In 1996, I wrote that the Internet would enable small companies with niche products to span the world and bring greater choice and low prices to consumers worldwide. Both predictions have come true and the world is certainly flatter than it was fifteen years ago. But, as Isaac Newton famously stated, to every action, there is an equal and opposite reaction.
That’s why Kathy Jocz and I wrote All Business Is Local, as an antidote to the repetitive chorus of claims that the world is flat. Yes, the global economy is progressively more integrated, but the Eurozone crisis highlights the ongoing reality that global governance is still dominated by nation states whose prime mission is to represent the interests of their citizens. Any financial crisis rekindles the forces of national protectionism including non-tariff barriers as well as import duties.
In China, there is no Interstate Commerce Commission as there is in the U.S. Goods and services do not necessarily move freely across provincial boundaries. The same is true in many emerging economies.
With next to zero population growth in the developed world, multinationals have to look to the growth markets of the BRICS and beyond. Business in these markets is decidedly local. The vast majority of transactions occur between local buyers and local sellers and involve locally produced products and services. Sure, some consumers at the top of the pyramid can afford to buy the occasional global brand, but these transactions constitute a small percentage of the total.
So western multinationals, governed by boards of directors who know next to nothing about the new growth markets, have to delegate to local management. The potential of these markets is so vast that the costs of adapting the product line and the go-to-market strategy are more than offset by the upside sales from aligning better with market needs.
Take McDonald’s, an iconic global brand. McDonald’s in China and India sources its raw materials locally, partners with local businesspeople as their franchisees, employs thousands of local workers, and develops local management talent, adapts the product line and store design to local consumer preferences, uses local sports heroes and pop stars in television advertising, and gives back to local communities in which the stores are located. McDonald’s is a great global brand because it is a great local brand.
Now technology is not just bringing the world closer together but enabling more cost effective local marketing. McDonald’s can now send special promotional offers to consumers passing near a restaurant who have GPS-enabled smart phones. The nature of the offer, the timing, and the geographic coverage can all potentially be customized.
Technology-enabled local marketing will give a big boost not just to chains like McDonald’s but to small local businesses advertising individually or as a group in a high street or strip mall. Many consumers will welcome the continuing viability of individual retailers who give character and social glue to communities. Others support local farmers, who keep supply chains short, guaranteeing our access to fresh, often organic, produce. Even though we may occasionally like to consider ourselves citizens of the world, we spend most of our time in a few places…at home, at work and in our neighborhood, town, or village. We are more local than global, and place is an important part of our self-identity.
–John Quelch is the author of All Business Is Local: Why Place Matters More Than Ever in a Global, Virtual World
[Image: Flickr user Harald Groven]