Standardisation vs Adaptation for Product Strategy in a Global Market

1818 words (7 pages) Essay in Business Strategy

08/02/20 Business Strategy Reference this

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This essay aims to critically discuss the dilemma between standardisation and adaptation for product strategy when attempting to globalise a product or service. The globalisation of a company may bring very important opportunities as it would allow them to operate in multiple countries which may result in financial benefits through developing it’s turnover and economies of scale by developing activities (Kotler, 2008). However, when considering the globalisation of a company, there are many factors that need to be taken into consideration. Although many products and services can be standardised to infiltrate foreign market, this transition, more often than not, requires adjustments to the production process and the marketing mix (Hollensen, 2017). This essay will compare the standardised and adaptive strategies that companies use for elements of the marketing mix.

Decisions with regards to products is one of the first elements a marketing manager decides on when creating a global marketing mix (Hollensen, 2017). According to Kotler (1997), there are 3 levels of a product that need to be identified, considered and developed when attempting to sell the product to an international market: core product, actual product and augmented product. It appears to be much easier to standardise the core product benefits (features, performance) unlike the augmented product (the services) which would often have to adapt to the culture and individual customers (Hollensen 2017). This raises the argument about whether or not a standardised product strategy or an adaptive product strategy works best in the attempt of globalisation.

There are many benefits to standardising a product or service when attempting globalisation. Economies of scale in product production can allow larger production runs, resulting in lower manufacturing costs by using one standardised product (Citeman, 2008) . An example of a company doing this successfully would be Samsonite as they have standardised their physical features for international product use. The physical attributes of the suitcases gave the company a chance to standardise it as consumer preferences are homogeneous with regards to travel luggage.

Another great example of product standardisation is when companies use the country-of-origin effect. This is when consumer attitudes, perceptions and purchasing decisions are influenced by the country in which a product originates and can be the sole reason a consumer purchases a product (Nagashima, 1970). It has become a key factor in gaining a competitive advantage when entering the global market (Da Silva, 1999). An example of successful standardised, ‘made-in’ strategies would be German cars, for example Volkswagen, as they are perceived to be the most durable and reliable. A further example would be French cosmetics and fragrances, for example, Givenchy and Yves Saint Laurent as they are generally perceived to be of high quality, simply because of their origin (Aichner, 2013).

A globally standardised product also raises a lot of concerns when entering into new markets. One being the cultural differences. Hofstedes 6 Dimensions of Culture explores how consumers in different cultures perceive and interpret their world and how marketers can use this for product strategy when expanding into global markets. Starbucks failed massively when they attempted to infiltrate the Israeli market whilst keeping their products standardised (Times of Israel, 2018). Israeli’s are known to have a strong coffee culture and are very specific when it comes to tastes and aroma. Starbucks products are generally much sweeter than Israeli’s prefer (Turkish Style Ground Coffee, 2018). They failed because of this and also due to their relaxed environment of coffee shops as Israel is a high uncertainty avoidance country as people are usually busy and do not have time for the social aspect of a Starbucks coffee shop (Insights, 2018).

Although the standardisation of a product may work in some circumstances when developing a global strategy, it is not often an approach that companies use due to micro and macro environmental factors. Product adaptation may not be the most cost effective, but it has shown to affect product performance positively (Calantone et al., 2004). When companies are able to take into consideration macro environmental factors and the different constraints that it includes such as language, climate, race, topography, religion, education, laws, cultures and societies  (Czinka and Ronakainen, 1998) it allows them to fully cater to their consumer by fully understanding their needs as an international market, taking their differences into account (Chung, 2009). Product adaptation allow companies to gain respect for the localisation of their products and being able to ‘tailor-make’ and product to suit the requirements of that specific culture. An example of a brand adapting it’s product successfully to suit it’s environment would be McDonald’s in India. They took their relatively standardised product (beef burgers) and were able to adapt it to suit the Indian culture by introducing tikki and chicken burgers with Indian spices, as the cow is considered a sacred animal (Roy, 2017).

Unlike standardised products, costs for product adaptation are relatively higher due to having to modify the product strategy for each individual target market. Economies of scale also does not benefit as product design and packaging would vary from market to market. An example of a company having to adapt it’s packaging to fit individual target markets and consumer preferences would be Nesquik. They very strategically adapt their product to fit the physical environmental of their target market by marketing their chocolate powder as ‘hot chocolate’ in colder countries and ‘chocolate milkshake’ in warmer countries (Sweet Press, 2013).

One example of product adaptation being unsuccessful, was when the Walt Disney Company named their new park ‘Euro Disney’ in Paris as the word ‘euro’ is a term that the French citizens associate with business and work, not pleasure as the park is intended. A strategic rename of the park to ‘Disneyland Paris’ immediately connected the park with ‘Disneyworld’ which was already perceived as he most ‘wonderful place on earth’ (Kissane, 2016).

There are a number of global companies who were able to standardise their promotion strategy through straight product extension. They were able to introduce a standardised product along with an identical promotional strategy, globally – one product with one message worldwide. One benefit in doing this, is that it can save of market research and product development. An example of this would be Cathay Pacific Airways, who kept their advertising materials identical with exception of the adaptation of English text to Japanese.

