Standardization of the Brand in the Context of International Strategic Marketing - Research Paper Example

 This paper evaluates the standardization/adaptation of the brand in the context of international strategic marketing. First the paper talks about the importance of global strategy and international marketing strategy. Then it moves on to discuss two of the strategies that can be adopted by the firms in order to deal with the global market: Brand standardization and Brand adaptation. Discussing each of the strategies in detail, the paper discusses the requirements and the advantages and disadvantages for each one. Also, it discusses the limitations that the firms may face if either of the strategy is adopted. In the conclusion, it discusses briefly what strategy should actually be adopted by the firms that want to operate globally. Introduction The concept of a global strategy has become increasingly popular over the last few years. A greater part of the popularity of global strategy can be observed in the Multinational Corporations. (MNCs) Furthermore, economic articles and journals, as Root et.al (1992) relates, are also increasingly urging the companies to ‘go global’. In addition, conferences held on the use of global strategy have also attracted a lot of support from the corporate sector and enthusiastic investors. Global strategy is gaining a lot of importance but it is important first to understand what global strategy is. Global strategy is a strategy that can be adopted by any corporation- a strategy that may guide it through the process of globalization. This means that the companies can achieve some objectives and have a comparative advantage over some countries in certain industries if they adopt a proper global strategy. A global strategy basically carries objectives like the managing of certain risks, the increase in the efficiency and also inner learning capabilities as Root et.al (1992) relates. The managing of risks can make it easier to reduce costs and increase profits for the companies. An increase in efficiency means that the companies can operate and achieve the economies of scale. As a result the costs incurred can be the least for the corporations. Increase of the inner learning capabilities on the other hand means that the corporations can enhance their research and development departments and so can come up with innovative and useful ideas that can be used in the future. In order to carry out the objectives that the global strategy emphasizes it is important to initiate a procedure that can make sure that the global strategy is properly followed. This can only be done if the decisions of the firms and corporations are managed in such a way that the long term objectives of these can be achieved. The management of global strategies is usually done through a progression which is called the international strategic marketing. International Strategic Management The international strategic marketing basically is comprised of a process in which the changing environments of corporations can be easily identified. Hence the process is the one by which the companies are a given a chance to expand and compete in international markets. To look at International strategic marketing in more detail, it can be seen that international strategic marketing is a sort of managerial activity where by the missions of an organization can be specified. A proper direction is granted to an enterprise through international strategic marketing as it focuses on the plans and objectives, the policies, the implementation and so the allocation of resources in a specific corporation that operates at a global level. With a corporation that functions globally, it becomes increasingly vital that the plans and regulations are carried out in a well organized way. This is done by the international strategic marketing. Two of the methods that can be adopted by the firms in order to deal with the global market in the context of international strategic marketing are Brand standardization and Brand adaptation. Debate over Standardization and Adaptation There has been a huge debate over the standardization and adaptation of the marketing activities since the famous Levitt wrote his article on the globalization of markets in the year 1983. As Alashban et.al (2002) explains, most of Levitt’s theory was based on the belief that the corporations that operate globally should treat the globalized markets as standardized ones. This way it was assumed that the each and every market was homogenous. This idea is clear in Buzzell’s definition of ‘standardization’ where he says that standardization is the offering of identical products using identical advertising and identical distribution channels as Medina et.al (1998) states. It is important to note from the definition mentioned that a certain standard is sort of enforced over any standard entity that can be a firm or a corporation. The fundamental belief here is that the producers worldwide face similar circumstances, as Medina et.al (1998) explains, and so produce products that are identical. The process of standardization means that the multinational companies are to adopt a marketing strategy that would enable them to produce homogenous products, advertise them in the same way, and distribute it through the same channels. This way, large scale production according to Levitt can be made easier. Wind (1986) however thinks otherwise. According to him, there is no evidence that can prove the fact that the customers found in different places in the world form homogenous markets. Also he believes that the notion of the customers being price conscious universally is also an absurd assumption. He further believes that since the customers who are conscious about prices switch brands (according to the prices), it is important for the multinational corporations to adapt themselves to the differences in the markets worldwide. This way they can increase or maintain price, depending on the relevant market, and increase revenues as Alashban et.al (2002) discusses. So this is how Wind introduced the concept of adaptation. The definition of according to AMA is the strategy that can help the multinational corporation to develop and modify products of others to create better