Globalization Vs Standardization

Literature Review

The issue of standards is a major item on the trade agenda globally. Success in reducing barriers has increased the relative importance of non-tariff barrier, including those related to standards and technical regulations. Advances in transportation and communication have opened up vast new opportunities for cross-border transactions, exposing a whole new array of standards-related issues to international scrutiny. Despite the success of international standards-setting bodies in developing globally applicable standards and regulations, governments continue to promote or set unique national and sub-national requirements. Therefore as the globalization of economic life continues, the role of standards in defining or limiting the contestability of markets remains a critical issue.

Product issues in international marketing are considered in standardization and adaptation of the products.  Timing and sequence of products introductions and new products development and global branding (Pelkmans: 1996) are some of the issues to be considered in standardization of products. In the quest of standardization marketing there is the issue of mandatory adaptation that is needed to cater for difference in standards, for instance the left versus right hand driving.

In putting standardization into effect there is equally the issue of government regulations that are different from one country to another which are taken into account. Other factors that are considered are differences in consumer tastes and level of education and technical sophistication. Two approaches to standardization can be considered; that of perceiving a domestic product as a world product. This approach endeavors to satisfy international customers and maximize returns during different stages of the product life cycle. Another approach is that of proactively developing a world product International product strategies considers whether the product function or the need satisfied is the same or different in the new market (Hart: 1998). Also whether the conditions of the product used are the same in the new market. In addition the ability of the consumers to buy the product has to be considered while considering international product strategies.

On the other hand, globalization forces that drive the market include convergence of per capita income and lifestyles and tastes (Sun: 1996).   Globalization sees global customers due to increased travel and organizational buyer. There is equally growing global and regional channels.  This in essence sees increased number of world brands and global advertising. One of the globalization forces is the cost drivers thus pushing for economies of scale. Cost is also incurred in accelerating technological innovation and in increasing cost of product development relative to the market. Emergence of newly industrialized countries with productive capability and low labor cost leads to low cost of the final products.

Furthermore, globalization forces of competition see to it that more countries becoming key competitive battlegrounds.  This also realizes the rise of new competitors who intend to fight for their share in the market. Competition also raises the growth of global networks making countries interdependent in particular industries. These therefore give more companies the allure to be internationally centered or oriented rather than nationally centered thus forming global alliances. Other forces in the globalization are the government driven forces which include reduction of tariff and non-tariff barriers. Market liberalization and privatization are equally forces to be reckoned.

The underlying philosophy in globalization standardization is that the customer needs and interests are becoming increasingly homogeneous worldwide.  There is also the will of the customers to sacrifice preferences in product features for lower prices at higher quality (Sun: 1996). Another feature is that substantial economies of scale in production and marketing can be achieved by developing standardized marketing programs.

In the quest for standardization and globalization the blurring of traditional lines between trade policies and domestic economic policies underlines the need for consensus and better coordination. Trade and international policy must support and reinforce domestic objectives and vice versa. Firms and governments alike need to respond creatively to international trends and the resultant adjustment pressures on the domestic economy.  The governments must find new responses that build upon their traditional strengths of cooperation and compromise. As part of this response the government and industry should develop an integrated approach that points the way to continuing prosperity. There is therefore the need to use national approaches to the development and implementation of product, process, and other standards and to integrate these into the pursuit of a more comprehensive and better functioning global trade regime.

Comparison of views expressed on globalization and standardization

(Zou etal: 1997) asserts that the major debate in international marketing deals with globalization of markets and extends to which a company’s marketing strategy can be standardized.  They observe the realization of the firms from the developing countries which assume the increasing importance role in international competition, thus showing the urge for companies to move out of their domestic market and venture into foreign market. In this regard the developing countries have been noted to have a cultural difference from the developed countries, they provide suitable context to assess the general ability of the existing knowledge in the standardization literature.

On the other hand there is implicit assumption that standardization concepts are un-dimensional in the overall marketing program. They highlight that interested researchers and practitioners have to know the perspective of firms from developing countries regarding the standardization and adaptation of marketing strategy. Also there is the anomaly that standardization concept is un-dimensional at the marketing program level.

The need of developing knowledge about the specific dimensions which is successfully standardized is an opinion carried by (Zou etal: 1997). Thus this knowledge facilitates managerial utilization of the research practice.  They equally highlight different ways in which standardization has been conceptualized which include meaning that the same marketing strategy is applied in all markets or domestic marketing strategy is applied to foreign market. They are for the use the conceptualization that domestic marketing strategy is used in the foreign market.

(Zou etal: 1997) highlights the apparent dominant perspectives including total standardization perspective, the total adaptation perspective, and the contingency perspective.

