IntroductionWith the furtherdevelopment of economy, economic globalization has become the basic trend ofworld economic development, and the production and operation activities of allcountries or regions will be integrated into the global economy. A unified andnetworked market system will be shaped the world over. Nevertheless, there haslong been a dispute between standardization and localization for the selectionof a business strategy by the transnational corporation. The former argues thatin the company’s option of standardization management strategy, scale economyand experience curve can be used for larger cost reduction, while the latterinsists that the enterprise’s localization management strategy to be chosen isto satisfy the requirements of various countries and regions (Cheon & Cho& Sutherland, 2007).
In this essay, it will be discussed. Standardization as a Regular PracticeStandardization refers to that atransnational corporation provides a unified product in a national, regional orglobal market (Theodosiou & Leonidou, 2003). In the case of othersimilarities, standardization will be generally selected.
Besides, a company ismore apt to all or partial standardization of the business strategy in theoverseas market, since the adoption of this management strategy has thefollowing advantages:1. To obtain scale economy and make pricespredominant. R&D and mass-produced standardized products will contribute tothe company’s product development and research as well as the scale economyarising from the manufacturing process (Moutinho& Chien, 2008). The realization of economies of scale considerably willplay a role in both cost cutting and depressed prices, making the company morecompetitive in the global turf wars and its products more accredited amongcustomers all over the world (Moutinho & Chien, 2008). In the case of thecompany cutting costs and prices but synchronously improving quality, thecustomers will prefer the world standardized products. Not merely reflected inproduction and R, such kind of cost savings is also embodied inprocurement, distribution, promotion, advertising, logistics and the like.
Additionally, both plan and control can be bettered and staff utilization canbe maximized by being standardized, therefore creating economies of scale tomanagement (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 andbrand marks that do not conflict with local culture in most countries andregions for its products, via the excogitation of world-prevailing and unifiedproduct standard with advanced technology and excellent performance andefficiency (Washington, 1998). The communications media acceptable to most ofthe consumer groups is used for information dissemination and communication inthe world through the sophisticated CI image design. And the customers aregalvanized visually and acoustically and impressed with a product brand imagethat is unified, distinctive and unforgettable, thus increasing their loyaltyto the brand (Richard, 2016). Certainly, the differences in consumer demandare not taken into the consideration of standardization management strategy (Cheon& Cho & Sutherland, 2007). Regardless of their individual needs, itbelieves 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 putaside, which makes the company exposed to the potential hazards while bringseconomies of scale.
After all, the demand of each consumer is naturallydifferent. Its fatal weakness exists in the standardized management’s failurein meeting different needs of different consumers. Competitiveness of Local Differential Business StrategyLocalization operation is the differentialmanagement strategy implemented by a transnational corporation in accordancewith the actual situation of the place where the target market is. By applyingthe differentiated strategy, it not only works to meet the specific needs ofall local markets, but also maintain the company’s differentiation competitiveadvantage and make profits (Haron, 2016). Compared to thestandardized management strategy, the local differentiated business isspecifically distinguished by:1. Its benefit of integrating into the localculture and better meeting the needs of the local consumers. To a great extent,consumption behaviour depends on culture as the unique spiritual wealth of aregion and a particular value historically determined. For one thing,localization has eliminated the differences of foreign culturesidiosyncratically, especially the estrangement formed by cultural diversitiesas well as the coercion and invasion of this culture (Cavusgi, 1996).
Foranother, the business strategy is developed by management localization based onthe situation of different markets and the actual demand of the consumers. Itis not merely compliance with the business philosophy of beingconsumer-oriented, but also makes the consumers’ satisfied changing marketneeds more likely (Cavusgi, 1996).2. Its contributions to the enterprise’seffective allocation of global resources.
As a symbol of the company highlyintegrated into the local area, localization can fully share the advantages ofproduction and manufacturing costs in the local market and also simultaneouslymake the best of capital, technology and human resources from host countries (Cavusgi,1996). After allocating all kinds of resources around the world, the companywill spend less on total cost and increase the total benefit, therefore alwaysoccupying a significant market share in the increasingly fierce marketcompetition.3. Accurate command of the local marketdemand and acquisition of the local competitive advantage. Attributed to theindigenization market strategy, the multinational companies are in possessionof the abilities to explore various marketplaces.
