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A comparative study of multinational companies' and how they have (not) adapted to cultural challenges within Middle Eastern markets

Abstract

The following dissertation studies the issue of globalization and establishes that branding process involving international marketing require sensitivity to social, cultural, political and religious factors. Multinationals that operate in the Middle East where cultural divided is marked, marketers need to understand that being global does not establish acceptance. In fact being a global company means that multinationals have to retain its unified standards, missions and vision yet think local wherever possible to integrate into the business model. Using Starbucks and Coke as examples the researcher establishes that glocalization is imperative when operating in a foreign environment to dissipate resistance from the locals.

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Executive Summary

It is the general misconception that being a global company, multinational companies expect acceptance from the global market especially among U.S. companies, they consider themselves universal. However, the following dissertation enumerates on the fact that being global means to alter one's corporate values to become localized, and yet at the same time retain unity in mission, vision and strategic planning. This hypothesis of the study has been based on a detailed study on culture and how it affects the organization's operations at Starbucks and Coca-Cola. The researcher has studied the cases in the context of the Middle East market, how they have adapted and (un)successfully achieved the status of global acceptance by the Middle Eastern populace. The study first outlines an overview of the global market, its current and future trends. This is followed by a literature review on the concepts of globalization, glocalization, branding, cultures and the Middle East environment. After the literature review, the researcher analyzes the companies Starbucks and Coca-Cola, their organization, achievements, establishment in the Middle East, and what kind of problems they have to face. The discussion part follows to offer the researcher's opinion and perception of the problem. The study ends with the conclusion that Starbucks have not been successful in its understanding of the local environment and insists upon its American identity which resulted in the closure of the shops established in Israel. Starbucks have not realized that corporate identity and leadership are synonymous to nationalism. When foreign markets are left to perceive that they are being invaded by corporatism and Americanism, they tend to resist. What is needed in such a situation is a strategic marketing plan for diffusing the resistance, which Starbucks carried out at a much later stage when the shops in Israel had been pulled out. On the other hand, its counterpart Coca-Cola being a mature company in the Middle East and elsewhere understands glocalization concept only too well, and manages to blend into the Saudi Arabian cultural environment despite being a global and American company. Coke's success shows that corporate international marketing campaigns have to consider cultural, political, social and religious factors when entering into a foreign market. The strategy should be focused on affiliations and integration, and not dominancy and expected acceptance. Instant success does not come about in countries like the Middle East where resistance to outside culture is marked. Instead Coke shows that cultural study, understanding and acceptance is critical aspects of thinking local. Through this understanding strategic plans should be devised with the aim to build trust and a gradual consumer base before the company can position its brand in the new market. Thus, the researcher establishes that branding and culture go hand in hand. It is imperative for multinationals to position itself as part of the environment and community in which they operate instead of identifying itself as a separate and foreign entity. International marketing students and professionals will find the study critical in understanding this concept of glocalization where a combination of global and local strategies could result in acceptance by the locals.

Introduction

With the growing trend of market integration, the world has become a consolidated market place comprising of only the most competitive companies surviving the battle of comparative advantage. Based on their comparative advantages in resources, manpower and investment strength companies contribute to the global market. Countries that have abundance in any one or a combination of these resources would gain comparative advantage, and dominate the world. To compensate for the lack of comparative advantage other countries with less developed resources form alliances with the motive to gain some access to the global market. The resultant scenario presents a world divided into developed, developing and less developed countries. Such categorization also places value on the kind of market these countries have, and their position in the world. Thus though national economies around the world have become integrated it is only to the extent of their market presence. In the same vein, international flows of goods and financial capital increased dramatically over the years, but only proved beneficial for countries that have competitiveness and dominance in specific resources such as skilled labor, capital, natural resources etc. However, recent evolution of the world market has not only dislodged these countries but also replaced them with technology based comparative advantage. Competency and competitiveness are inherent in the countries that develop technologically and are aware of their competitors. Technology, comprised of specific skills as well as machines, technological ideas and new methods of management etc. gain an edge over other countries. This combination of intellectual and material innovations have replaced many countries as world leaders and opened up new economies while at the same time closing others. The international market has grown considerably due to this integration as economies are no longer being categorized by the goods and services they provide but also by the technological skills and capital investments they have within their domains. The foreign based assets in the US increased manifolds while the global foreign direct investment in the Middle East forms the hub of capital resources are two examples of such dominancy.

If countries with technological resources do not have other resources to strengthen their position in the country, they venture out of their territories to capture new markets and new resources. Producers gain comparative advantage over other nations by establishing subsidiaries in other under developed or developing countries with the view to not only take advantage of the low cost labor and other resources but also of the market. Multinationals of this nature bring with them technology for production, skilled labor, and capital to invest in the host countries. They also bring with them new cultures, ethics, values and corporate trend that set the working environment at the local level. In return, they offer the host country with new products, knowledge, skills and seed capital for investment. Thus the multinational model has not only appealed to the developing and under developed countries but it has also in a sense helped them gain a piece of the global pie. Until recently, multinationals have been considered a positive practice among developing countries as they contribute in infrastructure building of the host country at virtually no cost. They have also helped the host countries to break down national borders, open the local markets to the world and enable these countries to compete at the international level.

Integration and elimination of market borders not only increased the flow of goods, services, information, investment and labor across regions but it has also given the consumers liberation in choices. Consumers across the world are becoming more aware of the various products and services available not only locally but also abroad; they are becoming conscious of standards and quality of goods they purchase. With many homogenous products available these standards form the basis for their decision making. Given the proliferation of the wide variety of products and services, the consumers have not only become conscious of the quality they want but also of the brand they get.

As a result the growing demands for foreign goods have led many multinationals to "think global" wherever they venture and ignore the local needs. Products have become too foreign for the consumer's liking. On the other hand products have also become highly sophisticated for the locals so that they are demanding modification to suit their needs. As more and more nations are demanding for modification and integration of the local environment, multinationals are becoming aware that thinking global has no effect on local consumers. In fact they need to "think local" as well in order to capture the domestic markets. This transitional trend in consumption has led to the emergence of the concept of "glocalization". Multinationals that strategize to integrate glocalization within their corporate plans, culture, and behavior tend to attract the local consumers the most as they are more accommodating of the specific cultures of the people of their host countries. Even the host governments, institutions and industries give way to more benefits to these multinationals in return for meeting the demands of their people. As a result more and more organizations are adapting to glocalization concept in order to achieve acceptability.

