Standardization Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Standardization refers to the efforts of companies to offer a common product, to use a common marketing approach, and to make their business activities the same or uniform throughout a particular market such as a country, a region such as Europe or western Europe, or the whole world. Companies pursuing the standardization approach tend to adopt the same or very similar strategies and marketing programs to offer similar goods and services in different markets throughout the world. The global marketing strategy refers to a plan that guides companies in how to position themselves and their products in international markets, what customers to serve, and the degree to which company activities should be standardized or adapted. Therefore, standardization is an element of the global marketing strategy. The importance of standardization for global business comes from the fact that standardization is one major strategy or approach used by companies in their international business operations; the others are adaptation and a mixture of standardization and adaptation. The term standardization is sometimes used to refer to global or global integration approach as well.

Strategies

When it comes to developing strategies streamlined for global markets, companies have three major strategy options. The first and perhaps the simplest one is standardization that comes from the geocentric view of the world that assumes that there are more similarities than differences across the markets throughout the world. Therefore, the global strategy, which is based on standardization, is the appropriate strategy to operate in international markets. Its argument is that markets throughout the world have become homogenized and thus companies can offer their goods and services through a high degree of standardization and a low degree of adaptation to meet some local market needs. The standardization approach may be appropriate for products having a high level of competitive advantage in terms of functionality and/or low price.

The second option is adaptation, which states that cultural differences exist among countries; therefore, companies should modify their strategies and offerings according to the local market’s conditions and consumer preferences. Thus, multidomestic strategy, which is based on adapting different strategies for each country or region, is the appropriate strategy when operating in international markets. The last option is to use a strategy that is a mixture of standardization and adaptation to get benefits from both markets and products that require standardization and adaptation at the same time to a certain extent.

Which Approach Is Better And Used By Companies?

When we analyze the practices of companies with respect to whether they utilize the standardization or adaptation approach, we cannot determine precisely which one is mostly preferred because companies differ in their choices of the standardization and adaptation approaches.

A chronological analysis shows that during the 1950s, the adaptation approach was preferred because companies were not familiar with international markets and consumers. Lack of information as to the purchase behavior of consumers in different markets may have discouraged companies from adopting standardization because companies may have thought that consumers were not the same; therefore, companies preferred the adaptation approach. Companies got more and more knowledge about international markets and consumers as time went by and therefore they were able to see similarities among consumer preferences across markets throughout the world. This led to the replacement of the adaptation approach with the standardization approach during the 1960s. However, the adaptation approach became popular again during the 1970s because of increasing nationalistic tendencies.

Recent Developments

The 1980s were the years in which the world witnessed the birth and growth of many multinationals that favored standardization; multinationals tried to implement similar product strategies across countries. Because the international competition was not intensive at that time and many countries began to abandon their protective and closed trade regimes and adopt liberal capitalistic ones, many multinationals were able to operate in such countries where competition did not really exist and they enjoyed this smooth competition through their standardized products in these markets at that time. However, because global competition is very intense nowadays, many products are available in many markets, and there have been changes in consumer tastes and preferences, so the standardization strategy alone does not always result in the expected performance. Therefore, we see companies currently using a mixture of these two strategies in their international business activities.

One key feature of the global marketing strategy is the extent to which marketing programs are standardized or modified (adapted). Some key elements subjected to standardization and adaptation decisions in international markets are branding, product development, pricing, marketing communications, and distribution. When a company does not yet have international operations, it has its domestic marketing strategy, which refers to various marketing programs of the company in its domestic (own) market. However, as the company acquires more and more international operations in different international markets, the domestic marketing strategy becomes the international or global marketing strategy and such a strategy becomes very complicated because the company now needs to consider local and international rivals, cross-cultural differences in culture, language, religion, living standards, economic and politic conditions, regulations, laws, business practices, and economic and business infrastructure in many foreign markets. The challenge for the company is to determine the activities to be standardized across countries and the ones to be adapted for specific markets.

