Standardization of International Market - Report Example

STANDARDIZATION OF INTERNATIONAL MARKET By Standardization of International Market Standardization of international markets usually involves the establishment of certain conditions that guide the operations and standards of a company. Such conditions include the policies of operation, the standards of goods, and other conditions that determine the kind of services and goods that a company uses to operate (Dana, 2006, p. 30). One of the challenges of standardization is that the international market is controlled by different strategies and conditions. Market conditions in one country may be very different from the conditions in another country. Policies, laws, culture, and other regulations, which determine the nature of the business environment, may cause the difference. The laws of operations from one company to another are usually different. Standards are usually derived from a certain cultural environment. They encompass some values that are necessarily designed to serve the interests of particular market situations. As such, their applications are suited to respond to certain needs and situations as dictated by the range of possibilities within a cultural milieu. Many companies regulate their operations in ways that respond to the kind of markets and situations. This regulation is aimed towards the actualization of certain conditions that apply within the specifics of the market. According to analysts, the variation of markets is shown in a range of factors that distinguish between one market and another (Parker, 2005, p. 51). For instance, the levels of income, the nature of infrastructural development, the regulatory policies, and laws may apply differently from one region to another. This implies that the application of certain standards within the different regions would have significantly varied impacts. Therefore, the standards are usually designed in ways that provide synergies to one market while denying the same to another market situation. Advertising and marketing strategies are designed in ways that respond to certain standards and expectations. For instance, the message in the advertisement of a certain product may vary significantly in accordance with factors of culture, target clientele, levels of disposable income, and a range of other variables. These factors determine the kind of preference of one product to another. For instance, it is usually the norm that certain products deserve the application of strict standards as compared to others. Studies have shown that companies that operate with some level of flexibility are more likely to yield positive results than those that are governed by some strict application of the standards. On this score, it becomes difficult to determine the kind of method that could apply equally across different operating environments. The field of operation in the United States may vary significantly from the one in Saudi Arabia. Products, goods, services, and processes in the two countries will ultimately be influenced by the nature of business environment between the two companies. For instance, the sale of mobile telephone services would be tailored on the specific cultural features that apply within one kind of market. The marketing strategy in Saudi Arabia would involve the appropriation of some kind of conservatism that is consistent with the nature of the market and the culture of the people. On the other hand, marketing and advertisement in the United States would entail some specific elements of the American culture of consumerism. This would entail an active search of products that fit into the scheme and preferences of the target clientele. The standards of the language used in the advertisement would necessarily involve the application of methods and strategies that suit the aspirations and preferences of the dominant population. It would be impossible for any success to attend to the specific needs of the society. It would be important to determine the kind of standards and applications that attend to the various issues and challenges in marketing. Multinational companies such as Coca Cola usually operate under flexible standards according to the different kinds of the international markets. On this note, some of the issues affecting the development of standards are usually considered in light of the laws and regulatory mechanisms that guide the markets. Companies have been known to venture into overseas markets to increase profitability and create a strong brand name (Doole & Lowe, 2008, p. 74). They are always faced with the challenge of whether to adapt to the marketing strategies of the various countries they plan to invest in or whether to retain the standards used in the companies at the country of origin and hence retain uniformity. The contentious issues in relation to retaining the standards from the country of origin are mainly pricing, target customers and marketing of products. Companies are also faced with the possibility of using the existing marketing strategies in the local markets integrated with part of their existing standards to adapt to the requirements of setting up businesses in the host country. The practicality of both approaches has been debated at length on various researches featuring these two approaches. Supporters of the first approach whereby the company seeks to standardize their operations to be same as those in the mother company have argued that requirements and customer needs are similar in the local countries and therefore need to standardize. They tend to think that the customer needs do not vary and that the environment requirements are the same around the globe. Majority of those that support this ideology claim that it reduces cost and ensures that products are low priced and consistency is maintained. Those supporting the ideology that adapting to the diverse needs in the host country claim that the nature of business is unique and therefore adapting to the market environment is crucial for the success of their business in the target places (Quelch & Deshpande, 2004, p. 55). They argue that catering for the specific needs of a cohort of customers is better than catering for a generalized assumption that customer demands are the same. This is best explained by the fact that economic growth varies from country to country and so does income. Preferences also differ due to climate differences, companies therefore will have to market products relevantly. These two approaches have been known to be in coexistence with one another because of the similarities in tactical approach required and differences in factors involved. The tactics are similar in that, both try to reach the biggest number of consumers with the little cost possible as well as trying to get the better of competition that existed there before. Of utmost importance is the profitability that the companies seek to