Yet despite the realization of glocalization there are still other multinational organizations that tend to ignore the local needs, perceiving that the international standardized platform has more importance than the local ones. Their rationalization is such that they believe local markets form only a small segment of the global market. And the corporate culture that they maintain at the global level is so foreign to the host countries in which they operate that to change means to discard their corporate culture, vision and mission. Therefore, it is in their best interest to discard the local and remain global, hoping the local people will adapt to their global culture.

Statement of the problem

This dual conceptual framework among multinational companies - global and local - has created two different schools of thoughts - one that believes in globalization whiles the other in localization. Though there is clear cut demarcation between the two, yet it is common knowledge that multinationals that adapt to the local environment tend to succeed the most, whether these are in their interests or not remains to be discussed. The problem arises when multinationals seek to establish business in totally different culture for example from Western to Eastern culture, and attempt to infiltrate their global culture within the local ones. For example the Middle East is considered to have a totally different framework for corporate operations, cultures and behaviors that are difficult to work in for many multinationals. How then can multinationals adapt to such environment? Do they totally ignore the local and continue to assert their transcultural concepts or should they learn to adapt? How would these actions affect their receptiveness among the local markets and global ones? These are complex choices that multinationals have to make when they enter into the Middle East, a market that is still relatively untapped. Consideration for issues like cultures, morals, ethics, language, behavior, religion and politics all play important roles in shaping the strategic plans of any organization that enters such a niche market.

The following literature attempts to enumerate on these concepts of globalization, glocalization, branding, culture, and what it means for multinationals to adapt within the Middle East market framework.

Review of related literature

Globalization-the importance it plays and future growth

Globalization is not a new phenomenon. History traces the emergence of globalization to the Roman civilization however its evolution has only been recently realized. The basic premise in globalization is the interconnectedness of exchange, customs, laws, politics etc. (Rippon 2005). This widely used term has a larger breadth and scope and meaning attached to it so that it is difficult to narrow it down to specific time, culture, political or economic period. According to Tomas Larsson (2001) globalization is the process of world shrinkage, of distances getting shorter, things moving closer. It pertains to the increasing ease with which somebody on one side of the world can interact, to mutual benefit, with somebody on the other side of the world. In this context the emergence of globalization would have dated to ancient civilization, a time when the different civilizations of the world namely the Chinese and the Romans have begun an interconnected trading system across the European and the Asian continents.

However, the nature of globalization is such that it is evolutionary. It changes with time and needs of the people. In Andre Gunder Frank's (1994) view for example globalization is the term denoting a world system in which nations of the world devise methods of transporting and trading to exchange goods and services. As the world evolved, in terms of communication and logistics systems so did globalization. Nations around the world not only changed their trading perspectives but also devised new ways to integrate this new phenomenon within their business framework.

Gary Teeple (2000) in his article on "What is Globalization?" writes about globalization as the "unfolding resolution of the contradiction between ever expanding capital and its national political and social formations." In Teeple's view globalization is no longer restricted to the trading of material goods but it also includes the exchange of services, ideas and capital. It includes externalities like political and social regimes that influence businesses. The ever expanding capital formation through corporations, ownerships as well as territory has increased the importance of globalization manifolds.

From creating national state to defining territories to forming translational corporations and establishing institutions across borders, globalization has become integral to economic progress for nations around the world as it "represents the shift of the main venue of capital accumulation from the national to the supranational or global level. This is evidenced in the large number of TNCs that dominate world production and distribution, the pervasive transborder operations of these corporations, the preponderance of foreign direct investment (FDI) over other forms of investment, and in the extensive numbers of transnational corporate mergers and takeovers, joint-ventures, share agreements, cartels and oligopolies." (Steeple 2000) Thus globalization has not only become the source for production and trade but also of self emerging capital.

Nations around the world are realizing the importance of integrated world system, free of trade barriers and an international system for corporate operations. As the world evolves into a trading network, nations are also evolving forming states and civil societies at a global level (Steeple 2000). State here means the set up of political system defined by the global civil society. The new global state has not only shifted some of the policies, laws, norms, cultures, religious practices along with corporate cultures to the international level but also implement it based on the same principles. Hence, globalization is no longer a business or economic phenomenon but also political and social one.

Multinationals, in terms of globalization therefore represent the global agencies working at the local level. With the shift of the global civil society, nations are also realizing that they have to think local as the capital flow are coming from organizations within the nation state that has important global reach. The parameters for the global corporations have altered manifolds in this context as it has become national agencies; citizenry organizations; producers and distributors; and representatives of the home country. To operate in a foreign land means to remain politically correct within their home and host country (Steeple 2000).

The network of globalization has become so widespread and interdependent that a single incident would affect other nations. Moises Naim (2004) in his article indicate that globalization in the last decade of the 19th century has changed the majority's perception of a global community. Globalization does not necessary mean positivist but in fact it challenges new realities. Currency crises in Asia can affect countries in Latin America; likewise an epidemic in Asia can affect countries in North America. The fast pace realities and its effects on regions, and not nations only, anticipate that the global trend would evolve even more to have larger meanings to all nations around the world. Naim projects the global picture as something that is bleak, and highly influential.

Naim's view is also reflected in Timothy Taylor's article "The Truth About Globalization" (2002). Taylor is of the opinion that globalization with its multifaceted influence has both the pros and cons attached to it. According to Taylor, globalization's premise has been to project one world, one economy and one source of capital. Nations around the world has attempted to put every measure on a single platform in anticipation of equalization of economies around the world. There is no doubt that the financial markets have opened up to help producers flow goods and services far and wide yet with this expansion they are also over-riding the needs of the specific nations and its people. As more and more nations around the world are becoming interconnected, policy makers are realizing the liability of a global world. The coordination mechanism established to promote globalization has not only become the source for undermining connected economies but also a source for injuring the interests of its people. Unemployment, joblessness, incompetence as well as bankruptcy among the nations are gradually becoming a regular feature.

