1. Benefits and Drawbacks of Adaptation
The term Globalization has gained a lot of attention in recent times. It has touched every aspects of life with embracement along with criticism. Globalization impacts culture and economy of any country by increasing diversity. Globalization means new opportunities and benefits for any company. Companies take advantage of economy of scale by supplying same products in international market. Companies sale their products at lower rates so that customers could buy these products even if products are not same or as per customer’s requirements. Various companies are known for their undifferentiated and homogeneous products that they stick to their western derivation. People in other nations buy those products because they perceive them as luxury or quality products. Associated culture of western countries is also a reason for buying those products.
It is not always necessary that company have same homogenous products or services will succeed in international market. Cultural and economical factors play a major role in products and service design. People from different countries have different sets of needs: International marketing aim at identifying and fulfilling those needs by customizing their products and services. Product and services should always focus on providing satisfaction to the customers. Success of any product varies from country to country. Number of competitors existing in international market also impacts marketing strategy. If a company is not able to provide better product at reasonable price, it may not succeed in market. It is very important for any organization to formulate correct strategy of adaptation or standardization.
Zebra technologies is producer of variety of printers cater to different needs of customers. Company is having it’s headquarter in Lincolnshire, United States of America and serve customers across the globe. Company wants to expand its business in Russian market by offering lesser printer for personal computers. Company is developing strategy for launching lesser printer in Russian market. The biggest challenges in front of Zebra are: whether to sell standardize product or to go for product adaptation. What all advantages will be associated with product adaptation and can company control its pricing.
(i) Advantages of selling standardize lesser printer in Russia: Selling same standardize product in Russia will offer some benefits to Zebra like:
Cost Reduction: Zebra will be able save cost by offering same product in Russia. Company will reduce cost of production as the product is same and can be produced in bulk. If we analyze the supply chain of Zebra we will find that company can save cost at most of the process of supply chain like: procurement, logistics, manpower and marketing. Customizing some features like language, design of few parts will require development of software in different language and will also require procurement of modified parts. Company is also not required to allocate separate marketing and product promotion budget as the product will remain same.
Brand Image: Zebra Technologies is known for providing high quality products and services. If company will offer same product; the perceived value of product will remain intact. Customers reinforce the positive image of brand if product is standardized. It helps in spreading word-of-mouth publicity of the products.
Simplified Operations: standardization helps in keeping all the process simple. Making any change in design or software will lead to complicated process. A separate division will require working on adapted product. Simplified processes helps in minimizing errors related with product defects, communication, logistics, inventory management and the like.
Improved Quality of Product: keeping standardize product make process simple hence company can focus on producing high quality product. Complex processes are hindrance in research and development of product. Simplified processes also make sells monitoring and customer management process stronger.
(i) Advantages of selling adapted lesser printer in Russia: adaptation of product refer to changes made in product, to meet the requirements of customers of different countries. Selling adapted lesser printer in Russia will help Zebra in following ways:
Meeting Mandatory Requirements: adaptation will help company to follow the government guidelines like having specific voltage requirements or design of equipments etc. these kinds of adaptations are mandatory and company is required to meet them if wants to serve Russian market.
Local Requirements: zebra will be able to bridge the gap between expectations and offerings. Company will be able to fulfill customer’s needs and to provide customer satisfaction. It will be difficult for Zebra to sell its product having standard language because In Russia majority of the population is aware with Russian language and very few numbers of people knows foreign languages. If company will modify software of printer to serve people in desired language; it will help in providing customer satisfaction.
Increased Revenue: the sales of product will go up if product is able to meet the requirements of customers. Adaptation also make product different from competitors which provide a strong positioning to the product in foreign market. Zebra will be able to meet all additional cost incurred in product adaptation by selling higher quantity of the product.
Physical and Perceptual Positioning of the Product: adaptation will make product more consumer friendly which help in positioning the product better then competitors. The company will also be able to build strong brand image and positive publicity.
(iii) Factors Affect Product Adaptation Decision: In competitive era companies are more customers centric; they want to offer best solutions to customer needs. Customer’s needs are not same across the globe. Product adaptation make product user-friendly as their needs. There are various factors that are responsible for different needs and requirements of customer.
