Excerpted from "All Business Is Local: Why Place Matters More Than Ever in a Global, Virtual World"by John A. Quelch and Katherine E. Jocz.
Some pundits tell us the world is flat while others insist it’s spiky. Some politicians and observers tell us that cultures and values are converging, while others point to cultural divergences that generate world conflict. Some praise globalization, while others point to its dangers. We’re told consumers want to live in a digital cloud but still value the importance of physical touch. Only one thing is certain: competing trends are pulling multinational firms in all directions at once.
Accepting this premise means accepting that place still matters, that the local is still as significant as the global, and vice versa. It means believing that IBM is successful because it creates “Solutions for a Small Planet,” while HSBC attracts customers by being “The world’s local bank.”
Local marketing and global marketing must coexist. No global company is more quintessentially American than McDonald’s or Coca-Cola — both of which may represent the first physical contact that some people have with things American. Yet even McDonald’s cannot be a great global brand without being a great local brand. It could not penetrate, let alone dominate, markets the world over without expanding beyond its global core products and cultivating authentic local appeal. This has been a more gradual process in some markets than others — Europe accounts for 40 percent of revenues, while Asia Pacific, the Middle East, and Africa collectively account for less than a quarter. But almost every McDonald’s outlet is locally owned and locally staffed, and, wherever possible, uses locally sourced supplies. Each franchisee is encouraged to invest in the local community; and the global hamburger leader goes to great lengths to customize menus to local tastes.
Google is perhaps the ultimate “placeless” firm— all of its services and products are delivered to consumers worldwide via the “cloud.” It apparently doesn’t matter where Google offices or servers are as long as you can access its products whenever and wherever there’s an online connection. Yet recently the firm paid a high price for thinking it was “beyond geography.” In January 2010, Google announced it was considering leaving China— both its cyberspace market and physical presence there— after discovering the Gmail accounts of Chinese political dissidents had been hacked. This was not the first time Google had a run-in with China; for years it had balked at having to comply with Chinese government censorship of search requests on its Chinese- language Web site. In the ensuing spat between Google and the Chinese government, few believe Google won. Meanwhile, the company faced invasion of privacy lawsuits in Germany after it photographed streetscapes featuring private homes for its Street View mapping product. Google, a company whose primary product has no physical form, had suddenly become firmly rooted in place.