Benefits and Risks of Outsourcing to Low Cost Countries
Apparel and luxury value chains have come up with strategies so as to be cost competitive, increase the income, and expand the market for their goods. Outsourcing the end-to-end supply chain means that activities of an organization are carried out by an external company that specializes in these activities (Pickles et al., 2015). More so, a company can pay attention to its key competencies satisfy consumers, and be more flexible in maintenance and operation of its supply chain.
Apparel and luxury industry is very volatile today, frequent changes in expenses, risks, and demands for materials and goods as well as the changes in factors like international business environment are some of the challenges affecting the end-to-end supply chain. Anything that halts or reduces the movement of material, as well as the apparel and luxury goods, are considered a problem to the supply chain (K3SoftwareSolutions, 2017).
Outsourcing Benefits
Apparel and luxury companies have been able to expand their supply chain to many different countries and migrating to outsource manufacturing which has seen reduction in the cost of production. This strategy has promoted division of labor throughout the end-to-end supply chain by allowing company to concentrate on principal business undertakings. The organization is allowed to concentrate on its core competencies while specialist suppliers are given non-core undertakings (Handfield, 2017).
Suppliers who can carry out the processes more efficiently are tasked with this role and therefore outsourcing in low cost countries helps make the supply chain more effective. International brands have been allowed to create a completely responsive supply chains as well as bringing apparel and luxury products of low price to the shelves of stores (Handfield, 2017). Low priced goods are as a result of using external company’s expertise, knowledge and links to make cost-effective plans. Besides, time is economized since the time taken in designing, and delivering new clothes and luxury products to the market has been reduced from over a year to only a few weeks (Handfield, 2017).
Through outsourcing in low-cost countries, companies have been able to achieve effective processes, low-priced goods, and consumer satisfaction leading to outstanding performance and strategic advantage. Supply chain also becomes more flexible as the company has freedom to choose who they can do business with. Also, outsourcing enables the end-to-end supply chain of the organization to be more traceable (Robinson, and Hsieh, 2016).
Outsourcing-Low-Cost-Countries
Outsourcing Risks
Despite the benefits, an organization exposes their brands to great risks through outsourcing because it becomes a supply chain against supply chain. When going after cheap labor, apparel and luxury companies have been putting immense pressure on the suppliers who in turn are ready to reduce their invested capital to have low costs (Handfield, 2017). So as to compete with other businesses in the low-cost countries, suppliers forwent investments and labor practices that reduces the safety standards in a company and this is likely to damage the brand image of the apparel.
Poor working conditions in the apparel and luxury industry so as to maintain common local codes in low-cost countries is a disadvantage to the supply chain (Handfield, 2017). Another challenge to the supply chain is the abroad manufacturing delays. Apparel and luxury stores that are in western countries are progressively relying on the clothes and accessories from countries like China. Most newcomers to the industry may be found off guard by the delayed manufacturer (K3SoftwareSolutions, 2017). Moreover, damaged shipments and some that get lost is another menace to the apparel and luxury industry. Possible unseen costs such as inflated shipping price can result.
Besides, there are possible setbacks to the supply chain for instance late receiving of inventory leading to consumer dissatisfaction, loss of income and problems in the end-to-end supply chain. Problems may also arise during integration of the two Apparel and luxury companies affecting supply chain. If the hired company economize, use cheap materials or even fail to assess risk fully, the supply chain will be affected due to decreased sales and brand equity (Meeken, 2013).
Conclusion
Outsourcing
in low-cost countries helps Apparel and luxury companies be more efficient in
their operations because they concentrate of core competencies and they can
produce cheaper clothes and accessories as well as satisfying consumers,
therefore, affecting supply chain positively. However, there are risks involved
such as pressuring suppliers to reduce investment capital to keep low costs.
More so, companies adopt common local standards which can ruin the brand image
and problems in the hired company can also affect the organization negatively.
References
Handfield, R. (2017, August 23). Needed: A New Way to Manage Risk in Low Cost Countries. Supply Chain Resource Cooperative.
