Introduction mass-produced standardized products will contribute to the company’s

Introduction

With the further
development of economy, economic globalization has become the basic trend of
world economic development, and the production and operation activities of all
countries or regions will be integrated into the global economy. A unified and
networked market system will be shaped the world over. Nevertheless, there has
long been a dispute between standardization and localization for the selection
of a business strategy by the transnational corporation. The former argues that
in the company’s option of standardization management strategy, scale economy
and experience curve can be used for larger cost reduction, while the latter
insists that the enterprise’s localization management strategy to be chosen is
to satisfy the requirements of various countries and regions (Cheon & Cho
& Sutherland, 2007). In this essay, it will be discussed.

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Standardization as a Regular Practice

Standardization refers to that a
transnational corporation provides a unified product in a national, regional or
global market (Theodosiou & Leonidou, 2003). In the case of other
similarities, standardization will be generally selected. Besides, a company is
more apt to all or partial standardization of the business strategy in the
overseas market, since the adoption of this management strategy has the
following advantages:

1. To obtain scale economy and make prices
predominant. R&D and mass-produced standardized products will contribute to
the company’s product development and research as well as the scale economy
arising from the manufacturing process (Moutinho
& Chien, 2008). The realization of economies of scale considerably will
play a role in both cost cutting and depressed prices, making the company more
competitive in the global turf wars and its products more accredited among
customers all over the world (Moutinho & Chien, 2008). In the case of the
company cutting costs and prices but synchronously improving quality, the
customers will prefer the world standardized products. Not merely reflected in
production and R, such kind of cost savings is also embodied in
procurement, distribution, promotion, advertising, logistics and the like.
Additionally, both plan and control can be bettered and staff utilization can
be maximized by being standardized, therefore creating economies of scale to
management (Theodosiou & Leonidou, 2003).

2. To shape a unified image and build a world brand.
The company adopting standardized management designs a set of brand names and
brand marks that do not conflict with local culture in most countries and
regions for its products, via the excogitation of world-prevailing and unified
product standard with advanced technology and excellent performance and
efficiency (Washington, 1998). The communications media acceptable to most of
the consumer groups is used for information dissemination and communication in
the world through the sophisticated CI image design. And the customers are
galvanized visually and acoustically and impressed with a product brand image
that is unified, distinctive and unforgettable, thus increasing their loyalty
to the brand (Richard, 2016).

 

Certainly, the differences in consumer demand
are not taken into the consideration of standardization management strategy (Cheon
& Cho & Sutherland, 2007). Regardless of their individual needs, it
believes that merely one identical demand can be found in all the consumers,
and the market segmentations that perhaps mean a lot to the company are put
aside, which makes the company exposed to the potential hazards while brings
economies of scale. After all, the demand of each consumer is naturally
different. Its fatal weakness exists in the standardized management’s failure
in meeting different needs of different consumers.

 

Competitiveness of Local Differential Business Strategy

Localization operation is the differential
management strategy implemented by a transnational corporation in accordance
with the actual situation of the place where the target market is. By applying
the differentiated strategy, it not only works to meet the specific needs of
all local markets, but also maintain the company’s differentiation competitive
advantage and make profits (Haron, 2016). Compared to the
standardized management strategy, the local differentiated business is
specifically distinguished by:

1. Its benefit of integrating into the local
culture and better meeting the needs of the local consumers. To a great extent,
consumption behaviour depends on culture as the unique spiritual wealth of a
region and a particular value historically determined. For one thing,
localization has eliminated the differences of foreign cultures
idiosyncratically, especially the estrangement formed by cultural diversities
as well as the coercion and invasion of this culture (Cavusgi, 1996). For
another, the business strategy is developed by management localization based on
the situation of different markets and the actual demand of the consumers. It
is not merely compliance with the business philosophy of being
consumer-oriented, but also makes the consumers’ satisfied changing market
needs more likely (Cavusgi, 1996).

2. Its contributions to the enterprise’s
effective allocation of global resources. As a symbol of the company highly
integrated into the local area, localization can fully share the advantages of
production and manufacturing costs in the local market and also simultaneously
make the best of capital, technology and human resources from host countries (Cavusgi,
1996). After allocating all kinds of resources around the world, the company
will spend less on total cost and increase the total benefit, therefore always
occupying a significant market share in the increasingly fierce market
competition.

