Serving local markets is key
Companies should aim to thrive locally whether they are in one market or hundreds
That’s the basis of a recent report which says that as globalisation is under more pressure from protectionism, tariffs, and other issues, the strategy of ‘economies of scale’ becomes less viable.
The report by A.T. Kearney’s Global Business Policy Council, Competing in an Age of Multi-Localism argues that companies must focus on thriving locally in each market in which they have a presence, whether just one or more than 200, by becoming locally integrated enterprises.
Companies must go beyond simply decentralizing production and marketing functions. To compete effectively, they must become locally integrated enterprises in each market in which they operate. This marks a fundamental shift requiring a deep-rooted change in both mindset and operations. Rather than pursuing the globalization of operations and sales, companies now need to embrace localization. In doing so, they will shift and devolve such functions as management, operations, supply chain, production, and marketing to local markets around the world.
The study provides a richly researched background for why these changes are necessary. It then makes the case for why companies cannot afford to disregard the actions necessary to bring them into what the authors dub “the age of multi-localism.” These include the increasing preference for local communities, industries, products, cultures, and customs, driven by such factors as rising populism, consumer preferences, and technological advancements. As a result, supply chains and production locations, among other functions, will be subject to being reengineered into a new, decentralized business model.
“Multi-localism is not a passing fad,” says Paul A. Laudicina, founder and chairman of A.T. Kearney’s Global Business Policy Council and co-author of the report. “All companies must determine how to become locally integrated enterprises in a fundamentally transformed operating environment. Executives that ignore the imperative to transform will find their companies increasingly uncompetitive in the marketplace.”
The report calls for two primary shifts in strategy. The first is to recalibrate global operations based on a company’s core markets and its supply chain. “Technology changes, particularly in robotics and additive manufacturing techniques such as 3D printing, pose particularly profound questions for executives as they make decisions regarding global supply chain and procurement,” says Erik Peterson, managing director of the Global Business Policy Council and co-author of the study. “Executives must carefully consider how these technologies interact with other drivers of localization, including industrial policies and trade barriers that seek to buttress local employment and protect intellectual property rights.”
The second shift in strategy is to develop a heightened awareness of local conditions, which the authors dub “sensory perception.” By means of refining this capability, companies will develop and shape business insights tailored to each local market. “Executives need to hone five specific senses to identify and implement successful strategies for each market more quickly and effectively,” observes Courtney Rickert McCaffrey, manager of thought leadership for the Global Business Policy Council and co-author of the study. “This will enable companies to become locally integrated citizens of each community in which they operate, which is necessary to sustain profitability and growth in an age of multi-localism.”
To read the full report, visit https://www.atkearney.com/web/global-business-policy-council/business-policy/article?/a/competing-in-an-age-of-multi-localism.