Product standardization vs adaptation

In international marketing, the marketers are required to come up with a decision as to whether they are going to standardize the product or to modify the existing products which is one of the challenging decisions that they have to make. And this decision can make impacts on the organization in terms of the Research and development expenses, finance, production, organization structure, procurement, marketing mix etc. And the decision as to which to choose depending on the attitudes towards the different cultures. So in this article, we are going to cover these two concepts so that you can have an idea about the two concepts in depth.

1. Product Standardization vs. Product Adaptation By : Neetika Rao

2. In international marketing, the marketers are required to come up with a decision as to whether they are going to standardize the product or to modify the existing products which is one of the challenging decisions that they have to make. And this decision can make impacts on the organization in terms of the Research and development expenses, finance, production, organization structure, procurement, marketing mix etc. And the decision as to which to choose depending on the attitudes towards the different cultures. So in this article, we are going to cover these two concepts so that you can have an idea about the two concepts in depth.

3. Product Standardization

4. Product standardization refers to the process of maintaining uniformity of products and services sold in different markets or in other words setting identical characteristics for a particular good or a service. For an example, if a particular company comes up with the decision of standardizing the product then the product is being manufactured using the same materials, same processes and even sold under the same name. There are several examples for industries that use standardized products. Piston industry Nut and bolt industry Standardization promotes the uniformity among the products and services and hence yields the advantages. This does not give advantages only to the organization but also to the customers as well.

5. Advantages of Product standardization To the organization Reduction in cost  – In the standardization, an identical product is produced using the same materials and processes etc. So that the materials can be purchased in bulk quantities and this will lead to have discounts in purchasing. At the same time, this will cause less wastages in material usage as well and reduces the cost. Production efficiency  – When the product that we are currently producing is being uniformed, the production process becomes efficient due to enabling factors such as mass production, specialization of labour, automation of the processes of production. Well established and well-strengthened brand  – When an identical product is being available in different markets it helps the organization to establish and strengthen the brand. Increase in production  – When the differences among products are reduced the production of the company can be easily increased. To the consumers Customers are enabled to choose the exact product that they wan t – When the differences among the products are reduced then the customers are not required to confuse as to which product or service to buy. So that they can choose the exact product without any confusion. Can obtain a high-quality product  – When the products are standardized consumers can obtain relatively a high-quality product. Better living standards  – When the consumers are capable of consuming high-quality products at lower costs their living standards gradually increases. But there are situations where this product standardization gives negative results as well.

6. Disadvantages of Product standardization Stagnation  – When the organization keeps producing a uniform product for a long time then it will cause the organization to remain in the same place in the industry. This is not good for an organization since the rivals can take advantages of this. So while trying to standardize the products they need to make changes to the products as the environment changes. Communication failures  – As the time goes the demand of the consumers can be changed and in such situations, organizations will still try to maintain the consistency without looking at the changes of demand of the consumers. This will make bad consequences on the organizations’ survival. Less choices to consumers  – Since the product is a standardized one, the consumers do not have a wide range of choices.

7. Case Example; P ositive Standardisation as a cost saving strategy For example, integrated marketing communication processes of a leading consumer electronics company – Apple, are highly standardised and this is partially caused by the fact that its products such as IPhone, IPad and personal computers do satisfy the same types of customer needs to regardless of the geographical location. Furthermore, the practice of standardisation in marketing practices also benefits from the concept of “world consumer” according to which increasing forces of globalisation and role of media, and frequent travelling at the global scale have fuelled harmonisation of values and lifestyles across the borders. Global image of the brand can be effectively reinforced via the application of standardisation to integrated marketing communication strategy. The slogan of a global sports clothing company Nike, ‘Just Do It’ can be mentioned to justify this argument. This slogan effectively communicates the same marketing message and promotes the same lifestyles in the global scale, and so far Nike has immensely benefited from this strategy in terms of profit maximisation.

