Another argument for standardisation by Levitt is that “substantial economies of scale in production and marketing can be achieved through supplying global markets.” Douglas and Wind however suggest that three critical and inter-related points have been neglected, these being “ a) technological developments in flexible factory automation enable economies of scale to be achieved at lower levels of output and do not require production of a single standardised product b) cost of production is only one and often not the critical component in determining the total cost of the product c) strategy should not be solely product driven but should take into account other components of the marketing strategy, such as positioning, packaging, brand name, advertising e.t.c.”.
Levitt also argues that product standardisation makes commercial sense in that it offers substantial costs benefits from economies of production, distribution, marketing and management. Sorenson and Weichman, 1975 also believe that “ the standardisation philosophy offers attractive cost savings, owing to economies of scale in R+D, production and marketing.” On the other hand Douglas and Wind argue that “adaptation philosophy offers more customer orientation since it systematically evaluates buyer behaviour and market characteristics in each foreign country” which according to Terpstra and Sarathy,1994, “results in profit maximisation because revenues accrued from marketing mix modifications may rise by more than adaptation costs.”
So far there has been little to back up Levitt’s theory on standardisation however one advocator of Levitt’s theory, Ohmae, 1985 states that “large companies must become more global if they hope to compete. They must change from companies that treat their foreign operations as secondary, to companies that view the entire world as a single borderless market.” Even Douglas and Wind conclude that “under certain conditions is it likely to prove a ‘winning’ strategy in international markets.” The conditions which they refer to are 1) the existence of a global market segment, about which Ohmae, 1995 explains, “ for some kinds of products, such as battery-powered products like cameras, watches, pocket calculators……. the kind of globalisation Ted Levitt talks about makes excellent sense.” 2) potential synergy from standardisation ; and 3) the availability of a communication and distribution infrastructure to deliver the firm’s offering to target customers worldwide.
I will now be discussing the extent to which standardisation of each element of the marketing mix is possible and adaptation is required.
The first element of the mix which we will focus on is ‘product’. This element of the mix can be standardised to a great extent only adaptation of the products packaging or labelling may be required in some instances. Examples of this can easily be seen in electrical goods such as DVD players or VCR’s where the product sold in Japan for instance is exactly the same as one bought in the local high street in the U.K. The only differences that will be apparent is the labelling on the box and of course the instructions manuals which these days normally come in the form of a small novel containing the instructions in many different languages. The great extent to which a product can be standardised is shown in the case of Coca-Cola where only slight variations in packaging and sweetness are made all across the world. Adaptations of products are generally only required to be made due to government laws and local customs other than this adaptations to products are made to satisfy consumer wants and needs. Standardisation of the company’s brand name is commonplace these days with more recently the UK household detergent ‘Jif ‘ changing its name to ‘ Cif ‘ in order to align with the company’s brand name in other countries.
Many companies implement different levels of standardisation with reference to their product, as mentioned these adaptations were unavoidable and obligatory mainly due to demographic and political-legal factors. A good example of this can be seen through the fast food giant McDonald’s. One of the main aims of McDonald’s is to create a standardised set of items that taste the same whether in Singapore, Spain or South Africa. However the company learned that although there are great cost savings through standardisation being able to adapt to n environment ensures success. With this in mind the company’s flagship burger ( the Big Mac ) undergoes varying levels of standardisation throughout the world. For instance due to religious laws and customs in Israel, the Big Mac are served without cheese, thereby permitting the separation of meat and dairy products required of kosher restaurants. Other McDonald’s products undergo varying levels of standardisation from country to country but on the whole a burger purchased in the UK will taste the same, right down to the sauce used, all around the world.
The next element to be discussed is ‘price’. The degree to which the price of a product can be standardised is very low, this is due to the fact that it is very difficult to determine the perception of the price by consumers all over the world. What may be seen as a normal everyday product in one country may be seen as luxury in another. Price is also difficult to standardise to any extent due to the fact that price is dependent on other factors such as distribution, tariffs, target market and the product itself. Strategic choices about products and distribution often set important guidelines for both price and promotion. A current debate on price is currently on going between US pharmaceutical companies and Africa over the cost of H.I.V/Aid’s drugs which are set at the same price to an African patient as they are to a US patient. This is obviously causing problems due to the fact that there is a very big difference in income levels between African citizens and American citizens. Even if pricing could become completely standardised it would not be advantageous to many companies who can charge extra for their product it different markets. A great example of this is seen in the car market in Europe, where as it happens small scale type of globalisation called ‘Europeanisation’ by companies does occur, where the prices of cars between different European countries varies intensely. As can be seen total standardisation is probably never going to be likely perhaps mainly due to pricing and the fact that the perceived value of a product of say a person in Africa is likely to differ dramatically from that of a person in the UK as well as the variance in other factors in different countries that affect pricing strategies.
