BACKGROUND and CONTEXT Taking your business global and successfully selling your products and services in international markets can pose many challengers. Through the years we have witnessed many multinational companies make costly errors when attempting to sell to a global audience. These errors are primarily explained by a lack of understanding of how Standardization and Adaptation play in international markets. This research paper examines the issues of standardization (global strategy) and adaptation (customization) in global marketing strategy and suggests methods that can guide multinational companies compete effectively and efficiently within the international markets. I. SUMMARY OF BEST AVAILABLE EVIDENCE Since the beginning of the 1980s, the issue of ‘Globalization’ has become increasingly significant. Globalizing means homogenizing on a worldwide scale. With globalization, differences between countries have become smaller however they still exist. This onward march of globalization and internationalization of businesses has had a strong impact on how companies view and plan for their global marketing strategy. Consequently, numerous studies have been conducted on whether multinational companies should adapt or standardize international marketing behavior. As companies begin to market its products abroad, one essential strategic decision is whether to use a standardized marketing mix (product, price, place, promotion, people, physical evidence, process management) and a single marketing strategy in all countries or whether to adjust the marketing mix and strategies to fit the unique dimensions of each local market (Vrontis and Thrassou,2007). One view suggests that markets are becoming more similar and progressively more global and believe that the key for survival is companies’ ability to standardize. On the contrary, the other view points out the difficulties in using a standardized approach, and therefore supports customization and market adaptation. However, evidence suggests that standardization and adaptation is not an all or nothing proposition but a matter of scale. Standardization vs. Adaptation The first view is the standardization standpoint (as proposed by Jain, 1989; Levitt, 1983). According to these authors, supporters of standardization believe that there is a union of cultures with similar environmental and customer demand around the globe. They argue that trade barriers are getting lower and that technological advances and firms are displaying a global orientation in their strategy. As they believe, creating one strategy for the global market and standardizing the marketing mix elements can achieve consistency with customers as well as lower costs. Levitt (1983) argues that companies that are managed well have moved away from customizing items to offering globally standardized products that are advanced, functional, reliable and low priced. According to him, companies can achieve long-term success by concentrating on what everyone wants rather than worrying about the particulars of what everyone thinks they might like. On the contrary, supporters of the international adaptation approach, emphasize the importance of customization. The fundamental basis of the adaptation school of thought, is that when entering a foreign market one must consider all environmental factors and constraints such as language, climate, race, occupations, education, taste, different laws, cultures, and societies (Czinkota and Ronkainen, 1998). However, researchers have identified important source of constraints that are difficult to measure such as cultural differences rooted in history, education, religion, values and attitudes, manners and customs, aesthetics as well as differences in taste, needs and wants, economics and legal systems. According to Vrontis and Thrassou supporters of this approach believe that “multinational companies should have to find out how they must adjust an entire marketing strategy and, including how they sell, distribute it, in order to fit new market demands” (2007). It is important to alter the marketing mixed and marketing strategy to suit local tastes, meet special market needs and consumers non-identical requirements (Vrontis and Thrassou,2007).Advantages and Disadvantages of Standardization Standardization and international uniformity has many advantages. For one, people can expect the same level of quality of any specific brand anywhere around the world. Standardization also supports positive consumer perceptions of a product (Products and International Marketing, n.a). If a company enjoys strong brand identity and a strong reputation, choosing a standardized approach might work to its benefit. Positive word-of-mouth can mean an increase in sales around the globe. Another advantage includes cost reduction that gives economies of scale. Selling large quantities of the same, non-adapted product and buying components in bulk can reduce the cost-per-unit. Other advantages related to economies of scale include improved research and development, marketing operational costs, and lower costs of investment. In addition, standardization is a reasonable strategy at a time where trade barriers are coming down. Finally, following a standardized approach helps companies aim focus on a uniformed marketing mix specifically focusing on one single product, leaving enough room for quality improvement. By emphasizing on one uniformed product, staff can be trained to enhance the quality of the product attracting manufacturers to invest in technology and equipment that can “safeguard the quality of the standardized product offering” (Products and International Marketing, n.a). Standardization, however, poses a number of disadvantages. As mentioned previously, different markets mean different preferences. Selling one unified product lacks uniqueness. This allows competition to gain market share through tailoring their products to meet the need of a specific market/segment. Since different markets have different needs and tastes, by using the standardized approach, companies can become vulnerable. One example is Walmart’s failure in entering global markets. The retail giant faced many challenges when entering foreign markets such as Germany, Brazil, South Korea and Japan as it discovered that its formula for success in the USA (low prices, inventory control and a large collection of merchandise) did not translate to markets with their own discount chains and shoppers with different habits. The biggest problem was that Walmart, a uniquely powerful American enterprise, tried to impose its values around the world. In particular, Walmart’s experience in Germany, where it lost hundreds of millions of dollars since 1998, “has become a sort of template for how not to expand into a country” (Landler and Barbaro, 2006).Another disadvantage is that it depends largely upon economies of scale (Products and International Marketing, n.a). Naturally, businesses that are global manufacture in many counties. This can pose a problem since a number of countries implement trade barriers such as the USA and the European Union (Products and International Marketing, n.a). In this case, adaptation is predestined.
 Pros and Cons of Both Approaches Nevertheless, although the standardization approach is more common, its adoption is not unconditional, as proposed by Douglas and Wind (1987). The authors explain that standardization strategy increases a company’s performance. However, this is only true for companies in which competition takes place in a global range, such as consumer durables, electronics, fashion, luxury goods, perfumes, etc. In these cases, the same product can be sold throughout all markets. On the contrary, there are other industries in which the same does not apply and this must be considered. Consumer nondurables, including food products, are the most sensitive to differences in national tastes and habits, making them more likely to need changes for various markets. For example, Unilever saw an opportunity among low-income consumers in India who wanted to buy the company’s high-end detergents and personal care products, but couldn’t afford them. In response, the company developed a low-cost packaging product and other options that allowed it to offer dramatically less expensive options. This flexibility not only opened a new market for the company, but also allowed it to develop brand loyalty that consumers could take with them when their income increased and they could afford higher-end products from the same manufacturer.
Strategic Adaption to Foreign Markets Businesses should answer questions related to the marketing mix such as “what do we intend to standardize?” and “Do we standardize customer service and product support, marketing communications, pricing, and channels of distribution?” The answers to these questions should neither be all standardized nor all adapted. It should be a balance of both.
McDonald’s also chooses convenient locations for all of its franchises. This includes malls, airports and local neighborhoods. These marketing strategies have confirmed to be effective, indicated by the company’s 7% increase in profit margins over the past four years (Mourdoukoutas, 2012). However, McDonald’s has made every effort to improve them through recent marketing initiatives with respect to the 7Ps. McDonald’s has begun to renovate its eateries, going from a plastic look to a more brick and wood design in an effort to maintain a contemporary image (Mourdoukoutas, 2012). They have also decided to “re-image” themselves in their ads by incorporating a hip-hop theme with teen icons such as Justin Timberlake and Lee Hom in China as a means to attract teenagers. In addition, the company has begun to offer healthier food products, such as oatmeal, given consumers are more health conscious. II. CONCLUSIONS References |
What two situations likely exist in developing countries that cause marketers to adapt their global distribution strategies?
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