Question

Consider the following statement: ‘In a global world, multinational enterprises should not waste their time and money localising their products and services for different international markets’. In 500-600 words, to what extent do you agree or disagree with the statement and why? Provide evidence and examples.

Answer 1

I disagree with this statement as multinational enterprises have several fronts which they have to take care of, they have to look at several aspects and by looking at the localised products and services they are better able to serve the needs of the customers, otherwise their products won't sell on a global base. If they don't diversify than their costs mount up if the capital is not allocated efficiently. If they localise than their revenues increase as seen from the case of Apple which sold cheap variants in developing markets and McDonalds which diversified its sourcing techniques and sold several localised goods according to the local tastes and preferences.

For example if McDonalds did not localise their products and services such as it continued to sell pork items in Arab countries, their products won't sell at all and there would be no use diversifying and going global, if they are not able to earn profits. This ultimately leads to decrease in profitability and firms foregoing huge margins and not expanding efficiently beyond their markets.

Secondly localisation increases the productive capacity and the labour force is often cheap. This ultimately increases the longevity of the business and decreases the risk of the business.

Localisation also increases the adaptability of the business and the firms are able to conquer any hardships as they have a strong ground work. The customers relate to the product and buy the products based on that relatability. For example, a U.S firm advertising its huge sedans, this won't work in countries which have smaller roads, thus the firm will have to produce small size vehicles.

Increasing globalisation leads to economies of scale and businesses are able to adapt quickly. This enhances their competitiveness and ability to survive in the market. McDonalds relies on a global supply chain and procures localised products which are manufactured locally, this creates an impetus in the local economy, as the more its people earn, more they eat outside and ultimately the earnings of the multinational firms increase.

Each international market has its own unique features and a company essentially needs to diversify in order to connect with the audience. If they don't localise that the money infact goes waste and customers don't tend to buy such products out of sheer non relatability aspect. This is what happened with Dunkin Donuts as it tried to sell doughnuts in developing markets which don't necessarily consume sweet items for breakfast. The company failed drastically and had to exit the market. It should have analysed what the local market eats and provided variant goods of local breakfast items but with a global taste, the customers would have related to the product and this would have also increased the companies sales in the long run.