There are in principle 7 main criteria to centralize or decentralize. The basic draw of centralization or standardization is scale, cost savings, time savings, efficiencies and leverage.The benefits of decentralization are around tailoring products or approaches to local cultural insights, sales channels, local competition, local laws and languages.
Here is a framework for those 7 criteria.
1. Geographical centralization or decentralization
Centralization or Decentralization is often the question when companies are expanding their geographical scope and coverage. Often the company starts with a local approach as this covers the few markets best, but once more and more international markets are added certain scale advantage will start to appear. The mistake often made is lumping everything under marketing. The level of benefit will depend on what part of the marketing function we talk about and the level of scale benefits that can be achieved.
One of the elements that can be implemented early on is the area of Creating insights and best practices. This is often claimed but not really well executed. It takes time for the local teams to write up all the learnings (including the local insights and also what did not work well) and it is an interference with their day-to-day job. On the other hand, the person at central finds it often not that rewarding as their job consists of chasing local teams and collecting and structuring the learnings. Of course this can be organized via award programs, incentives, learning web-communities etc,....
Next is the area of creating Brand Consistency for multi-country brands. This area is usually well developed by setting up an international brand team that guards the brands strategy, brand design, global positioning and cross-country marketing initiatives. Local compliance needs to be achieved by giving the global team enough authority to challenge the local teams. Formal structures will usually be in place to facilitate the working relationship between the centralized brand team and the local brand teams.
Of particular interest are the Factors Affecting Advertising Standardization. The contextual, organizational and market segmentation variables affect the advertising process in various ways. The contextual variables include media availability and costs, advertising regulations, advertising agency and the number of competitors in the foreign market. Multinationals have to pay attention to local advertising regulations as some global ideas may violate the rules of a particular market. Having an advertising agency that understands the essence of globalization of advertising and the importance of local adaptation is essential. That is, the advertising agency is required to think regionally but to act locally. When dealing with different cultures it is also important to understand how local culture decodes the advertising.
In my experience, there are certain clusters of countries that have a similar cultural background that tap into the same type of humor. For example, England, New Zealand, South Africa and Australia have a shared cultural background that can be tapped in.
In general, you can go from product centric advertising to consumer insight based advertising. Many studies have found that advertising leveraging specific cultural insights provide a strong connection with the consumer and makes the consumer feel that the brand "gets me". These tend to be culture specific and are expressed in humor, choice of characters, casting, wardrobe, music selection, location, words, mannerisms, etc.... There are universal human truths and product stories that appeal to everyone. They tap into core human need states. So it is possible to create stories with global appeal but not always that easy and this will depend on the type of product that is being advertised. To achieve this, advertising concepts are often tested in multi-countries to indeed test if it resonates across different cultures.
With regards to setting the Investment Levels, it is often that the local opco has full P&L responsibility but requires central approval of the budget. It could also be that central optimizes the allocation of budgets across markets to funnel funds to the highest growth markets. For this to work smoothly roles of countries need to clearly agreed upon so that the different teams understand the cross-country allocation better.
There are significant marketing decentralisation drawbacks. Most have to do with duplication of efforts, lack of consistency, diverging goals and if no quality check from the center inconsistency in the quality of the work produced. In addition, individual markets often fail to see the bigger picture or create synergies to approaches that work in multiple markets. In very decentralized organizations it would be difficult to share best practices and to have a healthy culture of building on each others contributions.
However, some companies have gone back and forth between a centralized or decentralized marketing approach. Yahoo is one of those for example. An advantage of a decentralized approach is that marketing decisions, marketing talent and marketing budgets are brought closer to the customer — and into the regions that depend on these critical plans. It takes linguistic, cultural and legal aspects into account and leverage those that a global approach can't. In addition it links marketing strategies to revenue growth, sales objectives and overall accountability.
There is a happy medium where the global team collaborates with the local teams and each contributes to the right balance. Global teams can produce breakthrough advertising with talent, music rights and production values that an individual opco can not afford. Local teams can produce emotional relevant advertising that connects deep with a local culture. An integrated joint effort could be quite powerful and provide a competitive advantage.
There might be several tension points between the local and the global marketing leaders. One source of tension could be when people in Group or Head Office functions don't look at things from a truly global perspective and look at things from the country and operating environment where their headquarters is located. Another one is when the added value of the center is not very clear and local opcos feel they are the ones that actually generate revenue and a headquarter environment is seen as being an overhead.
2. Portfolio centralization or decentralization
There is another reason to centralize certain marketing functions. This is often related to ensure both individual brand and multi-brand or portfolio needs are being managed. Here is an overview.
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