Product Standardization

Even though product adaptation becomes inevitable in the case of certain products, it should be realized that there is sound economic logic behind a product policy which suggests uniformity in all markets. Six factors have been identified which may favor international product standardization.

1. Economies of scale in production: When only one standard version is marketed in all the areas, it will be possible to have larger production runs, which will result in lower manufacturing costs.
2. Economies in product research and development: Similarly, product standardization will allow recovery of the costs incurred in product research and development from the entire sales. This will reduce the recovery period as also lower the break-even point. Moreover, additional expenditure on adapting product to each individual market can be avoided.
3. Economies in marketing: When the same product is to be launched in different markets, economies can be achieved in terms of Sales literature, Sales force Training, Inventory management, and Advertising and after-sales service requirements.

The above three factors which are economic might motivate a company to go for international product standardization. There are also three marketing factors which may reinforce the standardization level:
1. Consumer Mobility: Consumers are becoming increasingly more mobile and trans-continental travel is now fairly common. A consumer who is loyal to a particular brand in his home market is more likely to remain loyal in a foreign country as well when the product in question is the same. Gillette razors and Kodak films are good examples.
2. Made-in Image: When the name of a country is associated with a high standard of quality in the minds of the consumers, a product manufactured in that country may enjoy a psychological premium in the foreign markets. French perfumes and Japanese cameras are good examples.
3. Impact of Technology: Industrial products is generally tend to have standard specifications and do not require much adaptation for foreign markets, unless climatic and similar considerations call for it. Even when industrial goods are modified, changes are likely to be minor, e.g changes in voltage or conversion to metric measures. Products in which technical specification are critical tend to be uniform. However, operating instructions have to be in the local language.

The basic argument in the favor of uniform multinational product strategy is that it is least costly in terms of both manufacturing and marketing costs for the company. For example, Italian companies concentrated on manufacturing a limited range of standardized refrigerators and washing machines in great numbers. This strategy which reduced the cost of such manufacture and marketing helped them in capturing sizable shares in the UK and the continental markets at the cost of such industrial giants as Frigidaire, Seimens or AGE. However, the corporate objective is to maximize profits and not to minimize cost and the uniform product strategy may not be a relevant instrument for profit maximization. The factors which may necessitate non-uniform product strategy are already indicated above. But even in the face of such factors, it may be possible to develop a uniform product strategy. Pepsi-cola and Coca-Cola are the two outstanding examples which offer the same product and follow identical promotional themes in all the markets. Therefore, the question before the management would be to find out how far uniformity would be a feasible and, at the same time, a profitable strategy. There are certain factors, e.g., technological and legal, which will not allow an exporting company to have any option with respect to product adaptation. For example, if a company wants to export electrical goods to Japan, these will have to be of 110 volts and not 220 volts. Similarly, for export food items the health regulations as imposed by the importing countries must be adhered to. Where the company has the choice, it will be a matter of relative costs and benefits of the alternative strategies of uniformity vs. adaptation. The strategy of adaptation involves greater costs but promises more flexibility and more marketing success. The strategy of uniformity is least costly but is more rigid and consequently may be less successful in market penetration.