Due to the risks involved, nations around the world are no longer keen on the borderless expansion but rather prefer to secure their local industries. Free trade agreements between nations have resulted in nothing more than unemployment, high priced products and services, and unequal distribution of wages due to the uneven distribution of resources. Thus according to Taylor (2002):

"The global tide of economic growth over the last century has not raised all economic ships. But globalization is an avenue through which high-income nations can reach out to low-income ones. Expecting the poorest people in the world to pull themselves up by their bootstraps, without access to foreign investment, training, technical skills, or markets, verges on indifference or cruelty. Foreign aid has its place, but as a matter of practical politics, it will never arrive in sufficient quantities, nor be spent with sufficient wisdom, to raise overall standards of living dramatically in low-income countries. Only a combination of institutional reforms within low-income countries, coupled with much closer connections to the extraordinary resources and buying power of international markets, offers a realistic chance of substantially improving the plight of the poorest people in the world. "

For this reason the future of globalization is bleak as the cost of connecting to the world system is high rising. Multinationals, with their high profiles are dominating less developed countries through low pay, poor work conditions and paying low price for using their resources and yet at the same time sell the products at a high price to the same people. Protests against the establishment of multinationals across the world are justified in this context as these organizations in their greed for higher profitability are undermining the locals.

Globalization and its advantages and disadvantages

Literature on multinationals indicates the nature of these organizations includes:

a. replication of their home country activities in host country including manufacturing, sales, research and development; t

b. international management structures based on devolution of control to separate subsidiaries

c. separate subsidiaries linked in terms of financial flows, circulation of home based managers and trickle down processes, products and power from the home country (Mair 1997).

Given these characteristics of multinationals, they are borderless, and contribute to the breaking down of international trade barriers. They have significant power over the host countries in generating trade and international link. However, in the recent years the fundamental shift in the nature of these international companies have marked their status not as aid providers but an ideal type. Multinational companies are not only forming strategies for production in host countries but they are also forming strategies for standardizing products and sales from disparate localities of the world. They are acting as the integrating factor for the global market. Evidence suggests that multinationals are now responsible for the flow of finished goods and components from various countries of origin to other nations for its sales. According to Mair (1997) "many local communities in the traditional industrial areas of the advanced economies... have significantly become developed" due to these multinationals as they uplift the local, regional and national status to the global level.

Despite these facts, experiences of multinational companies suggest that it is not easy to degenerate local states from their respective environment and expect them to accept foreign direct investments. It takes years for organizations to be able to localize their firms, meaning adapting to the environment in which they operate before they are able to achieve the desired advantage. Thus, multinational firms find it imperative that they under go localization before they can take advantage of the local resources and market.

Localization is the opposite of globalization whereby the concept is to alter the product or service with distinct features for a particular market. The key to success is to adapt to the traditional pattern of demand and supply existing within the current market and lead it toward world standards. Most Western companies for example seem to focus on the globalization of products as they are considered to have high quality, incur low cost and superior in production technology. Yet when they have to cater to the local level, they find it difficult to penetrate the market as demands are different so are expectations. In Mair's (1997) article the author gives the example of how Honda, a Japanese firm managed to secure the localization model in the Western countries especially in North America and Europe by adapting to the local markets, designed specifically for these customers. Honda has been able to penetrate the market because it studied the quality standards, the cost structure, the competitors, the market expectations and its own designs to create hybrid automobiles that work both ways - globally as well as locally.

The dynamics of global and local from the social, economical and political scales have given rise to the struggle among producers whether to go local or global. They have to consider the social, labor, environment and monetary regulation within the local environment yet at the same time they also have to follow the international standards and regulations in order to control the multi subsidiaries around the world. This struggle for a balance global and local status has given rise to glocalization.

Glocalization takes into account of the social relationships incorporated in individuals in the form of habits, acquired routines, rules and norms. It integrate the class, gender and ethnic position, national, and international position of the local members yet at the same time does not limit the scope of the wage relations, variety of local, regional and national mechanisms etc. According to Erik Swyngedouw (1997) the sociospatial relationship between the multinational companies and the local is scalable when taken from the glocal perspectives. This is because the relationship is based on autonomous and fragmented centers of resources, conditions and characterized by the market mechanisms. Planning for ex ante elements like "cost-plus pricing, anticipated market expansion, medium-term [bureaucratic] planning, and so on" is usually based on the local level whereas the competitive positioning in the world market is carried out through cooperation between the state and national entities. The essential structure of the glocal organization remains territorial yet the organization and operations are inherent in regional differences and global collaboration.

The diversified nature of glocalization takes into account of both the positive and negative aspects of localization and globalization. Glocalization considers the freedom, sensitivity to locals, importance of regulations and institutions, state interference etc. From the consumer perspectives it pays particular attention to gender, ethnicity, culture and norms prevalent in the host country. Yet at the same time it also realizes the importance of labor relations, international regulations, organizations, governance and practices identified by international organizations like the European Community, the World Bank, the General Agreement on Tariffs and Trade (GATT), United Nations Educational, Scientific, and Cultural Organization (UNESCO), North Atlantic Treaty Organization (NATO), COMECON, and a host of others (Swyngedouw 1997).

Branding and its importance

According to Tom Blackett (2004), Group Deputy Chairman of Interbrand brand can be defined as "the visual distinctiveness of a brand may be a combination of any of the following: name, letters, numbers, a symbol, a signature, a shape, a slogan, a color, a particular typeface." More importantly, the name is also an important part of these elements. Thus a brand cannot achieve its true visual distinctiveness unless the name is combined with it. Elsewhere, Blackett also writes how brands tend to adapt to the market. In highly developed markets for example consumers are particularly sophisticated. They tend to experiment with brands by testing it through various dimensions like corporate identity, quality, product standards, adaptation to the environment or loyalty etc. (Blackett 2004).

Charles Young (2002) article "Brain waves, picture sorts (R) and branding moments" reveals that the "mind of the consumer can be thought of as being continuously engaged in the process of defining the self and orienting it with respect to the outside world." The consumer is constantly assessing and re-assessing the surrounding with respect to his/her own needs. The consumer is constantly struggling to place him/herself among others. The need to compete with others, to groom self image as well as the penchant for quality products have initiated a wave of brand conscious consumers around the world today. According to Young (2002):

"A brand's image is constructed in relationship to the consumer's concept of self. A brand's positioning is determined with reference to the marketing universe of competitors. But, it is the dramatic tension between the inner-directed process of brand image building and the outer-directed process of positioning a product in the marketplace that energizes the yin-yang of advertising creative as it is received by the mind of the consumer."

