Product standardisation V’s product adaptation in the international markets.

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PRODUCT STANDARDISATION V’s PRODUCT ADAPTATION IN THE INTERNATIONAL MARKETS

International Marketing ‘is the performance of business activities that direct a flow of a company’s goods and services to consumers or users in more than one nation for a profit’ (Cateora & Ghauri, 2000, p7). The strategy a company uses to direct this ‘flow’ of resources is dependent upon many economic, political and environmental factors, as well as the product itself and circumstance/ attitudes of the members within the parent organisation. This essay will address the complexities involved with two particular opposing approaches in international marketing; whether a product and its communications should be adapted or standardised for particular international markets, the benefits and drawbacks of each approach and the factors that contribute to such decisions being made. To conclude, the question of to what extent globalisation affects ones tastes and needs and thus the relationship with standardisation of products and services will be considered.

        Product standardisation occurs when a company offers the unique version of a product sold in the home country in all of its foreign markets. Such a strategy is based on the principles of cost minimisation, where the expenses of research and development, adaptation, marketing and production in different countries can be passed on to creating greater production volumes; thus economies of scale can be achieved and a reduction of the total unit cost of the product (Sorenson & Wiechmann, 1975). The critical principle is that economies of scale in production would lead to ‘low price/ high quality ratios’, which would sway consumer preference over and above the products they are used to (Mooij, 2000, p103).

        Further attributes of standardising products that make an attractive proposition for multi- nationals is the level of consistency the brands will hold amongst their consumers due to the greater control on foreign subsidiaries particularly if the parent company has a centralised structure (Buzzel, 1968). Reckitt Benckiser recently changed their brand name of the popular depilatory product; ‘Immac’ from its Middle Eastern, African and UK markets to ‘Veet’ in order to homogenise with its European markets, and thus develop global brand awareness (www.ameinfo.com).  This is particularly relevant for the new type of customer who is increasingly emerging in both western and eastern markets, who is extremely mobile and has access to other markets thanks to developments in transport and informational technology etc. For example a business traveller can find almost anywhere they go a Hilton Hotel, Gillette Razors and a bottle of Coco Cola. Such control will also have the consequence of simplifying operational variables and maximising the speed of information flow through the business. This creates maximum advantages from dissemination of valuable ideas and learning from mistakes within the total organisation (Hovell and Walters, 1972)  

        But companies who adopt a standardisation technique may run the risk of failure in accounting for consumers possessing different tastes, needs, purchasing powers and the strategies of local competitors that correlate with different cultures. As a result the possibility arises that commercial efficiency is reduced and volume of sales will not deem profits despite the initial cost saving. Complete standardisation is based on the assumption that with globalisation there will emerge consumers across the world who have similar needs, values and requirements or who value reduced cost over all other factors.

To contrast, the adaptation technique encompasses a customer orientation, where the evaluation of buyer behaviour and market characteristics is methodically completed in each foreign country (Douglas & Wind, 1987). So although McDonald’s restaurants can be found in many different markets in the world, the food offering is altered to the nations tastes- for example rice and fish is offered in Japan, beer in France and salad in Greece. It is based on the strategy of maximising sales and will be adopted if the sales forecast outweighs the cost of adapting the product through the accrued marketing mix modifications (Terpstra & Sarathy, 1994). Similar to standardisation there are also benefits with information flow around the organisation; innovation and creative thinking is energised as new solutions are found to different market pressures (Czinkota & Ronkainen, 2001).

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 The negative aspects of adaptation are the complexities that it causes; e.g. multiple brand managers, multiple pricing strategies, multiple products in different markets, a variety of distribution systems and non-continuous messages in promotions across markets. All this threatens efficiency and effectiveness and drives up the costs that must be compensated for through forecasted and actual sales. The discrepancies between each market will serve to weaken the brand in the perceptions of increasingly sophisticated consumers (who have increasing access to communication and knowledge through technological improvements), after all “global recognition of brands accelerates new product introductions and increase(s) the efficiency and ...

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