Why Globalism Has Made Local More Important

Today's Business Leaders Are So Preoccupied With Global, They Risk Neglecting the Importance of Local Excellence

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Today's business leaders are so obsessed with global that they risk neglecting the importance of local excellence.

The best global brands are also the best local brands.

McDonald's, for example, sources its raw materials in local markets, partners with local businesspeople as franchisees, employs local workers and develops managers, adjusts its menus and seating configurations to local tastes, recruits local sports and pop stars for marketing campaigns and gives back to local communities.

At HSBC, "The World's Local Bank," the global and local also run in tandem for two reasons: Local customers believe they are getting access to cutting-edge services if they are with a global bank, while global clients want to believe that the bank really understands local conditions so that they can penetrate those markets.

Appreciating the universal aspirations of consumers worldwide is all very well, but in the face of increasingly sophisticated national competitors, global brands must adapt to local preferences. If the extra outlays of time and money involved in adapting a marketing program are rewarded through higher unit prices or sales, adaptation may be worthwhile. But if it delays a product's global rollout and gives competitors time to catch up, the costs may be too great.

A local approach is often important even for high-tech firms. IBM founder Thomas Watson always emphasized employees giving back to their communities. A high percentage of IBM sales are to national and local governments; every "smart city" sale has to be heavily customized to fit the context.

Indeed, the nation-state remains the organizing framework for much of the world's population. Globalization may have integrated the world economy, but botched attempts to solve the eurozone crisis reveal the weakness of international institutions when officials are elected by the citizens of individual nations.

In tough times, nations hunker down, protectionism increases and local trumps global.

Premium luxury brands from Chanel to Mercedes-Benz continue to be bought by the global elite, but those purchases are minimal as a percentage of the total. Even at a global retailer like Carrefour, over 90% of sales are of local brands and produce. Globalization has raised hundreds of millions of Chinese, Indians and others out of abject poverty. These new consumers may be able to buy an occasional Coca-Cola, but the vast majority of their purchases are decidedly local.

In developed economies, the anonymity and questionable reliability of global supply chains have created unease, especially on food safety. Many consumers are willing to pay a premium for locally grown organic produce. The more we go global, the more consumers want to reinforce their communities, shop at neighborhood stores and support nearby farmers. For them, preserving the local village is more important than enjoying the global one.

Technology has enabled consumers to shop the world and small businesses to sell to it. This makes for bountiful choice, increased consumption and economic growth. The same technology is now empowering local merchants to market with pinpoint accuracy. Time - and place-relevant messages can be targeted to GPS-enabled phones within the traffic area of a cinema, shop or restaurant.

Billions of transactions occur every day. The vast majority are local, between buyer and seller. Even the most global business must win sales one by one, with boots on the ground, responding to local cultural differences, adapting their offerings according to local needs and preferences. Consider UPS or Frito-Lay. For such companies, a grand strategy without local execution would be like music without instruments.

John Quelch and Katherine Jocz are authors of "All Business Is Local" (Portfolio, 2012).

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