reach using whichever approach they choose to follow. The differences are brought about by the fact that, countries involved may be on different continents transfer of services or goods as well as experience will have some cost implications. Promotion of products will differ based on the diversity of culture in the countries that the multinational companies will want to engage in. The growth and survival of businesses with an international scope, and the quest for expansion in a liberalized market structure are entirely dependent on global business services as an integral factor. Global business services have emerged as the most important driver of the twenty first century global business networking and service provision. Generally the term global business services is derived from the discourse of outsourcing that deals specifically with the integrated systems that govern the operation of global businesses in terms of service provision. Global Business Services and Global Shared Services have evolved as indispensable factors in the liberalization and globalization of commercial enterprises. These two factors have opened up the global business space as a limitless space of inter-related business operations. The efficiency and productivity of doing business is entirely reliant on the kind and degree of elements of global business services and global shared services that might be employed within organizations. One fundamental aspect of Global Business Services is the 80/15/5 rule. According to this rule, 80 percent of a business process can be standardized in accordance with global basis. The other 15 percent of the process can be standardized in line with regional structures. The remaining five of the process is then standardized on a localized scale. This aspect represents the sweeping scope of (GBS). Another defining aspect of GBS is the integrated suite, which illustrates the component of inter-connectivity of systems that manifest within the substance of the GBS. The concept of inter-connectivity is, in fact, an important feature that distinguishes GBS from Global Shared Services. Another important feature of GBS is the virtual centers that act as the locale for expertise, which aids in the task of the dissemination of the subject matter. What this implies is the fact that the sphere of operation of the GBS might not be physically verifiable but its effects are significant. Subsidiary aspects of GBS are numerous but are commonly centered on the global ownership of the process as the singular aspect of global control. In shared services, goals and accountabilities are distributed among business units and organizations that engage in the services. In this manner, there is little chance for the occurrence of loss of control between the parent organizations from where the particular services originated. The concept of shared services is anchored on the giving out of some core functions by some services, which has always led to the misconception that organizations might lose their control by sharing out these functions. More specifically shared services bring about value through three main different ways: economies of scale, simplification, and standardization. The essence of shared services, however, is to limit the operational focus of the firm to the most important aspects of its operation so that the phenomenon of irrelevancy and redundancy is effectively eliminated. This naturally means that a business gets the ‘breathing space’ to adjust its scales of efficiency while at the same time minimizing on costs. Some of the areas that are positively affected include efficient use of company resources, process ownership, collaborating, and teamwork. Moreover, there is an efficient utilization of tools and technology. This process also encourages specialization, the growth of expertise within the work force, which ultimately leads to excellence. Global Business Services (GBS) generally refer to the integrated systems that run the services within a company setting. Shared services, on the other hand is defined by process ownership and partnering as key characteristics (Hassan & Kaynak, 1994). The differences between Global Business Services (GBS), and Global Shared Services (GSS) can be reduced into four main categories: functional scope, employment opportunities, leadership focus, service delivery models (SDM). In terms of leadership focus, GBS are usually run like separate business entities that have lives of their own. On the other hand, GSS are simply focused on streamlining efficiency and effectiveness within an organization, and do not extend their goals beyond these. In the aspect of employment, GBS act as a larger pool from where the organizations can draw talent, but in the GSS, this pool is limited due to the relatively smaller size of the organization. The classifications of global business services are as diverse as the different areas that are integral in the operation of any prime business. The types and categories cut through all the sectors of production, service provision, and supportive services. The main categories, however include, Finance and Administration, Legal services, Information Technology Infrastructure, Procurement services, Parts Management, Supply Chain, Workforce, Customer Relations, Network, Fleet, Customer Relations and a wide range of others. In many cases, these different types work in a complementary fashion. The import of value drivers in GBS is cost saving. Some of the value drivers that have been known to reflect within the framework of the GBS include economies of scale, economies of scope, standardization, simplification, access to talent, skill arbitrage, visibility, labor arbitrage, and pure arbitrage. Through the economies of scale, organizations are able to make savings basing on their sizes. Economies of scope involve leveraging the systems of management and the expertise through several service offerings. The process of simplification involves the removal of unnecessary steps within the structure of a process. Standardization manages to bring about savings by the adoption of a single standard, method or process so that the resources that might have been used for extraneous varieties are channeled to other systems. Visibility as a value driver manages to lower costs and bring about efficiency in the system through the creation of a transparent system within the labor force in a manner that eases the task of management. This is traditionally achieved through structural adjustment programs that might involve downsizing, or in other cases, restructuring the management system by creating alternative designs. Access to talent is an important driver that ensures that the firm is able to get the best talent in the world. This will naturally translate into the improvement of quality in the systems, processes, and products. There is usually the aspect of balance where by organizations will deliberate