and innovative products. This is not imitation of the products of others but their development. This definition implies that a firm that works in the domestic market, if gets global, has to improve its corporate structure so that it can adjust to the changes in the circumstances in the new markets. The importance of brands Keeping in mind the importance and relevance of the standardization and adaptation techniques, the firms and corporations that operate globally are focusing increasingly on the importance of brands and brand names. A brand is a symbol or a number of words that can make a certain product distinct among many others. A certain brand name can prove to be very important for a multinational corporation. This is because it can help in the differentiation of a certain firm. A brand can signify a certain quality of a company. As a result customers can make quick decisions while purchasing. Customers rely generally more on the brands and brands name rather than on prices and quality of the product. Various studies have proved this point. For example one study done by Zaltman and Wallendorf in 1979 showed that 40% of the success or the failure of a firm was reliant on the brands and brand names. Hence, the brand, as Alashban et.al (2002) states, is one of the most important assets for a firm. Many different kinds of strategies have been adopted by the multinational corporations when it comes to brands. There has been the brand standardization strategy, the brand adaptation strategy, the brand globalization strategy and the brand customization strategy. Discussing the last two is beyond the scope of this essay. So the rest of the essay would focus on brand standardization strategy and brand adaptation strategy. Fist I will discuss the brand standardization. Brand Standardization Brand standardization refers to a situation where the firm can utilize a certain logo and set of attributes of a certain product and introduce it throughout the global market. It is important to note here that the ‘authority’, as Medina et.al (1998) states, in this kind of brand standardization is the domestic market. The greatest challenge that a firm using the brand standardization strategy can face is the finding of such a product that can target the domestic market and can also have international appeal. The domestic market is the main target of the firm as shown in Figure 1 where as the domestic target product is basically designed in such a way that it is also liked by the consumers that are present in the global market. There are many corporations and companies that have adopted brand strategy. An example is McDonalds. The food items that are present in the menu of McDonalds are supposed to target the people that live in the United States as the core. However, the food items on the menu also have appeal in many different companies. Requirements There are many elements that have to be taken into account before coming to the decision of whether to standardize a certain product or not. A strategy that is global is far more beneficial for a firm as compared to a local one however it can also prove to be very complicated. In order to survive in the global market the firm has to take into account many things into account- things that can easily be avoided in the domestic market. There are many strategic and operational difficulties that can be faced by the managers when it comes to this decision. The standardization question, as Ghantous (2008) explains, in the words of Van Raaij (1997) should concern four elements. The first is the mission, the next is the proposition, the third is the concept and the fourth is the execution. Although some people may have distinct and separate opinions about strategic and operational options, Chernatony et al. (1995) believes that the standardization is a double sequence event. For him the first part of the sequence is the reflection of the core essence of the brand and the next part of the sequence is a reflection of the operational executions of the company or brand. The process of brand standardization is so important in the global market that people like Keegan (2002) believe that it should be carried out all the time whenever it is feasible. The first important thing that has to be considered is the differences and similarities between the target audience vs. the foreign audience. Prior to reaching a decision pertinent to a certain logo or quality of the product, it is vital that the managers at first study the economic levels of the target and the foreign market as Ghantous (2008) stresses. A product that can be easily purchased by a customer in the United States is likely not to be purchased by some customer living in any poor country like India. The purchasing power parity of the target area and the foreign market has to be taken into account after the consideration of the respective exchange rates. Also socio-cultural conditions have to be given importance. It is important that the managers realize that the introduction of some products can prove to be of sensitive nature to certain people in different markets. An example can be the introduction of pork related food item. The introduction of pork related food items can be favored by the Europeans and the United States, but the product may not get the same response from Islamic countries like Saudi Arabia, Pakistan etc. This is because the eating of pork is not allowed in the culture and religion of the Muslims. Firstly, such products are less likely to get introduced in Muslim countries, secondly if the multinational corporations in some way convince the governments of such countries to let them sell such products, the customers would not purchase. In fact they would take the introduction of such items as an offence, and would avoid the brand in the future even if it sells non-pork food. It is natural that the customers, once disappointed, would not revert to buying from the same brand. It is this reason that the managers need to consider the sensitivity of the customers towards various products. In addition to this, another important thing that the multinational companies need to adopt in the brand standardization process is its internal expansion. While focusing on target and foreign markets it should not