Standardisation Vs Customisation

Standardisation Vs Customisation A spectacular globalisation has been observed in the international business due to regional economic integration, advances in transportation, communication, technology and liberalization of worldwide trade policies (Czinkota Ronkainen, 2004; Keegan, 1999).ÂÂ   With the growing international business, international marketing has become more complex and diverse, (Terpstra, 2000; Cateora Ghauri, 2006) environment that is uncontrollable, unpredictable resulting uncertainty in business environment. International business is not only sending goods and services to foreign market but also to deal with different issues that make international marketing more complex, in particular geographical borders, different political systems, business regulations, currency conversions and cultural variety (Keegan, 2002; Geri Ian, 2009). Convincing cases can be put forward for both a standardisation or customisation approach to global marketing practice. These arguments are keenly explored; drawing from examples of Coca-Colas international marketing programme to reveal key points. This report discusses the contemporary issue facing by the global companies in marketing their products. Part One Issue: Global Marketing Standardisation Vs Customisation Global versus local marketing strategy have been a major debate in cross-national business development over decades for global brands (Levitt, 1983; Solber, 2002). The issue here is if the companies should follow a standardized marketing program to different consumer groups in different countries or a customised one by adapting their strategy according to the needs and habits of the specific country. The explanation for this confusion can be supported with two variables, awareness of local market condition at the headquarters and the level of headquarters influence in decision making of local marketing. This dilemma of standardising and customised marketing is mainly due to key factors like cost, ethical issues, legal restrictions, media, culture, and markets. For example taking the leading beverage company Coca-Cola (2003) into consideration it global campaign Life tastes good has been backed just after 2 years after its launch. Now the companies advertising headquarters operates ac cording to the local market needs rather than the draft developed at central headquarters. In addition to this it is also argues that product category is also a key factor in making advertising decisions (Summerfield, 2002). Kay (2002), president of Toronto consulting firm The Glasgow Group in similar fashion says technology and clothing brands tend to fit well with standard marketing but food and beverage products face difficulties with cultural mismatch, category development, brand name and local economy. Another example for customized marketing is McDonalds, a food chain, which customises its marketing strategy as well as products according to the needs and culture of the countries. The products launched in each country differ according to the cultural requirements and habits, economic development and affordability of the targeted class. This is considered to be issue because of the complexity created by the issue in the decision making process of international managers. As the main motive of the advertising is to influence the companys customers in selling their products, it is important for the company to decide if their advertising campaigns are influencing its customers globally in all regions. Thinking from a strategic point of view organisations marketing with a standardised marketing strategy implies offering standard product at standard price through standard distribution system, supported by similar promotional programmes in different counties, with different market requirement and in some cases completely opposite markets, this supports customising approach. On the other hand Cohanim (2002), Vice president of marketing and communication of IBM (Past), says IBM looks at the globe as a single market and IBM try to operate as a single global market, the company supports this by stating the solutions for their industry, customers, products and services are similar for all countries in which they are operating. Critical Analysis: Global Marketing is the strategy involving the four Ps of marketing i.e. Product, Price, Place and Promotion to deal with the markets according to the geographical and cultural adaptation. Complete Standardisation marketing strategy is to offer identical product line and features at identical prices through identical distribution channels endorsed by identical promotional programs. The other extreme of this would be Complete Customisation marketing strategy to develop distinct tailored products, pricing, promotion and distribution policies with no specific standard elements (Imad, Naresh 1995). Many writers have endorsed standardisation instead of customisation for international marketing (Britt, 1974; Clark, 1975; Obrien, 1986). This argument is pleasing as it can be estimated an outstanding sales for a standard global product. Levitt (1983) in his Globalization of Markets states that If a company forces costs and prices down and pushes quality and reliability up while maintaining reasonable concern for suitability customers will prefer its world-standardized products. Also the cost factor, which can be reduced by single marketing strategy when moved to low-cost market, helps the organisation to maintain the quality of the product (Walter, 1986; Yip, 1989). It is also observed that most of the international marketing campaigns are showing attention towards the standardised approach of advertising (Varder, 1992). Some researches conveyed that industrial products lend themselves more easily to standardisation than consumer products (Hite and Fraser, 1988) still, product categories cant be considered as great factor in standardising international marketing (Saimee Roth, 1992). In US, EU markets it is found that businesses with standardised products are well established and gain the advantage of create a standard image of their products (Bharadwrj et al, 1993; Rosen et al, 1989). The other important factor that encourages standardisation is reduce in unit cost, this gain a competitive advantage for the global companies who can easily penetrate into the price sensitive markets and drive the small competitors out of market. Walliser Usunier (1998, p. 530), in their review article, conclude that even though opportunities exist to standardize the strategic levels of international advertising, mainly