Standardization And Adaptation Strategies of Macdonalds, Pepsi, Toyota Motors in International Market - Essay Example

Standardization And Adaptation Strategies of Macdonald’s, Pepsi, Toyota Motors in International Market INTRODUCTION 1.1. History and Background: The globalization of the world has totally changed the way to carry out business as companies forced to be precocious concerning the choice of their internationalization strategy. The last few decades have transformed the business world onto a marketing mix where companies strive in making globalized decisions to fit the competition spectrum (Ramos and Rathinakumar). With globalization, a set of universal needs has developed among people all over the globe, therefore setting pace for companies to no longer target markets by country. Instead they target by segment that congregate groups of citizens from diverse countries with universal needs. This trend is so robustly present in the current world that it creates a complete different class of companies that benefit from international markets. Fascinatingly, the concepts of standardization and adaptation strategies are not new terms in global marketing perspective. Product strategies of standardization and adaptation experimental investigation have been in existence since the 1970s. Nonetheless, the entry of companies in the international arena does not come effortlessly, for many of these companies are encountered with the challenges of whether to standardize or adapt the essentials of their marketing blend (Ramos and Rathinakumar). 1.2. Objective of the Study: The intention of this marketing strategy report is to understand the internationalization of multinational companies and their application of the standardization and adaptation marketing strategies. The case studies are three multinationals namely; MacDonald’s fast-food company, Pepsi-cola or soft drink company, and Toyota Motors in the international market. In the analysis, I seek to analyze the current general outlook of these companies’ standardization and adaptation strategies. Secondly, I will discuss the current scenario in the Middle East, and how the companies are faring out with regard to the international marketing strategies stated herein. As stated earlier in the background information, the entry of Multinationals in the international market is characterized by some challenges, I will in the third part analyze some of the challenges these companies are facing. Final segment of this report will be a recommendation or likely solution to the challenges these companies are facing. 2. Discussion and Analysis The standardization strategy envisages that a multinational company venturing into the international market is going to sell the exact identical product or service it trades in its domestic market. The foremost objective for the company’s standardization is hence to minimize the operational costs by the economies of scale approach. The progression could be on the entire production chain engrossing specific division of the marketing blend like the design and the packaging of products as well as distribution advancement. On other hand, the adaptation strategy involves the transformation of the company’s operations while venturing on new global markets. Adaptation engrosses factors such as host country’s infrastructure, hospitality, and so forth, and thus a company can blend itself to be able to sell to populaces who have a totally diverse cultural style. A company can therefore to get higher returns by convincing an extra customer base (Ramos and Rathinakumar). 2.1. Current Scenario in General. MacDonald’s strategies: MacDonald’s is definitely one of the top multinationals that have employed substantial standardization and adaptation strategies with the aim of sustaining its international presence. Currently, the company has over 33,500 restaurants selling fast foods in 119 countries, yet the giant company has skillfully managed its entire franchise business model. This has facilitated it delivering a remarkably reliable customer base and branding across its destination (Ramos and Rathinakumar). In its adopting sense, the company allows for locally appropriate menu and service discrepancies in segments across the globe and therefore accommodates diverse setting. Again with standardization, the company has maintained its innovativeness in marketing and it is evident, for the company has made all advertisements to feature in 12 dissimilar languages, with each region having customized products The current strategies are bearing fruits according to Mourdoukoutas for the has sustained 7% profit margins increase over the past four years (Ramos and Rathinakumar). Pepsi’s strategies: The current scenario of Pepsi is very interesting, not only in the application of the standardization and adaptation strategies, but with how has it dealt with competition as well. The major competitor to Pepsi is Coke, and the fight often known as “cola war” over the international market has existed for a couple of decades now. In the application of the adaptive strategy, Pepsi has tried to appeal to the public