K3 Software Solutions, (2017, December 8). Supply Chain Challenges in Apparel Industry and How You Can Fix Them. Fashion ERP.
Meeken,
Z. (2013, June 13). The Risks and Benefits of Outsourcing Supply Chain
Management. Business.org.
Pickles
J, Plank L, Staritz C, Glasmeier A (2015) Trade policy and regionalisms in
global clothing production networks. Camb J Reg, Econ Soc 8(3):381–402
Robinson, P. K., & Hsieh, L. (2016). Reshoring: a strategic renewal of luxury clothing supply chains. Operations Management Research, 9(3-4), 89-101.
Did you find any useful knowledge relating to outsourcing in this post? What are the key facts that grabbed your attention? Let us know in the comments. Thank you.
Behavioral Finance and
the Psychology of Financial Decision
Behavioral finance and financial decisions have a big role in shaping critical decisions that people make. The study summarizes the facts about financial choices and the behavioral and psychological theories influencing them. We learn that people have predisposed cognitive constraints coupled with low levels of financial literacy, in such regard, their decision-making choices violate sound financial principles. The case studies teach us that most investors and managers over-extrapolate from past returns and trade, or they make decisions based on overconfidence and personal history.
We explain most of these behaviors based on behavioral finance theories like prospect theory, behavioral finance, and behavioral corporate finance. Many companies and institutions today shy away from traditionally defined benefit pension plans in favor of defined contribution plans, in such circumstance, the role of the financial adviser is gaining an integral value.
In this case study, a recent graduate from UMUC is employed to advise different clients on investment. The consultant delves into studying the biases in financial behavior that predict prospective theory. While applying the key concepts of behavioral finance, the consultant can recognize that the client (Violet) displays behavioral biases that impede optimal savings and consumption allocation. He can learn this by deducing from concepts of finance that assess how people organize their financial assets by creating separate slots for money designated for specific roles as well as other approaches such as mental accounting.
Expected Utility and Prospect Theory:
Unlike most of the economic
theories, Expected utility theory is the most preferred by scholars ((Shiller, Robert J.). The approach attracts people
because it has the best economical representation characterizing true rational
behavior in uncertain situations. However, application of expected theory is
criticized in many circumstances because of the systematical misrepresentation
of human behavior.
Allais (503)
proved that Prospect Theory refers to a mathematically developed theory
that substitutes “value function” contrasted to “utility function” and
“weights” contrasted to “probabilities” in expected utility theory. Here,
people work to increase the weighted total value instead of utility such that
probabilities do not equal weight. Simply put, people view extremely probable as
certain but the improbable events as impossible.
In many circumstances, prospect
theory appears inconsistent with expected utility theory. To begin with, in
probabilities, utility is all linear but not value. Also, value is defined
regarding losses and profits, but utility depends on final wealth.
Contrary to expected utility
theory, prospect theory foretells that preferences depend on how a problem is
approached. In case the reference point defines the outcome as an advantage, in
this case, the resulting value function will be curved in, and those making
decision will be risk-averse. But if the
reference point’s outcome is seen as a loss, those making decisions will be
risk seeking since is a convex value function.
Violations of Expected Utility
The possible abuses of this theory
include the Allais paradox (certainty effect), and inflation of small
probabilities. As for Allais paradox, there is an extreme underweighting of
high probabilities. In such a case, it falls short of certainties such that the
travel time outcomes become extremely attractive. On the other hand, inflation
of small probabilities violation projects itself in the form of a set of
stated-preference route-choice challenges.
Value Function
The definition of the value function lies on variations from a reference point,
and in most circumstances, it is risk aversion–concave for gains, convex for
losses. Similarly, value function is acute for losses than for profits. In this
case, the stress of decisions is less compared with the equivalent
probabilities, with few exceptions in the assortment of low probabilities. A value strategy deals with the
purchase of stocks that have low prices compared with the dividends, earnings,
book assets, or similar measures of significant value.
