PROFESIGNALIDAD

In a global marketing context, marketing managers typically struggle with balanc-ing standardization versus adaptation. Five basic alternatives exist: (1) a product initially developed for a domestic market is sold internationally without modifications; (2) a domestic product is sold internationally with some adaptation;

(3) a global standardized product is created for transnational segments across different national markets; (4) a global product is created to target transnational segments across different national markets, with some adaptations to meet local country differences; (5) a new product is created for a foreign market.⁸

Unsurprisingly, the standardization–adaptation debate is one of the most widely discussed subjects in international marketing journals.⁹Among the first to pick up the debate was Robert D. Buzzell.¹⁰In his seminal article from 1968, he sheds light on the benefits of standardization, yet acknowledges limitations arising from differences between markets. In 1983, Theodore Levitt takes a more defined standpoint. His widely cited article, “The globalization of markets”, not only popularized the termglobalization, but also seems to serve as a common justifica-tion for standardizajustifica-tion strategies. He argues that consumers’ needs and desires are increasingly homogenized and claims that consumers, regardless of origin, request goods at low prices and high quality, even at the cost of individual preferences.

Accordingly, Levitt suggests that companies should see the world as one single market, best served through standardized offers.¹¹

In the 1980s, Coca-Cola seemed to have followed Levitt’s suggested approach.

Under chief executive Roberto Goizueta, Coca-Cola pursued an aggressive strategy of centralization and standardization. It reduced its portfolio to focus on a number of megabrands and standardized its offers to reap maximal economies of scale.

However, the strategy did not pay off. Coke’s market value dropped by roughly 100 billion US dollars, more than 40 % from its peak.¹²The inevitable consequence was to decentralize operations again, contrary to what Levitt had suggested. The Coca-Cola example is frequently used as counterargument to Levitt and illustrates the difficulties in achieving economies of scale. Many scholars also attack Levitt’s underlying assumptions by pointing to significant differences in consumer tastes;

others point out that consumers are unwilling to trade off product features for lower prices.¹³

However, the judgment is still out whether Levitt’s paper was visionary or utopian. Levitt defended his standpoint in 2006, indicating that despite the exis-tence of counterexamples he still supports his main arguments.¹⁴In 2005, author

8Alon and Jaffe (2013).

9Leonidou et al. (2010).

10Buzzell (1968).

11Levitt (1983).

12Ghemawat(2007a).

13Hise and Choi (2011).

14Levitt (2006).

and New York Times columnist Thomas L. Friedman published his view on the issue under the title “The World is Flat”, picking up Levitt’s early thoughts and bringing them back into the spotlight. Although Friedman does not go as far as to say that all products should be standardized, he stresses that the environments firms are operating in are becoming increasingly homogeneous.¹⁵ Thus, he follows one of Levitt’s underlying assumptions, namely the convergence of consumer needs around the world. In fact, the title of Friedman’s bestseller strongly resembles one of the subheadings in Levitt’s article, namely “The Earth is Flat”. Pankaj Ghemawat, who had also criticized Levitt previously, contradicted Friedman with an article called

“Why the World Isn’t Flat”, which provides several arguments to the contrary.¹⁶ Taken as a whole, the standardization–adaptation debate frequently resembles a Ping-Pong game. Standardization is often depicted as the ideal approach, but has been shown to be unfeasible in many cases. Moreover, the discussion lacks suffi-cient ground to allow multinationals to infer concrete strategic directions. A review of pertinent research found that “a careful analysis of the relevant literature results in the conclusion that we really do not know much about it.”¹⁷ A similar study characterized existing research as extensive, yet often fragmented, repetitive or contradictory.¹⁸Samples and methodology are often too weak or too specific to be of practical value. Thus, neither standardization nor adaptation alone, but rather the balance between both appears crucial. Conceptually, this balance is reached where the additional costs incurred through adaptation intersect the manufacturing and marketing costs driven down by economies of scale (Fig.5.2). In reality, companies Optimal Degree of Standardization / Adaptation

Adaptation Standardization

Cost Of Goods Sold, Marketing and Admin Costs

Cost of Lost Sales Combined Costs

Fig. 5.2 Optimizing standardization and adaptation

15Friedman (2007).

16Ghemawat(2007b).

17Hise and Choi (2011).

18Theodosiou and Leonidou (2003).

find it incredibly difficult to determine the ‘right’ balance. Below, the advantages and disadvantages of standardization versus adaptation are elaborated in more detail.