be forgotten by the managers it is also pertinent that the inner learning capabilities of the firms be enhanced. This way the firm can come up with new products and services that can help attain the firm attain its objectives. The various things that have to be considered by the managers in the standardization process makes the entire process much more complex than it seems. However this complex procedure can be simplified into a simpler framework if certain things are given importance. The first is the product’s global vocation, as Ghantous (2008) indicates. For brand standardization to be successful it is important that the product of the company is designed in such a manner that it helps to standardize its market strategy. To explain further, global vocation of a product means that the product is liked by the people in the domestic target market along with the people in the foreign market which means that the product has a significant capacity to standardize the marketing strategy of the firm as Ghantous (2008) discusses. The product category is one of the most critical components of the market strategy of a firm; this is the reason why it is extensively discussed in journals and articles. It should also be taken into consideration that all the brands do not possess the same global potential. The objectives achieved by one product may not be attained by the introduction of another as Hassan et al. (2003) states. Overall, the more a certain corporation focuses on a product that has increased global vocation; the better off the firm can be in the global market. Although there is no proper scale that can measure the global vocation of certain products, managers do have some literature on the products that have proved to have more global vocation in the past. For example, the universality of certain products has led to them having more global vocation than their counterparts. Also, it has been observed, as Ghantous (2008) states, that the companies that produce high technology products are in a better position to standardize their marketing strategy. Now that the pre requisites for the standardization process in the global market have been discussed, it is important to focus on the internalization of the firm. The figure 2 shows the strategic matrix for brand internalization. According to the matrix and as Ghantous (2008) explains, it can be seen that as the global vocation of the homogenous products (in homogenous markets) increases, there is a need for the firm to standardize the brands accompanied by the executions. Also, it can be seen that as the global vocation of a product becomes weaker, it becomes important for the firm to focus on the standardization of the firm in some markets and not in the others. This can be a situation where the products may not be welcomed in some countries even if the markets are homogenous. It is also important to discuss some of the advantages of brand standardization here. Advantages Brand standardization has many advantages. One of the advantages is that the corporations do not have to waste time and money over extensive Research and Development. It is true that initially the corporations might find it hard to introduce a product that is essentially famous in both the domestic and the foreign markets, however once this is done and the product gets successful, there is no need to carry out Research and Development or bring out new and improved ideas. Innovative ideas may be introduced to increase the number of products or services that a firm may provide in the global market. However the time and the cost that is incurred on such a research is far less than the time and cost that would have been spent on the research that is carried out separately for each market when the environmental factors are taken into account. Another advantage of adopting the standard brand marketing is the fact that it certainly has a large market. Because of the advancement of the media and the internet, the customers can know and research about various different kinds of products. This way there is a likelihood that the customers think similarly about the quality of a certain product. Since the standard market strategy is based on homogenous markets, firms that adopt the structure can benefit greatly from the move and can develop and compete well with the competitors worldwide. Disadvantages Although brand standardization may be beneficial in some ways, it certainly has some disadvantages. For example, one of the major demerits of standardizing the process is to produce identical products itself. The very idea of the introduction of homogenous products rules out the introduction of products that are differentiated. This way there is less choice available to the customers. Furthermore, the presence of the homogenous products may mean that the firms have no incentive to compete. As a result, the prices may be higher for the products and the already low consumer choice can be constricted further. Another important thing to consider is the fact that the use of homogenous products as mentioned earlier means that the Research and Development sector of a company does not have to be very active. Consequently, there would be less new products available in the market. This would further aggravate the situation for the customers who may already be suffering from fewer choices. Apart from having advantages and disadvantages, the brand standardization market strategy has some limitations too. Limitations One of the limitations of using brand standardization is that although the assumption that the people throughout the world prefer homogenous products is true to some extent, it may not always hold. Brand standardization has worked a lot in the past for corporations like McDonalds etc. However, seen from a different perspective it can be observed, as Ghantous (2008) indicates, that the similarities between the markets of certain countries may exist because the countries may be close together geographically. For example in the case of McDonalds it can be observed that most of the market for its products lies in the US and the European countries and less of its consumers are found in the Asian countries (although the market there is developing gradually). It can also be deduced from