Levitt argues that because the world is shrinking – due to heaps of technology, communication and so forth – well managed companies should shift their emphasis from customizing items to offering globally standardized products that are advanced, functional and low priced for all. Coca-Cola being an international brand found everywhere in the world still has not standardized its marketing. The differences in consumer behavior still prevail across countries. Many firms have been forced to tailor products and marketing programs to different national markets as a result. McDonald’s appears worldwide but some aspects of its marketing activities are customized. It serves beer in Germany, wine in France, and coconut, mango and tropical mint shakes in Hong Kong. McDonalds’ fierce commitment to product and service standardization is one reason the retail outlets are so similar all around the world. Standardization saves costs but looses revenue. Adaptation involves making appropriate changes in a product to match the requirements of customers in specific markets. This involves tailoring the product specifically for the needs of the customer. The fundamental international product decision after the decision to internationalize includes deciding between: 1. Adapt completely: to suit local requirements this will achieve market acceptance but may not provide global economies of scale. 2. Standardize: Make no changes at all this will achieve global economies of scale however it may limit market acceptance. In reality the decision is not dichotomous, there is a continuum of product adaptation and standardization. -The higher the scope of exploiting brand image in the market, the lesser the need for adaptation -The higher the need for the product to be closes to local market expectations, the higher the need for adaptation.
The product or service can be defined as the complex combination of tangible and intangible elements that distinguishes it from the other entities in the marketplace. 1. The core product: The core benefits that consumers are really buying when they obtain a product. For example: McDonalds’ is seen as fast food take out in US. However in India, McDonald’s is seen as enjoying the ultimate American experience of food and they had clean toilets. 2. Actual product: a products parts, styling, features, brand name and other attributes that combine to deliver the core product. This differentiates from competitors. 3 Augmented products: Additional consumer services and benefits that are built around the core and actual products to build relationships.
The factors that encourage standardization of a product are: 1. High costs of adaptation: Adapting the price of the product might lead to being uncompetitive 2. Nature of product: When technical specifications are critical, they tend to be internationally uniform. Like for that of many industrial goods. Customer goods tend to be more adapted as they reflect personal preferences 3. Convergence of tastes between countries: Countries with similar income levels and consumption patterns. The greater the convergence the greater the potential for standardization. 4. Economies of scale in manufacturing: The benefit of cost savings increases as the firms increase production. 5. Economies of scale in R &D: By offering standardized products R&D is used globally. Less R&D effort is consumed in product modifications. 6. Economies in marketing: Marketing costs will fall the product literature, sales force, training, advertising and promotional activity will require less modification. The factors that encourage adaptation are:
1. Variation in consumers needs and tastes: Different consumption patterns may require different products. Fast food franchisers have often been faced with this need to adapt the food portions offered by McDonalds in Japan are smaller than those in the US or OZ. The greater the cultural similarity between...