Overview of Standardization and Adaptation in Marketing Mix - Toyota - Essay Example

?You are a senior marketing consultant working for ‘Global Marketing Solutions plc.’ Your chosen global brand has commissioned you to produce a report that answers the following questions: STEP 2 Answer ALL of the following questions: 1. Critically analyse the extent that your chosen global brand’s marketing mix is standardised and/or adapted across international markets. Conclude by providing a 2-3 paragraph summary that discusses whether you consider this to be an appropriate strategy(s). Remember to support your answer. (50 marks) 2. Discuss which Internationalisation Process Theory (IPT) ‘best’ describes the internationalisation process that your chosen global brand has undertaken. Again, remember to support your answer. (25 marks) 3. Analyse the extent that you believe Country of origin effect (COO) influences consumer perception of your chosen global brand. Justify your answer. (20 marks) A maximum of 5 marks are awarded for presentation - (5 marks) Overview of Standardization and Adaptation in Marketing Mix Marketing mix, as defined by Jain (2009), refers to the combination of the product, the distribution system, the price structure and the promotional activities. The author (Jain, 2004), has further been of the opinion that it is a term that is used to denote a specific combination of marketing variables that are controllable by an enterprise and that are used to appeal a particular market segment. Both Marketing standardization and marketing adaptation of the marketing mix encompass opposite characteristics. Marketing standardization has been defined as “the offering of identical product lines at identical prices, through identical distribution systems, supported by identical promotional programs, in several countries (Buzzell, 1968). On the other hand, marketing adaptation or localization has been identified as having marketing mix satisfying specific needs of the local market (Alimiene and Kuvykaite, 2008:36). Internationalization has necessitated either to strategically implement standardized marketing mix or adaptation marketing mix. The concept of foreign markets and the subsequent removal of trade and custom barriers along with the aid of technological advancements, various companies were required to decide whether they would use standardized or uniform marketing mix strategic in all current and potential countries or they would adapt to and pursue and implement different marketing mix strategy. With the presence of these two options, Toyota was also required to determine a particular marketing mix strategy or a combination of both strategies. Toyota Background Toyota is one of the foremost automobile firms in the world. It has been operational for more than 75 years and has expanded base all over the world. One of the first car makers to come up with world class cars from the Japanese stable, the organization has indeed created a name for itself all over the world. With increasing sales slowly spreading to all over the world, production facilities also disseminated to other parts of the world. Gradually, the company has grown to become one of the largest multinational companies the world over. With production as well as assembling plants in US, UK, China and France, and present in over 170 nations, the Japanese company has come a long way in making a name and sizeable market share for itself. Over the years the company has launched one great car after another and above all the company is guided by sustainable development for its present as well as future course of actions (Toyota website, 2012). So far as their global presence is concerned, in order to make their ventures profitable, they operate from 27 countries and have 50 manufacturing companies working together to make Toyota what it is (Toyota, 2012). They have R&D facilities in key markets such as USA, Japan, China, Australia and Europe. Japan being their headquarters has extensive production sites and dealer networks. Toyota’s Global Presence Courtesy: Toyota-global.com Discussion Toyota has a pursued a combination of standardization and adaptation of marketing mix strategy. Toyota has not only adopted standardized marketing mix strategy but also has implemented adaptation marketing mix strategy. For instance, United States of America is one of the biggest markets for Toyota. Boston Consulting Group Matrix has been launched by Toyota. In this particular adapted marketing mix strategy, the company has introduced and heavily promoted three products- Prius, Camry & Corolla (Bhandari, n.d.). On the other hand, Toyota has pursued standardization across its global operations. After the successful establishment of the Asia Pacific Global Production Centre in Thailand in the year of 2005, Toyota have also established North American Production Centre in the United States of America and the European Global Production Centre in the United Kingdom in February 2006 and March 2006 respectively (Bhandari, n.d.). The ultimate objective is to share manufacturing related information with the overseas production facilities. Of course Toyota has never gone out of focus when it came to their home market Japan. As per a report published in The Japan Times (2012), they