Estrategias de Negocio Internacional: Estandarización frente a Diferenciación Global

Chapter 5: Standardization vs Differentiation

Standardization and Differentiation Overview

Standardization: The drive towards global standardization is based on the view that the progressive removal of trade barriers plus the growth of global cultural values leads to a single economic system. It implies: global products, common marketing strategy, and common brand names. Standardization arises from realizing advantages of mass production in terms of economies of scale and scope. BUT the tendency toward a single market system is overrated.

Differentiation: The persistence of economic, legal, and cultural barriers to mass production generates an approach that markets should be segmented according to cultural clusters and within countries by social and demographic groups. BUT oversegmentation is expensive.

Distribution Strategies

Distribution: It consists of reaching the target groups and refers to the means of distribution, which include transport, logistics, wholesaling, and retailing systems.

• Standardization: It aims at achieving economies of scale in logistics; the complexity of distribution networks can be reduced by cooperating with the same distribution partners across many countries; customers may prefer standardized distribution of goods across the globe.
• Differentiation: It aims at adjusting to local selling systems. It is necessary if national distribution systems consist of close networks between producers, transport firms, wholesalers, and retailers.

Configuration and Product Decisions

Configuration: Decisions on two levels:
(1) Configuration of the program: horizontal range (width) and vertical range (depth).
(2) Configuration of object: customer value and benefits, pricing decisions, branding decisions, packaging.

Product: Nearly all products require modifications to fit with legal, technical, and cultural conditions in the host country; some products need very little modification, and commodities normally need none.

• Standardization: Major aims are higher economies of scale and return on investment. When do customers prefer it? Customers may want to buy identical products of world-famous brands and world's best ideas.
• Differentiation: Major aim is an increase in the product value for customers in different regions/markets. When do customers prefer it? Products that are adapted to the needs and requirements of local customers and adapted to specific economic, legal, and socio-cultural factors.

International Brands vs. Local Brands

International Brands:

• Economies of scale
• Unique brand image across countries
• Larger advertising budgets

VS Local Brands:

• Better response to local needs or needs not covered by international brands
• Higher flexibility in price
• Closer relationship with local consumers

Multinational vs. Global Approaches

Multinational:

• Characteristics: Country-specific brand concept, adaptation of branding policy to local conditions.
• Objectives: Optimal market exploitation, increased national image, flexibility.

VS Global:

• Characteristics: Standardized brand concept, internationally consistent branding policy.
• Objective: Synergy effect in production and communication, increased brand awareness, consistent brand image.

Price Strategy

Price: Should we set the same price across markets or set different prices depending on the respective market characteristics?

• Standardization: To avoid re-import and to avoid uncertainty and frustration of the consumers.
• Differentiation: Economically, it is often reasonable for firms to charge different prices, but they need to take into account customer willingness to pay, different taxation systems, and exchange rates. Standardization of the product and differentiation of the price is one option.