Standardization in International Marketing strategy: doomed to failure or successful strategy?

Content

1. Introduction

2. Literature Review
2.1 Theoretically Arguments
2.2 Empirically support for standardization

3. Measurement of standardization

4. Standardization of Consumer Goods – Jägermeister & Nixon
4.1 Non-Durable Goods - Jägermeister
4.2 Durable Goods - Nixon

5. Conclusion

6. Appendix

7. References

1. Introduction

The debate around standardization versus adaptation in international marketing is going on since nearly half a decade now. The first articles regarding the question whether firms should adapt their strategy and marketing program to the local costumers needs or if they rather should focus on global standardization were published in the 1960’s (e.g. Bartels, 1968; Buzell, 1968; Elinder, 1961/1965; Keegan, 1969). Since then over 300 articles address this research question and it is a never- ending debate with inconsistent findings. A recent detailed meta-study over relevant articles of the last 50 years leads to contradictory findings: Out of 274 articles published in Marketing and Management Journals, 8% recommended global standardization, 14 % favored adaption, 10 % could not give a recommendation and the majority (68%) stated that companies have to make their decision grounded on the specific situation they are in (Schmid & Kotulla, 2010). These contradictory findings in the literature alone show, that the statement “Standardization in International Marketing strategy is doomed to failure” cannot be easily agreed with.

This essay has the purpose to disprove the statement and demonstrate, with the help of previous literature and practical examples, that in certain contexts and for some companies, standardization can be a successful strategy. Section 2 provides an overview of the debate concerning standardization versus adaptation and the empirical results of a choice of articles. Section 3 explains which aspects of the marketing mix will be analysed in this essay and clarifies the definition of standardization. Following in Section 4 two companies within the consumer goods industry will be presented, who clearly follow an international standardization marketing approach. A conclusion will be provided in Section 5, integrating a final valuation of the discussed statement.

2. Literature Review

This section firstly provides an overview over the debate concerning standardization versus adaptation and presents the arguments for and against standardization (2.1). Secondly, the theoretical arguments will be supported with empirical results from recent research. The main purpose is to analyze if the literature can underline a likely failure of standardization in international marketing strategy.

2.1 Theoretically Arguments

“Companies must learn to operate as if the world were one large market – ignoring superficial regional and national differences” (Levitt, 1983, p. 92).

This extract from Levitt’s article in 1983 makes the definition of standardization clear. With the process of globalization customers become more homogenous, and therefore global companies should standardize their marketing to fulfill the need of the global customer. The outcomes of this process are supposed to be standardized, high-quality and low-cost products that require little or no customization for the sale in foreign markets (Buzell, 1968; Levitt, 1983). This idea can be traced back to the 1960’s, when Elinder (1961) proposes that advertising strategies, which are targeting basic human-nature needs (e.g. desire for health, beauty and a better life) can be successful not just in the eclectic US regions but also worldwide. This approach evoked a wave of critique. Supporters of the international adaption school of thought highlight the difficulties in using a standardized approached and argue that despite globalization there are and will be enormous differences between country markets, and even between regions of countries regarding the physical environment, political and legal system, cultures and economic development (e.g Boddewyn, Soehl, & Picard, 1986; Wind, 1986; Papavassiliou & Stathakopoulos, 1997). Furthermore they suggest that nationalism hinders free trade and has a negative influence on the acceptance of foreign products (Samiee, 1994) as well as regarding the concept of similar customer behavior on an international basis as simply unreal (Helming, 1982). In their opinion companies should adapt their products and marketing strategy to the local needs of the customers and specific conditions of the market.

Proponents of the global standardization approach favor it mainly because of the potential cost savings it involves. They believe that customers and markets are becoming more global and homogenous, which allows and even advances standardization. This leads to cost savings and therefore companies who standardize can achieve ultimate financial gains (Keegan, 1969). Cost savings can be achieved through economies of scale, especially in production (Douglas & Wind, 1987; Keegan, 1969), research and development (Buzell, 1968; Keegan, 1969; Theodosiou & Leonidou, 2003), purchasing (Douglas & Wind, 1987) and marketing (e.g. Buzell 1968; Keegan, 1969; Terpstra, 1987). Furthermore potential cost savings lie in the possibilities of exporting rather than other, more expensive market-entry modes (Terpstra, 1987) and the rationalizing of the international production (Carapellotti & Samiee, 1984). Besides cost saving standardization can help to create and maintain a consistent global brand image (Theodosiou & Leonidou, 2003), and from a managerial perspective an international standardized program is easier to implement (Samiee & Roth, 1992) and to coordinate and control (Levitt, 1983).

