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To illustrate how you can use this tool, let's take a look at some examples that demonstrate how companies have had to adapt their models, in ways that could be categorized under one of the Localization Premiums and that show the importance of the Culture and Government & Regulation filters and how each affects aspects of the Localization Premium Categories. Let’s start with the Go-to-Market Premiums:

Product Features (PRODUCT PREMIUM)

In Asia, exchanging business cards during face-to-face meetings is a ceremonial custom where cards are passed and accepted with two hands and inspected at length as a sign of respect. To accommodate this cultural norm, Zoom has a feature that allows for the virtual exchange of business cards to make virtual meetings more in line with traditional in-person meetings. Additionally, Zoom's video streaming windows can be rearranged to align with formalized seating arrangements customary in Asian in-person meetings, where senior attendees are placed in the most prominent seating positions or screen positions to communicate their level of importance. 

Revenue Model (SALES PREMIUM)

Culture can significantly impact pricing strategies. For example, in Mexico, it's common for companies to offer zero-cost loans when purchasing products. In Japanese business culture, price negotiations are typical, and prices are often set artificially high with the expectation of negotiating discounts of up to 90%. In B2B industries in China, it's not unusual for the last invoice to go unpaid, as vendors may view this as a signal of commitment to the future of the partnership. If a business doesn't account for these cultural pricing practices, it may quickly find itself operating at a loss. The team at ThoughtWorks learned this lesson the hard way. This is another culture-related finding.

Value Propositions (MARKETING PREMIUM)

In Germany, employees tend to stay with the same company for longer periods, and as a result, creating a profile on LinkedIn, a platform that primarily focused on job searching in the United States, was perceived as disloyal. Thus, LinkedIn had to alter its value proposition to position itself as a useful tool for professional development. 

The company shifted its emphasis away from job searching and emphasized the everyday knowledge-building aspects of the platform. LinkedIn worked to communicate that updating your profile or status did not necessarily indicate that you were seeking new employment and highlighted how the platform could help individuals improve the skills required to succeed in their current roles.

Target Customers (MARKETING PREMIUM)

Depending on cultural or regulatory dynamics, the customers to target, and ways to engage them, may differ.  LinkedIn faced similar market dynamics in Japan as it did in Germany. Besides the value proposition around doing your current job better, instead of the US-centric job-hunting platform, the team had to focus on attracting a different tier of customers to get traction in Japan. 

Normally LinkedIn would target the masses, but in Japan, lower-level workers were afraid to join LinkedIn, not wanting to be thought of as disloyal. It took LinkedIn’s Japanese team getting higher-level executives to join the platform as a means of social permission, to get the everyday worker to create an account and actively use the platform.

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While for many B2B companies, there is a conscious choice between targeting enterprises or SMBs when entering a market, in Germany the middle market is significant. The Mittelstand, as it is called, consists of companies that don’t exactly fit nicely into either category and are often family-owned instead of publicly traded. 

Regardless, they tend to have a similar set of core values and management models and are very influential, therefore need to be addressed in a special manner when expanding into Germany. 

Distribution Channels (SALES PREMIUM)

Vivino, a wine app with an e-commerce model, faced challenges in France due to high wine shipping costs and a consumer preference for a "click and collect" model. To adapt to the French market, the company created a distribution system that allowed for this option. However, in countries like Russia or South Korea where selling alcohol online is prohibited, the company had to reassess its revenue model. 

By understanding the government and cultural landscapes of different markets, companies can gain a competitive advantage and even shape their go-to-market strategy, as proven by DocuSign’s entry into the German market. This is a great example of a discovery that would be listed under the government & regulation filter column.

Customer Purchasing Criteria (MARKETING PREM)

Evernote experienced the importance of understanding customer purchasing criteria in its expansion to India. Through on-the-ground research, Troy Malone identified the importance of social status for Indian consumers. How you are perceived by others is a key purchasing criteria and companies that were able to connect their product with upward mobility and characterize themselves as “luxury” brands, were more successful at gaining traction and scaling. Through the Evernote team’s efforts, having Evernote Premium became a status symbol communicating to others the Premium users were smart, ambitious, and career-oriented.

The Evernote team went further in two key ways:

(A) By embedding features in their mobile app to both give users satisfaction that they were Premium customers and allow them to share this with others. The product team built an accessible screen where you could see your “streak” of how long you had continuously been a Premium user. The team noticed at conferences that people would show each other these screens. The team would play into this at events by calling out long-time users, asking “Who has been a Premium user for 2 years or more?” to cheers from the crowd.

