China's not always first for your globalisation strategy

First published in the New Zealand Marketing Association's DLB Magazine in September 2008

China’s not always first

Les Mills International should be our poster child for Kiwi marketers going global.  They have 5.5 million people working out every week to likes of their revolutionary BODYPUMP program.  Their distribution network to achieve this is 60,000 instructors leading classes in 12,100 fitness clubs in 70 countries around the globe.  They’re also quintessentially Kiwi having been founded 11 years ago by our very own icon of fitness; Phillip Mills.  The original weights-to-music group fitness program has grown to eight different programs today.

China’s not always first

Global for Les Mills International was not China first.  Their network was solid and established in the mature economies of the USA and Europe before they attacked the BRIC (Brazil, Russia, India and China) markets.  They’ve recently launched in India, are now in China and Russia and have massive growth in Brazil which is already up to 1,200 clubs.  Good thing too.  BRIC markets will account for 50% of the global economy by 2050.

Going global for most marketers is frequently a rose tinted vision of China’s 1.3 billion people and their rapidly growing consumption of any and all products.  Not so fast.  The China market is more like a mere 130 million middle class Chinese today.  That will rise to 650 million in 2010. 

Exporting your Kiwi business to China means you need to deal with the basics of language and dialects in China and you’ll need to transact in their currency.  

Localise me (carefully)

You’ll also need to amend or even compromise your proposition to meet local requirements.  Was Google’s decision to exclude the Human Rights Watch website at China’s request an amendment or has this compromised their “do no evil” policy?  It’s in dealing with local requirements in China that money is made or lost. 

Disney’s Euro Disney stumbled when it first opened in Paris because it was too American for their target French employees.   Recruitment initially proved slow as the standard US dress code banned facial hair and dictated “appropriate” underwear – not something the French appreciated.

We’ve also stumbled. Carlson Marketing is one of the four pillars of Carlson Companies (the other three are Carlson Wagonlit Travel – now the biggest travel company on the planet, Carlson Hotels and Carlson Restaurants). Last year Carlson had global revenues of NZ$50 billion.  When our restaurants division first opened the TGI Friday’s chain in Korea they weren’t American enough for customers.  TGI Friday’s in Korea didn’t follow the American menu and instead included traditional local dishes like kimchi.  Customers weren’t impressed – they expected the same global menu consistency of a Starbucks or a McDonalds.

In fact the consistency of a McDonalds was not what Starbucks needed as they’ve found a growth ceiling and are preparing to close stores all over the world.  The issue here seems to have been more about positioning than about market entry.  Starbucks seems to have become stuck in the middle of attempting to be a unique, club like atmosphere with the ubiquitous store presence of a price competitive eatery like McDonalds. 

Each long tail needs to have its own dog

The long tail, pareto effect or 80/20 principle all are used to describe two sides of the same coin.  On one side; a few customers represent the bulk of the revenue available and this will generally come from a few block buster products or offerings.  It’s on the other side of the coin that the long tail proves alluring.  That’s where the 6 billion potential consumers on the planet separate out into tiny niche markets clamoring for niche products that only a few specialist providers can or want to make.  Marketers frequently aggregate the long tails of multiple countries and arrive at a big number as justification for going global.  The revenue opportunity is real and meaningful but still needs the same business disciplines of segmentation, branding, market research, competitor tracking, local support, logistics, conformance with local tax and legal structures and local supply chain.    These cost money and if you’re unable to aggregate these into a single, scalable support structure – the cost rapidly outweighs the revenues.  

Make them come to you

By 2002 EDS New Zealand was already this country’s largest IT outsourcing and services company.  To drive growth it started to export services.  Working with the international EDS network, EDS New Zealand quickly picked up high value IT work with over 30 international clients.  Better still – an Investment New Zealand grant pumped $1.5 million into the venture which delivered production engineering, software development, IT outsourcing and contact centre work. 

With this success in importing IT customers and our well documented success in importing students to our educational system – what other options might there be?   Other countries in our region are importing customers too.  Globally there’s a growing medical tourism market as individual customers exploit the huge price disparity between specialist procedures in their home market and the cost of the same treatments in say Malaysia or Thailand. The market beachhead made by these perhaps long tail customers is rapidly approaching mainstream proportions.  Britain’s huge National Health Service already exports some of its patients to other EU countries and on occasion to outside of the EU. Aetna, a giant American insurer, has this year launched a pilot scheme in partnership with Singaporean hospitals to do the same.  Some American employers offer “global medical travel” as an employment benefit. 

Practice, practice, practice

In the Asia Pacific region, our company has been working to build the business in established economies like Japan, Singapore and Australia at the same time as we grow in China, Korea and Indonesia.  For the latter markets – you have to be there to learn the lessons and we architect our approach almost annually as we learn.  As golfing great Gary Player famously said “The more I practice, the luckier I get”.