International marketing strategy standardization versus adaptation

Management and Administrative Sciences Review ISSN: 2308-1368 Volume: 2, Issue: 4, Pages: 353-359 (2013) Š 2013 Academy of Business & Scientific Research

www.absronline.org/masr

 Research Paper International Marketing Strategy: Standardization versus Adaptation Akmal Hussain1* and Shahbaz Khan2 1.

Faculty of Management Sciences, International Islamic University Islamabad, Pakistan.

2.

Department of Management Sciences, The Islamic University of Bahawalpur, Pakistan.

The debate on the standardization and adaptation of marketing strategy is not new, but the researchers not yet came to an agreement that which strategy is better to serve the international market. The aim of this research paper is to evaluate the previous researches and evaluate that which international marketing strategy is better. After the extensive research on the topic authors find out that standardization strategy is used to achieve the economies of scale and it is used when the target market has the similar needs and wants.

While on the other hand adaptation strategy is appropriate when the consumers have a different needs, wants and preferences and when there is a significant difference in the socio economic conditions of the target market. The key to succeed in the international market is to use the mix of standardization and adaptation strategy and try to create the balance between the two.

Keywords:

International marketing; Globalization; Marketing Strategy; Marketing mix;

Standardization;

Adaptation;

INTRODUCTION In last few decades competition has been increased at the international level due to the liberalization of the trade policy, ease in monetary exchange process and rise in the regional economic cooperation and advancement in the means of transportation and communication (Czinkota & Ronkainen 2001; Keegan 1999). In such highly dynamic and vibrant business environment it is very difficult for the businesses to operate internationally. According to Kotler (2009), nowadays, global corporations face difficult decisions regarding what marketing strategy to adopt. A basic question arises what should be the marketing strategy of the company when they go global, whether they standardized their processes or adapt their marketing strategy according to the environment. Standardization versus adaptation of

marketing strategy at the international level is a vital area of research for both the academicians and for the practitioners. According to the (Wierenga, Pruyn and Waarts, (1996) in the field of marketing the concept of standardization and adaptation or customization is intensively debated usually in the American context. In the past researches in the field of international marketing extensively research the issue of standardization and adaptation. In the view of Vignali and Vrontis (1999) the discussion on the topic starts in early 1960, when Elinder (1961) write an article on global advertising. In the earlier the standardized advertising was at the heart of the issue (Kanso and Kitchen, 2004). In the view of the earlier researchers there should be a single or standardized advertising campaign for the entire

*Corresponding author: Akmal Hussainl, Faculty of Management Sciences, International Islamic University Islamabad, Islamabad, Pakistan.

E-Mail: akmal_11@hotmail.com

353

Standardization versus Adaptation

world. Then this debate move forward from a standardized advertising campaign to the standardized promotional mix and now the debate encompasses the entire marketing mix (Schultz and Kitchen, 2000; Kanso and Kitchen, 2004; Kitchen and de Pelsmacker, 2004).

There is a difference of opinion among the researchers on employing the standardization or adaptation strategy at the international level. The advocates of standardization strategy at the global level propose that, markets in the international level are homogenous and global in nature and they believe that it is necessary for the continued existence and growth at the global level, depends on firm‟s ability to standardize their goods and services (Fatt, 1967; Buzzell, 1968; Levitt, 1983; Yip, 1996). The bases of the arguments of the supporters of standardization are that needs and wants of the consumer do not vary significantly at the international level. In their view the world is becoming progressively more homogenous in relation to the requirements of the customers and environmental factors despite of their regional and geographic location.

While on the other end supporters of adaption says that it is very difficult to use the standardization approach across the globe and thus they support the adaptation approach to efficiently and effectively fulfill the requirements of the international markets (Kashani (1989; Thrassou and Vrontis, 2006). The foundation behind the advocates of the adapatition is that there are significant differences in the countries and even between the different regions of the same country (Papavassiliou and Stathakopoulos, 1997).

Solberg (2002) suggests that the standardization and adaptation is one of the key issues for the international brand management is to create the balance (trade-off) between the benefits achieved by the standardization through economies of scale and the cultural prerequisite of adaptation.

Although the issue of standardization and adaptation is extensively researched but the researchers are not yet came into the conclusion that what approach is best to serve the global marketplace. The aim of this research paper is to investigate through the review of the prior researches to evaluate the both approaches of

Research Paper

international marketing and find out that what approach is best and why. The aim of this paper is also to investigate that what marketing strategy has positive relationship with the firm‟s performance at the international level. This theoretical research paper is divided into the 3 section; first section is consisting of the introduction of the study. Second section of the study will involves the literature review and the formation of conceptual framework, whilst the last and third section of the study will involves the discussion and conclusion.

