Standardization and customization

Standardization and Customization- A Global

Debate

Dr. Jyotsna HirmukheXMBA Batch 4

Introduction

Global versus “regular” marketingScope of activities are outside the home-country market

Product/market growth matrix1-2

StandardizationStandardization:Achieving maximum productivity through standardization of service product and service design and delivery achieving global economy of scale and lowest unit cost which is an import tenet of economics (product or production orientation)

standardization means "one size fits all”.1-3

CustomizationCustomization on the other hand refers

to the tailoring of the campaign according to the needs of an individual or groups of individuals.

These are high margin products where

the volumes are low and the buyers are few. E.g. McDonalds in Gujrat, Custom made models of cars

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Factors that promote standardization:* Globalization and the enhancement of technology - lead to international trade, easy access to communicate and travel. (Standardization is assumed to be the best method as it could give a maximum profit)* Westernization and Americanization – domination of global favourite brands or products; McD, Starbucks, KFC. (It is assumed that public will accept global products)* Convergence of consumers buying habit 1-5

Globalization Globalization is the inexorable integration of

markets, nation-states and technologies to a degree never witnessed before—in a way that is enabling individuals, corporations and nation-states to reach around the world farther, faster, deeper and cheaper than every before, and in a way that is enabling the world to reach into individuals, corporations and nation-states father, faster, deeper and cheaper than ever before.

Thomas L. Friedman1-6

Global Marketing

Create value for customers by improving benefits or reducing price

Improve the productFind new distribution channelsCreate better communicationsCut monetary and non-monetary costs and pricesValue =

Benefits/Price 1-7

Global Marketing: What It Is and What It Isn’t

Single Country Marketing Strategy

Target market strategyMarketing mix

ProductPricePromotionPlace

Global Marketing Strategy

Global market participationMarketing mix development

4 P’s: adapt or standardize?

Concentration of marketing activitiesCoordination of marketing activitiesIntegration of competitive moves

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Home, supplier, partner, and customer countries of competitors – differences as sources of competitive advantage Differences in global value connectionDifferences in products, brand, technologyDifferences in impacts of political, legal and regulatory climate – trade agreements, home country policies

Design global competitive strategies for competitive advantage

Global competitive strategies

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Standardization- Standardization of marketing practices across markets is tempting because of potentialeconomies of scale in production, promotion, distribution and research and development. Standardization can also contribute to a coherent and consistent global image of the firm and its products. However, there are many obstacles to the application of uniform marketing policies. Variations across markets in consumer attitudes, competitive environments, and marketing management related variables must be adequately assessed to insure the success of the product in a particular market.

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The global challenge

Global market size: standardization

Local differentiation: customization

Strategy: Determine best combination of global and local activities for competitive advantage

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Standarization versus Adaptation

Globalization (standardization)Developing standardized products marketed worldwide with a standardized marketing mixEssence of mass marketing

Global localization (adaptation)Mixing standardization and customization in a way that minimizes costs while maximizing satisfactionEssence of segmentationThink globally, act locally

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Standarization versus Adaptation

Arabic

read right to left

Chinese

“delicious/happiness”

The faces of Coca-Cola around the world

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McDonald’s Global MarketingMarketing Mix Element Standardization Localized

Product

Promotion

Place

Price

Big Mac

Brand name

Advertising slogan “I’m Loving It”

Free-standing

Big Mac is $3.10 in U.S. and Turkey

McAloo Tikka potato burger (India)

Slang ’Macca’s (Australia)

MakDo (Philippines)

McJoy magazine, “Hawaii Surfing Hula” promotion (Japan)

Home delivery (India)

Swiss rail system dining cars

$5.21 (Switzerland)

$1.31(China)1-14

The Importance of Going Global

For U.S. companies, 70% of total world market for goods and services is outside the country

Coca-Cola earns 75% of operating income and two-thirds of profit outside of North America

For Japanese companies, 90% of world market is outside the country94% of market potential is outside of Germany for its companies

