Understanding the glocal approach
The term ‘glocal’ is used to refer to firms that attempt to be both a global firm, but also to remain responsive to local demands. For example, a firm may try and have large production volumes to benefit from economies of scale associated with operating worldwide, but also try and cater the offerings to meet the local conditions.
Why do firms try and act both globally and locally at the same time?
When operating globally it is common for firms to either attempt to have a standardized product sold all over the world or to cater their products to the local market. While a standardized product has economy of scale benefits (sometimes referred to as agglomeration of demand in the global context), it runs into the issue that the standardized product may not be desired in all parts of the world. Similarly, while the localized approach can customize the product to the specific demands of the market, the approach lacks the economies of scale benefits associated with operating at a global level.
The glocal approach attempts not to fall into either extreme, but rather consider the factors that are important to adjust at the local level, while keeping others consistent across operations to benefit from the economies of scale of being a large global firm.
What is an approach to try and achieve global scale and local responsiveness?
One approach to achieve glocal is to centralize many of the functions – those that can be shared globally. Areas such as manufacturing and product development could for example be centralized, benefiting from the advantages of a global scale. Other parts of the firm such as sales and marketing could be more region-specific, able to adapt the offerings to the local conditions. Feedback between the decision can also help increase responsiveness to the local market – potentially identifying customizations that can be made to local product versions. The product could largely remain identical across markets, with small modifications made to adjust to the specific market demands of the separate regions.