are all set to capture as much as 55.6% of the Japanese auto market. Thus though they have very profitable businesses all over the world, they are nevertheless equally concerned with their home market. Toyota Factory Japan Courtesy: www.treehugger.com Since Toyota is a truly global organisation, it has markets all over the world. However, the basic tenets of international marketing hold that one of the major reasons why companies internationalise is because they want to take the advantages of economies of scale (Baines, Fill and Page, 2010). Thus, it is imperative that Toyota’s one of the major objectives is also to reach economies of scale of its production and operations. However, since the demographic, psychographic and other factors in the markets the company plays has to be taken into consideration, a firm cannot usually afford to go by the same marketing mix in all the markets it plays in and thus has to either suit its operations and marketing to the market or even glocalise (Joshi, 2005). This is exactly what Toyota has also done with its marketing mix. For each and every market, they have tailored their marketing mix to suit their target market. For example, in India, Toyota entered as a premium brand that suited the pockets and tastes of the well to do of the society and with time they came up with small cars such as Etios Liva (Anon, n.d.). Again, for the US markets, the company has divided the market into as many as four market segments and their cars cater to each of them (Bhandari, n.d.). Though the US market is the largest market they have, the company has still suited their offerings to the tastes and preferences of their markets. Each brand of cars Toyota has, such as Corolla or Camry or Prius, is marketed to target different segments of the market. For example, Toyota Prius, one of the most popular cars in recent times, has been promoted heavily in Brazil as an eco-friendly car (Bhandari, n.d.). Again, small car such as Etios Liva has been promoted heavily in India, that has a large small car market. Coming to the prominent variables of the marketing mix of Toyota, the four variables of product, price, place and promotion in different markets are as follows: Product: Toyota, which proclaims that they sell ‘popular economy cars’, has cars for various segments of the market (Bhandari, n.d.). It has the small car Etios Liva, the compact car Corolla, the mid sized sedan Camry, the eco friendly relatively high priced car Prius and a host of other cars as well. However, not all cars are marketed in all the countries they are present in. Also, the products are named differently to suit the market requirements. For the developing countries such as China and India, more focus is on developing small cars and capturing the large markets for such cars. On the other hand, in the US the focus is on catering to each segment of the car market. Price: Since Toyota focuses on selling popular economy cars, their cars are generally not lavishly priced. Though they manufacture and sell products for various market segments, their prices are rather economical or at least competitive in comparison to their competitors’ offerings in each of the markets they are present in. For example, they have a large range starting from around $10000 to $30000 plus (Bhandari, n.d.). However, in the US, their range starts at a much higher rate since they do not focus on selling small cars in the US but offers low priced cars in emerging markets in Asia such as China, India and Indonesia. Again, they offer high priced vehicles under the brand name Lexus in European nations. The models they offer in Toyota for EU are also different since even the small car is not Etios Liva but iQ and the other major cars such as Aygo, Yaris, Verso and Urband Cruiser (Toyota, 2012). Place: Toyota has an extensive distribution network and one of the major objectives of the company is to be available in all major car markets of the world (Toyota, 2012; Bhandari, n.d.). Toyota has showrooms in all key areas of their markets along with service centres. This has indeed increased their popularity and has led to increased sales. This is, however, one of the standardised marketing strategies they have followed at Toyota. Promotion: Promotion of Toyota’s cars is largely done through the leading media as well as participation in various auto and trade shows. However, the promotional materials are highly localised, tailored for each market and thus the marketing paraphernalia are different from market to market. However, they also focus on the basic message of the popular economy car through whatever or however they promote themselves. Thus, in the case of promotion, their strategy is one of a mix between standardisation and adaptation of the marketing mix. Conclusion Toyota’s marketing strategy, vis a vis their marketing mix, seems to be apt for the markets they cater to. Though there is a mix of standardisation and adaptation even within the marketing mix, these seem to go well with their vision as well as their target markets. A high degree of adaptation of the marketing mix characterises their product strategy since the products they offer to their European customers has a much wider range than what they offer in India. Thus apart from offering their