Global Brand Challenges

There are numerous examples of companies attempting to sell products in foreign markets without doing their appropriate due diligence concerning language, from Chevrolet selling Novas in Spanish language countries when the words “no va” translates as “doesn’t run”, to Gerber marketing baby food in French speaking countries when the word “gerber” translates as “to vomit”. While language errors represent marketing failures, and can be quite costly to companies, they essentially are little more than humorous anecdotes when compared to some of the truly inept blunders that some major global companies have made when introducing brands into foreign markets. This paper examines the three tenets identified in the article How Global Brands Compete, published in 2004 in the Harvard Business Review, of Quality Signal, Global Myth, and Social Responsibility through examining new product development challenges, technology challenges, and accompanying legal and ethical implications. Starbucks, Toyota, Google, and Proctor & Gamble have all recently witnessed various levels of success or failure through their adherence to these three tenets.

Challenges in New Product Development
Douglas Holt, John Quench, and Earl Taylor discuss in their article How Global Brands Compete, that multinationals have three distinct phenomena that work in their favor when consumers select global brands; 1. Quality Signal, consumers attach an ideal of quality to global brands, 2. Global Myth, consumers look to global brands as cultural ideals, and 3. Social Responsibility, consumers look to global companies for solutions to problems that influence society. Through anecdotal examples we can see how these same phenomena can also work against companies in the global market.

Challenges: example number 1.
Consumers choose global brands, even though they can be substantially more expensive than comparable local brands, because they expect a level a quality that they feel they do not get from local brands. Marketing in a global arena however can backfire when there is a demand for products and consumers are unwilling or unable to pay the premium price. Notably, Starbucks attempted infiltration into markets where coffee is plentiful and less expensive has met with limited success as their profit margins from foreign markets were only 8.1%, compared to 14% from their U.S. stores, even though consumers in these markets may enjoy the product, they are less willing to pay a premium price for it, (Matlack, 2008). Alternatively and more notably is when the consumer expects quality and the company fails to deliver as is the case with the recent recalls of cars made by Toyota due to manufacturing defects. The company now faces multiple class action and individual law suits in the U.S. and Canada as a result of these defects and the company’s reputation with consumers will suffer as a result. Expectations are that perceptions concerning Toyota’s quality will fall by at least 5% with consumers over the next three years as a result of these product defects, and could potentially fall as much as 20%, (Jackson, 2010).

Challenges: example number 2.
Global companies introducing a new product into the global market face a myriad of challenges but no challenge can doom a new product to failure more than a display of cultural insensitivity and the inevitable reactions of consumers. Cultural insensitivity can cause consumers to necessarily choose between the global myth and their own cultural identity. A recent example included the use by Google of culturally insensitive maps to be overlaid on the current satellite street maps of Tokyo, Kyoto, and Osaka used in the product Google Earth, (Lewis, 2009). Google unknowingly tapped into bigotry within Japan against its Burakumin citizens by using older maps. The name Burakumin translates into the words “filthy mob” and the names used to describe their neighborhoods on Google Earth loosely translate into the words “scum town” and the descendents of these citizens still live in these neighborhoods. Through their insensitivity they have reignited a deep rooted prejudice that is still in existence and has existed in the country for nearly four centuries. Blunders such as Google’s continually plague multinational corporations as they attempt to do business abroad as companies struggle to understand cultural sensitivities. Repercussions can be enormous in terms of lost trade opportunities, not only due to consumers reacting negatively, but also foreign governments have intervened in some cases and prohibit these companies from distributing their products.

Challenges: example number 3.
Finally, multinational companies must continually demonstrate a commitment to social responsibility, an onus that local brands do not face, or they must suffer the effects of this criticism. An additional difficulty is that most consumers react to social responsibility initiatives from multinational corporations with skepticism and regard these initiatives as opportunistic. Holt et al describe in their article an initiative by Proctor & Gamble seated in entrepreneurship as an example of a social responsibility initiative that indicated an actual interest in the welfare of people and could be viewed without skepticism, (2004). P&G identified that a billion people use unsafe drinking water daily which leads to 2 million deaths per year. They subsequently identified a process within their scope of expertise to develop a water purification technique that could be easily and inexpensively deployed throughout the world. P&G harnessed their own resources to credibly solve a global sanitation problem.