3. Accurate command of the local market
demand and acquisition of the local competitive advantage. Attributed to the
indigenization market strategy, the multinational companies are in possession
of the abilities to explore various marketplaces. From the perspective of
market, the profit opportunities of the enterprises are all transferred with
the consumption demand in which there will be definitely potential business
opportunities (Haron, 2016). For the transnational corporations, the global
market is subdivided in accordance with the country and all controlled
companies are empowered for marketing plans which are customize based on the
consumer demand in each market. All actions and means are in line with the
local needs and preferences, so that the business opportunities in all
countries can be made the best.

However, the local differential operation also
has disadvantage of its own. First of all, it is less likely for the companies
in which differential operations are advocated to become dominant in the way of
costs (Viswanathan & Dickson, 2007). Since the companies are required to
make the differential operation combination according to the differentiating
demands, they fail in the realization of scale effect and the utilization of
location advantages in the way of products design and manufacturing. Secondly,
local differentiated management may trigger brand cognitive bias. In different
market segments, the separate product positioning, price strategy, distribution
strategy and promotion model of the company may obfuscate the consumers’ brand
cognition (Aaker & Joachimsthaler, 1999). Eventually, the local
differential operation goes against the company’s coordinated control in the
global (Ger, 1999). For implementing differential operation, all branches are
expected to entitle to greater autonomy, which helps to make the branches more
creative but also pose them a terrible dilemma of global coordinated control.

In this regard, the transnational corporation
shall take account of the fact that the global economic integration is on the
way and shall make strategic decisions stretching into the globe. But in the
process in which it is implemented and operated concretely, the differences in
different regions are considered on the basis of analyzing the merits and
demerits of the two means including standardization and localization. For the
multinational firms, the standardized and localized management means are
generally and synthetically used, and the proportions of differentiation and
standardization depend on the actual situation. Consequently, the concept of
“Global localization management strategy” comes forward, which is to call for
the company’s fulfilment of dual track operation between “Global
standardization operation” and “Local differentiated management” under the
strategic thought of ” To think globally and act locally”.

1. International market to be subdivided
macroscopically and all submarkets to be standardized.

There are many countries and regions in the
world, and the unique market demand of each country or region makes for an
independent submarket. Despite that disregarded market differences may render
the business failures, it is unlikely for the company to design a
differentiated product and make business plan for all countries or regions. To
make it compromised and efficient, it is subdivide the international market on
the macro level, namely to divide the whole world into dozens of submarkets
which consist of many countries or regions and have the basically identical
environment for business according to a certain standard. With a view to the
different characteristics and needs of the various submarkets, the company is
to adopt the differentiation management strategy but to insist on the highly
standardized strategy within every submarket (Zhang & Cantwell, 2013).

2. Products standardization and promotion
localization.

Relatively speaking, the implementation of
standardized operation is unlikely in international promotion for the company,
since there are tremendous gaps between the cultural backgrounds of all
countries. Of various business portfolio factors, promotion is one most
sensitive to cultural difference. And the discrepancies on the aspects of
language and education, religion, aesthetic, advertising media and even
government regulations make the company more inclined to the differentiated
promotion strategy (Bustamante, 2011). In all countries, Coca-Cola drinks
manifesting a global image of happiness, good moments and pleasure are
positioned in the same way, and they are uniquely formulated and wrapped with
red and white. But when advertised internationally, the cultural differences of
all countries must be considered. In a well-received advertisement of Coca-Cola
Company, it is to shown Joan Gobinni, a rugby player, presents his sport shirt
to a little boy who gives him a bottle of coke after an arduous match. But it
is additionally changed outside North America. Diego Armando Maradona as the
Argentine soccer legend and Nivat as Thailand football star respectively star
the advertisement for South America market and Asian market. After it’s
marching into China, Liu Xiang, the world champion of the 110 meter hurdles, is
selected (From Youtube Coca-cola advertisement).

 

 

 

Conclusion

After writing the paper and reviewing the
relevant information, I have a more profound understanding of the global
business strategies developed by the multinational corporations. The global
operation of multinational corporations is an inexorable trend of the future
development of multinational corporations. Only by accelerating the process of
globalization can all of them remain invincible in the future commercial war.
Accordingly, the selections of frameworks and strategies play critical roles
for the transnational corporations. After analysing the advantages and disadvantages of the standardization
and localization respectively, we know that it is so difficult to make it. So
we should combine the strengths of both standardization and localization as a
strategy to manage the company. Also, we should not only analyse the market,
culture differences but also investigate the preference and custom of consumer
in order to fulfil long-term development in a timely and effective way.

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