This document discusses the debate between standardization and customization in global marketing. It notes that while standardization allows companies to achieve economies of scale, full standardization may not be appropriate given variations across markets in customer preferences and regulations. Companies must determine the best combination of global and local activities. The document provides several examples of companies that take different approaches, such as McDonald's using a global brand but some localized products, and concludes that adjusting strategies to account for market variations enhances success.
3. Standardization
Standardization:
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”.
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4. Customization
Customization 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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5. 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
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products)
6. 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. Friedman
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7. Global Marketing
Create value for customers by
improving benefits or reducing price
Improve the product
Find new distribution channels
Create better communications
Cut monetary and non-monetary costs and
prices
Value = Benefits/Price
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8. Global Marketing: What It Is and
What It Isn’t
Single Country
Marketing Strategy
Target market strategy
Marketing mix
Product
Price
Promotion
Place
Global Marketing
Strategy
Global market participation
Marketing mix development
4 P’s: adapt or standardize?
Concentration of marketing
activities
Coordination of marketing
activities
Integration of competitive
moves
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9. Global competitive strategies
Home, supplier, partner, and customer countries
of competitors – differences as sources of
competitive advantage
Differences in global value connection
Differences in products, brand, technology
Differences in impacts of political, legal and
regulatory climate – trade agreements, home
country policies
Design global competitive strategies for
competitive advantage
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10. StandardizationStandardization of marketing practices across
markets is tempting because of potential
economies 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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11. 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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12. Standarization versus Adaptation
Globalization (standardization)
Developing standardized products marketed
worldwide with a standardized marketing mix
Essence of mass marketing
Global localization (adaptation)
Mixing standardization and customization in a way
that minimizes costs while maximizing satisfaction
Essence of segmentation
Think globally, act locally
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14. McDonald’s Global Marketing
Marketing Mix Element
Standardization
Product
Big Mac
Localized
McAloo Tikka potato burger
(India)
Promotion
Brand name
Slang ’Macca’s (Australia)
MakDo (Philippines)
Advertising slogan
“I’m Loving It”
Place
McJoy magazine, “Hawaii
Surfing Hula” promotion
(Japan)
Free-standing
Home delivery (India)
Swiss rail system dining cars
Price
Big Mac is $3.10 in
U.S. and Turkey
$5.21 (Switzerland)
$1.31(China)
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15. 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 country
94% of market potential is outside of Germany
for its companies
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16. Global platform strategy
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
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17. Global platform strategy
Forces calling for local products (customization):
Differences in customer preferences and income
across target countries
Build local brand recognition
Competition from successful domestic products
Regulatory requirements (quality, safety, technical
specifications, domestic content) -- EU product
standards
High costs of trade create separate markets
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18. Global platform strategy
Product variety versus economies of scale
Business sells 10 units each in Country A and in Country F
Unit 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)
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19. Global platform strategy
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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20. Global platform strategy
Most products are local and not branded. For example: in
food sector Nestle estimates that only 1 % of all goods in
food markets are branded
Increasing number of international brands, Corona, Nestlé,
Sony
Increasing brand variations: BMW 3-series (1990s):
More than 1 million varieties can be ordered
Local distribution and marketing
Example: McDonald’s, Coca-Cola: Global brand, some
local product tailoring, reliance on local distribution
Local technology, production, customer service
Acer computer company
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21. Global Auto Industry
Thousands of auto companies globally in the
early twentieth century
More than 500 of those producers were in the
United States
Today there are fewer than 20 in the world
Toyota is the world’s most valuable car
company and is eighth largest in revenue
globally
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22. Management Orientations
Ethnocentric orientation
Home country is superior to others
Sees only similarities in other countries
Assumes products and practices that
succeed at home will be successful
everywhere
Leads to a standardized or extension
approach
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23. Management Orientations
Polycentric orientation
Each country is unique
Each subsidiary develops its own unique
business and marketing strategies
Often referred to as multinational
Leads to a localized or adaptation
approach that assumes products must be
adapted to local market conditions
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24. Management Orientations
Regiocentric orientation
A 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
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25. Management Orientations
Geocentric orientation
Entire world is a potential market
Strives for integrated global strategies
Also known as a global or transnational company
Retains an association with the headquarters
country
Pursues serving world markets from a single
country or sources globally to focus on select
country markets
Leads to a combination of extension and
adaptation elements
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26. Global network strategy
Physical 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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27. The right choice
Following 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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28. The right choice
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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29. 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 matrix shows that market development is defined as taking existing products into new markets. Wal-Mart’s expansion into Guatemala and other Central American countries is an example of this strategy.