on a regional basis, considerable adaptation of exceptional elements in international advertising campaign is inevitable. The standardisation or the customisation depends on the products and the notion of the consumers towards the product. Products like laptops, computers, televisions, cameras, watches, cosmetics, and clothing associated with fashion and status, etc are marketed on the basis of their world class recognition and hence a standard approach to campaign the products is used. A customised approach in such cases might not be preferred as they are advances in technology and thus the consumer demands in such cases have universal acceptance of these global products (Yvette Reisinger, 2008). This kind of globalization leads to homogenization of consumer acceptance and adaptation of such goods. But products like food and beverages, services like banking and insurance solutions depend on the habits and tastes and needs and wants of the targeted ethnicity. For example, McDonalds recipes differ from each country it operates and are accustomed to the eating habits of the locals. The pricing of such pro ducts too is done by considering the spending ability of the targeted class. A standardised approach in such case would possibly result in a failure of the product in international markets. Yvette Reisinger (2008), in his book describes the failure of the fast-food concept in France which is well admired in China. The Chinese consumers prefer faster service with low waiting time where as the French consumers seek distinctiveness and identity of the service. The study thus implies that a standardised or a customised technique of marketing products might not be feasible in all cases and depending on the influencing factors; thus, either of them or sometimes both of them might have to be considered. This is understood by a thorough research of the behaviour and adaptations of the countries while launching a product and depending on the mindset and acceptability of the consumers in those geographies (Salah Hassan, Erdener Kaynak, 1994). Philip Kotler in his Global Standardization Courting Danger (1986) describes few such failures of products belonging to renowned brands due to non-customization. Philips initially failed to make profits in Japan due to larger size of the coffeemakers and later did well after reducing the size to accommodate Japanese kitchens. Mattels Barbie doll, a famous product introduced in foreign markets, could have made positive profits with its standard western features accepted by many countries with a lower price m odel. This could also be counter argued by having a culture specific meaning of dolls and the need to have their features reflect a national look with would obviously earn better profits due to wide acceptance (Philip Kotler, 1986). Even though the Barbie sales were good with its western features in 60 countries, the sales in Japan have flourished only after the features of the doll were modified to reflect Japanese. This doesnt completely mean that Mattel has done well in those 60 other countries and leaves behind a dilemma that if there were customized features representing the nations, they could have done better. A proper and complete understanding of these two strategies i.e. standardization and customization is necessary for global marketing and thus enables us to channelize the knowledge to leverage the opportunities in international markets. The idea is not to debate on which of the both is better but to investigate potentiality and research on which of the strategies suit the product (Philip Kotler, 1986). The possibility is that, by applying each of them independently could be successful or by a combination of both the strategies is to be decided while the promotional strategy for the product is being designed. This could be realized by a primary market research in the geographies where the product is being launched and the cultural, economic, political and infrastructural adaptations and limitations of the countries. This is quite necessary for successful marketing and promotion to launch any product in the international markets and to be noticed and appreciated by the consumers of the product. A predetermined notion in this regard is dangerous and might in turn result in a disaster. Depending on the study conducted before the launch, it is then necessary to plan accordingly, the marketing strategy that needs to be implemented (Levitt, 1983). In international markets striking a balance between standardisation and customisation is vitally essential for the product to be successful globally (Amanda 2004). The element for success is an accurate assessment of market forces currently facing the specific brand and how to best take the advantage of this market environment. It is probably one of the reasons that Coca Cola is the worlds most powerful brand as stated by Interbrands Global Brand Scorecard in 2003, estimating its brand value at $70.45Bn(No. 1-0085). Part Two Organisation for Research: Coca Cola, worlds largest manufacturer and distributor of non-alcoholic beverages is the best example for the global marketing. We have considered Coke due to its global recognition and also for its efforts to remain a leader by dealing with the issues in standardisation and customisation strategies. The organisation currently operating in more than 200 countries with over 450 brands and a portfolio of more than 3000 beverage products worldwide, constantly competing with its international rivals as well as local players in the countries it is operating in, to revive its position as a leader in the domain. The vast business structure of Coca Cola has led to prologue of innumerable marketing strategies and theories which have constantly been modified to maintain the brand as a global paramount. Achieving such a position all over the world is no cakewalk for any organisation and involves complex marketing strategies to deal with boundless problems encountering across the world in different countries. A detailed analysis of different strategies and theories implemented by Coca Cola in executing its marketing plan across the world could help us to understand the concepts of standardisation and customisation better, and the advantages and disadvantages of both these theories. Issue and Facts: For any company that is continuously growing it is vitally necessary that it does not contain geographical limitations and that is one theory that Coca Cola has excelled in. On July 29th when the company announced its second quarter results, a raise in profit of 43% has