Thus, branding has become the basis for the flow of products and services, and commercial activities around the world. Sylvie Laforet and John Saunders (1999) are of the opinion that firms effectively compete in today's world because they interplay between brand names. They write "They present a simple brand hierarchy that focuses on brands and corporate names. Their concerns grow from their professional interest in corporate identity. They aim at imposing a structure on the visual image of corporations and their "confusion" of brands." From their point of view branding and brands are important prescription for establishing product hierarchy as well as account for successes in competition.

Corporate dominance no longer has the desired effect on consumers unless they follow it with a brand name, corporate identity and image. In the global context, companies no longer dominate the market, but brands do. Brand dominant approach has been followed by leading marketers of the world such as Proctor and Gamble, and Mars and manages to secure significant market size due to the prominence of their brands.

Branding is a whole different phenomenon than simple selling and buying of products. As mentioned earlier it takes into account of the consumer psych and strategies to attract them toward the products or services. Laforet and Saunders (1999) notes "Company structures reflect brand structures" and for this reason multinational organizations structure tend to structure their geographical location centrally or decent rally, depending on the product type and brands they want to position in the host and home countries. This complex relationship according to the authors allows them more chances of competitiveness. Furthermore, with their corporate identity, organizations can build the management systems and attitudes to permeate their values, brands and identity. Not only this but the authors also note that literature on branding indicate "Corporate-dominant structures reflect strongly held beliefs and values with the name providing a focus that helps communicate ideals." (Laforet and Saunders 1999).

Marketing issues can be resolved or dissolved through corporate identity as it is embedded in the company policy. Companies like Procter and Gamble, Kellogs, Heinz, Deutches Bank etc. not only pride their brand names in the corporate world but also as national emblem for their countries. Any kind of strategic plans for products would have to take into account of the product brand, its associated relationship with the corporate brand and its image within the market.

However, the authors also reiterate that: "Corporate names may have associations that do not suit the full range of customers that firms wish to target. By using brand-dominant strategies, companies can differentiate their products and position them for diverse target markets. In this way companies can sell products of different quality to markets that are incompatible. Brand-dominant strategies also suit decentralized businesses with wide portfolios where managers champion their products' interests." In this context branding is the key to the multinational orientation in the complex global yet local market place. As Fortune magazine indicate (1997):

"In the twenty first century, branding ultimately will be the only unique differentiator between companies. Brand equity is now a key asset." (qt. Blackett 2004).

Culture - what it means

From an anthropologist point of view culture means "a network of practices, ways, customs and beliefs comprising what is most representative of a particular people. This includes the language used by the inhabitants to communicate with each other, their food and the sports they play, and also their habits, gods, demons and every kind of ghost and spirit." (Llosa 2003) However, from the global perspective, this takes on a new dimension. Issues like boundaries, spiritual dimension, human life, knowledge and beliefs as well as ideas, myths and so on all contribute to culture. It is restricting yet at the same time expansive to include the life and practices of people of particular places. It also takes into account of globalization and how people adapt to the global environment.

Another author Stephan Dahl (2001) offers a more comprehensive explanation for culture and what it means. Culture has its root to the Latin word "colere" which basically translates to mean "to build, to cultivate, and to foster." Over the centuries culture has emerged more as a product attached with a set of values and attributes, and its relationship with the individual. According to Fisher (1988) for example culture is defined as "shared behavior which is important because it systematizes the way people do things, thus avoiding confusion and allowing cooperation so that groups of people can accomplish what no single individual could do alone. And it is behavior imposed by sanctions, rewards and punishments for those who are part of the group." Fisher's definition reflects the one above that categorize it as group behavior.

Alternatively, culture is also individual as it is the individual that determines the characteristics of culture by contributing to the group culture. It is self evident; self ruled, self categorized and a natural behavior accepted by the group. S. G. Summer introduced this concept of culture which centralizes culture known as ethnocentrism.

To combine the two aspects of centralization and decentralization of culture, culture constitutes (qt. Maletzke, 1996):

- "national character / basic personality

- perception

- time concept

- space concept

- thinking

- language

- non verbal communication

- values

- behavior: norms, rules, manners

- social groupings and relationships"

Furthermore, culture comprises of three layers which are the following:

"The outer layer, artifacts and products, is the most explicit of all layers: including language and food, architecture and style etc.

The second inner layer, norms and values. Norms are "the mutual sense what is right and wrong" while values represent the "definition of what is good and bad".

The innermost layer, basic assumptions, represents the core assumptions of what life are assumptions about how to handle everyday problems that have become self-evident." (qt. Dahl 2001).

Culture is also nationalistic as it represents national character of particular place and group of people. These characteristics include the shared behavioral patterns and personality traits that are differentiable from other nations. Dahl (2001) believes that culture is national, and diversified when compared from region to region. Each culture has its own particular personality, social character and undergoes stages of transformation. This is why national culture tends to dominate individual culture when viewed from the regional or global perspective. It not only influence the perception, conception and thinking of the particular group but also shape the communication pattern, behavioral pattern as relationships within the groups. It establishes the standard by which everyone is to behave and act and it is made of a complex integration of human nature, man nature, time, activity and relational orientation which develops into a value system.

Value Orientation

It is through this value system that the patterns of behaviors can be judged as correct (or not correct) through the norms, rules, manners and roles. Depending on the maturity, and rigidity of the social system, culture can be adaptable or rigid.

Middle East culture, religion, ethical and traditional values

The areas that touch north and east of Africa, and south west of Asia make up the region is known as Middle East. Countries that come into this bracket include Armenia, Azerbaijan, Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Turkey, Turkmenistan, UAE and Yemen. The disparate area that the Middle East covers is not based on the geographical distribution but rather based on the similarity of history, land, people and culture. Geographically, the Arabian Gulf knit the various countries together with a history dating back to the Ottoman Empire. However, today the various countries are divided on the basis of the regional and economic cooperation for peaceful development. Most of the countries are ruled by royal families while others follow a combination of the ministry, military and royal regimes. The majority of the countries are operating on the basis of the abundance of petroleum which contributes to about 75% of their GDP and exports. Saudi Arabia and other Middle Eastern countries rely on the success of economic reforms, privatization policies, foreign direct investments, and immigration policies (Rice 2004).

