Should all industries adopt a global standardization strategy?

As we saw with the initial disaster of poor planning (lost $92.3 million in 2010 and underestimated local responsiveness) with Disneyland in Hong Kong, appropriately blending global and local flavors is vital for success internationally (Peng 2014, 396).  Billions of dollars are at stake and too many companies have paid a high price for not taking into account local customs, preferences, and government requirements.  For a multinational enterprise (MNE) as large as Disney, having a clear cut strategy is key.

As Disney faced, MNE’s have two major sets of pressures in international competition: cost reduction and local responsiveness. The delicate balancing act in international competition is being locally responsive makes local customers and governments happy, but often increases costs (Peng 2014, 396).  Many MNE companies desire to streamline their global products and services to reduce costs but may ignore local customs, needs, and preferences.

In 1983, Theodore Levitt argued there is a convergence on a worldwide scale of consumer tastes.  For example, see the worldwide success Coca-Cola, Pepsi-Cola, Levi jeans, Revlon, and a growing list of products that have become household names as evidence that global consumers, despite deep-rooted cultural differences, are becoming more and more alike – or, as the author puts it, “homogenized.”  Others see the massive failures of MNE in not initially adapting to local customs and are now adjusting to local responsiveness as evidence a global standardization strategy is not a wise move.

The two sets of pressures (cost reduction and local responsiveness) are captured in the integration-responsiveness framework (Peng 2014, 396).  The integration-responsiveness framework allows for the balancing act of juggling between global integration and local responsiveness.  Peng lists four sets of strategic choices in response to the desire of MNE to compete successfully on a global scale: 1) home replication or international strategy (duplicates home-country-based competencies in foreign countries); 2) localization (focuses on a number of standalone local market foreign countries); 3) global standardization strategy (focuses on development and distribution of streamlined, standardized products worldwide for cost reduction reasons and advantages). and 4) transnational strategy (seeks a balancing act of being cost efficient, locally responsive, and learning driven worldwide) (Peng 2014, 398-400).

Glocal standardization strategy is known for having centers of excellence where subsidiaries are opened to produce one part or an element of the main product or service in an international setting rather than a major domestic hub.

Levitt argues with the speed of communications (even faster today with the worldwide web and interconnected Facebook than in 1983), last year’s products and services cannot be dumped off on third world markets and satisfy the masses (Levitt 1984, 4).  They will not be fooled and they too desire the latest and greatest products in the market their global Facebook friends are experiencing (Peng 2014, 473).  As the western economy and tastes become the envy of the world, more and more economies desire to have the same products as the West has. “The products and methods of the industrialized world play a single tune for all the world, and all the world eagerly dances to it. Ancient differences in national tastes or modes of doing business disappear” (Levitt 1984, 4).

Global Product division structure supports the global standardization strategy by assigning responsibilities and obligations to each product division.  It reduces duplication and operates on a regional basis keeping a pulse on the cost effciency (Peng 2014, 402).

Since globalization has entered the international competition, the question of marketing mix or program and process refer to the creation, direction, purpose, and management of the four Ps (product, price, place [distribution], and promotion) is also an element of controversy and strategy (Kustin 2010, 100).  How much marketing do you standarize and how much to remain focused on the local responsiveness is an important decision (Peng 2014, 469). Peng advocates for a compromise solution in having a product that appears to be locally adapted while deriving as much commonality as possible so consumers do not know the difference (Peng 2014, 469). Kustin found in his study between Japan (program standardization at 50%) and US (program standardization at 100%), “The findings in the study suggest that in global markets profit performance is positively correlated to marketing program and to a lesser extent to process standardization” (Kustin 2010, 106).

Customers on a global scale can be segmented into categories regardless of their nationality or region: 1) global citizens (favor of buying global brands as Levitt advocated); 2) global dreamers (may not be able to afford but admire global brands); 3) antiglobals (skeptical of global brands quality); 4) Global agnostics (against globalization and actively protest it) (Peng 2014, 471).  Those who love the global brands (78%), global standardization strategy will work for them even though they may not be able to afford the product.  The worldwide web has truly interconnected the world and caused people to become centered on global brands their Facebook and Twitter friends are enjoying (Peng 2014, 473).

I believe global firms would be foolish to completely adopt a global standardization strategy.  A one-size fits all is not appropriate in all locations.  Global Companies are smart to market localized products under local brands in consideration of the local responsiveness.  They must be cognizant of the language differences, customs, and government requirements in each local area or face a major international blunder (Dalgic & Heijblom 1996, 81).  When the local responsiveness is either overwhelming or underwhelming, adjusting to failure will be a high and costly learning curve.  Too often, when the local responsiveness is negative, the cost savings of adopting a streamlined global product is eliminated.  Seeking to build relationships and act diplomatically is globally wise.  Listening, seeking understanding, and being accepting of local customs is a sign of respect.  Ignorance and impatience do not bring solutions in any market.  Think long-term local relationships with international customers before seeking to make a quick profit (Dalgic & Heijblom 1996, 10).  Having a relationship orientation, focused on building longterm relationships with customers is better in my opinion than a marketing orientation.  Emerging economies like Asian countries are known for their relationships orientation and I believe the USA to remain competitive, needs to adapt their wise relationship ways (Peng 2014, 483).  It will pay off in the long run and benefit a more peaceful world.

Articles Cited

Dalgic, Tevfik, and Ruud Heijblom. “Educator Insights: International Marketing Blunders Revisited–Some Lessons For Managers.” Journal Of International Marketing 4.1 (1996): 81-91. Business Source Complete. Web. 13 June 2015.  http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?vid=43&sid=ab2fe6da-910a-43aa-8a2c-cda4e38dc236%40sessionmgr114&hid=114

Levitt, Theodore. “The Globalization Of Markets.” Mckinsey Quarterly 3 (1984): 2-20. Business Source Complete. Web. 13 June 2015.  http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?vid=16&sid=ab2fe6da-910a-43aa-8a2c-cda4e38dc236%40sessionmgr114&hid=114

Kustin, Richard. “The Earth Is Flat, Almost: Measuring Marketing Standardization And Profit Performance Of Japanese And U.S. Firms.” Journal Of Global Marketing 23.2 (2010): 100-108. Business Source Complete. Web. 13 June 2015. http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?sid=ab2fe6da-910a-43aa-8a2c-cda4e38dc236%40sessionmgr114&vid=28&hid=114

Peng, Mike.  “Strategizing, Structuring, and Learning around the World.” Global Business, 2014.  pp396-473.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s