LITERATURE REVIEW According to Bennet (2008) strategy can be defined as “the actions managers take to attain the goals of the firm”. Selection of the appropriate marketing strategy at the national level as well as at the international level is key to success. Hill (2002) further argues that, Firms which compete at the global stage usually face two kinds of competitive pressures. 1) Pressure for cost reduction and 2) pressure to be locally responsiveness. In this section the authors will review the standardization and adaptation of marketing strategy and their advantages and disadvantages and what are the factors that motivate firms to standardize or adapt their marketing strategy.

Standardization Standardization can be defined in different ways but Medina and Duffy (1998), define it as, “the process of extending and effectively applying domestic target-market-dictated product standards tangible and/or intangible attributes – to markets in foreign environments”(p,229). While the globalization is defined by Cherunilam (2009) as “the process of integration of economics across the world through cross border flow of factors, products and information”.

According to Cavusgil et al., 1993, the global market is becoming homogeneous in nature and the homogenization of the international markets allows the firms to adapt the standardization strategy across the globe. There are number of advocates of the standardization but among them Levitt is one of the most strong advocates of standardization. According to Levitt (1983) the

354

Manag. Adm. Sci. Rev. ISSN: 2308-1368 Volume: 2, Issue: 4, Pages: 353-359

standardization strategy emerges due to the advancement in technology and communication and due to changes in consumer taste and preference and they became homogeneous increased global competition is another reason for standardization. According to Levitt (1983), “a successful global marketing strategy consists of having a common brand name, packaging, and communication”. For example, Levitt (1983) in his landmark paper suggests that standardization of the marketing mix and the design of a single strategy for the whole global marketplace help in achieving economies of scale in the production process.

Moreover, standardization has number of positive effects on the performance of the firms as it helps the firms in the achievement of the economies of scales. It helps them to faster learning experience which helps them to reduce the inventory cost, this not only save cost but also helps firms to get competitive advantage over the competitors.

Furthermore, standardization of the products will enhance the chances for product innovation as firm can apportion more of its resources to build and develop the product portfolio rather than allocating resources to adapting it to different marketplace (Kotabe, 1990). Whitelock (1987) suggests that standardization will leads to the attentiveness of the technical research work, as the process is standardized so less staff training is required. According to Bennet (2008), firm which employ standardization strategy will develop a single product for all the markets in all the regions and this kind of universal product will be suitable where;

(1987), adaptation and customization are two opposite terms. Medina and Duffy (1998) define adaptation as “the mandatory modification of domestic target market- dictated product standards – tangible and/or intangible attributes – as to make the product suitable to foreign environmental conditions”. On the contrary customization is defined by Medina and Duffy (1998) as “the discretionary modification of domestic target-market-dictated product standards – tangible and intangible attributes – as to make it economically and culturally suitable to foreign customers”. The basic difference between the two terms is that one is mandatory while the other is discretionary. According to Kotler and Armstrong (2008) “An international marketing strategy for adjusting the marketing mix elements to each international target market, bearing more cost but hoping for large market share and return”. Kotler and Armstrong (2008) write in their book most marketer suggests that companies should adapt the following policy, “Think globally but act locally”. Companies must have to seek a tradeoff between the standardization and adaptation.

Although both influence, either directly or indirectly, a firm‟s international business operations, the adaptation affects mostly the tangible (or physical) attributes of a strategy because it focuses on environmental conditions of various markets. Customization on the other hand is mostly affected by such factors as cultures and therefore has a deeper impact than adaptation, on the intangible (or non-physical) attributes of products (Medina and Duffy, 1998).

3)Ther e are large markets which exist across the world so cultural adaptation is not required

According to Bennet (2008), firms which operates internationally have to made a basic/key decision whether to go in the foreign markets with the firm‟s current product or made necessary changes in the products according to the requirements of the foreign market, product adaptation will be suitable in the case where,

4) Universal product has a strong international brand image

1) There is a significant differences in consumer needs and wants

Adaptation

2) Competition is intense, which force them to differentiate their products

1) As the basic need is same so the product will better satisfy the needs in international market 2) After sale services can be standardized

Customization is also interchangeably referred as adaptation. According to Douglus and Wind

Akmal Hussain & Shahbaz Khan

Standardization versus Adaptation

3) To fulfill some necessary host country requirements such as packaging, technical and legal issues 4) These are also important reasons for product modification/adaptation , climate, living conditions, customer lifestyle, literacy and income level of the consumer.