Total standardization perspective stresses on the trend towards the homogenization of markets and buyer behavior and the substantial benefits of standardization.  Total adaptation perspective emphasizes the persistent difference between the nations and the competitive regulatory necessity to customize marketing strategy to individual market. The contingency perspective, on the other hand allows for various degrees of standardization which contingent on the international organizational characteristics and the external environmental forces. In this respect Levitt observes that the most effective world competitors incorporate superior quality and reliability into the cost structures. They sell in all national markets the same kind of products sold at home or in the largest market, compete on the basis of appropriate value- the best combinations of price, quality, reliability and so forth.

According to Zou’s paper, the premises that underlie the arguments for standardization is that the global markets are becoming homogeneous thus enabling standardization to be   practicable. His views are that globalization marketing has taken root in various economies and has been enhanced by technological advancements.  He goes ahead to distinguish global corporate and multinationals. (Levitt: 1983) on the other hand has the view that the world’s needs and desires have been irrevocably homogenized thus making the multi national corporations obsolete and the global corporate obsolete. Also the benefits of standardization are significant and give it ought to be given an upper priority.   Some of the major benefits of standardization aspect have been brought out which include cost saving, consistency with customers, improved planning with distribution and greater control of national boarders.

Levitt’s view is that advanced technology in communication and transportation has regulated markets globally. This has made global consumers to demand high quality products at a low price. This has consequently led to change in competitive dynamics in global marketplace-between companies.  Levitt was for the opinion that the firms ought to pursue a standardized product and international marketing strategy since standardization of products and international marketing strategy facilitates the realization of the economies of scale in production and marketing.  Zou is of the view that there is the need for firms to seek opportunities to rationalize their world operations and treat the world as a single global market. This enables the global market to compete equally both internationally and locally.

Zou’s paper equally highlights drawbacks that are associated with standardization strategy.  Standardization strategy has a drawback of considering the product thus being product oriented rather than customer oriented.  Market standardization is subject to internal constraints such as the company’s world wide network of operation might be incompatible with the standardization strategy. Also moving swiftly towards global standardization can result in the disruption of the established operations and the loss of key assets. Another drawback that emanates from standardization strategy is that it may not be compatible with the governments’ regulations which vary across the globe markets, especially when the foreign markets are required when substantial differences exist in marketing infrastructure since the same marketing campaign may fail as a result of infrastructure deficiencies in some markets.

Zou’s  paper goes ahead and bring out the issue of to what extent does current knowledge of international marketing standardization can be generalized to companies in the developing world in which countries may compete with different pattern in the international market, due to differences in the culture and the home market environment. Thus the view is that firms in the developing world may face more challenges than those in the US. Another issue highlighted to this effect is the performance implications of the international marketing standardization.

Unlike Zou, Levitt view is that a market segment of one country is seldom unique and has similar related segments everywhere because technology has homogenized the globe. He further asserts that even small local segments have their global equivalents everywhere and become subject to global competition- especially price. Also the need for the global competitor to seek to standardize whatever they offer everywhere is a thing he looks at. He is of the view that the most endangered companies are the ones which dominate a small domestic market with high value-added products and lack clarified global focus thus remaining inattentive to the economics of simplicity and standardization.

Levitt’s opinion is that cultural preferences, national tastes and standards, and business institutions as things of the past. They have grown into segments that exist in worldwide proportions and thus cannot defy or contradict global homogenization but actually affirm it.  He does not advocate for the systemic disregard of local and national differences, he rather alludes to the sensitivity to such differences does not require that it ignore possibilities of doing things differently or better. He further cites poor execution as the reason for failure of companies which have tried to go global and failed. This in essence will reflect what people want in the market and what is available in the market before going into the international market thus going into it with adequate information. Two things that influence customers according to Levitt are low prices and heavy promotion regardless of the price. Probably aggressive promotions lead to influx of customers while the vice versa is correct.  There is also the need to be some accommodation of differences and cites and imminent failure in this case results from lack of accommodation.

List of References

Hart, M. (1998) “Globalization and standardization. Does a Global Economy Need Global Rules?”  Journal of Regulatory Affairs and Standards Policy Directorate Industry Canada

Levitt, T. (1983). The Globalization of Markets. McKinsey Quarterly: McKinsey & Company, Inc

McDonald, F. (1995) “Completing the Internal Market in the European Union,” The Economic of the New Europe. London: Routledge.

Pelkmans, J. (1996) “Removing Regulatory Barriers: The case of deep Integration”.  Journal for OECD Trade Directorate meeting in Paris.

Sun, J.  (1996) “Regulatory Competition in the Single Market.” Journal of Common Markets Studies, 67-89

US National Research Council (2000) Standards, Conformity, and Trade. Journal of US-EU Negotiations 130-134

WTO (1995) Trade Policy Review Mechanism: European Union, 37.

Zou, S. (1995) Standardization of International Marketing Strategy by Firms From a Developing Country. Paper of International Marketing Review, Vol. 14 No. 2 pp. 107-123. MCB University Press