been observed due to overseas growth even though it suffered weak domestic volume (Source 1: NY times). Since the time Coca Cola has started its global expansion, it has either become a leading beverage brand in countries worldwide or it tried to acquire the topmost beverage seller of that country. A recent such deal that Coca Cola tried to make is in China (Source 2: NY times), which unfortunately couldnt be completed due to government restrictions. Reportedly, Coca Cola tried to acquire a Chinese juice maker Huiyuan in the $2.5Billion deal (Source 3: CBS News). The company has ensured an equal market spread across the world and that is how it still made wonderful in spite of the weak economy back home in the United States, by its overseas markets (Source 4: Barrons). Recently in the month of June, it has announced the release of Green Tea Coca Cola in Japan, which they claim is good for health and beauty (Source 5: WBST). The range of products that the brand releases in different countries differs with the local adaptations, tastes and needs of the people. The marketing strategies and ad campaigns too differ depending of the mindsets and interests of people. In the Asian Countries of India and Pakistan, the caption goes as Jo Chaho Ho Jaye Coca Cola Enjoy, by which the brand is recognized in those countries. Most of the captions and marketing plans of Coca Cola are such that they seem to the people to identify and relate themselves with the brand(Ref: 25, 25). The Colalife campaign is another example of Cokes strategy to support the social cause for the Third World countries by supplying social products like Vitamin A tablets in their crates for people who direly need them (Source 6: PFSK). In Spain, Coca-Cola withdrew its 2-liter bottle after discovering that few local refrigerators had large enough compartments (Philip Kotler, 1986). The evidences of such a global leading brand in following the strategy of customization and adaptation regionally in spite of maintaining its international brand image makes it one of the worlds most powerful brands. Literature: Issue Analysis: The Coca Cola Company mission is to expand their business by understanding the trends and forces that will help them to sustain by creating value and making difference (Coca Cola Mission Statement). In the process of achieving this mission, they believe that consumer demand drives everything they do but also brand Coca Cola will always be the core of their business(Ref: 27). The focus on market is by getting into the market to listen, observe and learn what their consumers, customers and partners need. They wish to create a brand image that would inspire creativity, passion, optimism and fun (Coca Cola Mission Statement). The point here is to observe the possibilities of sustainability, which is a key factor in a global market. One should always understand the fact that to be Global, one needs to be local. With a history of more than hundred years, the company has created a brand value for itself for its core business by the name Coca Cola or Coke and thus, is widely recognized by it . The idea now is to sustain its global model by constantly endeavoring new and innovative products that best suit the markets of the countries it is operating in. The theories of standardization and customization have been utilized constantly by this firm to maintain its core brand value as well as making the people feel it as local with its adaptive and customized brands and marketing. The emotional connection that they make with consumers while providing them with product quality and variety builds brand value and drives preference for their beverage products. The issue is, to maintain such an emotional bonding with their customers, they need to listen to their customers and respond to them according to the needs. Various ethnicities have various habits and thus different tastes. The proper control of top management and their readiness to listen to their business customers worldwide and executing marketing plans through proper research and analysis is one the main reasons that Coca Cola is an example for its business model and marketing strategies. They have dealt with the issue of varying needs of their customers by launching products that resemble the countrys ethnic habits and taste. A standardized approach in this case could prove dangerous as, if the product is not welcome by the people, no matter how best the marketing plan is and how well it was received in the home country or for that matter any other country, if people of one particular country dont like the product, it will result in a disaster in that nation thus forcing the com pany to withdraw its operation due to such failure. A proper method would be to deal with their local necessity and simultaneously promote the core brand to achieve standardization. This way, even though customized products are being offered to the people, the core brand value is always promoted. The Coca Cola Company, with its experience in serving the world for more than a century, has excelled in the art of global marketing by customizing its products according to needs and also by maintaining the core brand Coca Cola or simply Coke across the world. Conclusion: The Coca Cola Company, in their 2008 annual review, mentions that We are just getting started. The reason is because currently they are selling 570 billion servings per year which makes it 18,000 servings per second. Estimates show that over the next 12 years the population worldwide would grow by more than 800 million people. In addition, 1 billion new people would enter the middle class population and nearly 900 million people will have migrated to urban centers. That means more consumers with more money who have ability to purchase the ready-to-drink beverages to thrive business. In an attempt to understand and test the product sustainability, the company continuously launches new products with intense marketing campaigns in different countries. Depending on the consumer response and market survival, it either retains the sale of product or withdraws it from the market. In this process of satisfying their customer needs, Coca Cola is constantly gaining experience and is getting re ady for its future targets by getting closer to its customers utilizing the theories of customization and standardization simultaneously and managing their effects intelligently to eliminate any negative effects and addicting people with its adaptive fondness Read more: http://www.oxbridgewriters.com/essays/marketing/global-marketing.php#ixzz2Bwx0DLy9