5.3.1 Standardization

In the first half of the twentieth century, firms commonly tailored their offers to the respective market. In the late 1960s, Buzzell, followed by Levitt in the 1980s, prompted many companies to embrace standardization. Converging consumer needs, driven by globalization, was given as the rationale for doing so.¹⁹Rolling out standardized products in several markets spreads fixed costs over a larger number of units and creates scale economies. Levitt argues that the “global com-petitor will seek constantly to standardize his offering everywhere. He will digress from this standardization only after exhausting all possibilities to retain it and he will push for reinstatement of standardization whenever digression and divergence have occurred.”²⁰ Thus, cost reductions are seen as the major benefit of standardization.²¹

However, standardization not only reduces production costs. It also facilitates planning and control, hence reducing the complexity of managing global product portfolios. For example, supermarkets feature various products with multi-language labels, allowing MNCs to produce centrally and then move products to different international locations upon demand.

Another important issue is time. Developing a version of a product that is tailored to local preferences may require weeks or months, if not years. And time may be a key factor, in particular if competitors are faster to launch their version.

Especially in industries with short development cycles such as fashion, the time to market is a critical success factor if companies do not want to risk being left behind by faster competitors. In addition, a standardized product often generates quicker returns, given its lower initial investment and reduced time-to-market.

Standardization also adds to a uniform image around the globe. With the emergence of multinational customers, this aspect gains more and more signifi-cance.²²Consumers are increasingly mobile, and so an American traveler expects her Caramel Frappuccino to be available at any Starbucks around the world. In the same way, a Spanish customer at McDonald’s in Bangkok expects his Big Mac to taste the same as back home in Spain. This drives MNCs to create a consistent image regardless of location. Finally, a powerful argument in favor of

19Buzzell (1968).

20Levitt (1983).

21Hise and Choi (2011).

22Buzzell (1968).

standardization is that good ideas are rare and should be exploited at maximum scale.²³

While standardization may certainly bring about considerable cost savings, it can also fail to satisfy consumers, result in lower sales and thus be extremely costly.

In addition to consumer needs and wants, there are also a number other factors that limit the scope for standardization. The following section discusses some of these factors and scrutinizes the key arguments in support of adaptation.

5.3.2 Adaptation

Adaptation may be obligatory rather than a choice. Legal requirements or factors such as different voltage levels regularly force companies to modify their products.

Hence, the main debate rests withinvoluntary adaptation.

A standardized product may simply not match the local requirements and thus come at the expense of lower sales. Tommy Hilfiger, for instance, developed an independent marketing strategy when it entered Europe. A design center in Amsterdam attempts to capture the taste of the European consumers and designs the clothes accordingly. As a consequence, products in North America and Europe are not identical. Thus, while companies may be tempted to standardize products, they risk not meeting consumer preferences. In the case of France and Quebec, for example, both countries share French as a common language, but a study on cosmetics for men revealed that French and Quebecois men have fundamentally different purchase motivation. That, in turn, is likely to require the use of different claims on the packaging.²⁴

Obviously, adaptation increases initial costs. However, adaptation costs may be offset by increased revenues. While proponents of standardization regularly use economies of scale and scope as a reason to reject adaptation, it should also be noted that optimal scale and scope are often reached at regional rather than global level.²⁵ In the car industry, for example, factory automation has lowered scale economies, enabling companies to serve regional and even local markets effi-ciently.²⁶Marketing costs, transportation costs and administrative costs may also increase rapidly when operations cross regional (i.e., here continental) boundaries.²⁷A final argument in favor of optimizing scale and scope at regional level lies in the so called “stickiness of knowledge”, which indicates that the transfer of ideas, experience and knowledge becomes increasingly difficult between regions.²⁸

23Douglas and Craig (1986) and Buzzell (1968).

24Souiden and Diagne (2009).

25Ambos and Schlegelmilch (2010).

26Douglas and Wind (1987).

27Nachum and Zaheer (2005).

28Szulanski (1996) and von Hippel (1994).

