Friday, 4 April 2014

Auto Industry Practice – EM Business Models – Multi-Cultural Learning (Part 1)

The crux of the previous four part web-log highlighted the contextual importance of today's multi-cultural mosaic, and sought to demonstrate how corporate initiatives must be increasingly fine-tuned to befit the “glocal” (consumer needs, wants and desires) within the ever more digitally enhanced, reality augmented and so hyper-real 'global village'.

It also illustrated the post-modern tendency for self-reference, an essential element of an ever deepening realm of semiotics within physical, virtual screen-based and today merged 'augmented reality' worlds.

Seemingly operating as part of the required cost containment strategy, this especially pertinent during this period of economic growth constraint, a rational which spans various enterprises: from the duplication of specific shopping mall layouts and structures to the re-deployment of digitally produced characters across successive animated films.

EM Influences -

Direct replication of products through imports and localised manufacture (thereafter adding associated consumer services) has been the modus operandi of the major automotive players over the decades; as new growth markets have willingly absorbed 'predestined vehicles' with modest modification.

Today however, a trend has begun by which EM customers seek-out the psychological reassurance of the 'quality guarantee' given by internationally renowned brands, but likewise increasingly desire more culturally attuned ingredients and formulae.

Indeed, auto-makers' own recognition that certain EM countries and regions are now as fundamentally important to corporate revenue and profits as AM countries have been, means that EM market sensitivity has increased many-fold.

This illustrated by the very fact that various German vehicle marques have already been seen to utilise styling traits with more Asiatic appeal and experimentation into their once far more conventional brand-formula restricted products.

Whilst the credit expansion excesses of the previous hyper-growth Chinese consumer society for a while underpinned its indigenous new vehicle brands. However, the fact that most such homeland vehicles were based upon old engineering platforms and low profit margins to try and capture market share, meant that when the economy slowed the vehicle market consisted of those credit-worthy, mainstream (private, company and fleet) vehicle buyers who continued to seek-out better quality vehicles with sound financial rationale (eg residual values, contract types etc). Vehicles offered by the major Sino-Western joint venture companies.

Yet, as the more deliberately exuberant (often Euro+) styling of smaller Chinese domestics flailed under intense competition, so the large corporates injected subtle indigenous cultural cues into their products to provide a flair of local flavour.

The seemingly globally generic vehicle, once engineered for unaltered reproduction, has itself becoming slowly 'glocalised'.

Route A: “Conventional Glocalisation” -

The multi-national desire for increased 'glocalisation' to date has naturally stems from the dual advantages gained from globalised economies of scale (in primary systems components) and a local affinity underlying local product appeal in aesthetics and over-all user experience (eg vehicle performance and associated technological content).

This then replays the developing markets scenario as seen in previous eras, but obviously now with greater in-market sensitivity. Importantly, the move from EM markets' previous acceptance of effectively 'de-contented' vehicles (to reach yesteryear affordable price points) toward today's elevated buyer expectations nigh on par with western product content standards (less regulatory in-car requirements)

As seen, the ability to to do so created by localised lower-cost manufacturing hubs within EM countries, consisting of major VMs, their western counterpart Tier 1 suppliers, and the raising of standards amongst local Tier 2 suppliers to meet quality demands.

This may be termed 'Route A' and called “Conventional Glocalisation” since it relies upon the respective business model pillars of: aligned local supply chain, scale economies of global production and local marketing capability.

But as seen, this now very engrained approach has had critical portions of its business template heavily eroded.

The previous yesteryear rational becomes gradually altered by the substantial success of prime EM nations, via both investment and production based 'supply push' and private earnings and credit fuelled 'demand pull'. Today at the point where the once innate difference in AM vs prime EM cost structures have shrunk substantially.

So whilst creating a more economically balanced world and also providing for western 're-shoring' opportunities, to replay 'conventional glocalisation' requires the availability of what have now been termed “lower order EMs” and “pioneer economies”; themselves expected to reach a tipping point from historical economic stagnation toward growth thanks to capital market friendly policy reforms and so inward foreign investment.

However, whilst the BRIC and CIVETS nations do indeed have further 're-play' opportunities from their own untapped regions, it appears likely that the remaining smaller EM nations across S. America, Africa, the CIS and fringe Asia arguably offer less productive capacity than than the astonishing levels seen by the prime EMs during the early 1990s to 2008.

This then means that new perspectives regards the business models behind global and glocal production and consumption will be required.

One possibility is what investment-auto-motives terms “Progressive Glocalisation”.

Route B: “Progressive 'Glocalisation” -
(New Thinking, Toward New Horizons)

This (admittedly purely conjectural and somewhat far fetched idea) posits the notion that a type of visually based 'Lingua Franca' might be created by multi-national corporations - individually or in harmony - acting in a progressive “social totem” guise, to attract an increasingly digitally immersed, visually cognitive global consumer.
This possibly achieved through applying an ever widening palette of signs and symbols drawn from the world's own spectrum of multi-culturalism.