Standardization, whether full or partial, is a natural process to a certain extent because companies will try to get benefit from their proprietary processes (ownership and production expertise) and scale economies (more production and less unit cost) when it introduces a product to a new market. Therefore, the choice of standardization is inherent to a certain extent in new markets. Moreover, as some markets become similar as a result of globalization and as global competition intensifies, the standardization approach may be preferable. However, in addition to these factors, many other factors affect the standardization choice: Companies need to analyze the nature of products, their own capabilities, the extent to which adaptation is required because of the differences among markets, the structures of foreign markets, the rivals, and the regulations in foreign markets in which companies consider investing. It is normal that markets differ; therefore, some kind of adaptation may complement the standardization approach to get as much benefit as possible from international business operations. For example, the core technology of the product may be standardized while the size, shape, color, additional benefits, price, distribution, and sales terms may be adapted to the foreign market’s needs. Computer chips, automotive electronics, color film, pharmaceuticals, chemicals, telecommunications, network equipment, steel, and petrochemicals are some examples of products to which the standardization approach is applicable. However, consumer electronics, automobiles, trucks, watches, toothpaste, shampoo, industrial machinery, toilets, chocolate bars, beverages, and clothing products are some examples of products to which the standardization approach is not much applicable, although exceptions are always possible, especially for prestigious products and brands.

Advantages And Disadvantages

There are many benefits of using the standardization approach. Other things being equal, companies generally prefer to utilize the standardization approach because it is appropriate in getting consistency in customer relationship and design; many companies operate in many countries throughout the world and when companies use the same product features, design, brand name, and packaging across markets, this can help create a universal representation of the products and the consistency among the offerings of the company. Such a consistency also helps create and sustain brand image, which refers to the perception of a company and its products by consumers. As such a perception affects buying behavior, a good and positive perception created through consistency is priceless.

Another benefit of the standardization approach is that when a product is successful in a market, when consumer preferences across markets converge, and when other markets have similar competitive conditions, then the standardization approach in new markets is expected to be successful and cost effective by capitalizing on similarities. The standardization approach is also beneficial in coordinating and controlling various company activities. As companies become international or global, it is hard to coordinate and control many and different company activities throughout the world. If company activities are standardized, then it becomes easier to coordinate and control these various and widespread activities.

However, when companies choose the standardization approach for one reason or another, they may miss some market opportunities. Although some markets are similar, a firm attachment to the standardization approach may not be effective as many markets are fragmented, and adaptation, albeit small, may be necessary to meet the expectations of local consumers. Therefore, it would be wise for companies to assess the advantages and disadvantages of standardization carefully and then determine what to standardize.

Standardization is not a good strategy when companies are required to adapt their offerings according to differences across markets. Culture, industry, legal environment, marketing infrastructure (distribution channels, quality and quantity of retailers, advertising agencies, and media), competition, consumer tastes and preferences, standards, and regulations as to product features may all differ. Such differences thus render the standardization approach not appropriate. In addition, the existence of “not invented here syndrome” in international companies makes the standardization approach not a good option. This syndrome refers to some internal resistance by subsidiaries and affiliates of international companies against the ideas, programs, and plans developed at the headquarters or somewhere else. Therefore, standardized plans and programs may not always be welcomed by subsidiaries and affiliates if such a syndrome exists and the managers of these affiliates are accustomed to autonomy in their decision making.

If full standardization is not viable all the time, then an appropriate question would be “what to standardize?” Strategic decisions that are related to the whole company are generally more standardized. Daily or tactical decisions may not be standardized and thus local managers can be flexible in their decisions. Marketing activities are generally less standardized than other business functions and within marketing activities, some marketing activities such as product design may be more appropriate for standardization than sales promotion. Standardizing corporate image, branding, and product positioning is beneficial as this can provide consistency and unification in company offerings across different markets. When deciding on what to standardize, managers need to consider the basis for customer purchasing behavior, the marketing’s role within the company strategy, and the viability of mass customization. If purchasing behavior shows similarities among consumers across different markets, then companies can capitalize on these similarities through standardization.

In conclusion, the standardization approach corresponds to the efforts of companies toward global integration and is generally suitable in such global industries as commodities, industrial equipment, and high technology products. Aircraft manufacturing, pharmaceuticals, credit cards, and chemicals are some examples of such industries in which consumers across markets or segments do not differ much in their preferences. Therefore, companies can adopt the standardization approach by offering identical products and implementing similar programs across different markets. Three major benefits of pursuing the standardization approach are reduction in costs, enhancement in company image, and improvement in planning and control. However, companies generally do not implement standardization alone. Instead, they also use adaptation at varying levels because it is not always viable to pursue one product–one world strategy because of differences in consumer preferences, legal requirements, and competitive conditions.

Bibliography:

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