The Implications of Prospect Theory for the Efficient Market Hypothesis
An efficient market, based on the definition
by (Fama 1965), is characterized by a large pool of rational profit maximizers
who compete against each other to interpret the market prices of individual
securities in the years to come; out of which a large pool of the present
information is easily available to all participants. The prevailing competition
in such a market opens the effects of new information on the actual prices in
an instantaneous way. In such a way, the prospect theory sets in under the
circumstance that makes stock price unpredictable following a random pathway.
Provided that information flow is
unrestricted and quickly reflects in the stock price, the probability for the
future price to change will depend not on today’s price changes, but on
tomorrow’s news. Given that news is unpredictable, consequently, price changes
also turnout unpredictable, and this conforms to the principle of prospect
theory whereby people view extremely probable as certain but the improbable
events as impossible.
Efficient
Market Hypothesis is characterized by the security prices that reflect
available information. It is based on the traditional view that investors use
rationale in executing the present information to increase the expected
utility.
Anomalies
The
Anomalies of Efficient Market Hypothesis’ set in when people feel there is
something wrong with the concept of Efficient Market Hypothesis. Under such
conditions, the rational approaches of investors lacks consistence. It is not wholly
right and must be analyzed alongside other human behavior approaches like the
prospect theory, overconfidence, or expected utility, or over and under
reaction, as well as the limits to arbitrage. Examples of anomalies as
expressed by prospect theory include the size, valuation, and the momentum
effect.
The Valuation Effect. Studies reveal that firms with higher P/B multiples are outperformed by those with low price/book (P/B) multiples.
The Size Effect. Studies predict that firms with smaller market capitalizations outperform those with large market capitalizations, disregard of the controls in their higher risk.
The Momentum Effect. Studies reveal that firms with good performance for the past six months to one year period outperform those that performed poorly over the same period.
Bias identification and how such behavioral finance concepts affect their investment decisions
The First Colleague: The Concept of Illusion of Control
The stated bias happens when people overly
justify their ideas. It describes people’s propensity to believe that they can
exert influence on the outcomes of action when, in the real sense, they cannot.
When this kind of bias occurs, people behave as if they can fully control their
situations than they actually can ((Ising, Alexander).
The first colleague responds by claiming to
know the technology industry and is determined to invest in them. While he
might have worked in the industry for a while, it is not justifiable to assume
that the circumstances will prevail in the long run. He is preoccupied with the
illusion of control bias.
However, the illusion of control bias can be
financially damaging since entrepreneurs might be motivated to trade more than
what is right. It may lead them to employ limit orders, maintain
under-diversified portfolios, or other related means just to express a false
sense of influence over their trade portfolios.
People who practice this bias find it hard
acceding with the irrationality and the changing nature of markets and the fact
that their expectation is a failed one. The outcome is a spiral of investment
catastrophe with the rationalization that while their belief is right, the one
who drove the buttons was so incompetent.
In the long run, the investor becomes
overconfident. The consequences of long-term investment may not be affected by
the immediate-term opinion, emotions, and impulses that frequently engulf
financial transactions. Rather, the success or lack of it emanates from
uncontrollable factors such as the prevailing economic conditions and corporate
performance.
The Second Colleague: Confirmation Bias
According
to the second colleague, the value of commercial property in the city has
maintained a 14% increase since the year 2000 reported a famous newspaper
article. Now, this is almost two decades down the line. It is very unbelievable
to assert that the value of the property has remained consistent over such a
lengthy period, and very few investors would settle on that. However, depending
on the interest of the reader and the prevailing circumstance, we can only
assume that the type of newspaper is biased towards such reports and that the
investor too is biased and love reading similar reports.
According
to confirmation bias, individuals are drawn to
information that substantiates their existing perceptions. It is just similar
when a person prefers watching news from a TV channel that represents his/her
political views while evading those that feature commentators of divergent
opinions. Similarly, people behave in the like manner concerning their
financial issues. Entrepreneurs believe in the market conditions will make them
walk toward information sources that validate such a belief.
