Beyond Numbers: Local Culture in Global Business Strategy

How many times have companies failed because they failed to take the culture, habits or core values of their target markets into account? As professionals working in the area of international business, we understand how logic and numbers are not enough to make a foolproof strategy. The cases of Gillette’s initial failure in India or Starbucks’ slow market penetration in Italy are no one-time episodes. What had happened?

• Gillette’s initial strategy was based on the sale of its premium multi-blade razor, a globally accepted product manufactured by a strong player in its industry.

• However, the strategy failed to account for the local habits of its target audiences in India – preference for single blades – as well as infrastructural limitations – limited access to running water – and a culture centered on barber shops.

• Once the strategy was localized, with products and messaging adapted to local needs, Gillette succeeded.

Even more strongly, Starbucks is still struggling in Italy, and as an Italian, I can fully understand why:

• Italy has a strong coffee culture where the quality of the beans, tradition, and the direct relationship between customers and local coffee shops matter. Even the look and the cup in which coffee is served matter.

• Starbucks, with its American-style offerings, is seen as a distant player, whose brand has little to do with Italy.

• To adapt, Starbucks launched a flagship ‘reserve’ store in Milan, the only one in the world for the company, with premium features and locally sourced materials to appeal to Italian sensibilities. (While still not a Starbucks regular client, I admit in my next trip to Milan I would at least be curious to pay a visit to this store).

Both cases are textbook examples of what American Nobel Prize economist and psychologist, Herbert Simon, defined as bounded rationality. Our decision-making abilities have limitations, information is incomplete, there are time or budget constraints and the capability to process the information received is biased by our own worldview. Approaching international markets always poses inherent challenges and the risks of falling into a bounded rationality trap are common. Working alongside consulting experts strongly mitigates such risks and helps organizations not just plan but make the most of their international venture.