Literature distinguished the standardization of marketing in two parts: Process and program (e.g. Sorenson & Wiechmann, 1975); Jain, 1989). Process standardization is “understood as the standardization of decision-making, data collection, planning and controlling” (Schuh, 2000, p. 135), whereas the marketing program “refers to various aspects of the marketing mix” (Jain, 1989, p.71). This essay focuses on the marketing program, following the majority of prior research.

After sketching the theoretical arguments for standardization a brief overview of the empirical results concerning standardization will be given.

2.2 Empirically support for standardization

In general research agrees, that the more similar the customers across country markets are, the more favorable a standardized marketing strategy is (e.g. Theodosiou & Leonidou, 2003; Kustin, 2004).

Despite the critique of the adaption-approach supporter, that country market cannot be treated as the same, Schuh (2000) demonstrates empirical evidence for a successful standardization strategy of western companies in Central Eastern Europe. Additionally standardization is recommended for markets, where the product is in the same life cycle stage as in its home market (Grosse & Zinn, 1990). “Regarding the marketing mix, product-related issues exhibit the most standardization” (Theodosiou & Leonidou, 2003, p. 156). The authors also state based on their literature review that the product attributes quality, design and feature are the most standardized. Resulting of their systematic literature analysis Schmid & Kotulla propose product standardization in the following scenarios: Situations with a high potential for cross-national economies of scale, situations with a high cost of product modification and situations with high foreign price elasticity of demand for a specific product call for a high degree of international product standardization (2010, pp. 11-12).

Furthermore research states that industrial and high technology products are more likely to be standardized than consumer products (Jain, 1989, p.74; Boddewyn et al., 1986). Although no difference regarding the performance between the standardization and the adaption strategy can be found, rapid change of technology has a significant positive influence on global standardization (Samiee & Roth, 1992). For high-technology, industrial products global standardization has a positive effect on the performance of the companies (O'Donnell & Jeong, 2000; Grosse & Zinn, 1990). This can be explained by the need to allocate the research and development costs over long production runs and the high cost of adaption in cases when technology calls for new products in short intervals. Concerning the reasons of standardization from a company’s view Vrontis, Thrassou & Lamprianou (2009) make out that significant reasons for UK-based companies are ‘easier planning & controlling’ as well as the ‘reduction of stock costs’. Although the authors also find out that in certain product categories and under a clearly defined sets of circumstances even total standardization can be favored (Vrontis, Thrassou, & Lamprianou, 2009, p. 490), it is commonly agreed in recent research, that “total standardization is uncommon” (Samiee & Roth, 1992, p. 4) and even “unthinkable” (Jain, 1989, p. 71). This should not support the discussed statement, but on the contrary demonstrate one of the three conclusions, recent research developed. The first one is that “neither total standardization nor complete adaptation is conceivable” (O'Donnell & Jeong, 2000, p. 20) and “the decision on standardization is not a dichotomous one between complete standardization and customization” (Jain, 1989, p. 71), but moreover a matter of degree. The second conclusion integrates a contingency perspective, in which the decision between standardize or adapt depends on internal and external factors (e.g. Jain, 1989; Schuh, 2000). Therefore the marketing strategy is situation specific and the companies have to consider the Fit between their strategy and the situation (Schmid & Kotulla, 2010). The last, but important conclusion is that global standardization is just appropriate to the extent to which is has a positive impact on the company’s performance and a long-term economic pay-off (e.g. Samiee & Roth, 1992; O’Donnell & Jeong, 2000; Schuh, 2000).

Summarizing this literature review it is obvious, that the statement “Standardization in International Marketing strategy is doomed to failure ” cannot be easily agreed with. In certain situations and for certain companies and products a standardization strategy might be a very successful one. To make this clearer, the second section of this essay will provide practical examples to demonstrate, that also in reality standardization is not doomed to failure but can actually work and lead to success.

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