exclusively with advertising its products being able to provide psychic benefit. Pepsi has also adaptively made a huge online marketing strategy in aiming to edge its competitors. Currently, the company has a total of 39 websites listed and categorized into six geographical groups of countries: North America Africa, Europe, Asia Pacific, Latin America, and Middle East. Some of the countries especially where the firm has a enormous presence in the Middle East have their own sites: Israel, Lebanon, Syria, Saudi Arabia, Jordan Kuwait, and United Arab Emirates (Chirkova). However, the company has not had huge success in terms of standardization, for the company has devolved several brands in markets. Nonetheless, the company has had its share of international market as indicated by its recent revenue of $65 billion, 50% of which was from overseas (Pepsico.com). Toyota Motor’s strategies: Toyota’s overall global motto has been… leading the future of mobility hence enriching people’s lives across the world by offering the safest and most dependable ways of moving people. Through the implementation of this vision together with standardization and adaptive strategies, the company has achieved magnificent success to even becoming the world’s largest motor manufacturer in the world in 2010 and subsequently in 2012. Adaptively, it has created a pool of innovative about 320,808 personnel (in 2010) around the world together with the provision of innovative technologies to facilitate delivery of top-notch products to consumers. One of the most significant adaptation approaches by Toyota is the Americanization strategy especially in North America. They accepted the North American’s preference for V8 pickups, and such has made the current company’s car sales in North America more than it does in domestic market (Japan) , and in excess of 60% of Toyota’s worldwide profits come from North America (Tang). Currently, the company has embarked on sustaining 100% procurement in global destinations, rather than sourcing everything from Japan, to reinforce their sensitivity to foreign exchange instabilities (Toyota-global.com). 2.2. Current Scenario in Middle East. MacDonald’s Middle East Current Scenario: The Middle East is one of the MacDonald’s premier markets as a fast food catering industry. The ranges of standardization by the company are extensive, but one notable is the employment standardization. The focus here is obviously the process as MacDonald’s is endowed about 500 thousand employees worldwide who are taught the same processes and methods and is evident across the Middle East (Ramos and Rathinakumar). As with adaptation, the farm has specialized in a tailored local taste. For instance, MacDonald’s introduced the McArabia, which is a flatbread sandwich to its range of restaurants in the Middle East and the adaptive trend has held since 2003. It also introduced a kebab burger in the Middle East that is tailored with local taste (Ramos and Rathinakumar). MacDonald’s also often selects convenient localities for its entire franchise chain. Most of the places in the Middle East include malls, airports, and local events such as game fields, etc. Pepsi’s Middle East Current Scenario: Due to boycott by Pepsi’s rival companies, till 1990s, the company which is the 2nd largest cola firm in the world had an incredible advantage in the Middle East and had the entire soft drink market to itself. Just about a decade later, Pepsi has come into struggle to maintain its lead over a new entrant Coke company, which has staged a dramatic comeback as its ouster four decades ago (Navar). Such dramatic turn of events, have left Pepsi executives with no option other than to initiate new strategies to keep up with competitors. Its adaptation policy has worked throughout that has seen it diversify its revenue base. After a couple of years, Pepsi has transformed from being a mere carbonated drinks maker to becoming a foods firm. Pepsi has gone into the purchase of snack firms around the world, including the Middle East. As held by Jerrett Martin, a beverage researcher in the Middle East, Pepsi are not devoting too much capital in fighting the invasion by Coke, but are focused more on developing their revenue base (Navar). Currently, company is generating various opportunities and international strategies to remain the top company in the Middle East. Toyota Motor’s Middle East Current Scenario: In 2012, Toyota announced that they will be rooting strongly in rising countries and hit the emerging Global market sales share by 50 % by 2015 together with adapting to 100% localization (Toyota-global.com). One of their target markets is the Middle East and as per the current scenario, they seem far ahead of schedule. They consequently envisaged at releasing compact vehicles specially designed for up-and-coming markets. They have honored the pledge by designing the Toyota Camry and Innova cars that have got a spectacular adoration in the Middle East. For instance, in 2013, Toyota realized a 10% growth in Middle East, selling 6 691,631 vehicles (Sambidge). According to Toyota’s Middle East and North Africa‘s chief executive, Nobuyuki Negishi, currently the company has reinforced their leadership in the religion thanks to its distributors. Another merit for Toyota motors is that their global model is a reconciled between adaptation and standardization, because their tailored car for one region end up being demanded by other regions (Sambidge). 