Standardization in business refers to the maintenance of some level of consistency in the product or service between outlets. The idea behind standardization is that all the outlets involved should enjoy mutual gains by employing similar tried and tested strategies. For instance, the coffee giant Starbucks in different parts of the world seems to offer a similar setting, products and services due to standardization of their franchise and outlets. Coca-Cola is another entity that employs global standardization throughout their marketing mix, especially with regards to the Product, Promotion and Distribution strategies. The advantages of this include:
- Lowered costs since the company employs similar strategies across different outlets and this helps them enjoy economies of scale.
- It ensures they protect their brands adequately since changes and differences in the offerings expose the brands to risks.
Disadvantages of standardization include:
- Lack of adaptation, since markets are different and dynamic, standardization is always challenged to meet these changes.
- Lack of uniqueness; different outlets and regions offer unique opportunities which may be beneficial to the company, but due to standardization these opportunities are not acted upon since all outlets are forced to conform to the standard practice.
Major branded hotel chains have the choice of standardizing their offerings across the brand or of letting individual properties customize their offerings to meet the needs of local markets.
The most obvious advantage of standardization is quality control, guaranteeing the customer of a uniform experience across the brand, irrespective of the ownership of the individual franchise. A second advantage is that it can reduce costs by enabling all hotels in a chain to take advantage of economies of scale and negotiate lower prices from suppliers.
The main disadvantage to standardization is that it reduces the flexibility of a chain to cater for regional tastes and expectations. As hotel chains increasingly rely on global revenue, this becomes a problem, as the needs and tastes of customers in areas as diverse as Nigeria, India, China, Dubai, Canada, Germany, and Chile, for example, are quite different.
The major advantage of standardizing the products on offer is that it builds up a brand that can be recognized by everyone. A person stopping at a McDonald's for example, knows exactly what they are going to be able to get. It allows them to have confidence in the particular store they are stopping at because they know it through its branding and its standardized products.
The major disadvantage of such standardization is that it robs the individual stores or franchises of any serious uniqueness. To use McDonald's again, when a McDonald's in Honolulu, Hawaii and one in New York City are essentially identical, there is no sense of place. This may not matter for fast food restaurants, but it may be more important in sectors of the hospitality industry like hotels.
So, the major tradeoff is between the security that comes with being part of a standardized brand and the uniqueness that comes with a lack of standardization.