world leader models such as Corolla and Camry, they focus on small cars in India. However, in Europe or US, they offer a much larger list of cars to choose from, and mostly in the mid sized range. This seems to be absolutely in tune with the dynamics of the markets they play in. On the other hand, the price of their cars, follow a highly standardised policy of offering value for money by selling popular economy cars. On the other hand, they also adapt their product offerings from market to market to be able to tailor the price of their products. This is done with increasing or decreasing focus on segments of cars and varying them from market to market. In Asia, the focus is on low and medium cost cars whereas in EU and US the focus is majorly on medium priced cars. Again, in South Africa, they have a large range of cars starting from the small car Etios to Land Cruisers and also a large number of cars sold in Europe such as Yaris, Hilux etc. Again in Australia, their product offerings vary and mainly focus on relatively high priced cars such as Camry, Hilux, Aurion etc. As far as the place is concerned, they have a highly standardised policy of having extensive dealer networks and service centres throughout their markets. This has indeed helped them increase market penetration and sell more. On the other hand, the promotional aspects follow a combination of standardisation and adaptation of the marketing mix. The message strategy, presentation, layout etc are different for the same model of cars in different markets, however, the core message that is conveyed through promotion remains the same throughout their promotional schemes. Ans 2 Ruzzier, Antocic and Hisrich (2006) have defined internationalisation as a synonym for geographical expansion of economic activities over a national country’s borders. Again, other perspectives have also emerged. Researchers such as Williamson (1985) have been of the opinion that from the point of view of economics, the process of internationalisation is taken as a type of investment outside the host country’s markets that is best put forward with the help of rational economic analysis of internationalisation, ownership as well as locational benefits. On the other hand, Chetty (1999) has noted that the process of internationalisation has several dimensions such as operation, market, product, time, and performance. Again, among the internationalisation process models that are popular in international marketing theory, there are mainly three schools of thought – the economic approaches, the process approaches, and the entrepreneurial approaches. Some of the foremost economic models are the monopolist advantage theory, the internalisation theory, the transaction cost theory, and the eclectic paradigm. The major process approach that is taken into consideration is the Uppsala internationalisation model. Among these, the most relevant model for the company under consideration, i.e. Toyota, is the Uppsala internationalisation model. The Uppsala internationalisation model postulates that firms broaden their purview of activities in foreign markets over time and follow an incremental pattern, depending on their increase in the knowledge of markets (Johanson and Vahlne, 1977). Furthermore, researchers such as Penrose (1959) have been of the opinion that “experiential knowledge” is crucial for firms in the expansion of their business in the foreign soil and this can be achieved through the help of personal lives as well as professional experiences. Courtesy: www.emeraldinsight.com In the context of the present study, Toyota’s expansion strategies can very well fit into the basic tenets of the Uppsala internationalisation model. Given the way Toyota has expanded its frontiers to all major parts of the world, it is imperative that they have taken a slow but steady step towards market expansion. Going by Toyota history, we can see that though the company was established way back in 1937, it started exploring foreign markets only in the 1950s (Toyota, 2012). Also, it was in the 1960s, after having exported their products to the well to do markets of the west that they started building bases there (Toyota, 2012). Again, though the base they built in USA was initially for economic reasons, however, it is not hard to understand that they mapped the psychic distance with the target markets of the US for quite some years and then ventured into opening plants in the US. Also, over the years, Toyota has been expanding their markets to other segments within the US market and today has over 15% market share in the total number of cars sold in the nation (Bhandari, n.d.). Again, another prominent feature of the Uppsala internationalisation model is that firms map psychic distances and then venture to countries that are culturally close to theirs or for that matter the nations they operate in. Thus, after having consolidated their base in the US and having understood their culture and other aspects, Toyota started looking for other lucrative markets that are close to US in nature and additionally offer good markets for their cars. Thus in the 1980s, Toyota opened production plant in the UK (Toyota, 2012). Also, subsequently they started capturing European markets through their market expansion strategies