Standardisation versus customisation (adaptation) of products and services by global brands

Introduction

In the current world globalization has transformed the way people do business. The level of interdependence among economies continues to increase. Companies that in the past focused on national markets are increasingly being confronted by the issues of standardization and customization as they attempt to venture into the international market. At the same time, a lot of research on standardization and customization has been conducted in recent decades. However, no much progress has been made in terms of efforts to create a theoretical framework that clearly defines issues of standardization and adaptation of products to specific markets.

The standardization strategy is normally preferred in situations where there consumer homogeneity while customization is the preferred strategies in situations different customers have different needs. In standardization, companies adopt a uniform marketing strategy to cover the entire market. In markets where the marketer predicts that the phenomenon of consumer homogeneity will prevail, a standardization method is likely to be adopted. The aim of this paper is to prove a critical understanding of theoretical issues of standardization and customization through a review of relevant journals and books. The paper also provides examples of companies that have used standardization and customization strategies.

Review of literature on standardization

Many companies are increasingly turning to the standardization strategy in order to gain a competitive advantage in the international market. According to ODonnell & Jeong (2000), this phenomenon is being contributed to largely by globalization. ODonnell & Jeong (2000) argue that globalization makes markets look increasingly homogenous in terms of the needs of customers. Those who support the need to standardize products and services argue that technology has led to the emergence of many similarities in markets. Therefore, marketers who standardize their products are seen to be taking advantages of the integrative power of technology. In the US and the EU region, many multinational corporations have chosen to adopt the standardization strategy because of the numerous shared characteristics. These markets are thought to be characterized by similar trends in terms of demand for various products as well as customers’ preferences.

Companies have also resorted to the standardization strategy in order to respond to customers who insist on high quality products at lower prices (Viswanathan & Dickson, 2007). According to Viswanathan & Dickson (2007), the best way of dealing with such a situation is to standardize products across the entire market. However, not all researchers agree with this approach. For instance, Chang (1995) argues that differences continue to persist in terms of customers’ needs despite globalization having taken over in the contemporary world. Chang (1995) argues that there is no sufficient evidence to support the thesis of standardization. By this, Chang implies that companies can still compete well in the international market without having to standardize their products.

Chang (1995) points out that even in markets that are characterized by cultural similarities, differences regarding customers’ preferences will always emerge. Even in situations where customers are looking for the same products, the criteria for decision-making will always be different (Chang, 2005). This means that the marketers always have to approach different segments of a market using different strategies. Moreover, in some cases, numerous differences among various countries that influence production processes tend to exist, thereby making the idea of standardization seem inapplicable.

From this debate, it is evident that a number of factors influence standardization. Some of these factors include level of competition, socio-economic environment, relationships between headquarters and subsidiaries, organizational orientation, nature of products and services being sold, and characteristics of the target market. Globalization has not been adopted uniformly across all markets. Some countries, especially in the emerging economies, have lagged behind in terms of the adoption of technology. In such markets, companies may encounter numerous difficulties in efforts to standardize products and services.

Little research has been done to determine how competition influences the choice of standardization strategy. Rather, emphasis is on theories that attempt to explain the rationalization strategies that managers rely on when making deciding to standardize products. According to Keegan & Green (2013), mental models are increasingly being relied on by researcher to explain the decision-making processes of managers who must choose between standardizing and customizing products. Managers are assumed to rely on certain mental models in efforts to deal with the complex environment in which they operate (Keegan & Green, 2013). Such models typically promote the view that managers are likely to make decisions on the basis of very few variables. They deliberately limit the number of variables under assessment in order to avoid complicating the decision-making process (Keegan & Green, 2013).

ODonnell & Jeong (2000) oppose the use of mental models in the investigation of decision-making processes relating to standardization because they fail to take into consideration all relevant variables. Instead, they propose the use of the three-factor model (ODonnell & Jeong, 2000). This model is beneficial because it creates a platform for analyzing variables relating to both standardization and customization (ODonnell & Jeong, 2000). Moreover, the model addresses the important question of how companies can transfer competitive advantages to new markets through standardization. According to ODonnell & Jeong (2000), researchers may also want to use the three-factor model because of the way in which it explores the issue of variations in economic freedom.

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