Douglas and Wind (1998)

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Standardise?

A company may want to standardise every part of their global firm, but if managers in certain parts of the world are used to more independence and autonomy, then there will inevitably be a degree of conflict.

There are some pitfalls to the basic underlying assumptions of a standardised global strategy (assumptions are based on Levitt, 1983):

Homogenisation of the world’s wants. There is no evidence to support that this is the case worldwide. There is evidence that tastes are diverging. Companies such as Coca-cola have to adapt to country-specific needs, such as having cold coffee in a can in Japan. There is heterogeneity within countries, such as differing lifestyles. A firm could target similarities between segments and countries, not differences, but the author states that this implies ignoring potential untapped markets.
Universal preference for low price at acceptable quality. There is more evidence of many industries, such as personal computers and household appliances, where quality, customer service, and product features are more important than price. In affluent markets, consumers are more likely to prefer prestige-enhancing products. Developing counties are more price sensitive, which means they rarely brand loyal and so a price-positioning strategy can easily be upsurped by technological advances and competitors. A standard product and price will also be too much in some countries and too little in others. In some developing countries a strategy to simplify the product and thus lower its price will be more suitable.
Economies of scale of production of marketing. There are 3 points this misses out:
1. Flexible factory automation enables economies of scale at lower levels of output and so does not require production of a single standardized product.
2. The cost of production is only a small part of the cost of running an international business.
3. Strategy should not only be product-driven, but consider other functions such as marketing, branding, and advertising.