A localization strategy is possible in markets there are difference in preferences and tastes and there are no or negligible cost pressures. A firm can increase its profitability if it customizes its product to match the local market requirements. By customizing its product as per the local needs it increases its value.
The negative factor is that the economies of scale would not be there and would add to the cost of the product. However if the local pricing is able to absorb this additional cost then this problem is solved. Alternatively one could take a view that this customization would boosts the local demand for the product. This additional volume could bring in economies of scale which were not present earlier and therefore reduce the cost.
A global standardization strategy makes sense when a firm can locate its facilities in areas that give it economies of scale, where it can use its learning effects and benefit from location economies. This can be achieved in products that are cost-sensitive and require very little, if any, local responsiveness. This cannot work in the consumer industry where the local responsiveness factor plays a very important part.
This works where universal standards exist as is found in the semiconductor industry. Therefore most of the major manufacturers of memory chips and micro-processor follow the global standardization strategy.
The Forbes List has been chosen since it gives a consolidated ranking after using the following metrics:
1) Sales Turnover.
4) Market Value.
In each metric the top 2000 companies were listed. In 2013 a total of 3400 companies figured in at least one of these lists. Thompson Reuters, Bloomberg, Interactive Data and World scope databases were used to compile this data.
An equal weightage is given for each of the four metrics depending where the company figured in the 2000 list. Any company below 2000 was given a score of zero.
List of the top 20 companies by these metrics is tabulated below giving their home country and industry..
Table showing the Top 20 Companies in the World
This list includes 21 names since there was a tie for the 20 th spot. There are 9 companies from the USA from diverse industries, 5 from China, mainly from the banking sector, 2 from UK and 1 each from Netherlands, Germany, Russia Brazil and South Korea.
Increased value leads to increased differentiation between the products. Therefore the firm has to decide whether it will be seeking its profits through differentiation or would it be pursuing a low-cost strategy.
Porter has noted that when comparing cost versus differentiation, at the high end of differentiation the cost rises exponentially. The opposite is true at the low end of differentiation where very little cost change will bring about a large amount of differentiation.
One has to decide as to where one is positioning its product. In the case of airlines many made the mistake in the early days of offering low cost flights and full-service flights under the same brand. Now every airline has separated into two distinct brands. The low-cost is a totally no frills service where you pay only for the airline to transport you from point A to point B in a seat.. Everything else from your check-in baggage to any snacks or meals have to be paid for extra. There is usually just one class of travel since the aim is for low cost and no differentiation.
At the other end one has the full-service airlines which normally offer three different classes of travel. Here the differentiation between the classes, apart from the prices, is seat size, seat type, interior décor, quality and choice of food and higher free check-in baggage allowances.
Ultimately both airlines are performing the same service of transporting one from point A to point B. The extra prices and benefits are what are perceived necessary by the people using those airlines in the various classes. Even two people travelling in the same aircraft in different classes have a differentiated perceived benefit of their purchase decision. The first class passenger is willing to pay for the extra cost for the extra services he gets and the comfort in which he travels, while the economy class passenger is willing to forgo some comfort for the cost benefit he achieves.