Such visual short-hand equivalent perhaps to basic Esperanto in its ambitions, but ostensibly without the communicative depth gained from the ongoing world-wide adoption of English. Instead with more significant and indeed signifying immediacy. Though if successful it could ultimately lead to a new era of complex hieroglyphs – a suite of visual elements underpinning a cognitive association behind an icon based global language.

This progress part of a new era of 'glocalisation' with expanded multi-cultural and cross-cultural interaction propelled by the strengthening worldwide commercial application of 'cultural streaming'; which in a 'global village' would gain an increasingly important role across corporate value creation and so successful global capitalism.

Increasing Cultural Complexity -

Though we seemingly live upon a cyber-unified planet the fact is that a myriad of expanding cultural identities exist. Beyond the given basics of ethnic background, religion and nationality, lay trends toward geographic localism (eg West Ukraine and Crimea), the influence of any associated revived languages, and perhaps more crucially the web's own promotion of distinct on-line communities becoming seen as virtual tribes., The seemingly smaller 'global village' then has become arguably yet more complex.

And whilst major nations have absorbed ever more divergent immigrant peoples to sustain their own economic basis, the progeny of such people with dual (or more) cultural perspectives and identities, plus those attributes of the seemingly self-created personal identity - though often drawn from a manufactured popular culture itself - adds to the fragmentation of, and so blurs, society's 'cultural mosaic'.

Invariably with such numerous influences the very idea of any singular cultural affiliation and so singular identity has become problematic, if not actually defunct, with beyond immediate birth nationality, and family ancestry, the addition of many tertiary cultural layers.

A cross-pollination of peoples, cultures, behaviour and perspectives has of course been with humanity since its earliest days, with as seen time after time, the adoption and adaption of specific cultural norms and phenomenon may occur to enable any one group's own culture-melding agenda.

At a personal and close group level there may prevail via local first name adoption with surname adaption by those groups seeking new societal acceptance, yet held 'within' and very separate from usual social interaction, may be secretive 'nourishment' of a core identity within their own community to maintain their over-riding core-community loyalty, far beyond any other association. Specific supposedly marginalised religious groups with constant tribal ratification obviously the most fervent and so invariably socially separatist.

At the societal level common cultures are changed by altering norms.

Most obviously is the effect of immigration as what seem stable, traditional cultures absorb new economic participants which bring their own ways and crucially differences This typically exacerbated by the fact that immigrants tend to be younger people with often their own youthful tendencies coupled with the drive of personal ambition for economic success. Thus invariably creating tensions with the previously comfortable and often over-complacent indigenous population.

In the West – and to the dismay of many EM nations – has been the rise of gay rights. Here in the UK after years of activism and calls for gay absorption into the norm, the very recent watershed event of homosexual and lesbian civil marriage was made law in the UK. This event undoubtedly resulting the now long sustained, highly influential efforts of the mass-media, whereby 'new norms' are televised as conventional and thus slowly absorbed by much of the public long before they are seemingly ratified by the establishment.

Culture Forming -

But such new 'culture-forming' itself poses issues.

Again here in Britain here are no doubt many within the religious and non-religious realms of the 'silent majority' who believe that the once well intended thrust of 1960s political correctness has extended far beyond its original intent of fairness to all colours, creeds and inclinations. With today the effective eradicated - through media 'demonisation' - those opposing promoted viewpoints, whether that be upon immigration, homosexuality etc. So the advent of what may be termed 'illiberal libertarianism', or paradoxically 'facist liberalism', where a climate of true, necessarily mature, free-speech is diminished or possibly labelled 'hate speech'.

These are but a few social dynamics with major cultural bearing that have evolved within micro and macro spheres.

And yet further, as noted by some insightful social commentators in the West, just as society fragments into ever more specialist interest groups, and so sub-identities, so such consequentially small, marginalised entities, promote their own interests by seeing and portraying themselves as what may be termed 'societal victims', with such resonating language deployed. Thus apparent sufferers instead become 'survivors' which in turn more closely knits together the emotions of the specific group.

Exactly how such an identity-fragmented and seemingly lobbyist, self-interested society can be understood en mass by the individual, the public at large, governmental policy-makers and corporate enterprise is the pertinent question of today.

The ongoing tribal shattering of once distinct mega-tribes such as countries such the USA, Canada, UK, Germany, France, Italy, Denmark etc, invariably indicates that more complex, newer tribal identities and links are being grown by the enabling function of cyber-space

So it seems that these more newly evolved multi-layered 'complex identities' are being formed and promoted, the nigh on singular identities of old which is today's convention – most prominently that of nationality – is being subtly eroded.

This is the concern that various EM countries apparently hold, the core worry regards the possible diminishing of their national and religious identities perpetuated by America's corporate hold over the internet and its future.

Common Commercial Links -

Thus for all societies and so the world at large, the workings of internal and external forces continue to reshape the very essence of 'culture'.

None more so than the direct and indirect influences of commercially orientated mass-consumerism; which over the preceding 150 years or so of so has become the for want of a better phrase been seen as “the new church” or “new religion” by social commentators.

Whilst lambasted, it acts as perhaps the only unifying “global religion”, where what are otherwise often distinctly different social groups, and possibly very different mindsets, meet.