8. Case Example; Negative standardisation is often criticised for neglecting unique aspects of local culture in foreign markets. Unique aspects of local culture may have huge impacts on the perception of each component of the marketing mix in general, and the marketing message in particular. This argument can be justified by mentioning the case study of Disneyland Co. The company opened its theme park in Hong Kong in 2005 applying standardisation strategy to a great extent, through duplication of its theme parks in California and Paris. However, due to significant cultural differences between Hong Kong and West, the financial performance of Disneyland in Hong Kong has been well below the expectations. Standardisation critics argue that its application diminishes the levels of flexibility of the business in new markets. In other words, global businesses pursuing standardisation strategy are able to respond to changes in individual markets to a lesser extent compared to local businesses or businesses using adaptation strategy.

9. Product Adaption

10. This is a strategy mostly used by Multi-National Companies(MNCs). This product adaption refers to the process of modifying the existing products in order to reach to each market . There are several product adaption strategies that an entity can use such as  product, target market, package and design, ingredients, language,  culture , religion etc.  That means in terms of target markets, packaging and designs, ingredients, languages, culture and etc the organizations need to come up with different ways so that they can cater different markets in a way where the customer needs and requirements are addressed . There are several reasons for such product adaption.  They can be listed as follows. Cultural factors, Usage factors, Differing consumer purchasing power, Level of local technical skills, Local taxation policies, Technical specifications, Climate ETC.

11. Eg :  The way the Red bull product is being sold in China and North America are different from one another. Because the label of the Red bull which is being sold in North America consist of red and silver for which the red bull stands for action and the silver background stands for the youth spirituality and spirit. Whereas in China the label is in red and gold for which the red colour stands for good luck and the gold colour stands for wealth and happiness. North American red bull:  Red is a symbol of action and courage Silver-symbol of maturity Blue-symbol of youth spirituality and peace Chinese Red Bull:  Red-symbol of good luck Gold-symbol of wealth and happiness

12. At the same time when the shampoo of Dove is being sold the Dove company use different packaging to reach different markets. To Islamic countries they use a girl with a scarf and to the other countries which are not Islamic, a girl without a scarf is used. Dove promo in Iran Dove promo International Version

13. There are mainly two types of product adaption methods . Mandatory Adaption  – Adapting the products to a particular country’s local requirements so that the legal and physical operations can be done by the company in the respective country. Eg : left hand driving in the UK Local non mandatory adaption  – Adapting a product with the intention of giving the consumers the chance to consume a better quality product which is not a legal requirement.

14. Strategic Adaptation to Foreign Markets Low High Industrial/ Technology Intensive Consumer Need for Adaptation Degree of Cultural Grounding Nature of Product Source: Adapted from W. Chan Kim and R. A. Mauborgne, “Cross-Cultural Strategies,” Journal of Business Strategy 7 (Spring 1987): 31; and John A. Quelch and Edward J. Hoff, “Customizing Global Marketing,” Harvard Business Review 64 (May-June 1986): 92-101.

15. Case Example; Positive Adaptation as an effective customer-orientation strategy Businesses may choose to apply adaptation strategy towards certain elements of marketing mix more than other elements For example, Nokia Corporation, a global communications and information company based in Finland focuses on product adaptation on new markets to a great extent, while other elements of marketing mix a subjected to adaptation to a lesser extend. According to this strategy Nokia focuses on selling low-cost basic but affordable products such as Nokia 3410 and Nokia 105 in market in African continent where customer purchasing power is low, whereas, the same company offers smartphones with advanced features and capabilities such as Nokia Lumia and Nokia E series in North America and Europe. The strategy of adaptation allows global businesses to respond to changes in local marketplace in rapid manner. These changes may be political, economical, social or technological; nevertheless, relevant business processes may be subjected to modifications in order to eliminate or at least to minimise negative impacts of these changes.

