A Two-Step Strategy For Competing In A Diverse World Market Environment

Disclosure: I own shares of YUM and DEO

How can you sell more smartphones in US, Europe, Japan, and Eastern China, where every consumer already carries one? What about in rural China and rural India, where scores of people do not have a smartphone, either because they cannot afford one or they find hard to learn how to use one? How do you market shampoo to consumers with a large disparity of preferences or incomes? What about fast food?

With a two-step strategy:

The first step is to determine whether the target market segment is pure global, pure localized or semiglobal, avoiding the pseudo-dilemma (globalization or localization), which has proved to be costly for other companies.

The second step is to come up with the right product offering (bundle) to address the peculiarities and specificity of each market.  Diageo (NYSE:DEO), Yum Brands (NYSE:YUM), and P&G (NYSE:PG) overseas success exemplifies this strategy.

All-three companies have treated the world market as a collection of all three segments, devising value propositions that include the right mix of global and local product characteristics to address the peculiarities and specificities of each market segment, as discussed in a previous piece.

Beverage maker Diageo mixes global drinks with local drinks and liquors to create product offerings that cater to local markets. Diageo's Gordon Edge, a mix of gin and lemon, caters to the UK market. Meanwhile Safari Luna, a mixed of fruit and liquor, caters to the Netherlands.

Allied Domecq's Presidente brandy and cola mix caters to the Mexican market, while TG — a mix of Scotch and guanana — caters to the Brazilian market. Campari's Mixx, a mix of grapefruit and Campari, caters to the Italian and Swiss market.

In some cases, Diageo has localized marketing to promote local brands, as is the case with its Bulliet brand, marketed to local bars. "By restricting ad spending and selling only to select bars, Diageo aimed to create an independent, hipster aura around Bulleit," writes Wall Street's Peter Evans. "The plan worked: Buoyed by the renaissance in bourbon and with a growing following in the cocktail trade, sales of Bulleit have increased fivefold in the past three years, largely through "on-trade" sales in bars."

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This localized strategy is in sharp contrast to the globalized strategy for the company's major brands, like Smirnoff, Johnnie Walker and Guinness.

P&G has designed value propositions that promote product characteristics, such as shampoo and dental paste branding and chemical components globally, while localized product packaging.

The company has crafted a careful strategy for each local market, especially in diverse emerging markets like China. "[P&G] entered China in the 1980s and first developed a distribution network for shampoo," writes Edward Tse in The China Strategy. "Then P&G added other products one by one, building on its experience both in reaching markets across the country and running marketing campaigns to support the launch of each new category of goods."

Yum! Brands (NYSE:YUM) has designed Pizza Hut and KFC menus that include both a global and a local component. This is especially the case for China, YUM's largest overseas market. "Like Procter & Gamble, KFC spent a long time—nearly a decade—figuring out its basic model, which gave it the foundation it needed to embark on its rapid restaurant rollout in its second decade in China," writes Tse in The China Strategy. "KFC deliberately adopted products and practices that would mesh well with inherent qualities of the Chinese markets it was trying to reach."

The bottom line: Winning in a diverse world market takes three different value propositions, one for each segment: A universal value proposition for the pure global segment; a customized value proposition for the localized segment; and a hybrid value proposition for the semiglobal segments.