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Save Your Strategy from the Global–Local Divide

Ken Favaro

Ken Favaro is a contributing editor of strategy+business and the lead principal of act2, which provides independent counsel to executive leaders, teams, and boards.

 

The phrase “think globally and act locally” doesn’t quite capture what multinationals are up against. Companies with multiple lines of business that span the world must respond to the unique situations they face in each market, and at the same time operate to take advantage of their scale and scope. A more accurate motto would be “think and act globally and locally.”

Living that motto, however, is challenging, because it requires an organization to work in two dimensions. For example, the Coca-Cola Company has global leads who are responsible for marketing and innovation in product categories such as sparkling soft drinks, water, and energy/sports drinks, as well as “cluster” leads who are charged with driving sales and distribution in individual countries around the world. Oil giant BP has global business units for exploration and production, refining, retailing, and chemicals, and also regional heads for North America, Europe, Asia, and so on.

But organizing and operating in two dimensions complicates the design and implementation of strategy. Should a multinational have global strategies that get tailored locally, or local strategies that get reconciled globally? Either way, how do you make that work? Who gets to decide how to position or make or price or market a product or business in a particular market — the global or local dimension? How does the company know whom to hold accountable for a strategy?

The answer to these questions comes in four parts. The first is to matrix your strategies by making explicit their global and local elements. For example, BMW’s value proposition everywhere in the world is “the ultimate driving machine,” but its product mix is specific to individual markets. Thus, in the U.S., BMW has a relatively richer mix of SUVs, whereas in Germany it has a higher proportion of top-end luxury and sporting models.

Another example is Starbucks. The roasts and recipes used in its core menu of coffee drinks are the same from market to market, but its broader value proposition varies around the world. Stores in the U.S. have more of a fast-food feel, whereas in Germany they have a high-end café atmosphere. Both the BMW and Starbucks strategies have global and local elements, although they are different: BMW has a global positioning with a local product mix, whereas Starbucks has a global menu with a location-based positioning.

In any case, having spelled out the global and local elements of your particular strategy, you are then able to split authority for its implementation within your organization. Implementing a strategy requires hundreds if not thousands of decisions, regarding pricing, sourcing, manufacturing, marketing, compliance, regulatory, and staffing. The global and local sides of your organization cannot both have authority for making any of these decisions unless you want to seriously gum up the works. Those that are most critical to the global elements of your strategy must be owned by the global side of your organization. Local decision-making authority must be granted only for the local elements of your strategy. This may sound obvious, but it’s easier said than done — and impossible unless you have matrixed your strategy (hence, that comes first, as described above).

It is human nature to want authority that is commensurate with one’s accountability. For example, if you are accountable for the profitability of a particular market or line of business, you want authority to make all the decisions — be it pricing, marketing, or manufacturing — that affect its profitability. Thus you see multinationals struggle to define accountabilities for the global and local dimensions of their organizations, because each side’s decision making affects the other’s results, often in quite material ways.

To resolve these issues, the global and local units in your organization must share accountability for the same bottom-line results where their lines of business and geographic markets overlap. This asks the global and local units to see themselves as two parts of a single team, rather than as two teams with multiple (possibly competing) accountabilities. If they share accountability, they will want to make decisions that optimize the whole strategy rather than just their part of it.

Your global and local units should see themselves as two parts of a single team.

The final piece of the puzzle is to make information on bottom-line results readily and equally available. Shared accountability with split authority requires everyone to be informed about bottom-line results — and what is driving them — where their operations overlap. Imagine that your local units have authority for marketing and that your global units have control of manufacturing. Of course, the marketing decisions made by your local units affect the growth and profitability of your global units, and the global units’ manufacturing decisions have a big impact on local results. Local unit results should include global manufacturing costs and global unit bottom lines should include local marketing expenses. Moreover, the global and local units should have access to information on one another’s results so they can know the full enterprise impact of their decisions.

If your company is struggling to make its strategies span the global–local divide, try asking how well it’s following these four prescriptions. You’ll gain insight into how to think and act both ways at once — enabling you to implement strategies effectively everywhere you compete.

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Save Your Strategy from the Global–Local Divide