As previously mentioned the extent to which price can be standardised is extremely low and therefore there is very little level of price standardisation implemented by any companies. This is due to the fact that companies may have to increase or decrease their products’ price with reference to tariffs, distribution strategies and other relevant factors in countries where they wish to trade. The may also alter their price to increase profits by positioning their product differently in other countries. Good examples of this can be seen in Volvo cars and beers such as Kronenberg.These products in their home countries are not perceived as premium products as they are in the UK and therefore the company charges premium prices compared to much lower prices than in France and Sweden respectively.
The extent to which distribution can be standardised is much the same as the previous mix element, price. The channel systems vary widely from country to country in that each country has its own distribution system that has evolved over time and changes very slowly. Also the relative significance of different members or elements of a channel system e.g. the role of wholesalers vs. retailers or shopkeepers can vary significantly across countries. For instance in food and drink retailing distributors play a far more important role in the delivery of goods from producer to retailer in the UK than in other EU countries such as France and Germany. In some markets such as the Japanese one the distribution system is complex and hard to penetrate, consisting of many layers and large numbers of intermediaries. Due to the varying systems in place in different countries it is very difficult to standardise and most global marketers must usually adapt their channel strategies to the existing structures within each country.
Implementing varying levels of standardisation with reference to distribution is an on going problem for many businesses the world over. Implementing a standardised distribution strategy in for example China is extremely difficult for companies, the problems they may face include include China's overburdened, underdeveloped physical infrastructure; inexpert, under funded state-owned distribution companies; unbalanced economy development; enormous, fragmented distribution and logistics sector; and regional protectionism. Beyond these, foreign firms also face bureaucratic restrictions that prohibit them from legally importing, selling, and servicing products in a straightforward manner.
Although an extremely difficult country in terms of distribution a few so called ‘prestige’ multi national corporations have received permission from local governments to establish distribution centres that in effect act as wholesalers for their production supplies. In the retail sector, the world's largest retailer Wal-Mart and the second largest one Carrefour have established their distribution networks in several important metropolises around China. This has virtually allowed them to standardise their distribution strategy in the Chinese market and not only enabling them to actually transport goods but also to reduce costs by implementing the same strategy they apply in their home country.
‘Promotion’ or the marketing communications mix, was seen by Kotler 1994 as consisting of five major tools: advertising, direct marketing, sales promotion, public relations and publicity and personal selling. For the purpose of this essay I will only be examining advertising and the extent to which it can be standardised. As with price, advertising also faces many barriers to the extent to which it can be standardised. Firstly its has to be seen that the availability of the media differs greatly from country to country, put this along with the differences in media penetration and circulation of newspapers and television usage are all important factors in the level of standardisation which can be obtained.
Regulations affecting media in different countries are often very diverse, especially television which being a primary medium is highly regulated i.e. in Sweden there is no commercials allowed on television at all. Cultural differences such as religion, politics, marriage, death, sex, alcohol, tobacco e.t.c. are of paramount importance to the advertiser because these lead to different values, taboos, etiquette and traditions which if an advert conflicts with then there could be negative feelings towards the product. For example taboos about colours must be considered as many have significant associations such as in Japan the colour white represents mourning and in Latin America purple represents death. Overall it is feasible to say that there will never be a completely standardised advertising campaign that can be used universally, certain changes will always have to be made to ensure the successfulness and effectiveness of the campaign in local markets.
In terms of advertising varying levels of standardisation are often implemented by companies, this is mainly due to the fact that if complete standardisation were to occur in all media then the product would have to appeal on a basic level and therefore the product itself would have to be a fairly basic commodity. The example of the Marlboro cigarettes advertisements devised in 1955 by Leo Burnett in Chicago is probably one of the most successful international advertising campaigns ever. The campaign transformed Marlboro from being a small market share brand into one of the world’s best selling brands – using the Marlboro cowboy. The strategy for every campaign is the same in every country as is the advertising idea, but the execution is different. For example in Nigeria the cowboy is black, in Australia he is an Australian cowboy in the outback.
Overall the majority of support in the argument between standardisation and adaptation lies with adaptation. This is not to say that standardisation is of no use, in fact from the literature I have been studying most authors believe that there is workable alternatives between complete adaptation and total standardisation. These include situation specific approaches that consider product-market fit along with individual firm strengths and weaknesses or checking criteria influencing adaptation for a product to a particular market. In these papers researchers have highlighted factors such as consumer and cultural characteristics, distribution institutions, local government regulation and level of local market urbanisation that will influence the degree of adaptation. In most fronts it is a general consensus that “ the ideal globalisation strategy should include at least minimal local adjustments.” Douglas and Wind 1985