this fact that since the United States and the European countries has similar cultural dimensions; the same brand tends to be more successful and famous in these countries. This means that a cluster of countries may prefer the product and a cluster may not. This process in itself leads to brand regionalization, as Ghantous (2008) explains. Brand regionalization means that the brands change for a certain group of countries depending on the similar cultural dimensions of the particular countries. If the brands change for clusters of countries then the whole process may not come under the strategy for brand standardization. So the brand standardization may actually fail because of the fact that it cannot make products that are purchased by the people in the domestic and the foreign market alike. Another limitation is the fact that the brand standardization solely relies on the belief that the customers are price conscious. This theory however has still not been proven yet. There is no empirical evidence that could prove it. Since the underlying belief of brand standardization is not proven, the process of brand standardization cannot be a reliable method. Till now, the paper discussed brand standardization in detail. Now it will focus more on brand adaptation strategy. Brand Adaptation As mentioned before, adaptation is the strategy that can help the multinational corporation to develop and modify products of others to create better and innovative products. Brand adaptation similarly is the process, as Wong (2006) relates, whereby a certain domestic brand is introduced in the foreign markets in such a manner that along with the domestic market, it also proves to be relevant to the minds of the people who live overseas. This way the firms ‘adapt’ to the different markets that are found overseas. There are many reasons why brand adaptation is becoming increasingly important in the global markets. Need for Adaptation For many of the firms that operate in the markets today, the wider the global markets that they work in, the wider are the national differences that may arise. In the brand standardization, where the assumption is that the markets are homogenous, it is easier to consider the domestic products that can have international appeal too. However, it is hard to carry the ‘homogenous’ procedure in countries where the domestic country market is very different from the one that is abroad. According to Steenkamp (2001) a country’s culture is the main determinant of varying market demands. Culture can mould the different perceptions and choices of the people living in different parts of the world. Culture can greatly affect a brand’s image and positioning. As mentioned before, the introduction of pork related food items can greatly affect the perceptions of the Muslim community towards a certain brand name. Studies have also shown the affect on the brand relationships because of linguistic differences. When there lies a lot of difference in the cultures and languages of s group of countries, it is not easy to select a brand name or a brand that can apply to all. It is interesting to note that according to a study carried out by (Eckhardt & Houston, 2002), the attitude towards the name ‘McDonalds’ differed greatly. Some people were in the favor of such a name, some were indifferent, while others opposed the name stating that they would have preferred something that had something to do with their culture and their language. Some customers even went as far as to say that they were not in the favor of the name because this way they felt that they were being dominated by the United States! When these different kinds of attitudes can arise just due to a brand name there is no question about what would happen if various homogenous products are introduced to these markets. Another important aspect that has to be considered while operating globally is the fact that the incomes earned by all the people are not the same as Wong (2006) relates. There are poor and rich, developed and developing, agricultural and manufacturing countries that are found globally. With such an increased variation of countries, there are obviously more increased income discrepancies. The demand potential of a product, as Wong (2006) explains, lies in the firm’s cost structure. In addition it also depends greatly on the income structure of the customers. As a result, if the firm has to succeed in the world markets it is relevant for it to deliver the different incomes a consideration. If homogenous products are introduced in these kinds of markets, the prices of the products will turn out to be the same after adjusting for the exchange rate. For a person belonging to America spending of $2 on a product would not be that much. But in a country like India where the average daily income of half of the population is less than $2, it will be very difficult to purchase such products. Some of the customers may also develop a hatred for the product because of its high prices and so the brand name would be affected adversely. In order to facilitate a better consumer-producer relation it is necessary that the managers take into account the incomes of the people in consideration. This done on a global scale would mean that the managers should be aware of the income differences of the people in certain countries of the world. Since the target domestic market and the foreign markets are not the same, there is a need for the differences in both to be given some deliberation. Requirements for adaptation It is important for a firm to operate globally, to recognize the differences between the host and the home market, as Wong (2006) states. It is also important that the firms employ market strategies that can help to understand the overseas market situations and introduce marketing practices different from the domestic markets that can be used abroad. In order to develop a capability similar to this one, it is important the firm realizes the importance of international commitment as Wong (2006) explains. According to him, international commitment can be easily controlled by the firms unlike the environmental conditions like income discrepancies and different cultural dimensions etc. International commitment is a type of behavioral concept that