Cultural Factors: culture of any nation play major role in developing different habits and influence consumer behavior. Consumers from different countries have different language, life style, eating habits, shopping habits, working culture, buying pattern and the like. Companies those are unable to measure these patterns and introduce standardize product in foreign markets do not perform well. For example Electrolux that was operating successfully in American market thought that European market is also same. Electrolux introduced same refrigerator model across the Europe. In Europe customers eating and shopping habits changes from one location to another location hence the product was a big failure in European market. Culture impact the purpose of products which may not be same for which product is designed. For example washing machines are used by Chinese for cleaning potatoes. In some part of India people use washing machine to make local beverages. It is very important to understand local requirements and differences in order to modify product as per needs of customers. Companies like Coca-Cola and Pepsi change their positioning as per needs of international consumers.
Psychological Factors: these factors also play an important role in decision of product adaptation. It is not necessary that consumer attitude towards product’s tangible and intangible characteristics will remain same across the borders. People from different countries have different economy, different competition that influences their attitude towards pricing, packaging and promotion of products. For example Cadbury has different packaging and pricing in different countries. Various clothing companies like Levis, United color of Benetton, Mango etc. change their design and sizing pattern according to average body built of population of that country.
Legal and Government Compliances: these are mandatory requirements that company need to fulfill for entering into specific country. These requirements vary from company to company.
Economy of Foreign Country: income level of population changes from country to country. Rich nations have higher income level and can afford more expensive product whereas developing countries have lower income level. Companies are required to change their pricing strategy considering the income level of target country. For example cosmetic companies like Revlon, L’Oreal introduced low cost skin and hair care products to capture Indian market.
Competitive Scenario: product adaptation decisions also get influenced by competition level in international market. Company is required to make changes in products to provide addition or unique benefits to the customers. For example baby strollers are started coming with tracking equipment GPS. Mobile phones are coming with projectors.
(iv) The biggest challenge in front of Zebra Technologies is pricing strategy of their product in Russia. The income level of Russian is lower than American hence company is required to reduce prices of its printer to tap Russian market. Zebra need to cut down cost and expenditure from various sources to reduce the final price of the product.
Reducing Production Cost: company can reduce the production cost by increasing labor productivity. Company may involve people from bottom of pyramid. Company can find suitable skills with the help of local government and non-government organizations. The people from this level are in need of income: in exchange they perform their duty effectively. Lean production can also be an option to reduce cost. Inventory management is also a huge expenditure for company. Effective inventory control can pull down the cost. Advance planning of procurement can bring down the cost of raw material.
Reduction in Marketing Cost: having multiple layers of supplier, distributors and retailers cut down the margin on products. Establishing direct marketing channel can help in increasing margins which can be passing on to customer by lowering the cost. For example shakti project of Unilever involves various direct-selling agent from bottom of pyramid. It helps organization to reduce poverty and gain benefit from vast untapped market. Establishing a direct marketing channel will also reduce the advertisement expenditure of company.
Volume Selling: if company wants to reduce the prices of its product, they can recover the profit by selling higher volume of product. Many companies have not yet realized the potential available in remote and rural areas. Exploring untapped market can also help Zebra to reduce pricing of the product.
2. Activity Location in Global Value Chain
Value chain of any organization is set of all activities carried out by organization starting from procuring raw till final use of product and after sales services. Value chain includes all activities like pre planning, production, packaging, distribution, marketing, distribution, sales and after sales services to consumers. The spread of value chain can range from one single location to multiple locations. The spread of value chain varies depending upon nature of product or service and benefits attached to the locations. Global value chain refers to operation of multiple organizations across the globe. Globalization has created one world market. All companies are ready to tap opportunities existing outside of their country. Local markets are getting saturated and companies are exploring new locations. Companies are focusing on their core activities and moving other activities to different organizations by joining hands together. This process created global value chain.
(i) Majority of the companies keep certain amount of duplication while operating or expending business in other countries. Companies get benefited in some ways by keeping some amount of duplication. Companies are operating in highly competitive environment that are interlinked. Customer requirements and desires change from one location to other. The level of competition also does change from one location to other. It is very important for organizations to modify their positioning and strategy to be successful in international market. Companies are required to develop some advantages over their competitors. Firms develop such advantages in cost effective manner so that the advantages will not cost additional money from consumer’s pockets. On the other hand they should also not compromise on quality of the products. Companies are required to have special resources, skilled manpower and potential to sustain these advantages that are not imitable by rivals. With the help these advantages company deliver superior quality product at effective prices. Company replicates its unique advantages while positioning in international market. This duplication process is not easy; it requires deployment of specialized skills, resources and capacity across various markets. Organizations are also required to communicate learning and knowledge from one place to another. Some amount of duplication help organization to maintain their unique feature and values they are offering to consumers.