(B) The Evernote team also leveraged a physical representation of someone’s status as a Premium user. Premium users were sent a special pin that they could adhere to their clothes. These pins became akin to wearing a nice watch, further building up Evernote’s ability to meet the social status customer purchasing criteria

Marketing and Product Design (MARKETING & PRODUCT PREMIUMS)

The Nike team originally experienced challenges gaining tracking in the Japanese market, identifying that its marketing campaigns and product images did not connect with local customers, but not understanding why. 

Adopting a page from the agile playbook, the local team observed customers in retail stores and realized that the process Japanese consumers went through to evaluate whether to buy a new pair of shoes was very different than American consumers, and it mainly came down to how their shoes looked. When putting on shoes, Americans looked at foot mirrors, evaluating how shoes looked from the side when they wore them – Nike’s advertising showcased shoes from a side view. From a certain perspective, Americans cared more about the look of a show than how others would look at it.

Japanese consumers, on the other hand, didn’t care much for evaluating the side view, but instead looked down at their feet from above. In a sense, Japanese consumer cared more about how the shoes looked to themselves, from their own point of view, from above. In realizing this, the Nike team adapted its marketing to account for this more personal viewpoint, showcasing more shows from above, and they even began to consider the look of the show from above and not just from a side profile. This is another good cultural example.

Marketing & Sales Premiums

The South Korean messaging app KakaoTalk found tremendous penetration in its home market (the app is installed on more than >90% of mobile users), but despite having users in more than 130 countries, it hasn’t found nearly the same level of traction elsewhere. This is in part because of the company’s brand name. 

The word “kaka” is slang for poop in Spanish, French, Italian, and English, as well as in Arabic, Russian, Hungarian, Hebrew, Albanian, and other languages - something that is off-putting to customers who speak these languages creating a barrier to wide-spread adoption. Airbnb, on the other hand, changed the name of its app in China to Aibiying, meaning “welcome each other with love” to better connect with Chinese consumers and has been much better at gaining traction.[1] 

Next, let’s look at the Operational Premium categories:

Tech Stacks (INFRASTRUCTURE PREMIUM)

Customer data and privacy have become an increasingly important debate that has crossed international borders and led countries to create laws with varying levels of strictness. This led the European Union to implement the General Data Protection Regulation (or GDPR) which dictates how data can be collected, stored, and used by companies that operate within the union of countries. In Germany, for example, German citizens’ data must stay in the country. If a company didn’t have a cloud instance or technology stack operating on machines physically in Germany they run the risk of not being compliant with the local law. This is another good government & regulation example.

Hiring (ORGANIZATIONAL PREMIUM)

The Middle Eastern country of Oman has its “Omanization” initiative, which requires companies operating within its borders to hire only Omani nationals for some roles (like HR), while other roles, such as sales, can be filled partially by expats. At the same time, a certain percentage of company employees need to be Omani nationals for the country to grant visas for international employees. When expanding to the country, the team from the food delivery platform Talabat ran into issues since locals lacked certain skills the company needed. It slowed hiring and required the company to invest heavily in training. Similarly, when Workday closed the Korean enterprise company Samsung, they were required to hire a Korean-based account team to service the account to align with local business culture – given that firing poorly performing employees in Korea is extremely difficult, this was a risk for the company.

Payment Processing (ADMINISTRATIVE PREMIUM)

A number of years ago, Apple implemented a worldwide paperless transition process, completing transactions via iPhone or iPad and sending paperless receipts. When building out retail locations in the Brazil market, the company had to revert back to a paper receipt process to comply with local regulations that required paper receipts to be given for all retail transactions, receipts, called Nota Fiscal, that had to be printed on a specific type of paper. This is another example of government and regulation considerations.

Interestingly Apple faced an issue more recently in Brazil, that fell under the Product Premium category, but still involved government regulation, when a new company-wide policy not to include chargers in the packaging for some devices conflicted with a Brazilian law that said you have to provide all components to operate a product you sell – without a charger an iPhone is worthless in a matter of hours. The company had to make a decision whether to stick to the company policy and be fined by the government every day or comply with the policy.

These are some examples of the countless types of localizations required to succeed in a new market, and how each fits under one (or more) of the Localization Premium categories and relates to the Government & Regulation or Culture filters.

NOTE: Don't miss out on the next episode! If you want to continue learning about global expansion strategies and dive deeper into the course material, simply click here to access Module 7, Episode 1 of the Global Growth Master Class.