Customization Essay

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Customization refers to the efforts of companies  to offer goods and services specifically designed or customized  according  to the needs of a particular  customer,  a group  of customers,  or  an  entire  market (country). The core of customization or customization strategy is the focus on specific customer  needs. The opposite  of customization is standardization, which refers to the efforts of companies to offer a common product  or  common  marketing  programs  throughout a particular  market, region, or the whole world. Therefore, with respect to global business, companies pursuing  the  customization  strategy  or  view treat each country as having unique features and customize their offerings accordingly instead of offering standardized  products.  That means  that  companies will modify their offerings according to differences in market characteristics, culture, industry conditions, legal environment, and marketing infrastructure (distribution  channels, advertising agencies, and media) to better serve foreign consumers.  Some terms used in the same or similar meaning  with customization are adaptation, personalization, personalized marketing, and one-to-one marketing.

There are two broad strategies regarding international  operations  of companies: the  global and  the multidomestic  strategy. In companies  implementing the global strategy, products  are the same across all countries  in which the company operates  and there is a centralized decision-making  and control system. This strategy is appropriate  when there are small differences across foreign markets  with respect  to the product  the  company  offers; this  strategy  provides cost  advantage  and  flexibility. However,  companies pursuing the multidomestic  strategy customize their offerings  for  each  market  and  give these  markets autonomy in decision making. This strategy is appropriate  when  there  are significant differences across foreign markets and companies may better serve local customers if local needs and preferences affect buying behavior. Compared to the global strategy, the multidomestic strategy is harder to design and implement due to the existence of different factors to be considered in each foreign market.

From the marketing  point of view, companies  are expected to serve consumers better through customization  than  standardization since the  ideal market segment size is one for which 100 percent  customer satisfaction  is needed.  Therefore,  customization at the  individual  level is the  highest  level of customization and assumes that each individual is different from others  and  thus  has unique  needs. Therefore, companies  need to know the specific needs of each customer  to be able to individually customize  their offerings.  For  example,  many  computer   producers now do not offer computers  with only standardized configurations; instead, they give consumers  the opportunity  to  configure  computers   according  to their needs. Similarly, companies in many industries such as automobile, clothing, real estate, and tourism offer customization opportunities to best  meet  the needs of their customers.

However, it may not be possible for some companies to customize products at the individual level since such a high level of customization increases costs and requires additional resources. As a result, some companies implement  customization at the consumer  group or segment level as well. For example, the needs of children, teenagers, and adults may be different, and thus companies customize their offerings according to the group’s needs; in addition to age, customers can also be segmented  in many other ways, for example, climate, language group, media habits, education, and income.

In addition to customization at the individual and group level, customization can be done at the country level as well; laws and regulations, traditions, and religion may necessitate such a country level customization. For example, cars with the steering wheel on the right in the United Kingdom and meatless hamburgers in India are examples of customization of products at the country level, resulting from differences in law, regulations, and religion across markets.

Customization is sometimes  referred  to as mass customization,   which  means  production and  marketing of good and services according to customers’ needs at normal or low prices that are close to prices of products  produced  in large quantities,  which  is called mass-production. When companies engage in mass-production, they are able to decrease their unit cost, capitalizing  on the  scale economies; however, with  respect  to  customized  production,  this  is not always the case since companies  need to have additional resources to produce customized or somewhat different products.  So, how are products  not so high priced in mass-customized production?  In the past, companies  could offer low-priced  but similar products through  mass-production (having taken advantage of low unit cost), but they used to offer customized or differentiated products at generally higher prices. However, technological  developments  nowadays have allowed companies  to interact  with customers  easily and effectively and also enabled quick and flexible production that together allow decreases in costs of customized  products  as well. Therefore, mass-customized products  are not priced as high as they once were.