Example: Procter & Gamble very effectively duplicated their unique brand management strategy in different countries. Company also focus on mass merchandising and position its product accordingly. Their product Ariel positioned in European market as low-temperature washing powder. In America it is used as all-purpose washing powder. WalMart is also successfully duplicated its operational efficiency in other markets of Asia and Europe.
(ii) Strategic Advantages: these advantages can be defined as competitive advantages organizations have over its competitors in same industry. Organizations have strategic advantages if they have one or combination of more than one advance factors over rivals. These advantages could be like having smooth access to raw material, having advance technology and the like. Company can achieve competitive advantages by implementing unique strategy and delivering higher performance level. To gain strategic advantages company utilize those resources in very effective manner that have capacity to perform stupendously.
The strategic advantage can be developed from followings:
Efficiency – organizations can develop strategic advantages by having smooth access to skilled labor, production material, untapped market and economy of scale. Company can also gain advantage by introducing old products in developing or poor countries.
Strategic – company can gain advantage by introducing product first time in the market. For example Maggie and Kellogg’s corn flax in Asian market. Cross subsidization and transfer price also help in gaining competitive advantages.
Brand Image – positive perceived image of company in international market is an advantage.
Comparative Advantages: these advantages are related with capacity of an individual or nation to produce specific product or service in very less marginal cost than others. If any other nation is rather efficient in developing all the goods, both countries can trade in different efficiencies. For example if one country can produce ten cars or ten trucks in one day by using labour and equipment and other country can produce 6 cars or 3 trucks in one day, both may get benefited by trading if they will trade between car and truck. The efficient nation is having comparative advantage in truck production. This country can move its worker for truck production and exchange it for two cars per trucks.
Any organization can gain optimal benefits by combining both of advantages. Strategic advantages provide them an edge over their competitors and organization can enjoy good market share as well as revenue. Comparative advantages also help them in getting more value from their efficient operations and resources. It is very important for organizations to effectively position its brand in global market and utilize full available resources. Combination of strategic and comparative advantages enables companies to fully utilize available resources and gain maximum profit.
(iii) Market integration requires companies to assess the location based benefits associated with different value chain activities. Companies need to analyze whether multiple activities at one location will bring more efficiency or spread of activities at different locations will be more beneficial. Activities that are creating strategic advantages for the company need to place very strategically. Production and research & development are two most important activities holding upper position in value chain. Research and development is very important function which play major role in bringing product innovation. Generally company placed their Research and development centre along with manufacturing centre because of economy of scale. If a company is not able to locate both activities together due to some condition; they can establish a proper formal communication linkage between both locations. A formal communication system will help in exchanging information and systematic operations.
While deciding upon location of Research and development function following factors need to be considered:
Research and development function should be placed in same location where problem solving and market research functions are taking place. Any problem or research findings can lead to ne innovative product. For example Procter and Gamble have research department for washing powder at three locations: Europe, America and Japan. All centers work on different problems and develop new product after exchange of information.
Location of Research and development function near rival can be beneficial in terms of getting more information about their future move, strategic plan and innovations.
It is very important to use advance technology to communicate and exchange information. Different locations of Research and development function can help in generating a unique idea or concept that could be potential strategic advantage of the company.
In the field of technology innovation play major role in providing advantage over competitors. Companies like Dell and Toshiba that are one of the largest computer selling organizations positioned themselves as technology oriented brands. Dell is highly focused on providing best customer services and sell product on call through limited outlets. For Dell location should be integrated with problem solving and research department. Whereas in case of Toshiba location should be selected keeping in mind different countries and regions company is serving. Company should decide the location by focusing on changing needs and increasing competition in markets.
George S. Yip and Tomas Hult. (2002). Total Global Strategy. New Jersey: Prentice Hall.
Prahalad, C. K. (2010). The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Upper Saddle River, New Jersey: FT Press and Wharton School Publishing.