according to Wong (2006) can be easily manipulated by a certain firm. Hence, the behavior of the firm in the international markets can be changed in such a manner that it can help the firm in the recognition of its brands in other countries. It is important to note here that brand adaptation is a little different from simple adaptation. According to Wong (2006), they both are the same in the sense that they involve a change in the foreign markets. (The changes can be in the quality, the packaging, the distributions etc.) However, brand adaptation tends to consider the psychological and physical factors both because through brand adaptation the minds of the customers are targeted. Since the minds of the people are the target, it has to be made sure that the cultural and environmental problems that the customers may face due to the introduction of a certain brand be considered. Advantages Brand adaptation has many advantages. The first one is that it is a more practical marketing strategy as compared to the standardized marketing strategy. As discussed earlier, foreign markets differ from the domestic markets. Since brand adaptation adapts to the environmental factors of a certain country, it has a greater market than the standardized products. Standardized products may not be favored due to economic, cultural and social constraints. On the other hand since the brand adaptation takes all these factors into account there is a greater chance of success for the firms that have adopted it. Further, the brand adaptation approach is more customers oriented rather than being product oriented (in the case of standardization) as Wong (2006) explains. This implies that the firms that adopt brand adaptation are prone to have better relations with the customers in opposition to those firms that adopt the standardized way. Moreover, since there is no empirical evidence that proves that the customers are price conscious, the brand adaptation way is a better way to deal with the problem of international strategic marketing because this way the customers are more likely to prefer the product changes that have been specifically designed for them as Wong (2006) discusses. Disadvantages Apart from having advantages, the brand adaptation has disadvantages too. Brand adaptation means that the changes in different markets have to be considered. First of all, it is very difficult to incorporate the changes in different markets in such a way that the domestic and the foreign markets can be both targeted, as Wong (2006) discusses. The firm can either concentrate on the domestic market or the foreign markets. Since the entire process of considering all the environmental factors is very time consuming, there is a great chance of the firm making unnecessary predictions about the changes- predictions that can actually reverse the entire procedure. The changes incorporated might disappoint some of the consumers. For example if a certain product has to be introduced in a rich and a poor country simultaneously, the firm may have to compromise on the quality of the product in the poor country. As a result, the customers from the poor country may feel inferior. So overall a great deal of time can be wasted in assessing the changes in markets that can also prove to be fruitless. Limitations A limitation of the brand adaptation may arise if a firm or company does not have ample amount of experience in a certain country. Because brand adaptation means that various cultural and economic factors have to be taken into account, it is important that the concerned company has some experience of working in the respective countries. This way such firms can better predict the changes that can be made in their products so as to attract many customers from a certain country. It also implies that an indefinite amount of time has to be wasted to consider all the factors that may affect the perceptions and choices of the people concerned. On one hand a lot of time has to be wastes. On the other hand, it is not necessary that the time spent researching has fruitful results. It is possible that the experience of the firms is not in accordance with the true economic and cultural factors. The worst case obviously would be that the firms do not have any experience and try to predict the changes in the product. This way the firms can often overrate the risks and the costs that may be associated with a certain product and suffer. Conclusion To conclude, brand standardization and brand adaptation are two strategies that can be adopted by the companies that operate globally. The brand standardization is a process where homogenous brand products are produced and the products that are used domestically are also used internationally. Brand adaptation on the other hand is the complete opposite of the brand standardization. This is because brand adaptation requires the companies to develop brands that can be used domestically, but are also related to the minds of the consumers in the global markets. Brand standardization may not prove to be a good method in the context of international strategic marketing because of the fact that its underlying belief of the customers being price conscious has not been proven yet. Brand adaptation may prove to be a better and more practical way of dealing with the global markets. However, brand adaptation itself requires a lot of research that is not possible. The better way would be for the corporations to adopt a policy that would be a marketing mix. This way they can adopt brand standardization in some markets and brand adaptation in some. Figure 1 Figure 2 References Aaker D., Joachimsthaler E. (1999). The lure of global branding. USA.Harvard Business Review. (November-December): 137-144. Alashban, A. Hayes, L. Zinkhan, G & Balazs, A. (2002).International Brand-Name Standardization/Adaptation: Antecedents and Consequences. USA.American Marketing Association Buzzell R. (1968).Can you standardize multinational marketing? USA. Harvard Business Review. (November-December): 102-113. Eckhardt, G. M., & Houston, M. J. (2002). Cultural paradoxes reflected in brand meaning: McDonald's in Shanghai, China. Journal of International Marketing, 10(2), 68-82. Ghantous, N. 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