Standardization and Adaptation of International Business

By the growth of business when companies starts their operations in other countries they are called global or international companies, at that time of growth their business strategies that being used in their home countries are no more effective, since global business dynamics are different from local business environment and local business objectives are different from global business objectives, there is a need to have a global business strategy that is not able to achieve global business objectives but also able to make the organization perform in home country, at the same time that strategy should be able to meet short term and long term goals of the organization, while looking at goals shorts term goals can be managing cash flows, revenue targets, market share and cost management and long term goals can be having sustainable competitive advantage and brand building leading to continued profits and growth.

While looking at the literature available regarding global business management and having sustainable competitive advantage and profitability, there are strategies which are presented and commented, but the there are two most important and main strategies that are suggested by key practitioners and commentators, these two generic are called standardization and adaptation, these are the main strategies one business follow and other strategies like cost leadership and diversification are derived from them. Each of these strategies has their own advantages and disadvantages, some commentators are in favor of standardization and some commentators are in favor of adaptation.

Standardization has been in use from the early production era, basic philosophy of this strategy is to make a standardized product or service for every target market, the entire marketing plan remain one and unchanged for different market segments, this strategy has a building block which is the idea that all human beings have the same need and this need can be satisfied with the a standard product no matter what the geographical area is and other forces that are involved in decision making can be ignored.

Standardization has be practiced by production oriented companies specially the FMCG sector and automotive industry, this strategy has its own benefits that makes strategists to advocate it, for example when company opt for standardization it produces the same product for every market, that gives the company with the advantage of economies of scale, companies following cost leadership strategies normally goes for standardization strategy and compete in market on the basis of price. One other benefit that company gets is regarding raw material, when company produces one product then they need one kind of raw material by doing this they comes in the position of having bargaining power advantage over their suppliers because they will be purchasing in bulk quantity and this way they also get preference over other suppliers, another benefit is related to channel of distribution, standardized products are easy and cost effective to distribute and manage. Standardized products and marketing plan also provides companies with global brand image and helps company to establish their brand as big giant. Some commentators advocate that standardization fails to understand the local variation of needs.

In contrast to standardization there is a strategy called adaptation, this strategy follows the base line that needs differ from region to region and market to market, and there are some other variables that influence the decision making of any product or service that can range from economic forces to cultural variable and that is why every product cannot be sold to everyone or everywhere without making some small but valuable changes in them and entire marketing plan should be customized according to the factors available in the target market.

Adaptation requires some customization of marketing plan according to the region or market that is targeted, according to some commentators adaptation increases the cost of operating in business as production processes are channel of distribution needs to be modified accordingly but on the other hand it is also an argument that since adaptation enhances the overall customer experience with brand and their acceptability of product it eventually results in increased profit. Modern day businesses are not transferring toward adaptation with some mix of standardization; this strategy increases the adaptation process by the consumers and increases the revenues in result, companies following adaptation also follow diversification and then compete local players in market.

What is to follow entirely depends upon the business, industry and target market, in some industries standardization is more suitable where mass production is required, needs of customers do not vary significantly and same product is required worldwide, in some industries adaptation is best to follow where customer’s need are variable is geography and diversification is required to have competitive advantage. Currently we can say that no company is depending entirely on one strategy, there is a mix of standardization and adaptation which followed by most of global companies, whether it is FMCG or Telecom or Automotive sector, big organizations are mixing standardization with adaptation, where main product remains same and some small modifications are done in marketing plan to make it successful and acceptable in market.

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