The Role And Effect Of International Business Strategies Marketing Essay

Published Date: 23 Mar 2015

Internationalization of operations has led organizations to assume different types of strategies. Some organizations focus primarily on domestic operations and export products or services while other firms establish subsidiaries or business units of varying autonomy in host countries that concentrate on the specific needs of those particular markets. Many international business researchers have specified characteristics of global industries and the associated managerial approaches to address the structure-strategy-environment fit. It was proposed that businesses are subject to varying degrees of economic, competitive, and technological pressures which drive those organizations toward different internationalization strategies. Specifically, they suggest that global strategies correspond with high pressures for global integration and low pressures for local responsiveness; local responsiveness corresponds with low pressures for global integration and high pressures for local responsiveness; multifocal approaches are associated with simultaneous pressures for global integration and local responsiveness.

Nowadays, companies must be flexible to respond rapidly to competitive and market changes, business strategy is the foundation of successful business; (M.Mazzucato, 2002) a successful strategy is a core for a firm. According to Charles W.L. Hill,"a firm's strategy is the actions that managers take to attain the goals of the firms." (C.Hill. International business, PP420) Profitability and profit growth are the goals for most firms. Global standardization strategy and localization strategy are the important way to reducing cost. Therefore, this essay aims at explaining the role and effect of global standardization strategy and localization strategy.

Localization strategy

Currently, localization strategy is the develop trends of multinational companies. "A localization strategy focuses on increasing profitability by customizing the firm's good or services so they provide a good match to tastes and preferences in different national markets." (Hill, 2009) This strategy requires that enterprise develop with local culture. Localization strategy helps the firm easily to enter other countries' market; generally, localization reflect in four ways, product, human resources, marketing, research and development. Firms often use these ways to change themselves to match local market. Most companies apply localization strategy and successful, such as KFC, Coca Cola, MTV, Motorola, P&G, etc.

When a multinational company enters the local market, usually confront collision or inconsistence from the local government and the consumers. Implementation of personnel, corporate culture, materials, marketing localization can establish enterprises public's image, then company could occupy the local market rapidly. In 1992 when Motorola has just entered in China, it lacked understanding of the domestic market, cannot keep up with the changes and development of China, which is easily losing market opportunities. The implementation of localization can choose local human resources to achieve materials, research and development, marketing and others, through the local subsidiary observation of the market, Motorola can be based on consumer demands and market changes in the first to research and develop, produce and occupy the local market. Through the 'Localization' model to be close to the market, Motorola occupies a very high market share in China, which is multinational corporations and also Motorola's one of the important goals.

On the one hand, a localization strategy has a lot advantages; by using localization strategy, firms could merge with local society and suit for local culture, meet the local needs. Such as Microsoft, it is developed globally, the functions are the same, but when the product developed in foreign countries, it required different language. In addition, localization strategy helps firms reducing cost, dispel prejudices and build a good brand image.

On the other hand, localization strategy involves some duplication of functions and smaller production runs, customization limits the ability of the firm to capture the cost reductions associated with mass-producing a standardized product for global consumption. (Hill, 2009)

Localization is most appropriate where consumer tastes and preferences differ substantially across nations and cost pressures are not too intense.

Global standardization strategy

Compared to Localization strategy, most executors and researchers thought that global standardization strategy could gain more profit. Standardization of production by firms who engage in global business entails producing the same product for the national as well as the international markets with only minor changes in attributes. There are many firms have successful with this strategy, like Microsoft, McDonalds', Hollywood, Apple. The application of global standardization can be seen everywhere; such as brand name, product feature, product packaging.

Global Strategy involves internationalization with standardized products through globally standardized marketing and production processes that target standardized customer needs. (Kedia, Ben L. 2000) Global standardization strategy often used when the firm focus on increasing profitability and profit growth by reaping the cost reductions. "Firms pursuing global standardization strategy try not customize their product offering and marketing strategy to local conditions because customization involves shorter production runs and the duplication of functions, which tend to raise costs." (Charles Hill, 2009)

A global strategy is effective when differences between countries are small and competition is global. (tutor2u) Global standardization strategy makes sense in some aspects. Firstly, firms could implement economic of scale to reducing cost in product research, product development, product marketing and produce. Secondly, the strategy helps enterprise have effective control on product global marketing; implement global standardization strategy not only reduce the difficulty marketing management but also concentrate marketing resources. Thirdly, global standardization strategy o the benefit of establish unified product image in the world, strengthen firms' reputation and helpful to product identification for consumers. These are the advantages of global standardization strategy. By taking full advantages of global standardization strategy, McDonalds' become one of the most famous fast food restaurants in the world. In global marketing aspect, McDonald's use the unitary brand image and standardization distribute to achieve economic of scale; in distribute management aspect, McDonalds' carry out operating franchise, for instance, McDonalds' requires all chain store follow the staff rule in store location, decoration, promotion and other aspects. The global standardization strategy brought global image for McDonalds'.

However, there are some disadvantages of global standardization strategy. Because of global standardization strategy has to face global competition, unless the product hard to copy. Besides, this strategy requires global needs; it is inappropriate when demands for local responsiveness are high. For example, Vodafone failed in Japan market because the global standardization strategy does not match local market realities. (Charles Hill, 2009) In 2002, Vodafone group paid $14 billion to acquire J-Phone which is the hot property in Japan provide wireless communication services; then Vodafone developed the technology which allows people take phone when they go aboard, the problem is that company ignored that most cell phone users are young people who do not often travel abroad. So, companies who take global standardization strategy required focus on the local market realities.

The global strategy is best suited to industrial products for which there are high pressures for cost reductions but relatively low pressures for the product to be differentiated to meet local market requirements. (Stuart Wall, 2010)

Conclusion

To sum up, international business strategy sets very tough challenges for companies. They need to be globally excellent in nearly every activity, and find the right balance of global, regional, and national solutions. (George S. 1992) Both global standardization strategy and localization strategy have strong pressure for cost reductions. Global standardization strategy makes most sense when cost pressures are intense and demands for local responsiveness limited. Conversely, a localization strategy makes most sense when demands for local responsiveness are high, but cost pressures are moderate or low. (Charles Hill, 2009)

Localization strategy and global standardization strategy are two relative strategies. When firms using global standardization strategy could not meet local market, they had to change their strategy; localization strategy make most sense when firms in this circumstance. Localization strategy is well targeted, global standardization strategy is universal. These two strategies have their own advantages; In general, firms use these two strategies at the same time to response different market needs.

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