in the continent. Furthermore, when they found suitable opportunities, they started entering Asian markets and today they have a strong foothold in all major continents of the world. Post liberalisation of the Indian subcontinent, they entered India in 1997, probably one of the best times to enter the Indian markets. Again, the Uppsala model of 1977 relied on the process of market knowledge to impose commitment decisions and their current activities assured of their market commitments. However, with the changing dynamics of business, the researchers Johanson and Vahlne, updated the model in 2009 in order to suit it to contemporary business perspectives. The latest model relies on knowledge opportunities for their relationship commitment decisions, and the activities such as learning, creating and trust building to build their network position. Thus the important of network in modern business has grown manifold. Also, knowledge opportunities have overtaken market knowledge. Given Toyota’s business model, it becomes clear that Toyota has over the years been relying initially on market knowledge. However, the recent trends, as is clear from their website, they rely on personal experiences to develop an understanding of the opportunities they have in the markets they operate in (Toyota, 2012). Also, their commitment to their markets is based on their network position, thanks to the extensive network they have built all over the world. This huge market presence has literally translated into the huge success they have earned in recent years and is also evidence of their following the Uppsala internationalisation model carefully as well as successfully. Ans 3. Country of origin has a long association with international business (Dichter, 1962). Exploring the possibilities of a product’s country of origin can be seen as a major way of promoting a product. Many products derive their positive brand association from such country of origin advantages. Examples would include French wines, Swiss chocolates, Japanese electronic items and cars, German steel etc. Thus it is clear the country of origin can indeed be used for the purpose of branding the product or service the firm is into marketing in foreign markets. As far as Toyota is concerned, the country of origin it owes its source to, is Japan. Japan is one of the biggest economies and one of the foremost of the developed nations in the world. It has made remarkable success in manufacturing of electronic and other items and Japanese multinational companies have been dominating global business for quite some time. Japan has been branded as a country that produces high quality products at a price that is affordable compared to their western competitors. Thus Japanese products have flooded the markets in recent past and have helped Japan grow into a mighty super power in the realm of world business. In terms of cars, Japanese have indeed made considerable development and have some of the biggest car makers of the world such as Honda, Toyota and Nissan. Thus, the Japanese automobile industry is known far and wide. Since the leading car makers of Japan are normally known to make popular economy cars that sell in all parts of the world, it is imperative that Toyota has also benefited from the country of origin effect. As noted by Vrontis and Thrassou (2007), in the era of globalisation, the concept of country of origin makes more sense since it is likely to help firms market their products better across the world using this tactic as well as is likely to generate premium for the product if the product of the particular nation is famous. Since Japanese car makers have already captured sizeable portions of the world car market, it is imperative that Japan has made its way into the minds of all target segments of car buyers across the world. In the light of this, Toyota is likely to have found it easier to market their products in their existing markets as well as new markets by also showcasing that their cars are perfect examples of the high quality that Japanese car makers offer and that too at such affordable prices. Thus Toyota may have in fact found it easier to market their products to their target customers in the light of the positive associations that Japanese business houses have created for themselves. It is also likely that these positive brand associations with country of origin make marketing easier for companies and thus Toyota may have found it easier to find markets for their products in all parts of the world. Thus the degree to which Toyota is likely to have utilised its country of origin effect to market its products seem quite high. References 1. Jain, A. 2009. Principles of Marketing. New Delhi: V. K. Enterprises 2. Buzzell, R. 1968. Can you Standardize Multinational Marketing?. Harvard Business Review. 46 (November-December). 102-113 3. Alimiene, M & Kuvykaite, R. 2008. Standardization/adaptation of marketing solutions in companies operating in foreign markets: An integrated approach. Inzinerine Ekonomika-Engineering Economics. (1), 37-47. 4. Toyota website. 2012. Company. 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Adaptation vs standardisation in international marketing – the country of origin effect. Innovative Marketing. 3(4) Read More