Part 1: Summarize the Important Case Facts

Who are you in the case?

Toshio Tanaka, President and CEO of Garrard Japan

What is the main problem? How did this problem happen?

Garrard has a glocal score of 3.5 out of 10, which is the average ranking among its peers in the CPG industry. Garrard wants to improve this score.

Tanaka got an action plan stating that Garrard should

1. Define its business purpose in Japan and communicate it clearly to stakeholders

2. Define employee behaviors and align them with business purposes

3. Pursue local relevance

But Tanaka is worried about whether or not this action plan would actually improve Garrard Japan’s glocal rating, and who should provide the resources: Garrard Japan or Garrard HQ?

What are some key facts in the case?

Multinational Enterprises

· Three characteristics:

o Invests in foreign countries instead of just exporting to them

o Actively manages offshore assets (e.g., stores, offices)

o Integrates operations in different countries

· Need to strike a balance between serving global needs and local needs (culture, consumer preferences, ways of doing business, government demands, etc.)

· MNEs have been facing more and more challenges recently

o More protectionism

o Less multilateral trade agreements

o More state capitalism (governments supporting domestic industries instead of international businesses)

o More state-owned businesses

The Packaged-Foods Industry

· $2.11 trillion worldwide in 2016

· Very fragmented (many many competitors)

· Rooted in local cultures because each culture has their own tastes

· A global strategy is very difficult because

o Local demographics are changing in many places. Millennials want fresh foods, local ingredients, and they track the supply chain to ensure ingredients are ethically sourced

o New distribution channels, such as home delivery of food, is becoming more popular.

o Increased pressure to be more healthy and reduce processed foods.

Japan and the Packaged Foods Industry

· Revenues of 182.5 billion USD in 2016

· Two major demographic trends: a shrinking population and an ageing consumer base; hence manufacturers are focused more on adding value to products to command a higher price rather than trying to sell more products

· Japanese consumers frequently buy ready-to-eat meals while on the go, but they buy them from convenience stores near their homes

· Online food purchasing is not very popular yet, but Amazon has started trying to make it popular

· Leading companies in Japanese packaged foods are Meiji Co, Fujiya Co., Morinaga & Co, and Ezaki Glico

Garrard S.A.

· Revenues of $100 billion in 2016

· Dozens of brands, each with sales of over a billion dollars

· 250K employees; operates in most countries

· History resulted in Garrard having a more multidomestic strategy

· Garrard took high performing managers at the local level and moved them to the HQ. Then those people could persuade the local managers to accept HQ’s ideas because they have high credibility with those local staff.

· All new products from HQ had to be validated locally before local launch

· Implemented IBA (International Business Achievement) to get greater control over sourcing, production, and distribution

· Focuses on being affordable to customers rather than targeting rich consumers

· To lower costs, Garrard uses three ways

o Local sourcing

o Local manufacturing

o Local distribution

· Uses a hierarchical organizational structure for areas where the local needs are the same

· Uses a matrix organizational structure for areas where the local needs are unique

· Two ways to solve conflicts and make decisions

o 1. The executive team meets monthly

o 2. All the country managers (~180 people) meet at HQ once every 2 years for a week-long summit

· Over 90% of what was sold was produced locally

· All entry-level jobs at Garrard are local

· Has a stable tenure of leadership; many CEOs came in at entry-level and rose to the top despite global trends for outside CEOs

Garrard Japan

· Started in 1930s

· Sales of $4 billion in 2016

· 20 manufacturing, sales, and distribution sites across the country

· 60% of finished products were imported

· Employs 6000 people

· Pays $1.4 billion worth of Japanese products and services annually

· Tanaka joined in 1990 and became CEO in 2013 (23 years in different roles). He has 11 direct reports. He reports to a zone executive VP at HQ.

· Social media makes consumers worried about product safety even when that news isn’t related to Japan’s locally produced foods

· HQ is often demanding Garrard Japan to improve its margins but they forget that Japan has higher regulatory costs related to packaging.

Garrard Survey

· Done by a public opinion and market research firm in Tokyo

· Done from July 26 to Aug 2, 2017

· 1201 Japanese adults took it

· Tanaka hopes for Garrard to have the size, scale, and expertise to offer the best products from around the world, while also producing the products in local factories, using local ingredients, engaging local resources, and employing local people.

Issues Facing Tanaka

· Some survey respondents have a negative view on MNEs

· Some survey respondents have hope for MNEs

o 94% of people believe it is possible for MNEs to act in local interests

· There seems to be the opinion that “it is hard for people to like businesses once they grew beyond a certain size, despite how much they contribute to the economy.”

o Tanaka wants to communicate that big is not bad

· The Japanese respondents also aren’t aware that Garrard Japan was actually a local company in many ways

Was the Strategy Adequate?

· Company purpose is “Ensuring quality of life through healthy good”

· Core values: Equality, diversity, sustainability

· Tanaka needs to evaluate if the global strategy fits the needs of the Japanese people

Could the strategy be executed?

· Three problems for HQ’s suggestions

o Garrard Japan has always promoted individual brands rather than promoting the company as a whole

o Garrard Japan has no budget for corporate campaigns. They have always focused on store-level promotions and social media.

o In order to communicate that products have no artificial additives or sourced ethically, they have to put that messaging on each product. The costs would be huge because Garrard Japan has so many products. Who should pay?

Part 2: Analyze the Case and Find Solutions

Question 1: Why is it important to improve the glocal score?

· Low glocal score can reduce sales and reduce employee morale

· However, since Garrard is a CPG, not many people actually know the name “Garrard”. Most people just know the product names. So improving the glocal score may not be that important.

Question 2: Is the action plan suitable and sufficient to achieve the goal of improving the glocal score?

· In theory yes. The theory sound simple, but executing it is complex.

· Defining the business purpose and communicating it to customers would obviously increase the glocal score (though again, the question of whether or not this is a worthwhile investment is up for debate)

· Define employee behaviors and align them with business purposes would improve the glocal score from employees, but that’s not even tracked by anyone. So this one isn’t as important towards the goal of improving consumer glocal scores, but it is necessary to do to make sure the organization does what it promises.

· Pursuing local relevance is the most important one.

Question 3: What can Garrard Japan do differently or better in terms of pursuing local relevance?

· Right now, 60% of products are imported. Perhaps Garrard can reduce that and try to produce even more products all in Japan.

· Invest in programs to benefit Japan, such as providing jobs for youth, protecting the environment, and feeding the homeless

Part 3: Recommendation

Tanaka should tell HQ:

If you want to promote Garrard as a whole, then HQ should pay for it because it’s for the Garrard brand as a whole. The Garrard Japan brand doesn’t need this brand recognition because consumers only know the individual products.

Garrard Japan can invest a part of its earnings into the needs of the local community. Since it is a food company, it can open food kitchens for local homeless people. Then people will associate Garrard Japan with helping the local community. Other options include providing more jobs for youths or protecting the environment (e.g., protecting farmland soil from pesticides).

To decide whether or not to add package labels stating that the product is ethically sourced or has no additives, Garrard should do a small test to see if such a thing would increase sales. If there is an increase in sales that is greater than the costs, then Garrard Japan can do it. If not, then don’t do it.