key differentiator to consumers— for example, a customer who wants to have global banking services will be attracted to HSBC, which bills itself as “the world’s local bank.” To fully capture these potential benefits and enhance brand equity, it is critical for CPG companies to coordinate the communication and messaging related to global brands. Leveraging all these benefits, the portfolio of Interbrand’s Best Global Brands has consistently outperformed the markets by a considerable margin. Where the characteristics of consumer demand and preferences justify it, companies can generate significant value by supporting the development of global brands.
The Challenges of Global Brand Management Although coordinating brands globally has clear benefits, it often comes with two unintended consequences that have to be carefully addressed: increased organizational complexity and the potential for lack of focus in individual markets.
Organizational complexity: Adding global structures to coordinate activities across brands and markets where coordination does not add significant value can actually create unnecessary organizational complexity. Such complexity can result in an inflated organization and “shadow staff.” It can hamper market responsiveness if coordination processes, decision rights, and information flows
Yong Nam, CEO of LG Electronics.
between global and local teams are not defined clearly. Unclear accountability for performance, a natural consequence of poorly defined global structures, can make the situation worse and cause ineffective execution and loss of speed. Even P&G’s global structure, which is well defined, has troubles with accountabilities related to the P&L between the global business units (GBUs) and market development organizations (MDOs): The GBUs own the P&Ls for particular product lines, but the MDOs own the P&Ls for regional execution. If results do not meet expectations, it’s often unclear where the problem lies. Was the product, owned by the GBU, inadequate for local needs, or was there poor pricing in the market or poor execution in the store?
Diminished local focus: Global CPG companies face a major chal- lenge in finding the right balance between global coordination and the local flexibility needed to adapt to market-specific tastes and preferences (e.g., packaging, colors, flavors, and messaging). A global strategy that does not leave sufficient room for local market customization may diminish brands’ and products’ local relevance to an extent that sur- passes the benefits expected from global coordination. Although certain global brands (such as Coca-Cola and McDonald’s) are still largely associated with their home market in the eyes of consumers worldwide, others— in a variety of industries—are
attempting to appear more local as a way to be better connected to consumers in each market. LG Electronics, for example, aims to make it “completely unimportant to consumers where LG is head- quartered.”1 Finally, there is also a risk that the company’s global core may focus excessively on a company’s largest markets and may not give smaller markets the resources they need to grow. Para- doxically, the opposite can also be a risk—a company’s position in its home market may be threatened if its resources are spread too thin by global expansion.
Leading CPG Companies Take Diverse Approaches to Global Brand Management Faced with these complex trade- offs between the potential benefits of global brand management and the possibility of greater complexity and lack of flexibility, CPG companies have adopted a wide variety of approaches to global brand management, reflecting the diversity of their situations (see Exhibit 2).
A company’s organizational focus will be largely determined by the way it structures its brand-management model. Some companies, such as Procter & Gamble and L’Oréal, are primarily organized around powerful centralized category-management teams, which determine priorities for the category as a whole and leverage synergies across markets. Other companies, such as Ferrero and Heinz, have adopted a more decentralized approach, aligned
Booz & Company