There is a constant argument about whether or not the globalisation of brands is creating a homogeneous world (BBC, 2014) which in turn leads to an increase in standardisation of the elements of the marketing mix. An example of a brand successfully adapting a global approach in their product strategy would be Coca Cola. They are arguably the most standardised company in the world (Small Business, 2018) and have the continual reinforcement of the same message throughout the world resulting in massive cost savings (BBC, 2018).

However, a localised approach to promotion and advertising strategies enables the standardised approach to be criticised for not considering the economic, cultural and social aspects of a foreign environment (Okazaki, Taylor and Doh, 2007)

Adapting the promotional strategy of a product means to leave it unchanged whilst simply fine tuning the promotional activity through understanding the cultural differences between markets and their consumers (Hollensen, 2017). A benefit of promotion adaptation would be that it is cost effective as rather than adapting a product, companies can simply adapt the promotional message. An example of this would be Ikea and how it adapts it’s catalogues to suit different cultures around the world. For example, referring to Hofstede’s Cultural Dimension Model, when targeting masculine societies where power distance is quite high such as Saudi Arabia and Israel, they need to appeal to the ‘dominant male’ family members. Women were removed from scenes because they are not the decision maker therefore would not be browsing for home furniture. (Daily Mail, 2017) They are able to use the same products, with just adapting the overall promotional message in relation to that society.

When a company operates in multiple countries, a common issue that they face is how to coordinate prices between said countries. Price standardisation is one way in

To conclude, although there is an argument that globalisation is creating a more homogeneous society, there is also a rise of individualism in countries like the United States. In turn, this means that consumers will become increasingly demanding with regards to specific product features forcing global companies to adapt their product strategy to fit cultural and environmental differences between countries.

Lipman (1988) argues against the standardisation marketing theory as using the same product strategy globally can risk in customer hesitation and enable to company to lose sight of its consumer needs. Producers should strive to create an ideal balance between both standardisation and adaptation strategies as standardisation will keep production costs low, but adaption will ensure that consumers are being satisfied in each country they trade in. 

References

  • Aichner, T. (2013). Country-of-origin marketing: A list of typical strategies with examples. Journal of Brand Management, [online] 21(1), pp.81-93. Available at: https://www.researchgate.net/publication/263325911_Country-of-origin_marketing_A_list_of_typical_strategies_with_examples [Accessed 1 Dec. 2018].
  • Calantone, R., Tamer Cavusgil, S., Schmidt, J. and Shin, G. (2004). Internationalization and the Dynamics of Product Adaptation-An Empirical Investigation. Journal of Product Innovation Management, 21(3), pp.185-198.
  • Chung, H. (2009). Structure of marketing decision making and international marketing standardisation strategies. European Journal of Marketing, 43(5/6), pp.794-825.
  • Czinkota, M. and Ronkainen, I. (1998). International Marketing. 5th ed. Fort Worth : Dryden Press.
  • Da Silva, R. (1999). Country of Origin and Destination Effects in Buyer Decision Making. Manchester Business School, Working paper No 392.
  • Hofstede Insights. (2018). Country Comparison – Hofstede Insights. [online] Available at: https://www.hofstede-insights.com/country-comparison/israel/ [Accessed 1 Dec. 2018].
  • Hollensen, S. (2017). Global marketing. 7th ed. Harlow [etc.]: Pearson.
  • Kissane, D. (2016). Branding Lessons from Disneyland Paris | DOZ. [online] DOZ. Available at: https://www.doz.com/marketing-resources/disney-paris-name-change [Accessed 3 Dec. 2018].
  • Kotler, P. and Armstrong, G. (2008). Principles of marketing. 5th ed. Financial Times/Prentice Hall.
  • Nagashima, A. (1970). A comparison of japanese and U.S. attitudes toward foreign products. The International Executive, 12(3), pp.7-8.
  • Rao, S. (2018). Product Standardization. [online] Citeman.com. Available at: https://www.citeman.com/3426-product-standardization.html [Accessed 1 Dec. 2018].
  • Roy, E. (2017). Learn to adapt your products from these 4 success stories – Trade Ready. [online] Trade Ready. Available at: http://www.tradeready.ca/2017/topics/import-export-trade-management/learn-adapt-your-products-4-success-stories [Accessed 3 Dec. 2018].
  • Steinberg, J. (2014). The grande coffee plan that failed. [online] Timesofisrael.com. Available at: https://www.timesofisrael.com/the-grande-coffee-plan-that-failed/ [Accessed 1 Dec. 2018].
  • Sweet Press. (2018). Nesquik, 50 years in Spain. [online] Available at: https://www.sweetpress.com/en/nesquik-50-anos-en-espana/ [Accessed 2 Dec. 2018].
  • Turkish Style Coffee. (2018). Israeli coffee culture | Mud coffee | Kosher coffee brands. [online] Available at: http://www.turkishstylegroundcoffee.com/israeli-coffee/ [Accessed 1 Dec. 2018].
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