Technology and New Product Development

Technology is of the utmost importance in all three of the phenomena described by Holt et al. As a Quality Signal consumers look to global brands to develop new products and technologies faster than local rivals, corporations use technology to communicate locally through virtual teams to learn cultural sensitivities to determine the effectiveness of advertising and marketing campaigns for global brands therefore propelling the Global Myth, and finally Social Responsibility initiatives can be developed and implemented through the increased access global companies have to advanced technology and social welfare therefore can be improved.

Technology: example number 1.
Part of the quality problems witnessed recently by Toyota could have easily been avoided if the company had utilized the immeasurable technological resources at their disposal to track and diagnose the problems consumers were experiencing with their automobiles. Toyota initially rejected consumer accounts of their product defects; this ultimately led to the lack a consumer confidence that will be reflected in sales for years to come. Toyota’s investigation of consumer complaints ultimately led to the recall of the defective automobiles, but the company’s delay of appropriate action to remedy problems was due to a failure on management’s part, (Jackson, 2010). Inevitably, Toyota will lose customers in the ensuing years to their chief competitors, including Ford and Honda, due to this delay.

Technology: example number 2.
Google, a technology company, did use technology to correct the cultural insensitivity problems they had with their Google Earth problem in Japan. Responding to customer complaints, the old maps were removed within two weeks of their implementation, thereby mitigating some of the damage that had been done to their reputation, (Lewis, 2009).

Technology: example number 3.
Proctor & Gamble’s Social Responsibility initiative was rooted in the advanced technological expertise in which that company excels. P&G effectively turned a Social Responsibility initiative into an entrepreneurial success through their use of technology demonstrating an undeniable interest in the social welfare of the global community and an extraordinary social impact, (Holt et al, 2004).

Legal and Ethical Implications in New Product Development
A company’s action, or in some cases non action, in the global arena can have dire legal and ethical implications. Consumers rely upon Quality Signals from global brands and products that do not deliver on this implicit promise, that can potentially damage the health and well-being of the global consumer, indicate serious ethical lapses in management and can result in serious litigation against the firm. Additionally, as companies that enter the global market are entrusted with local identities and take on the responsibility of shaping global identities through Global Myth, they have an ethical responsibility to proceed with cultural sensitivity. Finally, as companies enter the global arena they wield extraordinary influence in these markets both positively and negatively; they should be expected to address social problems ethically through Social Responsibility initiatives and should be held legally accountable for any negative consequences resulting from their involvement in these markets.

Legal and ethical implications: example number 1.
Toyota’s lapses were the most egregious ethically and legally. A total of 18 people were killed and 304 were injured as a result of the manufacturing defects. Additionally there are hundreds of class action and individual law suits pending against the companies in addition to government actions. Overall, Toyota is expected to recall over 5 million automobiles due to the defects, (Jackson, 2010).

Legal and ethical implications: example number 2.
Google’s actions, while having no legal ramifications, indicate an ethical lapse in that they maps they used were significantly out of date and were offensive to the community that they were seeking to engage. The maps that they used were not properly vetted and demonstrated a cultural insensitivity. Although they reacted quickly to remove these maps it remains to be seen if any permanent damage is done to Google’s reputation and brand in Japan.

Legal and ethical implications: example number 3.
Proctor and Gamble not only behaved ethically in their Social Responsibility initiative, they did so without any profit motive and they have witnessed some criticism for doing so. The initiative that they introduced was a result of their utilizing their resources to solve a problem that have plagued governments and non-governmental organizations for years. However, as global consumers actually believe that multinationals have a greater responsibility for social welfare and towards solving social problems, then a humanitarian endeavor such as that accomplished by P&G should ultimately be rewarded by global consumers.

Conclusion
Increased participation in global markets is fraught with complications in new product development, technology, and legal and ethical issues. In order for companies to compete successfully in these global markets they must ensure that they sell quality products, engage local consumers in their brand, and participate in social responsibility initiatives. The challenge remains for global brands to demonstrate that they are neither a force for good of for evil but are in fact ethically neutral.

References
Holt, D.B., Quelch, J.A., & Taylor, E.A. (2004, September). How global brands compete. Harvard Business Review, 82(9), 68-75. Retrieved from EBSCOhost Business Source Premier.

Jackson, K. (2010, February 1). Toyota’s crash and burn. Automotive News, 86 (6397), 1-26. Retrieved from EBSCOhost Business Source Premier.

Lewis, L. (2009, May 22). Google follows ghetto maps and ends up in class war. The Times (London), Edition 1, 43. Retrieved from Lexis/Nexis Academic.

Matlack, C. (2008, July 3). Will global growth help Starbucks. BusinessWeek Online, 13. Retrieved from EBSCOhost Business Source Premier.