At the most basic level, there may be the unrecognised meeting of minds between 'poor' and 'rich' individuals who share similar responsibilities. Such as the African township mother who is able to feed her child, though only once a week, on the same branded high-nutrition baby-powder which her counterpart American suburban mother feeds her child three times a day. (Yes this is an overtly stereotypical picture, but still an unfortunate truth within our re-balancing world).

And in a very different realm, the ironic but mutually well recognised meeting of minds between two culturally very different persons who happen to share the same lifestyle. The up-scale shopping areas of most major city centres are typically inhabited by seemingly very culturally different but nonetheless similarly attuned wealthy people who share similar fashion and lifestyle interests. Herein, London's Sloane Street juxtaposes the ironic schism of inbound British weekend tourists with resident foreign Arabs and Chinese; and whereby the scantily dressed young Cheshire 'WAG' may covet the designer handbag of an older Saudi Arabian lady wrapped in full-cover dress. (Or indeed vice versa). For a time the social difference is diminished by the commercially generated shared interest.

The Car as Multi-Cultural Icon -

Similarly, a previous web-log looked at the broadly socially positive, but unfortunately neighbourhood negative, affects of what has informally become the spring/summer (arguably very cross-cultural) event that is the 'Arab Supercar Invasion'.

This effectively promoted by the younger sons of wealthy Middle-Eastern families who travel primarily to London and Paris for their more liberated summer vacations.

[NB Such individuals and families form a significant element of the British-Arabic diplomatic entente-cordial, which itself underpins the 'recycling' of the “Petro/Gas-Pound” into the services based sub-economy of SW3 and broader central London]

Though the arrival of the noisy cars invariably creates local tensions amongst residents (who do have good reason to complain) it is also undoubted that the free to view supercar show has undoubtedly become a significant part of the tourism draw. Even if not on the official sightseeing tour for visiting foreigners, it undoubtedly adds spectacle, and for many British tourist families added great excitement during their London visit. The visual and aural thrills of Bugattis, Lamborghinis, Ferrari's, Maseratis, Bentleys, Rolls-Royces, Aston Martins, Mercedes-AMGs, Porsches, McLarens and more - for good or ill – is as memorable (if not more so) than much of what is seen within the walls of near-by museums and galleries.

The cars viewed by the thronging crowds as modern mechanical marvels, as magnificent motorised masterpieces; and although there will invariably be unpleasant jibes about “the rich Arabs” by some gawpers, for a time the mutually shared interest in such vehicles eradicates the apparent gulf of supposed cultural differences between Anglos and Arabs
The high arts within the 'new religion' that is consumerism actually draws separate peoples closer together.

Back to the EM Populist Dream -

Although such marques and models represent the pinnacle of automotive engineering in a very specific social context of great wealth, and does promote the positivity of melded cultures, the global reality is very, very different.

Fact is, for millions of people living in 'the real world' within BRIC, CIVETS and lower league 'pioneer' countries, their dreams and aspiration centre around not around the perceived ridiculousness of hyper-cars or super-cars, but eventual ownership of four wheels which provides for family and commercial needs, functional safety and comfort, all within what to AM countries is considered a mundane vehicle, but life altering nonetheless.

Obviously as such economies continue to grow, weathering the slowed phases such as today, this offers an immense opportunity for those auto-makers that can create the right vehicles. As was the yesteryear remit of the Model T, Beetle etc, followed by the GOL. Today a primary strategic initiative for most auto-manufacturers: from TATA's seemingly the visionary Nano, to the many other domestic and foreign VMs which seek to (unlike Nano) typically incorporate their EM entry level vehicles into either their respective indigenous or global business models.

But identifying exactly the right fundamental DNA for the archetype 'glocal' vehicle' is a complex and hard task, made all the harder by the ever increasing PESTEL complexities inside EM and AM societies, as well as those that both conjoin and separate them.

To Follow -

Thus far this weblog has simplistically commentated upon: the increasingly powerful influence of EM countries upon multi-national companies, the basic corporate mentality toward creating a successful 'glocal' business model, the manner by which global economic re-balancing has and will further impact upon such conventional business wisdom (Route A), the need to re-think the very philosophy that is 'glocalisation' to create new multi-faceted merged opportunities (Route B), this set within the challenge/opportunity of increased cultural complexity as 'layered' personal identities emerge, the mention of just a few of the many social trends which re-make societies, the manner in which consumerism actually acts as far more of a social glue than has perhaps been recognised, highlighted by one specific and organically emerged social phenomenon, and how even that 'pinnacle' is but a drop in the ocean of consumer aspiration across the EM world.

In order to better understand how auto-makers might best approach the subject that is 'glocalism', the following Part 2 seeks to simplistically review the way in which auto-sector business and product strategy must evolve if it is to meet the 'glocalisation' challenge; as understood today and into tomorrow.

Providing insight into:

- Early era efforts of auto-globalisation
- Case studies of ill-contrived 'glocal' business plans
- The rigour of Japan's “deep knowledge” approach
- Examples of well-contrived new product development