.

In 1970s, 40 lifestyles were sufficient to define U.S population but now it increase to 66% on

the basis of ethnicity, age, wealth, urbanization, housing styles and even family structures and

etc. Second many large brands have expanded at their maximum. Third, if areas are available,

there communities create resistance for standardized chains. Fourth standardization is hinderto innovation and experiment that lead to attractive new products, services and processes.

But technology in the form of scanners, data-mining softwares, radio frequency identification

of objects have provided deep insight of local costumers preferences and buying behaviors.

BestBuy, Tesco, VF and even Wal-Mart are working on localization. Wal-Mart stores

localization starts on drawing boards. Store near office should keep features of ready-made

meals. Wal-Mart logistics system manages 110 distribution centers in U.S alone.

Retail Link program is used to create maps of daily sales items in every store which helps its

suppliers what is needed and when. Similarly Wal-Mart keeps 3 canned chili types are kept

nationwide for 60 types further are placed according to local tastes. In five years, Retail Link

also helped in placing from 5 to 200 planograms which raised growth of soups.

But there should be balance between localization and standardization according to where,

when, what should we localize? Too much localization will corrupt the brand and increases in

prices while too much standardization can reduce market share and profit. For Example Wal-

Mart that ant and roach killer sell in Southern and Northern united state brought difference

because northern states focused as it roach killer and didnt bought unless it was replaced

with ant killer.

Localization focus should be relatively on such small variables which can affect bulk of

customers. Instead of making decision for each separate store, companies are searching forcommunities having similar likeness. For example American Eagle Outfitters found similar

buying pattern in Western Florida and Texas and California customers. American Eagle now

promote in these locations collectively.

Drugstores, departmental stores, mass merchants, big-box retailers, restaurants, apparel

companies and varies of customers good manufactures used customization-by-clusters

strategy. In clustering members of same cluster have strong association and weak between


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Amat-UL Mateen Noor

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different clusters. For example if a manager has to decide about the stocking of 100,000 items

in 1,500 stores for 1 year, for each stock she would have to make 54.8 billion decision which

are too much and can be meaningless thats why if she makes decision on the basis of timing,

place then she would have to make 2.6 million decision which a computer can handle.

Best Buy identified five types of customers from its 700 stores. First type is of JILL who is

busy mother and wants quick personalized help in technology. The company designed store

and kept household appliances, lightening systems and toys.Buzz customers need latest

technology.Barry is busy and rich who want personalized services.Ray is those who need

technology in proper budgets.Geek Squads are small business customers who need office

equipment. By keeping them in mind, Best Buy designed products and services staff according

to their needs. For cluster making, information gathering is most important and different

types of companies required different number of clusters. Sorting the product in right cluster

is also very important. If senior citizen product is piled with college communities this will drop

sells.

By learning localization with Lowes Lin and Target companies are gaining advantages. Cadbury

added kiwi-filled chocolate Cadbury kiwi Royale in New Zealand, Kraft developed Fiesta fruitypebbles for Hispanias, Coca-cola make four coffees flavor for Japan, Procter and Gamble

introduced different flavors in Pringles according to countries needs.

VF did extensive market search to know about its customers demands, color and style

patterns. Immigrant and non immigrant Americans, even different stores in same

metropolitan areas showed diverse results. According to VF due to localization, sales can

increase 40% but at the same time it can reduce inventory and price to 50%.

Centralization and Decentralization in localization shit is another issue. Decentralization is not

good for two reasons: First local manager has lack of data and skills for buying

deicisions.Second, it can bring cost complexity and inconsistency in business and business

owners are less willing to accept too much decentralization.J.S Penney found that due to

decision leeway, managers tired to minimize risk by ordering variety of products rather than

hot products. Due to which sales slowed down and popular products moved back. In 2000,

the new CEO developed fixture modules and centralized the systems which increase store sell

to 5%.

But in centralization, coordination was needed to shorten the view of demand patterns. For

this, data from internet sales, store scanners, loyalty cards, and data from third-part such as

ACNielsen were used.

Product suppliers and retailers relationship is also needed with Central Coordination.

Manufacturers and retailers have deep knowledge of where the products sell and can getdemand of locals and clusters.

Local manager has now more powerful role still in centralization by focusing on store guests

and find innovative solution of local challenges .Wal-Marts store managers focus on pricings

and hot items.BestBuy employee displayed a shirt in front of store about IPods stock which

increased store ranking from 240 to 60.7-eleven has created a system called centrally

decentralized.


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Amat-UL Mateen Noor

UMT

Localization requires high investment and data collection and analysis and for clustering some

economies of scale will need to remove. Investment return in localization is slow but bring

more opportunities in longrun.Quick move of companies to localized markdown strategies

creates ease in pricing, promotion and marketing of localization. The thinking of homogeneity

due to globalization is proving wrong. Instead of it, as the communities are becoming diverse

the same will be companies diverse strategies.

localization the revolution summary

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