Types

There are four types of customization: collaborative, adaptive, transparent, and cosmetic.  In collaborative customization,   companies  listen  to  their  customers and find out their exact needs. According to this information, companies then produce the product. Customized computers,  clothes, and cars are all this type of customization.  In adaptive customization,  companies produce a standard  product  but the consumer  or the end user can change the product according to his/ her needs. For example, think of two chairs. One is not adjustable, whereas the other  is adjustable. The latter gives opportunity to the end user to adjust the chair and is an example of a product  for adaptive customization. In transparent customization,  companies offer individual customers  unique products  without telling them directly. This kind of customization occurs when companies can foresee customers’ specific needs. Companies  implementing  transparent customization observe consumers  without interaction  and based on this observation and further analyses, companies forecast the needs of customers  and produce accordingly. In cosmetic customization, consumers use a product in a similar way, but they do change the way the product is marketed. For example, through different packaging, advertisement, marketing materials, promotion, placement, terms and conditions, and brand names, a particular product is highly customized psychologically or emotionally but not functionally.

There are several patterns  and various degrees of customization that firms can adopt to do business in international  markets.  The  most  common  of these are obligatory and discretionary  product  customization.  An obligatory  or  minimal  product  customization  indicates  that  a company  is urged  to introduce minor changes or modifications in the product design for either of two reasons. First, customization may be obligatory to enter and operate in a particular foreign market. Second, customization may be forced by external environmental factors, including the special needs of the foreign market. In brief, obligatory customization is related to safety regulations,  trademark  registration,  quality, and  media  standards.  An obligatory customization requires  mostly physical changes in a product. Discretionary, or voluntary, product customization reflects a sort of self-imposed discipline and a deliberate move on the part of an international company to build stable foreign markets through  a better alignment  of product  with market  needs and/or cultural preferences.

Many factors necessitate  customization,  and customization may require significant changes in the design, manufacturing system, distribution,  and marketing  of the product  in foreign markets.  These changes will no doubt  bring additional  costs, and if the  company  has operations  in many  foreign  markets, then  the costs will further  increase due to the increased number of adaptations. Therefore, if possible, companies usually prefer standardization because it is easier and  less costly than  adaptation.  Others implement customization to meet local customer needs and mandated regulations. In most cases, companies implement standardization and customization simultaneously at varying degrees since it is rarely feasible or practical to follow a one offering–one  world strategy across all different markets. Convergence of regional preferences,  regional economic  integration, harmonization of product  standards,  and growth of regional  media  and  distribution  channels  all make regional customization more  feasible than  pursuing global standardization.

In conclusion,  customization offers opportunities to companies  to better  serve their  customers  since companies  can create  greater  variety in their  products to be sold at competitive prices because products are produced according to customers’ specific needs. When  companies  are able to find opportunities for mass-customization by identifying unique  needs  of consumer  groups, they can gain benefits from offering both  unique  and relatively low-priced products. Companies may also have to customize their offerings for a foreign country since laws, traditions, life styles, and religion necessitate customization.

Bibliography:   

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  2. Thorsten Blecker, Innovative  Processes and  Products  for Mass Customization  (Gito, 2007);
  3. T. Cavusgil, G. Knight, and J.  R. Riesenberger,  International   Business,  Strategy, Management, and the New Realities (Prentice  Hall, 2008);
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  5. Lars Hvam, Niels Henrik Mortensen, and Jesper Riis, Product Customization (Springer, 2008);
  6. C. Jain, Marketing Planning & Strategy (Thomson, 1997);
  7. Levitt, “The Globalization of Markets,” Harvard Business Review (May–June, 1983);
  8. Haim Mendelson and Ali K. Parlakturk, “Competitive Customization,” Manufacturing & Service Operations Management (v.10/3, 2008);
  9. J. Pine II and J. H. Gilmore, “The Four Faces of Mass Customization,” Harvard Business Review (v.75/1, 1997);
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  11. M. Tseng and J. Jiao, “Mass Customization,” in Handbook of Industrial Engineering, Technology and Operation Management, Gavriel Salvendy, ed. (Wiley, 2001).

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