16. Case Example; Negative Low speed of implementation of adaptation strategy in practice marks one of the main disadvantages of this strategy The process of gaining in-depth knowledge about specifications of the local market, and adjusting elements of marketing mix accordingly can last many months, and during this period the market may become saturated by local businesses or foreign businesses pursuing standardisation strategy. Adaptation strategy implemented at extreme scale may compromise core competitive advantage of a global brand causing disparity of image of the company. As it was discussed above, Nike brand image is associated with dynamism and active lifestyle effectively communicated though its slogan ‘Just Do It’ to the global marketplace. Decisions by Nike strategic management to increase the level of adaptation of its marketing message for international markets might negatively affect its core brand identity compromising its chances for further growth.

17. Compromise between standardisation vs. adaptation

18. Basis of Difference Adaptation Standardisation 1) Application in Marketing Means It is supported by strong market variety especially by market individualism and market uniqueness. Companies should apply the four basic marketing instruments (4P 5 ) in the same way world wide and ignore national specialties in individuals markets. 2) Reason for Application Almost every international company takes into account (in higher or lower level), regional or local conditions which are typical to the differentiation. MNC should think globally and apply integration access world wide. 3) Product Offered Altering relevant feature of the product in significant ways for each and every individual geographical market in the product is sold. Complete standardization would involve designing a product that is identical in every relevant way for geographical market in which the product will be sold.

19. 4) Characteristics A product is differential from competitor’s product and further the products produced by particular company. A standard product does not need to have all the characteristics of the other products buyer requires. 5) Approach Adaptation is an approach of detailing the differentiation that exists between products and services. Standardization of product is the approach for increasing commonality of product in the supply chain management. 6) Economics of Scale Unique aspects in product result in different in quality thus increasing cost of production and lower economies of scale. Commonality in products results in higher productivity due to higher demand, having an impact on economies of scales which lowers the total cost. 7) Need Satisfy a particular need of buyer. Satisfy the heterogeneous needs of the buyer. 8) End Result Show sense of value to the buyer but they have to pay more for such product. Benefits buyer by lowering price.

20. Compromise between standardisation vs. adaptation argument can be achieved in a way that standardisation can be applied in order to develop global marketing strategies in general, at the same time when applying adaptation to address unique aspects of local markets. In other words, standardisation and adaptation strategies do not have to be mutually exclusive; however, an adequate level of balance needs to be maintained between the two.  In this way global businesses can take advantage of benefits offered by standardisation such as achieving economies of scale and exercising the same competitive advantage for all markets, at the same time when taking advantage of benefits offered by adaptation as well such as addressing unique needs of local customers and responding to changes in local marketplace in rapid manner.

21. Case A McDonald's and the Marketing Mix One company that has managed to highlight the benefits of both the standardized and adaptation approach is McDonald’s. With more than 33,500 restaurants in 119 countries the company skillfully manages its franchise model, delivering a remarkably consistent customer experience and branding (I’m lovin ’ It) while still allowing for locally relevant menu and service variations in segments across the globe. Furthermore, all advertisements are shot in 12 different languages, featuring the customized products catered to each region. In 2003, McDonald's introduced the McArabia , a flatbread sandwich, to its restaurants in the Middle East. It also introduced the McVeggie in India and the EBI-Fillet-O shrimp burger in Japan . McDonald’s also chooses convenient locations for all of its franchises. This includes malls, airports and local neighborhoods . These marketing strategies have confirmed to be effective, indicated by the company’s 7% increase in profit margins over the past four years . However, McDonald’s has made every effort to improve them through recent marketing initiatives with respect to the 7Ps. McDonald’s has begun to renovate its eateries, going from a plastic look to a more brick and wood design in an effort to maintain a contemporary image . They have also decided to “re-image” themselves in their ads by incorporating a hip-hop theme with teen icons such as Justin Timberlake and Lee Hom in China as a means to attract teenagers. In addition, the company has begun to offer healthier food products, such as oatmeal, given consumers are more health conscious.

22. Case B The notion of ‘Think Global, Act Local’ relates to this approach to a certain extent. Another effective illustration of this strategy can be observed in marketing of Unilever’s ‘Dove’ brand of soaps. Scenery, text and other elements of ‘Dove’ television advertisement are the same for all markets, however, models featuring in advertisements and the language used by those models are adapted according to local culture for each individual market.