The countries are governed by the Islamic law known as the Shariah which not only establish the legal framework but also the way of life for most Muslims in these countries. Most are rigid in their approach in commercial and investment endeavors resulting in joint ventures with Western partners yet they still retain their Islamic code of conduct for all business activities. This is because the dual influence of Islam and Bedouin tradition has profound effect on the political, social and business behaviors of most Middle Eastern countries. Compliance with basic religious obligations, cultures and events is imperative for any organization to successfully operate in these countries. In Saudi Arabia for example it is best to avoid business travel or dealing during the month of Ramadan when the Muslims refrain from eating and drinking from dawn till sunset (Rice 2004).

Another aspect of the Middle Eastern culture is its tribal heritage. The Bedouins from age old follow values such as loyalty, justice, generosity and social status. Loyalty to the family is critical, and after the family the loyalty lay with the clan, tribe and nation. In this sense the Middle Eastern people especially the Saudis are nationalistic. Similarly businesses are only conducted after trust has been established between the parties (Riche 2004).

Following the Bedouin tradition, Arabs are extremely reserved in their attitudes and behaviors especially when it comes to their family. Family loyalty has powerful influence in Arab societies which may influence job status, advancement, technical competency, management performance etc. It also influences the cultures, behaviors and management techniques within firms. Typically Saudi society affects its business environment as the Arabs pay particular attention to family and business hierarchy in the same manner. Chastity, sexual modesty, conservative dressing as well as Islamic based behaviors which prevail in the society are also adopted in the business environment. Hence, it is not common to find pork, eat with forks and knives, or drink alcohol in public places in many of these countries.

Although, many experts are of the opinion that the Middle East market has significantly opened up to the world through Westernization for the benefit of the foreign investors, yet the business environment remain essentially the same (Rice 2004).

With urbanization and foreign direct investments countries like the UAE, Bahrain and Turkey have developed exceptionally to superficially resemble Western environments. These countries have become exposed to modern television networks, telecommunication, as well as technologies which have greatly helped orient the Arabs to the Western culture. One of the major positive aspects of the Arab society is the abundance of funds available for investing in all kinds of technologies, businesses, and projects. This has resulted in high profile franchises, sponsorships, and development toward a market oriented society. Young people are becoming aware and embracing Western values and lifestyles and are greatly influenced by the Western media. As a result one observes contrasting social cultures prevalent in the region whereby the educated masses are attracted toward Western products, behaviors and lifestyles and on the other hand they remain loyal to the Arab traditions of collective home, family and married life. It is common to have Arab grand parents to live with their descendants and influence the family decisions. it is also common to observe that these same individuals are keen on international quality and branded products available at large departmental stores (Rice 2004). Leonard Binder made the following observation: "The interests of the urban middle class are to be identified with their current largely bureaucratic functions, but their cultural values are still importantly traditional or rather derived from the life experiences of the rural middle class." For this reason there is a contradiction in the social composition giving rise to a dysfunctional and highly inefficient social system.

Recent development among the disparate social groups resulting in popular culture has altered the specific cultural orientation. According to Mehran Kamrava (1998) most of the Middle Eastern ethnic groups consider themselves higher in social strata than the others. Each exalt in their social status from the others. At the same time popular culture with its highly fragmented structure permeates the Middle Eastern daily lives and to larger effect influences their perception in life. In Turkey for example the Arabic culture is not so heavily influential as compared to the Western cultural influence. On the other hand the Saudi Arabs are more anti-Semantics and consider them superior to other Middle Eastern race. This disparate perception of nationalism not only creates disjointed communal development and segregate cultural commonalities but also segregate them as a cultural group.

Yet even though they are dispersed by their ethnicities, Middle Eastern Arabs are united on the basis of Islam and its fundamental rules on social and cultural tenets. It is very difficult to separate the Arab life from the Islamic culture as it forms the basis for political, social and cultural regime. To sum up in the words of Mehran Kamrava (1998) "If only one word were to sum up the popular culture of the Middle East, it would certainly be "contradiction." From the topless beaches of Antalya to the ultraconservative corners of Erzurum in Turkey; from the angry rampages of Islamic militants to the café-society boulevards of Francophile Algiers; from the opulent Italianate mansions of Jeddah, Mecca, and Medina to the not-too-distant Bedouin tents encircling each city, the Middle East is a marvel of cultural and sociological contradictions."

Hypothesis

Given the above literature review the researcher pose the following hypothesis:

Branding involves cultural, political, social and religious consideration of the consumer before a company can successfully establish its unit in a foreign market. Being a global company does not establish the company as an accepted entity. In fact being global means a company has to retain its unified standards, mission and vision and yet alter it to the local level wherever it establishes its unit base to achieve acceptance.

Operational definition

globalization - Growth to a global or worldwide scale

glocalization - The creation of products or services intended for the global market, but customized to suit the local culture

culture - a network of practices, ways, customs and beliefs comprising what is most representative of a particular people

Middle East - countries belonging to a regional group including Armenia, Azerbaijan, Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Turkey, Turkmenistan, UAE and Yemen

branding - Giving a product or service a particular image or brand identification

Methodology

The choice of research method is a critical stage as it determines the accuracy of the results for which the researcher is aiming to achieve. To make a wise and appropriate choice, it is important to first understand these two different yet effective methods.

Quantitative research refers to the method that involves numerical calculations, interpretations and results. This usually entails the use of surveys, experiment, formal numerical calculations, derivations etc. (Myers 1997). Quantitative research usually is prescribed for those studies that require specific results for the understanding of particular issues or problem involving numerical results. The researcher has not opted for this method as it is not appropriate for the study on hand.

On the other hand, qualitative research entails carrying out experiments that takes into account of observation, behavioral patterns, social and cultural patterns and such subjective institutions. the data as such do not require numeric calculations but rather depend on its subjective understanding. To achieve this purpose, past records, data and researches have to be taken into account for a detailed study to further the current study. It involves studying of secondary resources as well as primary resources. This method has been chosen by the researcher.

The choice of secondary data include the Internet, magazines, newspapers, CDs, and brochures; and primary resources include journal articles, annual reports, books, interviews and case studies etc. These data sources offer the theoretical framework in the literature review which would enable the researcher to understand the behavior of firms under study.

