This is the challenge facing primarily multinational firms whether to standardise their local offering or adapt/localise it for the market they are selling into. According to De Wit and Meyer (2010), the question facing managers is whether they should anticipate and encourage global convergence by emphasising global standardisation, centralisation and coordination or should managers acknowledge and exploit international diversity by emphasising local adaptation, decentralisation and autonomy. In other words as St Augustine (534-430) put it “when I am in Milan, I do as they do in Milan; but when I go to Rome, I do as Rome does”.
Technology influencing standardisation
What is strongly influencing globalisation in today’s context is technology. Technology is driving converging commonality according to Levitt. Firms benefit more from commonality i.e. standardisation than adaptation to the local market. I would suggest that globalisation has been good for the world consumer in both rich and poor countries. This has largely been achieved through standardisation. In particular, corporations have benefited from this standardised approach through economies of scale in production, distribution, marketing and distribution.
As a consequence, the consumer has greatly benefitted in the rich and poor countries as goods have reduced in cost. It may be argued that this is purely for the consumption of goods but not necessarily for the communities that may have once manufactured these goods in either rich or poor countries. It can have devastating consequences once the manufacturer moves out of the local community. Kanter (Best of HBR 1995) would suggest it does not as she puts it “Does globalisation have to be at the expense of local community? Not at all if that community can become a world-class source of concepts, competence or connections.”
Standardisation is in essence according to De Wit and Meyer (2010) “doing the same thing in each country without any costly adaptation”. Standardisation is possible to apply to product offerings, value adding activities and resources employed. As mentioned previously, standardisation is particularly important as typically companies achieve economies of scale but more importantly for consumers it enables them to get a “predictable offering” according to Hamel and Prahalad (1985). Consumers all over the world know what to expect.
Companies standardise not just for organisational convenience but it is a means of achieving cross-border synergies. Companies benefit from this strategy by leveraging resources, integrating activities and aligning product offerings across two or more countries. For example, the Apple iPhone has the same layout in terms of operating system /language applied for US, Ireland, UK, Australia and other English speaking countries. Applying this standardised US centric approach enables Apple to achieve huge economies of scale and avoid the costly task of employing localisation companies such as Lionbridge Technologies, Sajan, welolocalize etc. to adapt the market for the locale it is intended for. Consumers generally “accept” the US English on their iPhones with regards to spelling and use of Apps installed on their phones.
The reason companies adopt this approach rather than localising for every locale is because the return in investment would be utterly negligible, enables Apple to have a cost advantage and ultimately keep the cost of the product down for the consumer. Other corporations such as Proctor and Gamble take a multidomestic strategic approach which is in essence treating the world as a portfolio of national opportunities. The product is the same/standardised for each market but the labelling or packaging has been adapted or localised for the market it is sold into. The company is thus avoiding R&D costs, “re-manufacturing” etc....