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Forces calling for global products (standardization):

Convergence in customer preferences and income across target countries with economic development and trade

Competition from successful global products

International brand awareness

Cost benefits from standardization

Falling costs of trade with greater globalization

Global platform strategy

Forces calling for local products (customization):Differences in customer preferences and income across target countriesBuild local brand recognitionCompetition from successful domestic productsRegulatory requirements (quality, safety, technical specifications, domestic content) -- EU product standardsHigh costs of trade create separate markets


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Business sells 10 units each in Country A and in Country FUnit costs – economies of scale

Two local products at 10 units each $ 30/unit Global product at 20 units $ 20/unit

Price company can charge per unit:Global product: $80/unit in each country Two local products: $95/unit in each country

Global versus regional product:Tailoring brings $ 15 more earnings per unit Profit greater by $ 100

Improve tradeoff with platforms and flexible factories to realize economies of scope (mass customization)

Global platform strategyProduct variety versus economies of scale

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International business managers make decisions about what should be global versus local:

Products

Technology and inputs

Manufacturing

Brands

Marketing

Distribution

Example: Wal-Mart must compete with both international players such as Carrefour and local retailers

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Global platform strategyMost products are local and not branded. For example: in food sector Nestle estimates that only 1 % of all goods in food markets are brandedIncreasing number of international brands, Corona, Nestlé, SonyIncreasing brand variations: BMW 3-series (1990s): More than 1 million varieties can be orderedLocal distribution and marketingExample: McDonald’s, Coca-Cola: Global brand, some local product tailoring, reliance on local distributionLocal technology, production, customer serviceAcer computer company

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Global Auto Industry

Thousands of auto companies globally in the early twentieth centuryMore than 500 of those producers were in the United StatesToday there are fewer than 20 in the worldToyota is the world’s most valuable car company and is eighth largest in revenue globally

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Management Orientations

Ethnocentric orientationHome country is superior to othersSees only similarities in other countriesAssumes products and practices that succeed at home will be successful everywhere Leads to a standardized or extension approach

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Polycentric orientationEach country is uniqueEach subsidiary develops its own unique business and marketing strategiesOften referred to as multinationalLeads to a localized or adaptation approach that assumes products must be adapted to local market conditions

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Regiocentric orientationA region is the relevant geographic unit• Ex: The NAFTA or European Union market

Some companies serve markets throughout the world but on a regional basis• Ex: General Motors had four regions for

decades 1-24

Management OrientationsGeocentric orientation

Entire world is a potential marketStrives for integrated global strategiesAlso known as a global or transnational companyRetains an association with the headquarters countryPursues serving world markets from a single country or sources globally to focus on select country marketsLeads to a combination of extension and adaptation elements

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Global network strategyPhysical networks:

Communications: Wired and mobile telephone systems

Internet

Transportation: Railroads, Airlines, Shipping, Intermodal systems

Energy: Oil and natural gas pipelines, Electric power transmission and distribution

Logistics: Postal systems, Wholesale and retail distribution

Business networks:

Manufacturing, services, distribution, technology, social networks (trust and information sharing)

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The right choiceFollowing a standardized marketing approach in all foreign markets might be tempting given the cost advantages it carries through the various economies of scale, and the consistent global image it grants the product. However, variations across markets indicate that a fully standardized marketing approach may not be appropriate. Adjusting the marketing strategy such that it takes into account these variations enhances the product's chance of success.

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Thus the nature of a product to be marketed internationally has significant implications for the particular variables that a manager must consider in deciding on the extent of standardization. Adjusting the marketing strategy such that it takes into account these variations enhances the product's chance of success.

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The right choice

Such factors could also be considered in segmenting a firm's global market. The resulting segments would then reflect a high degree of internal homogeneity, prompting the use of a highly standardized marketing approach in markets that belong to a single segment.Segmentation + Customization + Standardization within the segment

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The right choice

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Thank you!!!