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0:04
Marriott started its globalization journey in 1992.
And I have done some work with the company over the years.
And so, what was the situation in 1992?
As we know, Marriott has a number of
different hotel brands and some of these are global chains today and some are not.
But going back to 1992,
none of them were global.
At the top end, Marriott has a brand called Ritz-Carlton,
very well known, followed by Marriott five star,
then four star Courtyard,
followed by I think Fairfield is three star,
and then retirement communities,
what Marriott calls Marriott Senior Living Services.
And the question that Marriott faced was back in 1992,
when they were starting out on the globalization journey its first baby steps,
should they take all of these brands global at the same time,
or should they prioritize?
And if the latter, how?
Well, of course, Marriott had these properties but they
were all in North America, US and Canada.
So, Marriott now says, "Look,
it's time we started globalizing.
So, what do you do? You take all of them global,
or do you prioritize?"
1:19
The logic that the company should use for this is on these two dimensional frame.
So on the X-axis,
it's expected payoff from globalization.
So going back to the central idea in
my presentation on the foundations of thinking about global strategy,
I said that industry economics matter.
And some industries that are high on economies of global scale,
or global scope, or global delivery,
therefore should be looked at as globally integrated,
where the payoffs from globalization will be very
high or the penalties of not globalizing would also be high,
which is just a mirror image statement.
So going back to the Marriott example,
if you look at the Ritz-Carlton and Marriott the five star chain,
at that level, the customers are primarily global travelers for business or for tourism.
And for these customers,
a global reservation system
assurance that they know what kind of a hotel they are checking into,
et cetera, is very important.
And so therefore, unlike let's say, retirement communities.
For retirement communities, that's not for travelers,
that's where people are going to live.
And so therefore, for retirement communities,
we are not talking about global travelers,
but in fact people who may not travel much at all.
And so the expected payoffs from globalization are very high for the five star,
six star categories, and almost none for say retirement communities,
and that would drive the decision.
So, that's the X-axis expected payoff from globalization.
On the Y-axis, we have the strength of the local adaptation imperatives.
And these can range from local adaptation imperatives
on the lower level of the Y-axis that can be very high,
or at the upper level of the Y-axis local adaptation imperatives could be low.
And clearly, when the local adaptation imperatives are low,
you can standardize a lot of the design and activities in the product or service.
And if you can globally standardize and the customer does not care,
maybe the customer even prefers that standardization,
that reduces the friction on the globalization process,
introduces the risks that you will make mistakes.
So, to capture the central logic,
if the expected payoffs are high and the local adaptation imperatives are low,
you should basically close your eyes and rapidly globalize the business,
and that's the case with Ritz-Carlton or with the Marriott brand.
At the other extreme,
if the payoffs from globalization are low and local adaptation imperatives are high,
that's like Senior Living Services, lowest priority.
Others like Fairfield Inn, like Courtyard,
they would fall in the middle moderate priority.
So, this is the logic that in fact,
companies like Marriott have used and used it very effectively.