More specifically the researcher has also adopted the case study method which involves the use of descriptive analysis of situations pertaining to specific problem issue. According to Yin (2002) the case study method "is an empirical inquiry that investigates a contemporary phenomenon within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident". In the current research, the situation relates to the multinationals that operate in Middle Eastern countries. The specific problem issue here is identified as the adaptability of these companies in their environment. The case studies are expected to shed light to the relationship between environment and the specific problem of international marketing and globalization. The two cases namely Coca-Cola and Starbucks have been chosen for this study because they are two of the leading beverage companies in the world in their respective fields, having branches spread out across the world yet one succeeds in blending with the market while the other has not.

Analysis of the Problem

The Coca Cola Company Overview

The Coca-Cola Company was founded in 1886 and has become one of the world's leading manufacturer, marketer and distributor of non-alcoholic beverage concentrates and syrup. The company is headquartered in Atlanta with local operations spread over 200 countries (Annual Report 2004). Its major products constitute of carbonated soft drinks which it manufactures in cans, bottles, fountain and concentrate syrup form. With operations spread around the world including North America, Africa, Asia, Europe and Middle East and Latin America the company pride itself in its harmonious yet smooth decentralized operations. This operation is reported at $ 6, 222 millions in consolidated income for the year 2004 (Annual Report 2004).

The company's key strategy is to pay close attention to the local needs and tastes, and sustain its global mission and vision. Through an unrivalled distribution system, it resells to wholesaler and bottlers without restricting to the territories in which they operate. By giving licensing rights to local manufacturers and distributors, the company typically directs the network of its business partners, thus achieving localized marketing and distribution objectives which reflect its goal to use the company's brands, financial strength, distribution system and management and employee resources to compete in the world (Annual Report 2004).

The company has introduced a variety of brands, and its extensions in various countries of the world in 2004 to cater to particular tastes, namely Diet Coke with Lime in Australia, New Zealand and North America; Coca-Cola C2 in Japan and North America; Sprite Icy Mint in China; Fanta Naranja Chamoy in Mexico; Aqua Shot in New Zealand; Fanta Citrell in Germany; and in Finland and Sweden, we repositioned Fanta Light as Fanta Free. The company has also acquired ownership and license rights for Bistra brand in Croatia, the Cepita brand in Argentina, the Joya brand in Mexico and the Nada brand in Bahrain (Annual Report 2004).

These successes have not been achieved without hindrance. The events following September 11, has created unstable economic and political conditions in the Middle East, North Korea and India etc. which has resulted in differentiated business results. Furthermore, the company also admits to the change in the business environment which has led to change in consumer preferences, lifestyles, and health and nutrition considerations. These changes have led to more pressures on product and pricing as well as global competition (Annual Report 2004).

Naomi Collett (1998) notes the Middle East presents great opportunities for soft drink manufacturers and it is also one of the most competitive; and Coca-Cola is not indifferent to this perspective. Islam's prevalence within the region and laws negating the consumption of alcohol for most consumers has given rise to the demand for cola drinks. As a result, Coca-Cola and Pepsi have established and by far enjoyed dominancy in the region. Starting from Oman, Coca-Cola has swiftly captured the Arab market to gradually spread to Egypt, Lebanon, Jordan, and Yemen and more recently on the West Bank and Gaza. With 38 percent of the market share in 1998, Coca-Cola no doubt has secured one of the highest positions of a foreign soft drink manufacturer in the Middle East (Collett 1998).

Despite this fact one of the most important aspects of operating in the Middle East is that Coca-Cola is in constant political peril. With Middle East countries threatening to cut off ties from Israel, and those countries that have ties with it, Coca-Cola's position have always run the risk of boycotts, strikes and such political milieu (Collett 1998).

In the Middle East for example emerging local Islamic brands have threatened the US based cola company (Ligerakis 2003). Due to the anti-Americanism attitudes prevalent in Asia and Middle East a host of local competitors have emerged with slogans and marketing campaigns to target the Muslim consumers and displace them from drinking foreign made colas. Names like Zam Zam Cola, Qibla Cola, Star Cola and Mecca Cola have been launched with the objective to take away the lucrative soft drink and bottling market share from Coca-Cola. The slogan used by Mecca Cola for example state Don't Drink Stupid, Drink Committed. The competitors' tactic had been to attack on the nationalist psych of the Muslim consumers and detract them from being brand loyal (Smith 2004).

Not only this but the company also faced resistance from employees, business partners and distributors which made it difficult to make positive commercial decisions independently.

To resolve the company has developed a comprehensive strategic marketing campaign that integrates local perspectives into it unified international theme. Foremost, on the list had been forming strategic ties, and create alliances with local companies to retain its position. For example the company has won the support from the Saudi Arab locals through the sponsorship of its football team, as well as regional soccer activities. During the world cup period, Coca-Cola offered cash prices for fans to fly to the tournament as flag bearers, ball boys and team helpers (Collett 1998). Not only has this but the company also realized the importance of uniform marketing and distribution policy to sustain its position in the Middle Eastern manufacturing market. For this reason Coca Cola usually holds 100 percent equity share of its bottlers equity stakes especially in Jordan and in the Gulf states. Even if the company offers franchise partnership, it will retain its marketing, manufacturing and distribution rights to operate to ensure that there is maximom control over the local bottlers (Collett 1998).

Similarly, to address the problem of US image, Coke replaced all its universal ads dubbed in Arabic by commercials featuring Arab national figures. The company effectively launched television commercials which feature Arabic language, target Muslim events and uses local personalities in the starring roles such as Omani ace rally driver Hamed Al-Wahaibi endorses Coca-Cola, as does Saudi pop singer Abdul Majeed Abdullah. (Coke and Pepsi battle it out 2004).

In Saudi Arabia, Coca-Cola not only has to face critical market challenge but also environmental challenges. With the Islamic cola promotion on the rise, Coca Cola had to compete with local companies attempting to displace the US based company . In Saudi Arabia Coca Cola has an infrastructure worth $100 million with bottling plants in Riyadh, Jeddah and Dammam. Understanding the need for locals to accept the foreign based company, Coca-Cola has "Saudized" its management and personnel. With a local chairman Khaled Ibn Ibrahim Al-Baraheem on the board, Coke strives to be as local as possible. Following its corporate governance model, Coca-Cola is known as a good citizen as it participates in charitable acts, offers flexible timings during religious months and events as well as volunteer time for charity purposes (Smith 2004).