From the perspective ofmarket, the profit opportunities of the enterprises are all transferred withthe consumption demand in which there will be definitely potential businessopportunities (Haron, 2016). For the transnational corporations, the globalmarket is subdivided in accordance with the country and all controlledcompanies are empowered for marketing plans which are customize based on theconsumer demand in each market. All actions and means are in line with thelocal needs and preferences, so that the business opportunities in allcountries can be made the best. However, the local differential operation alsohas disadvantage of its own.
First of all, it is less likely for the companiesin which differential operations are advocated to become dominant in the way ofcosts (Viswanathan & Dickson, 2007). Since the companies are required tomake the differential operation combination according to the differentiatingdemands, they fail in the realization of scale effect and the utilization oflocation advantages in the way of products design and manufacturing. Secondly,local differentiated management may trigger brand cognitive bias. In differentmarket segments, the separate product positioning, price strategy, distributionstrategy and promotion model of the company may obfuscate the consumers’ brandcognition (Aaker & Joachimsthaler, 1999). Eventually, the localdifferential operation goes against the company’s coordinated control in theglobal (Ger, 1999). For implementing differential operation, all branches areexpected to entitle to greater autonomy, which helps to make the branches morecreative but also pose them a terrible dilemma of global coordinated control.In this regard, the transnational corporationshall take account of the fact that the global economic integration is on theway and shall make strategic decisions stretching into the globe. But in theprocess in which it is implemented and operated concretely, the differences indifferent regions are considered on the basis of analyzing the merits anddemerits of the two means including standardization and localization.
For themultinational firms, the standardized and localized management means aregenerally and synthetically used, and the proportions of differentiation andstandardization depend on the actual situation. Consequently, the concept of”Global localization management strategy” comes forward, which is to call forthe company’s fulfilment of dual track operation between “Globalstandardization operation” and “Local differentiated management” under thestrategic thought of ” To think globally and act locally”.1. International market to be subdividedmacroscopically and all submarkets to be standardized. There are many countries and regions in theworld, and the unique market demand of each country or region makes for anindependent submarket.
Despite that disregarded market differences may renderthe business failures, it is unlikely for the company to design adifferentiated product and make business plan for all countries or regions. Tomake it compromised and efficient, it is subdivide the international market onthe macro level, namely to divide the whole world into dozens of submarketswhich consist of many countries or regions and have the basically identicalenvironment for business according to a certain standard. With a view to thedifferent characteristics and needs of the various submarkets, the company isto adopt the differentiation management strategy but to insist on the highlystandardized strategy within every submarket (Zhang & Cantwell, 2013).2.
Products standardization and promotionlocalization. Relatively speaking, the implementation ofstandardized operation is unlikely in international promotion for the company,since there are tremendous gaps between the cultural backgrounds of allcountries. Of various business portfolio factors, promotion is one mostsensitive to cultural difference. And the discrepancies on the aspects oflanguage and education, religion, aesthetic, advertising media and evengovernment regulations make the company more inclined to the differentiatedpromotion strategy (Bustamante, 2011). In all countries, Coca-Cola drinksmanifesting a global image of happiness, good moments and pleasure arepositioned in the same way, and they are uniquely formulated and wrapped withred and white. But when advertised internationally, the cultural differences ofall countries must be considered. In a well-received advertisement of Coca-ColaCompany, it is to shown Joan Gobinni, a rugby player, presents his sport shirtto a little boy who gives him a bottle of coke after an arduous match.
But itis additionally changed outside North America. Diego Armando Maradona as theArgentine soccer legend and Nivat as Thailand football star respectively starthe advertisement for South America market and Asian market. After it’smarching into China, Liu Xiang, the world champion of the 110 meter hurdles, isselected (From Youtube Coca-cola advertisement). ConclusionAfter writing the paper and reviewing therelevant information, I have a more profound understanding of the globalbusiness strategies developed by the multinational corporations. The globaloperation of multinational corporations is an inexorable trend of the futuredevelopment of multinational corporations. Only by accelerating the process ofglobalization can all of them remain invincible in the future commercial war.
Accordingly, the selections of frameworks and strategies play critical rolesfor the transnational corporations. After analysing the advantages and disadvantages of the standardizationand localization respectively, we know that it is so difficult to make it. Sowe should combine the strengths of both standardization and localization as astrategy to manage the company. Also, we should not only analyse the market,culture differences but also investigate the preference and custom of consumerin order to fulfil long-term development in a timely and effective way.