This is essentially the point where a global business strategy differs from a national business development strategy as different other factors such as product standardization and adaptation come in. The factors of product differentiation and diversification are relevant in the case of both national and global business strategy in the wake of rising competition in both the national and international market. Global business strategies have emerged as a result of globalization and internationalization of established domestic companies which is purported to increase the value of the company in question. Increasing pressure of globalization and the rising global competition have prompted managers and academicians to rethink the formulation of global business strategy. As previously mentioned, global business strategies rests on two pillars of standardization and adaptation which have been in severe conflict in the recent years. This debate have been backed by claims of theorists from both sides who have exchanged salvos regarding which of the two is more profitable for the global businesses functioning in a unique set of circumstances.
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. This is mainly explained by the fact that basic human needs are the same in all countries across the world. This strategy to expand the global business has been supported by personalities such as Levitt, Buzzell, Yip, Loewe and Yoshino. The concept of standardization first emerged in the 1960’s and then again resurfaced in the 1980’s and it has been adopted very effectively by many Japanese and European firms which have experienced higher levels of product and process innovations which in turn have acted as source of comparative advantage for these companies in the international market. The arguments in favor of the global business strategy of standardization are as follows: -
At the opposite end of the spectrum, advocates of the strategy of market orientation using the techniques of adaptation or local adaptation argue that while basic human needs may be similar everywhere, standardization may not be the word as differences in cultural and other environmental factors significantly influence the buying pattern of people in different countries. Supporters of this theory include Boddewyn, Soehl Picard, Douglas, Sommers and Kernan.