The basic argument in the support of adaptation is that it involves the individual approach as it allows the firm to understand the needs wants and preferences of the each consumer. Supporters of adaptation approach convincingly advocate that there is a significant difference in culture, economic situation, rules and regulation, political system and the lifestyle of consumer and their values and belief system across the world these things must be considered for the success Cavusgil et al., 1993). The use of Adaptation of marketing strategy helps the firms to achieve the competitive advantage. (Cavusgil et al., 1993). Moreover, in the view of some researchers, the eventual goal of a company should not be cost reduction through standardization, but long-term profitability through higher sales accrued from a better utilization of the different consumer needs across countries (Onkvist and Shaw, 1990; Rosen, 1990; Whitelock and Pimblett, 1997; cited by Theodosiou and Leonidou, 2003). Lemak and Arunthanes (1997), opines that the advocates of standardization does not have the conventional wisdom of modern marketing. Despite many arguments of increased consumer homogeneity, it has been suggested that consumers are becoming gradually more diverse and complex and do not necessarily want to replace quality with price (Douglas and Wind, 1987).

Product adaptation or modification strategy will leads to increase in the sales volume of the firm in foreign marketplace, by better satisfying the needs and wants of the customers, by retaining the existing customers by making the products up-todate and also by taking into consideration the offerings of the competing firms.

There are also some negative impacts of product modification or adaptation of marketing strategy which are as follows;

Research Paper

a) Additional cost required for the promotional activities b) Duplication of the activities within the firm c) Inexperience and limited knowledge about the technical aspects of the different products and know how regarding the marketing of the product d) Extra resources will be required for the research and development (Bennet, 2008) In the following table the factors are highlighted which encourage firms to use standardization strategy or adaptation strategy at the international level.

Standardization versus Adaptation Factors encouraging Standardization

Factors encouraging Adaptation

Economies in product R Differing use conditions &D Economies of scale in Government and production regulatory influences Economies in marketing Control of program

Differing buyer behavior patterns

marketing Local initiative motivation implementation

“shrinking� of world marketplace

the Adherence to marketing concept

and in the

Source: Czinkota, Ronkainen, Moffett (2005) DISCUSSION AND CONCLUSION The aim of this paper was to determine that which international marketing strategy (standardization v/s adaptation) is appropriate for the firms which operate internationally.

The topic of standardization and adaptation of international marketing strategy is heavily/ extensively debated in the past. Researchers are divided into two schools of thoughts in the view of first school of thought; standardization is the best solution to serve the global marketplace, as the world increasingly becoming more homogenous due to the globalization. According to Levitt (1983), standardization of international marketing strategy means that performing the same

356

Manag. Adm. Sci. Rev. ISSN: 2308-1368 Volume: 2, Issue: 4, Pages: 353-359

marketing activities across the globe. Globalization turned the world into a global village, one of the main advocate/ supporter of standardization Levitt (1983) argues that, advancement and progress in the means of communication and transportation “the world preference structure gets pressed into homogenized commonality”. In their view these are the bases for the standardization,

e) Adherence to the marketing concept

d) Standardization leads to the economies of scale

Both standardization and adaptation strategy have their own advantages and disadvantages. Some of the element of the marketing mix can be more standardized as compared to others. As in the view of one of the researcher product should be standardized in order to achieve economies of scale, brand name and brand message should also be the same while these element of marketing mix can be adapted such as packaging, pricing of the product, sales promotion and distribution channel.

In short we can say that as it is also suggested by Solberg (2002), that firms in order to get success in the global market place create the balance between the standardization and adaptation.

e) Economies in research and development ( Czinkota, Ronkainen, Moffett, 2005)

REFERENCES

a) Changing world structure ( as due to globalization world becoming more homogenous in terms of their needs and wants) b) Standardization helps in work specialization c) Helps in ride down the experience curve

f) Standardization gives the image of global brand On the contrary there is another school of thought who supports the view of adaptation strategy in the international marketing strategy. The argues that although globalization made its impact on the world, but still there is a significant differences in the cultural, political and socio economic condition of the countries, these differences are not only found across the countries but within the country.

In a country there are different sub cultures and different economic conditions so the whole world can‟t be effectively and efficiently served with a single marketing strategy. According to Kotler (1986), most of the international products fail in the international market due to the lack of product adaptation.

Due to this reason Kotler and Armstrong (2008), gives the concept of adapted marketing mix “An international marketing strategy for adjusting the marketing mix elements to each international target market, bearing more cost but hoping for large market share and return”.

These are the some of the reasons for the adaptation of marketing strategy, a) Better satisfy customers’ needs and wants b) Leads to product differentiation c) Helps in achieving competitive advantage d) Legal and political conditions of the different counties and etc

Bennet.R. (2008). International Business (2nd edn), New Delhi, India, Pearson education Ltd. Buzzell, R. (1968).Can you standardize multinational marketing? Harvard Business Review, November-December, No. 49, pp.