on the best talent against the most cost-effective price of hiring this talent. Labor arbitrage has been a common feature in the western countries in the past decade. A driver ensures savings by allowing the countries to move into alternative locations that might promise better costs of productions. Skill arbitrage as a driver of global business services implies that the management shall seek out for higher-skilled labor at affordable costs so that the costs of hiring do not burden the projections on returns in both the long-term and short-term. Pure arbitrage implies the ability to transfer the operations from one location to another with the objective of taking advantage of the relatively lower costs of production that might be found in the alternative location. IBM is one of the world’s leading providers of global business services. It is estimated that the firm has a presence in close to 160 countries, with over 190,000 workers who serve in IT related fields. With their infrastructural resources and the skilled workforce, IBM helps different firms manage their IT services and resources. IBM’s main areas of focus are management consulting services and technology consulting. IBM took over the management consulting services from another lead Global Business Services provider Pricewaterhouse coopers. Some of the services that are offered by IBM include strategy and transformation, enterprise applications, Application Innovation Services and Application Management Services. At the functional level GBS is an end-to-end process that reflects a multiplicity of general and administrative functions (Mclvor, 56). Naturally, GBS has the capacity to handle multiple service delivery models. The most suitable case illustrations of the operations of both global business services (GBS), and global shared services is the commercial presence of American companies in the People’s Republic of China. Avon, G.E, AT&T are companies that have retained their presence in China because of the strategic commercial benefits that they might not have found in the United States or in other parts of Europe (Dunning and Sarianna, 152). In terms of taxes and the cost of labor, China compares better than the United States and other parts of Europe. The shifting of base from the US to China has therefore ensured that the companies remain stable at the time when other companies that trade is similar products have grappled with operational pressures in high labor-cost economies (Czinkota & Ronkainen, 2007). One other advantage that the three American companies in China benefit from is the massive market for their products. In terms of decision-making GBS are always structured in such a way that will minimize the clash of policies or decisions among the integral parts of the system. Usually the system is arranged in a manner that will promote complementary relationships between decision-making organs. The harmonization of roles and the increasing of efficiency have often been misconstrued to imply overlapping or subsuming of some systems within others. However, GBS have always had the import of simplifying the decision-making structures and levels of transparency to lessen costs, improve efficiency, and eliminate bureaucracy. The internal workings within these two systems are not static since they have to respond to the external pressures on the market and other legal, political, and other institutional conditionality that bear, either directly or indirectly, on the markets and organizations. The ability to analyze the markets and choose the most suitable structures within these two systems is the determining mark that defines the curve of growth for most institutions. Global Business Services and Global Shared Services are a significant feature that determines the competitive advantage on local, regional, and international markets. Firms that have survived the devastating effects of global inflationary pressures are the ones that adopt liberal guides that suit the objectives of their operations within flexible climatic paradigms. Choosing between the two systems is a factor that must necessarily attach to the realities of globalization and liberalization of the market economy, which continues to widen the concentric circles of the world’s economic and commercial ties. Ultimately, it might be argued that standardization of international markets is especially difficult because of the fluid nature of the international business environment and the abolition of certain traditional restrictions that provided rigid controls for the business environment. Forces such as liberalization have provided alternatives in methods and designs of doing business. Companies are not guided by any uniform structures. They are usually driven by the individual strategies of the management. There are no established standards of operation that apply to companies across the board. Companies usually respond to situations in accordance with the nature of the business and the choice of organizational design and strategy. Standardized systems have the disadvantage of reducing opportunities for competition. The competitive advantage of one company over another is usually affected by the ability of one company to adopt one system of operation over another. In a standardized environment, such processes are regulated within some definite structures that make it difficult for the companies to design unique systems and strategies of operation. It is important to consider the fact that processes of standardization are largely affected by the manner in which companies relate to the business environment. Standardization should be adopted in companies and organizations that are determined by certain universal thresholds (Jain, 2003). These thresholds are general affected by the manner in which companies adjust their internal systems in alignment with these systems. In essence, applying these standards on a company would require some amount of balance between the priorities of competition and the need to match the company’s processes with certain accepted standards as understood within the framework of international business processes. Works Cited Czinkota, M, R & Ronkainen, I, A 2007, International Marketing, Cengage Learning, London Dana, L, P 2006, Handbook of research on international entrepreneurship, Edward Elgar Publishing, Cheltenham, UK. Doole, I & Lowe, R 2008, International Marketing Strategy: Analysis, Development and Implementation, Cengage Learning, London. Hassan, S, S & Kaynak, E 1994, Globalization of Consumer Markets: Structures and Strategies, Routledge, London. Jain, S, C 2003, International Marketing Research, Edward Elgar Publishing, New York. Parker, B 2005, Introduction to globalization and business: relationships and responsibilities, SAGE, London. Quelch, J, A & Deshpande, R 2004, The Global Market: Developing a Strategy to Manage Across Borders, John Wiley & Sons, New York. Read More