Marketing Coursework

Contents

Introduction. 2

Review of literature on standardization. 2

Review of literature on customization. 5

Conclusion. 8

References. 10

 

Introduction

In the today’s world, globalization has transformed the way people do business. The level of interdependence among economies continues to increase. Companies that in the past focused on national markets are increasingly being confronted with the issues of standardization and customization as they attempt to venture into the international market. At the same time, a lot of research on standardization and customization has been conducted in recent decades. However, no much progress has been made in terms of efforts to create a theoretical framework that clearly defines issues of standardization and adaptation of products to specific markets.

The standardization strategy is normally preferred in situations where there is consumer homogeneity. On the other hand, customization is the preferred strategies in situations different customers have different needs. In standardization, companies adopt a uniform marketing strategy to cover the entire market. In markets where the marketer predicts that the phenomenon of consumer homogeneity will prevail, a standardization method is likely to be adopted. The aim of this paper is to prove a critical understanding of theoretical issues of standardization and customization through a review of relevant journals and books. The paper also provides examples of companies that have used standardization and customization strategies.

Review of literature on standardization

Many companies are increasingly turning to the standardization strategy in order to gain a competitive advantage in the international market. According to ODonnell & Jeong (2000), this phenomenon is being contributed to largely by globalization. ODonnell & Jeong (2000) argue that globalization makes markets look increasingly homogenous in terms of the needs of customers. Those who support the need to standardize products and services argue that technology has led to the emergence of many similarities in markets. Therefore, marketers who standardize their products are seen to be taking advantages of the integrative power of technology. For example, in the US and the EU region, many multinational corporations have chosen to adopt the standardization strategy because of the numerous shared characteristics. These markets are thought to be characterized by similar trends in terms of demand for various products as well as customers’ preferences.

Companies have also resorted to the standardization strategy in order to respond to customers who insist on high quality products at lower prices (Viswanathan & Dickson, 2007). According to Viswanathan & Dickson (2007), the best way of dealing with such a situation is to standardize products across the entire market. However, not all researchers agree with this approach. For instance, Chang (1995) argues that differences continue to persist in terms of customers’ needs despite globalization having been firmly entrenched in the contemporary world. Chang (1995) argues that there is no sufficient evidence to support the thesis of standardization. By this, Chang implies that companies can still compete well in the international market without having to standardize their products.

Chang (1995) points out that even in markets that are characterized by cultural similarities, differences relating to the preferences of individual customers are unavoidable. Even in situations where customers are looking for the same products, the criteria for decision-making will always be different (Chang, 2005). This means that the marketers always have to approach different segments of a market using different strategies. Moreover, in some cases, numerous differences among various countries that influence production processes tend to exist, thereby making the idea of standardization seem inapplicable.

From this ongoing debate, it is evident that a number of factors influence standardization. Some of them include level of competition, socio-economic environment, relationships between headquarters and subsidiaries, organizational orientation, nature of products and services, and characteristics of the target market. Globalization has not been adopted uniformly across all markets. Some countries, especially in the emerging economies, have lagged behind in terms of the adoption of technology. In such markets, companies may encounter numerous difficulties in efforts to standardize products and services.

Little research has been done to determine how competition influences the choice of standardization strategy. Instead, emphasis is on theories that attempt to explain the rationalization strategies that managers rely on when deciding to standardize products. According to Keegan & Green (2013), mental models are increasingly being relied on by researchers to explain the decision-making processes of managers who must choose between standardizing and customizing products. Managers are assumed to rely on certain mental models in efforts to deal with the complex environment in which they operate (Keegan & Green, 2013). Such models typically promote the view that managers are likely to make decisions on the basis of very few variables. They deliberately limit the number of variables under assessment in order to avoid complicating the decision-making process (Keegan & Green, 2013).

ODonnell & Jeong (2000) oppose the use of mental models in the investigation of decision-making processes relating to standardization because they fail to take into consideration all relevant variables; instead, they propose the use of the three-factor model. This model is beneficial because it creates a platform for analyzing variables relating to both standardization and customization (ODonnell & Jeong, 2000). Moreover, the model addresses the important question of how companies can transfer competitive advantages to new markets through standardization. According to ODonnell & Jeong (2000), researchers may also want to use the three-factor model because of the way in which it explores the issue of variations in economic freedom.