2.3. Challenges faced by these companies Competition struggle: The tension over the global market is becoming stiffer each day as there are more entrants to the market. For instance, Toyota’s all time strategy has been the deployment of labor innovativeness and productivity in gaining competitive advantage in the industry. Even though this tactic was initially very advantageous and inflexible to imitate, the game has changed, and it is no longer the same. Being a pioneer in such creative strategies has made competitors capitalize on mistakes and becoming better than Toyota and therefore becoming an unsustainable strategy. The same struggle is prevalent with Pepsi as it tries to regain its original command in regions such as Middle East with the entrant of Coke Cola Company (Navar). As with MacDonald’s, the fast food market is commonly concentrated- for instance the burger product is dominated by MacDonald’s and King burger company, therefore making the whole market fragmented thus increasing the rivalry. Other challenges include culture, countries’ governmental policies and high cost in implementing the selected internationalization strategies either standardization or adaptation. However, comprehensively the main challenge facing MacDonald’s, Pepsi and Toyota motors is the competitions among their peer companies (Ramos and Rathinakumar). 2.4. Solutions to the challenges My recommendation to Toyota is for the company leadership to review its productivity model. That way, the company can re-evaluate to see if the original labor plans are working. Secondly, the company should redefine its marketing strategy to other destination than concentrating in the US and Japan where it has succeeded to gain a pool of clientele. Their efforts should be directed at emerging markets, for they are good at pioneering and have presences in many countries in the world. As with Pepsi Company, the company is entirely struggling for its failure, and therefore the first endeavor should be at regaining its clients’ confidence through offering quality and reliable products. Lately, the giant cola producer has ventured into the fast food industry with several brands, and my recommendation is that the leadership should not feel confident completely. For if, they disregard their customers in the food industry as earlier in the carbonated drinks; they will definitely blame themselves. Finally, the MacDonald’s should continue to being innovative, and that will help it edge out its competitors. 3. Conclusion In wrapping up this report, it is paramount to reinstate that, whereas the call for globalization is inevitable for companies aiming at growing their revenue, the venturing process is obviously demanding and therefore begs for well thought strategy. Throughout the report analysis, having considered the three companies- Macdonald’s, Pepsi and Toyota motors, the implementation of the standardization and adaptation is fairly working for these companies. However, the influence by these strategies is not exactly identical; because for instance, Pepsi’s strategy is extensively adaptive and whenever they have tried standardization, there have been a backlash. On the hand, MacDonald’s has fairly adhered to both strategies i.e. adaptation when it tries to localize its operation such as production of tailored burger for Middle East and standardization when it comes to its employees. The same is for Toyota. In the Middle East, the companies are faring out roughly well. Toyota has made sure that it listens to its clients there, by offering the much-demanded cars; MacDonald’s provision of tailored burger; and finally Pepsi’s reinventing its strategies to keep up with coke rivalry. Nonetheless, these companies have their fair share of challenges and competition is paramount. Ultimately, the companies should endeavor to select the best strategy that best suits the business model in order to remain competitive. Works cited Chirkova, Alexandra. Pepsi Across Cultures: Analysis And Cross-Cultural Comparison Of Pepsi Websites. 1st ed. 2014. Web. 27 Nov. 2014. Nayar, Ranvir. 'ARABIES'. Mafhoum.com. Web. 27 Nov. 2014. Pepsico.com,. 'PepsiCo 2009 Annual Report - Letter To Shareholders: Strategies To Drive Our Growth'. N.p., 2014. Web. 27 Nov. 2014. RAMOS, Marco, and Joseph RATHINAKUMAR. 'INTERNATIONALIZATION STRATEGY: BETWEEN ADAPTATION AND STANDARDIZATION'. Academia.edu. N.p., 2012. Web. 27 Nov. 2014. Sambidge, Andy. 'Toyota Says Middle East Sales Up By 10% In 2013'. Arabian Business. Web. 27 Nov. 2014. Tang, Dr Yee Kwan Tang. A Brief Understanding Of International Business Strategy --A Case Study Of Toyota. 1st ed. 2010. Web. 27 Nov. 2014. Toyota-global.com, 'Toyota Global Site | Special Feature:Toyota's Efforts In Emerging Markets'. N.p., 2012. Web. 27 Nov. 2014. Read More