102-13.

Cavusgil, S.T. and Zou, S. (1994). Marketing Strategy-Performance Relationship: An Investigation of the Empirical Link in Export Market Ventures. Journal of Marketing, 58:1, 1-21.

Cavusgil, S.T., Zou, S. and Naidu, G.M. (1993) „Product and Promotion Adaptation in Export Ventures: An Empirical Investigation.

Journal of International Business Studies, 24:3, 479-506.

Czinkota, M.R. and Ronkainen, I.A., Micheal, H. Moffet. (2005) International Business (7th edn), United States of America, Thomson South-Western.

Douglas, S.P. and Wind, Y. (1987). The Myth of Globalization. Columbia Journal of World Business, 22:4, 19-29.

Akmal Hussain & Shahbaz Khan

Standardization versus Adaptation

Elinder, E. (1961). How international can advertising be? International Advertiser, December, pp. 12-16.

Fatt, A.C. (1964). A multinational approach to international advertising. International Advertiser, September, pp. 17-20.

Hill, W.L.C. (2002) International Business, Competing in the Global Marketplace: Postscript 2002 (3rd edn), United States of America, McGraw Hill.

Kanso, A. and Kitchen, P.J. (2004). Marketing consumer services internationally: localization and standardisation revisited.

Marketing Intelligence and Planning, 22 No. 2, pp. 87-94.

Kashani, K. (1989). Beware the pitfalls of global marketing. Harvard Business Review September/October, pp. 91-8.

Kitchen, P.J. and de Pelsmacker, P. (2004).

Integrated Marketing Communications: A Primer, Routledge, London.

Keegan, W. J. (1999). Global Marketing Management. USA: Prentice Hall.

Kotabe, M. (1990). Corporate Product Policy and Innovative Behaviour of European and Japanese Multinationals: An Empirical Investigation. Journal of Marketing, 54:2, 1933.

Kotler, P. (1986). Global Standardization – Courting Danger. Journal of Consumer Marketing, 3(2), 13-15.

Kotler, P., Armstrong, G.(2008). Principles of Marketing (12t edn), United States of America, Pearson education Inc. Czinkota, M.R. and Ronkainen, I.A. (2004) International Marketing (7th edn), United States of America, Thomson SouthWestern.

Lemak, D. J. and Arunthanes, W. (1997).

Global Business Strategy: A Contingency

Research Paper

Approach.

5:1, 26-37.

Multinational Business Review,

Leonidou, L.C. (1996).

Product Standardization or Adaptation: The Japanese Approach. Journal of Marketing Practices, Applied Marketing Science, 2:4, 5371.

Levitt, T. (1983).The Globalization of Market.

Harvard Business Review, 61:3, 92-102.

Medina, J. F. and Duffy, M. (1998).

Standardization vs Globalization: A New Perspective of Brand Strategiesâ€&#x;, Journal of Product and Brand Management, 7:3, 223-243.

Papavassiliou, N., & Stathakopoulus, V. (1997). Standardization versus Adaptation of International Advertising Strategies: Towards a Framework. European Journal of Marketing.

Schultz, D.E. and Kitchen, P.J. (2000).

Communicating Globally: An Integrated Marketing Approach, Palgrave, Basingstoke.

Solberg, C. (2002). The Perennial Issue of Adaptation or Standardization of International Marketing Communication: Organizational Contingencies and Performance. Journal of International Marketing, 10, 1-21 Theodosiou, M. and Leonidou, L.C. (2003).

Standardization versus Adaptation of International Marketing Strategy: An Integrative Assessment of the Empirical Research. International Business Review, 12:2, 141-171.

Thrassou, A. and Vrontis, D. (2006). A Small Services Firm Marketing Communications Model for SME-Dominated Environments.

Journal of Marketing Communications, 12 No. 3, pp. 183-202.

Whitelock, J. M., & Pimblett, C. (1997). The Standardization Debate in International

358

Manag. Adm. Sci. Rev. ISSN: 2308-1368 Volume: 2, Issue: 4, Pages: 353-359

Marketing. Journal of Global Marketing, 10(3), 45–66.

Yip, G.S. (1989). Global Strategy ‌ in a World of Nations? Sloan Management Review, Autumn, pp. 29-41.

Wierenga, B., Pruyn, A., and Waarts, E. (1996).

The Key to Successful Euromarketing Standardization or Customization. Journal of International Consumer Marketing, 8, 3967.

Akmal Hussain & Shahbaz Khan