Coca-Cola realizing the importance of families and unity integrated work timings, activities and events to collaborate with its distribution activities. This has not only earned the trust from the locals through employees and their extended families but also a well knit consumer base (Smith 2004).

Islamic Cola Brands

(Smith 2004)

From its strategic marketing plans, one understands that Coca-Cola is not stranger to the importance of cultural identity and meeting local market demands. In fact the company strives to produce products that meet these criteria which it believe would enable it to achieve specific business focus for the specific region. In the Middle East for example Islamic practices and demand for Islamic cola has become a fact. It is in the company's interest to tailor its products and marketing campaigns to portray Coke as a historical family brand which satisfies the consumer's demand even before the emergence of the Islamic cola brands (Smith 2004).

Given the global nature of its operation, the company anticipate differentiation and resistance when it comes to dealing with cultural, social, political and religious issues. To resolve such issues before hand, Coca Cola denounce its affiliation with any religion or ethnic group. It does not engage in any political or religious activities. Yet on the other hand, it realizes the importance of supporting outreach programs such as charities and volunteer works. These features have not only been congruent to the local culture in the Middle East but also identified the company as a pro-Arab company thereby displacing competition, and local protests against U.S. brand (Smith 2004).

Starbucks Corporation Overview

Starbucks Corporation is a Seattle based coffee company which buys, roasts and sells whole bean specialty coffees. It also provides coffee drinks through a chain of international retail outlets. From the beginning the company has consistently maintained its growth throughout the United States, and later on across the world with an annual growth rate of 20% (Annual Report 2004). In the year 2004, Starbucks has achieved $ 5.3 billion in net revenue which is a 30% increase from 2003. This also contributed to an earning per share of $0.95. Each year the company opens up new stores around the world and the year 2004 has been no exception. To date it has opened up 2437 stores worldwide and continue to open 1500 new retail more outside the US (Annual Report 2004). Although the majority of the company's income is derived from the US and Canada, nevertheless the global market also provides significant revenue which is the reason why Starbucks is looking forward to taking advantage of the licensing opportunities (Annual Report 2004).

From its inception in 1970, Starbucks pride itself in innovating products from the introduction of mochas, lattes and espresso to the classic Tazo teas and Frappucino. The company does not stop experimenting new tastes to suit its customers resulting in added brands and product lines such as roasted high quality whole bean coffees, fresh coffees, Italian style espresso beverages, tea products as well as bottled Frappucinio, DoubleShot coffee drinks and super premium ice creams(Annual Report 2004). These specialty brands and product lines have enabled the company to establish its products around the world (Annual Report 2004).

Starbucks pride itself in operating in multiple distribution channels from roasting to coffee making services. The vision had been to provide the Starbucks Experience which is synonymous with the American Experience to the customers. This means that the company has to have certain store formats, models of coffee bars for customers to sit and drink espresso with friends (Annual Report 2004). the environment is aimed at high traffic locations such as streets, malls and grocery stores. This image has proliferated from Italy which spread to the US and now it is aimed to affect the regions wherever Starbucks is heading toward. The unique US culture of having a cup of coffee in the morning, afternoon or night, and a hangout point is enforced within its corporate policy as well as in its management. It seems that Starbucks is more concerned with the strategic objective to induce management and workforce commitment to the Starbucks philosophy which is reflective of its American culture (Annual Report 2004).

From the distribution and branding point of view, the company is observed to be following multi level channels of distribution in which the company extends its brand according to the coffee needs of the area. For example cafe carts in hospitals, banks, offices and shopping centers cater to the fast moving public needs whereas the packaged and prepared teas cater to the growing demand of tea houses and general public (Annual Report 2004). But when it comes to becoming a global brand, Starbucks does not realize that the American image with its unique American tradition cannot work in the same manner. With the anti-terrorism campaigns on the rise, Starbucks has to realize that one unified corporate culture cannot work at all places of its establishment. It has to alter its strategy to meet the demands and perception of the locals. Admittedly, to this purpose Starbucks in the Middle East has joined hands with Alshaya, a company that brought many other brands to Middle East such as Next, The Body Shop, Burger King and the like (Fisk 2002). It has been expected that with this alliance, Starbucks would be able to channel to the local consumer market with its lucrative brand. It would have achieved its goals with these strategic alliances as Starbucks had also readied its community involvement strategies to infiltrate the local market, had it not been for the one and only important event which foiled the chances of success (Fisk 2002)

Howard Schultz, the company's corporate head had been regularly visiting Jewish meetings at synagogues and had even been awarded Israeli 50th Anniversary Tribute Award from the Jerusalem Fund of Aish Ha-Torah (Fisk 2002). This event has resulted in anti-Semantics sentiments among the Middle East Muslims. What Starbucks has not realized is the fact that though the event innocuous has great impact on its consumer psyche. For them Schultz represents Starbucks, and to team up with the Israeli gave the impression that Starbucks support the Israeli troops who they consider responsible for the unstable political environment in the Middle East. The boycott that followed this event not only denotes how Starbucks and its leader had been unaware of corporate identity issue but also not attune to the local Islamic culture.

The boycott had even more impact because Starbucks had been confident in wining the local Middle Eastern consumers through its corporate principles. Starbucks failed in Israel and had been forced to pull out its shops due to the cultural misunderstanding. Marketing managers at Starbucks in Israel like to quote the failure of KFC because differences between a global brand and local culture, not realizing that using the same story line could lead it to failure itself. The story quotes how KFC could not succeed in Israel because of the differences in the way Israel treat chicken and its preparation as compared to the international standards. Starbucks does not realize that in quoting the KFC story, it shows itself superior to the local culture, portraying the message that American standard is superior, and better in quality which is why brands like Starbucks and KFC succeed abroad, and not in Israel (Mozaffar 2003). These managers not only neglect that their corporate principles claim globalization, cultural integration and social consideration. Through their actions recorded by the media, one of the strongest sources of publicity, they demonstrate that Americanism is superior to any other culture which show their ignorance of cultural adaptation.