Diversification is developing new products for new markets. South Korea’s LG Electronics has created new products for the American home appliance market. Innovations such as a $3,000 refrigerator with a built-in flat panel LVD TV have been instrumental in Home Depot’s decision to carry the appliance product line.
Companies that use price as a competitive weapon may use global sourcing to access cheap raw materials or low-wage labor. Companies can seek to improve process efficiencies or gain economies of scale with high production volumes.
Marketers may be able to reduce non-monetary costs by decreasing the time and effort customers expend to learn about or seek out the product.
A market is defined as people and organizations that are both able and willing to buy. A successful product or brand must be of acceptable quality and consistent with buyer behavior, expectations, and preferences. If a company is able to offer a combination of superior product, distribution, promotion benefits and lower price than competitors, it should enjoy a competitive advantage. Japanese automakers made significant gains in the American market in the 1980s by creating a superior value proposition. They offered cars with higher quality and lower prices than those made by American car companies.
Because countries and people are different, marketing practices that work in one country will not necessarily work in another. Customer preferences, competitors, channels of distribution, and communication may differ. Global marketers must realize the extent to which plans and programs may be extended or need adaptation. The way a company addresses this task is a reflection of its global marketing strategy (GMS).
Standardization versus adaptation is the extent to which each marketing mix element can be executed in the same or different ways in various country markets.
Concentration of marketing activities is the extent to which marketing mix activities are performed in one or a few country locations.
Coordination of marketing activities refers to the extent to which marketing mix activities are planned and executed interdependently around the globe.
Integration of competitive moves is the extent to which a firm’s competitive marketing tactics are interdependent in different parts of the world.
The design is basically the same but the name is frequently transliterated into local languages. The Arabic label is read right to left; the Chinese label translates “delicious/happiness.”
Ethnocentric orientation leads to a standardized or extension approach. Foreign operations are typically viewed as being secondary or subordinate to the country in which the company is headquartered. Sometimes valuable managerial knowledge and experience in local markets may go unnoticed. Manufacturing firms may view foreign markets as dumping grounds with little or no marketing research conducted, manufacturing modifications made or attention paid to customer needs and wants.
Example: In Nissan’s early days of exporting to the United States, the company shipped cars for the mild Japanese winters. Executives assumed that when the weather turned cold, Americans would put a blanket over their cars just like Japanese would. Nissan’s spokesperson said, “We tried for a long time to design cars in Japan and shove them down the American consumer’s throat. That didn’t work very well.”
Michael Mondavi, former CEO of the wine company said, “Robert Mondavi was a local winery that thought locally, grew locally, produced locally, and sold globally. . . . To be a truly global company, I believe it’s imperative to grow and produce great wines in the world in the best wine-growing regions, regardless of the country or the borders.”
For example, Citicorp used this approach until the mid-1990s when John Reed instilled a geocentric approach. He sought to instill a higher degree of integration among operating units.
James Bailey, Citicorp executive, said, “We were like a medieval state. There was the king and his court and they were in charge, right? No. It was the land barons who were in charge. The king and his court might declare this or that, but the land barons went and did their thing.”
Jack Welch at GE also sought to instill a geocentric approach.
At GM, executives were given considerable autonomy in designing autos for their regions. One result was the use of 270 different radios being installed around the world.
EX: GM now assigns engineering jobs worldwide. A Detroit global council determines $7 billion annual budget allocation for new product development. One goal is to save 40 percent on the cost of radios by using only 50 instead of 270 different ones. Basil Drossos, president of GM Argentina, said, “We are talking about becoming a global corporation as opposed to a multinational company; that implies that the centers of expertise may reside anywhere that best reside.”
Other examples: Harley-Davidson (U.S.), Waterford (Ireland), Gap (U.S.)