If a firm chooses to be locally responsive, decision-making is likely to move from headquarters to the respective subsidiary, giving local product managers more freedom and responsibility. This usually contributes positively to motivation in that product managers are more engaged and committed if they have a say in the product design process rather than just executing what has been decided centrally.²⁹

5.3.3 Contingency Perspective

Looking at the marketing mix as a whole, the product tends to be the most standardized element of the mix while price is the most adapted one.³⁰But even products are mostly neither fully standardized nor fully adapted: Coca-Cola adjusts for sweetness, Apple modifies its products for different voltage levels, and McDonald’s enriches its menu with local offers. The degree of standardization and adaptation also depends on the product type. Industrial products are the most standardized. Otis Elevator Company, for instance, provides relatively standardized solutions and at most tailors to the respective specifications of the architects they collaborate with.³¹ Within consumer products, durable products permit more standardization than non-durables.³²Thus, products such as personal computers, refrigerators and the like require significantly less adaptation than food and beverages, which are overall more susceptible to local preferences. A commercial jet, in contrast, is likely to be standardized. Products used by internationally mobile consumers, such as Samsonite or Rimowa suitcases, equally offer room for standardization, given their high level of international exposure.³³ In contrast, few multinational companies develop completely localized products. At a mini-mum, the product consists of standardized components. Consequently, several scholars favor a contingency perspective, in essence claiming that firms neither fully standardize nor adapt, but apply a combination of both.³⁴

Modularity and programmability help in this process. Modularity involves breaking down a product into separable constituents, allowing standardization of some and adaptation of others. Any tailoring is achieved through the composition of constituents inherent in the product.³⁵ Ronan Keating, for instance, celebrated a success with the cover version of the duet “We’ve got tonight”. While he sang the song with an artist called Lulu in the United Kingdom, he recorded the very same duet with a local German artist, Jeanette Biedermann, for the German-speaking countries, in which Lulu was rather unknown. The video clips consisted of modules

29These issues are discussed in more depth in Chap.9.

30Vrontis (2003) and Hise and Choi (2011).

31Otis Elevator Company (n.d.).

32Lehrer and Behnam (2009) and Boddewyn et al. (1986).

33Usunier and Lee (2006).

34Vrontis (2003).

35Lehrer and Behnam (2009).

in which Ronan Keating and his duet partners never appeared together, making them easily adjustable for the two markets.³⁶A modular architecture thus permits to incorporate the benefits of standardization while still taking into account local particularities. Additionally, it considerably reduces the complexity of managing the product design. Instead of unique products, the portfolio consists of a more easily controllable number of components. Modularization is also a prerequisite for successful mass customization, achieving flexibility in product design whilst keeping unit costs down.³⁷ Consequently, cars, trucks and aircraft are often designed in modules.

An additional approach embracing the contingency perspective is called programmability. The concept involves a standardized product with adjustable features that the customer may individualize after their purchase.³⁸ Consider Android, a common operating system for smart phones. While the software as such is standardized, it comes pre-set with a number of adjustable features. Users may use their favorite picture as “wallpaper” or switch to their desired language.³⁹ The software of TomTom, a manufacturer of navigation systems, equally features more than 40 pre-installed spoken languages, among which customers are able to choose.⁴⁰Given its nature, this concept frequently finds use in software or websites.

Among the multitude of factors that influence the balance between standardization and adaptation are two that nearly always play an important role, namely the product use conditions and the expected product benefits.

5.3.3.1 Product Use Conditions

Product use around the world differs greatly. Among the more obscure examples are the French fondness for administering all sorts of medicines via suppositories rather than orally; the Indian families that prefer top-loading versus front-loading washing machines since they also use them for stirring curd or making buttermilk;

and the use of Vicks Vapor Rub, a cough and cold non-prescription medicine, as a mosquito repellent.⁴¹ Others include a preference among a sizeable segment of Japanese consumers to wash their laundry in cold tap water, which caused a problem for Procter and Gamble as they initially failed to adapt their washing powders originally designed to work with hot water to these preferences.⁴²It is obvious that such differences often—but not always—lead to product adaptation.

36Lulu and Ronan Keating—We’ve Got Tonight. YouTube.https://www.youtube.com/watch?

v¼EpgCBfZWr80; Jeanette and Ronan Keating—We’ve got tonight. YouTube. http://www.

youtube.com/watch?v¼_mm8cpVJMC8. Both Accessed August 12, 2015.

37Shamsuzzoha (2011).

38Lehrer and Behnam (2009).

39Honeycomb: Welcome to Android 3.0! (n.d.).

40Pick your Go (n.d.).

41Alon and Jaffe (2013).

42Bartlett (2004).

5.3.3.2 Expected Product Benefits

Differences in expected product benefits also drive product adaption and may even lead to specific new product developments for a particular country market.

Beiersdorf for example, a German skin and beauty-care company, expanded the sales of its leading brand Nivea in India by adding the first ever male-dedicated skin whitening product to its portfolio. Beiersdorf was encouraged by consumer statis-tics that show higher usage rates for face care products among Asian men than their European counterparts. And while consumers buy self-tanning products in the US and Europe, Asian men and women prefer a fair skin unblemished by the sun.⁴³