Similarly Schultz's action induced anti-Semanticist sentiments in countries like Qatar, Saudi Arabia, Bahrain and Kuwait etc. (Fisk 2002). Though Starbucks had tailored its business structure to meet the local criteria of hospitality and non-alcoholic beverage drinking trend, nevertheless its business model has not include the unifying factors such as family gatherings, loyalty to the locals, trusts among employees and trust to national believes etc. As a result, Schultz and Starbucks had to face adverse conditions.

Discussion

There is no doubt that globalization has proliferated and changed the investment, business and consumer market around the world. However, as one studied in the literature review, with the proliferation of globalization, people have also become aware of their own unique values, beliefs and culture. This has resulted in the demand for sustaining localization. Yet the pull and push factors of globalization and localization could not exist without each other, giving birth to the concept of glocalization. In the recent years, many multinational companies around the world have realized the importance of strategic integration of glocalization to successfully capture the local markets, and yet retain global dominance. Coke has been one example, as outlined above that successfully captures the world over through its glocalization strategy.

Being aware of localization is one aspect of the strategy, while communicating the same to the local is an entirely different strategy as it involves careful integration, action oriented activities, and localized conception and image. To win over the local, it has been critical for Coke to adapt to the image that the consumer wants to see. At a time when Islamic cola had been on the rise, Coke did not resist and assert its global image. Instead it has adapted and competed against its rival in the same manner and market, thereby winning over its consumers.

What is more important as one observes in the above analysis has been Coke's strategy to integrate local values. Understanding family unity, loyalty, and nationalism among Arabs, Coke took advantage of these factors and created a niche role for itself in the average Middle Eastern family. This not only earned the trust and loyalty of the consumers but also help it to sustain its position in the market amidst the unstable political and religious scenario. Arabs being sensitive to their religious practice and way of life, adopted Coke because it represent family, traditions, historical and cultural values that the Arabs hold dear.

On the other hand one observes that Starbucks following the footsteps of Coke in providing non-alcoholic beverage could not successfully earn such trust. This is because perhaps firstly the company is a relatively young one that has not experienced political, social and religious turbulence in its international corporate history. Secondly, even though Starbucks had carefully studied corporate trends and history, did not step on the toes of the locals through its corporate principles and values. In fact Starbucks pride itself in being part of the global world, and having successfully infiltrated one of the most lucrative markets in the world - Middle East - it forgot to be careful. With many stores established in the Middle East, Starbucks assumed dominancy in the Middle East. It does not believe in following an integrated marketing strategy or using advertising to communicate to its customers. Without these elements, the company remained elusive to the consumers. As Rob Frankel, a branding consultant says The most important thing Starbucks must keep in mind is that no brand expands in a vacuum, he says. Every brand is rooted in popular culture. That's the difference between advertising and branding. Advertising grabs their minds; branding grabs their hearts. (Karolefski 2002). Following strategic branding, Starbucks must realize that every action it takes reflect on the brand. A brand is synonymous with the company and also assumes its identity.

As a result when Schultz visited Israel and received an award from the Israelis, Starbucks lost its positive corporate identity among the Muslim world. According to them, Starbucks had breached the trust of the Middle Eastern consumers who have accepted the US based brand (Cooper 2003).

One of the mistakes that the researcher oversee in this case had been that Starbucks should have realized its critical position in the Middle East at a time of heated debates and anti-Americanism. Furthermore, it has also neglected to take into account that corporate identity as a branding tool is recognized by its people and leaders. As the leader of the company Schultz is Starbucks. To become involve in political and religious activities would likely result in anti sentiments from either groups. Of course there is a logical rationale for Schultz speech that he did not promote terrorism and Semanticist. Later on Schultz apologized for the misinterpretation but the damage has been incurred resulting in the hatred from Starbucks customers.

Overall through the companies' experiences one learns that to be successful in a foreign market, a brand has to be prominent in all aspects of the society whether it involves participation in charities or volunteering to clean the beach. These activities though do not cost much but it does have a positive impact on the consumer psych which earns high consumer base than any marketing campaigns can do. The social aspect is an important side to corporate operations as it enables the company to come to close contact with the customers, allowing the management to learn about the culture, practices and norms to adapt accordingly.

Conclusions

To conclude, the above research indicate that culture, ethics, values and beliefs play critical roles in devising strategies as well as in the perception of the consumers. Customers tend to adopt brands that appeal to their social, cultural, political and religious orientation. A mature brand like Coke understands the importance of localization not only in its corporate activities but also in corporate social responsibilities. In recognizing this fact, it has been able to win over one of the most difficult consumer base - Middle East in the midst of political turbulence. Coke proves that political affiliations, religious connotation and cultural differentiation can be overcome by strategic alliances not only at the corporate level but also at the consumer and employee level. It uses strategic marketing tactics, through local advertisements, local tastes and imagery to win over the Arab customers showing its sensitivity to the cultural environment in which it operates and yet retain its global perspectives.

Starbucks has to still learn this fact as it goes through its expansion in different territories. It would also have to learn that branding is a critical phenomenon in making it a success and also in wining over customers. Having established that Starbucks follows a branding strategy instead of advertisements, it differentiates itself as well as place itself in perils with the local consumers. In foreign market especially branding builds an image of the corporation in the minds of the customers. Acceptability stem from how adept the company is to the local culture, people and environment. Starbucks scandal through Schultz could have been positively altered through a repositioning strategy whereby Starbucks denounces its association and affiliation with Israel. Although it did do so at a later stage, nevertheless the damage has been done.

Their experiences indicate that multinationals when they venture out of their home countries can follow one unified vision and mission but values have to be altered to meet the local standards. In the Middle East especially the local culture is unique, and different from Western cultures. Unlike the American culture it is conservative, closed to families and associations, and based on religion. Based on these facts any company that anticipate to position itself in the Middle Eastern market has to orient its people, management and even strategies in order to successfully position itself in this environment.

Similarly, it must be noted that corporate branding as well as product branding all greatly influence the success or failure of a company. Any strategy to become a glocal company would have to scale through the cultural biases, political association, and religious connotation within the country.

Even though these companies have been studied from a broad perspective, of how branding and culture go hand in hand, future studies can delve even further by identifying corporate repositioning, effectiveness of marketing re-campaigns and reversing customer psych. In the above research the researcher has been restricted by the short space as well as the vastness of the issue of globalization, glocalization, culture and multinationals. Since Middle East is a large market in itself, future studies perhaps can direct one or two particular countries for effective and close observation of the effects of these marketing mechanisms.

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