There is abundant literature on how different companies have achieved tremendous success by standardizing their products for the global market. One company that has adopted the standardization strategy with tremendous success is Sony Ericsson. The company has refrained from coming up with a new strategy for the emerging economies. Its brand is uniformly promoted in all parts of the world. However, Sony Ericsson also endeavours to undertake segmentation efforts to ensure that all its products meet the needs of the targeted customers. Although it has put in place measures to respond to the needs of various customers in different markets, it has also been consistent in maintaining uniformity in terms of core brand values.

Review of literature on customization

The need to customize products arises from differences in the customers’ needs in different markets. Even within a single market, needs and preferences of individual customers naturally tend to vary. In this phenomenon, managers have to make a choice on whether to standardize their products in order to leap the benefits of scale economies or customize them with a view to establish a strong competitive advantage. According to Czinkota (2012), adaptive marketing is a reality in the modern world where industries are competing to establish strong competitive advantages for survival purposes. Literature shows that although companies need to come up with global brands, they must also adapt these brands to the needs of different customers at the local level (Blecker, 2007; Schuh, 2000; Theodosiou, & Leonidou, 2003).

According to Blecker (2007) it is extremely difficult to find markets where the products being sought by most customers are more or less similar. Even in situations where similarities exist, variations tend to emerge in terms of decision-making processes. This compels companies to adopt different marketing strategies. This in essence translates into efforts towards customization. In many instances, cultural factors motivate many marketers to customize their products (Schuh, 2000). Some researchers argue that the tendency to adopt the customization strategy varies from the nature of the product (Steenkamp, 2002; Codita, 2010). For example, many computer and electronics companies carry out low-cost modifications as a way of customizing their products to different markets (Codita, 2010). In Steenkamp’s (2002) view, even those companies that claim to be adhering to mass customization are at times compelled to undertake a certain degree of customization as a way of positioning themselves competitively in local markets.

Quelch (2009) argues that one must put into consideration the concept of experience-curve advantage to understand how companies can succeed in customizing their products in the international market. Experience-curve advantages are realized as firms learn how to make improvements on the way they manage their businesses. As the level of production in a business organization increases, new abilities relating to management are acquired (Quelch, 2009). Managers devise new ways of reducing costs while at the same time boosting production levels.     In the case of multinational corporations, these dynamics lead to changes in relationships between headquarters and subsidiaries (Solberg, 2012). Moreover, the ability by an organization to improve its core organizational capabilities varies from one market to the other. Therefore, it is obvious that efforts towards customization should be undertaken to enable business organizations acquire new core competencies in different markets.

Svensson (2002) supports the idea of customization because it promotes customer value. To achieve this goal, attention should be directed towards specific areas such as availability of skilled labour, adoption of new technology, and improvement of competency levels among managers. Svensson (2002) argues that companies that focus on these areas are in a better position to not only bring about customer satisfaction but also survive in the international business environment.

Most of the theoretical issues raised in literature on customization dwell on marketing and product development issues. Few efforts have been made to address issues of manufacturing processes and headquarter-subsidiary relationships. Similarly, not much has been done to analyze ways in which companies can promote a global brand strategy that emphasizes on customization. In most cases, focus is on companies that uses the same name for both corporate and brand marketing, for example IBM and Virgin.

A major problem with research in these areas is that empirical evidence to support the various claims made is often lacking (Alashban & Hayes, 2002). Only anecdotal evidence is available as far as the contemporary understanding of the importance of customization is concerned. In many cases, scholars justify their arguments in support of customization by giving examples of companies that have failed miserably after launching worldwide standardized product development and marketing strategies. Some of the companies that have adopted the customization strategy with tremendous success include Philips Electronics, McDonald’s, and Dell.

Through customization, Dell, a computer company, has succeeded in building a strong global brand. At one point, Dell changed its distribution strategy by introducing a new platform through which its products could be sold directly to customers. This enabled the company customize its products to the needs of customers. To do this, Dell had to do away with its tradition of setting up standard features and imposing them on all customers. Instead, customers were allowed to indicate their preferences and to have them put into consideration during the configuration process. This meant that different customers got different prices depending on the kind product that would best met their needs and preferences.

According to Simpson (2004), researchers should focus more on providing empirical data to support their claims regarding the benefits and challenges of customization as an international business strategy. Moreover, the scope of their discussion should be extended to cover all dimensions of marketing and not just product development (Simpson, 2004). Simpson (2004) points out that these shortcomings have created a situation where it is not clear which one between customization and standardization is best suited to today’s turbulent international environment.

Conclusion

This review of literature has demonstrated that companies that venture into the global market can choose between standardisation and customisation in their product development and marketing efforts. Many studies have highlighted the importance of standardization in companies’ efforts to obtain economies of scale while at the same time reducing the cost of production. Interest in standardization has grown significantly in the contemporary context of globalization where markets are becoming increasingly homogenous. On the other hand, it is also important for firms to customize their products and services even as they pursue the goal of establishing strong global brands in order to survive in today’s turbulent business environment. Nevertheless, the reality of the international business environment is that no company can rely solely on standardization or adaptation. The literature reviewed reveals that both strategies must complement each other in order for companies to build global brand awareness while at the same time retaining the ability to adapt their products and services to different cultures.

Lastly, there is a need for further research on factors influencing the choice of standardization and customization strategies. In current research, it is not clear whether aspects of adaptation and standardization should be applied uniformly across all organizational marketing and product development activities. Furthermore, the issue of how companies arrive at the decision on whether to choose customization or standardization remains unresolved. In future research, focus should be on efforts to develop a strong theoretical framework for analyzing, explaining, and critiquing the strategic decisions of different companies that seek to build competitive advantages in the international market.

 

References

Alashban, A & Hayes,L 2002, ‘International Brand-Name Standardization/Adaptation: Antecedents and Consequences’, Journal of International Marketing, vol. 10, no. 3, pp. 22-48.

Blecker, T 2007, Mass Customization Information Systems in Business, John Wiley & Sons, Boston.

Chang, T 1995, ‘Formulating adaptive marketing strategies in a global industry’, International Marketing Review, vol. 12, no. 6, pp. 5-18.

Codita, R 2010, Contingency Factors of Marketing-Mix Standardization: German Consumer Goods Companies in Central and Eastern Europe. Routledge, London.

Czinkota, M 2012, International marketing, University of Chicago Press, Chicago.

Keegan, W & Green, M 2013, Global Marketing (7th ed), Pearson Books, New Jersey.

ODonnell, S & Jeong, I 2000, ‘Marketing standardization within global industries: An empirical study of performance implications’, International Marketing Review, vol. 17, no. 1, pp. 19-33.

Quelch, J 2009, Customizing Global Marketing (5th ed), Princeton, Princeton University Press.

Schuh, A 2000, ‘Global standardization as a success formula for marketing in Central Eastern Europe?’ Journal of World Business, vol. 35, no. 2, pp. 133–148.

Simpson, T 2004, Product platform design and customization: Status and promise, Cambridge University Press, Cambridge.

Solberg, C 2012, ‘Standardization or Adaptation of the International Marketing Mix: The Role of the Local Subsidiary/Representative’, Journal of International Marketing, vol. 8, no. 1, pp. 78-98

Steenkamp, J 2002, International market segmentation: Issues and perspectives, International Journal of Research in Marketing, vol. 19, no. 3, pp. 185–213.

Svensson, C 2002, ‘Stimulating Manufacturing Excellence in Small and Medium Enterprises’, Computers in Industry, vol. 49, no. 1, pp. 77–89.

Theodosiou, M & Leonidou, L 2003, ‘Standardization versus adaptation of international marketing strategy: an integrative assessment of the empirical research’, International Business Review, vol. 12, no. 2, pp. 141–171.

Viswanathan, N & Dickson, P 2007, ‘The fundamentals of standardizing global marketing strategy’, International Marketing Review, vol. 24, no. 1, pp. 46-63.

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