While it is acceptable to attach an emphasis
to the consequences of our aspirations, for example, investing heavily in the
stock of the firm you’re working for, it poses significant risks when it comes
to diversification. If you should overcome confirmation bias, stress must be
levied on obtaining information from various.
The Third Colleague: Depicting Recency Bias
Recency
bias is a cognitive intrusion that encourages to perceive the most recent
information as more relevant compared to the old knowledge. However, this may
not be necessarily true. People base their investment decisions on how the market
has been recently performing. The exact state is seen on the third respondent
whose investment decisions in the Omega Corporation are drawn from the current
state of the company and industry. She denotes that from the decline of the
industry to capitalize on her investments since she presumes that case to
remain constant for some time.
Most entrepreneurs have the inclination to follow investment performance by investing more in the industry when it is peaking and just about to reverse. Given that the investment has been picking up recently, investors anticipate that to remain the case. However, based on the behavioral theory, it would be wrong for her to rely on this approach to make financial decisions. In most circumstances, people do extrapolate from recent performance and employ them as a signal of future performance which is very wrong. Consequently, entrepreneurs fall into the ploy of over-purchasing the now outperforming asset and under-own the now drifting asset.
Behavioral Finance Dissertation
Behavioral Finance and Investments
Siosan’s utility function. Contrasted with that assumed in traditional finance theory
Traditional finance posits that
humans are risk-averse, they love greater certainty than limited certainty and
have a perfect utility function. Conversely, behavioral theorists assume that
people display multiple characteristics and while they may be risk-averse, they
may also be risk-seeking, risk-neutral, or any blend of the three. Depending on
how things present themselves influences decision making.
The utility function measures an
individual’s preferences over a set of products, measured in units referred to
as utils. Utils exemplify the level of satisfaction of a consumer from choosing
a specific type or number of products. Traditional finance is built on the
utility theory with an assumption of diminishing marginal return. On the other
hand, Behavioral theorists assume that human beings don’t always
act in their best financial interests.
Appropriate in this
case study, the utility function specifies the satisfaction of an investor out
of all possible combinations.
For example, an investment with low risk and high return has a bigger utility
than that with high risk and low gain. This kind of function represents both
their welfare along with their preferences. Violet expresses utility function
that follows the behavioral approach. She wants to spend more. However, she’s
quite unaware of the circumstances of tomorrow reflected in her limited
investments. Under a traditional approach, Violet would either invest or not
invest at all. It would be that she has knowledge of the future market or she
does not, and if she lacks, her utility function would be concave. She would
spend less just to avoid the risks in the future.
Similarly, she purchases expensive
goods like cars and takes vacations for her satisfaction although, she feels
reluctant to incur debts. This is opposed to traditional finance that assumes a
diminishing marginal utility; Violet proposes utility function that will always
satisfy her interests and won’t diminish. Violet expresses some mix of
traditional and behavioral approach in some part, and traditional finance is
reflected in the way she detests debts. Albeit, she does little to avert those
debts, thus in part demonstrating a behavioral approach.
Siosian’s Behavioral Biases and how a rational economic individual in traditional finance would behave differently concerning each bias
Various cognitive predispositions cause
several behavioral biases or under-saving inclinations. This is according to
the perception by behavioral scientists who present several biases that emanate
from such predispositions by grouping them into three categories. Such include
preference biases, perceptions of prospects, perceptions on how to make
decisions bearing in mind the rest of variables, and price perceptions. The
typical behavioral bias presented in this case is the preference bias, and it
manifests itself in the form of the self-control, loss aversion, and
anticipatory utility.
Costly self-control bias- Living for today
Behaviorists
propose
that many people struggle with self-control in various fields. It may present
itself through over-eating, under-saving, or over-snoozing, what we can call as
“living for today”. Approaches to costly self-control
also suggest that such people will value commitment such that they will choose,
and even pay, to limit their future decision in some way, in an attempt to
discourage their future over-consumption predilections.
However,
in this case, study, Violet fits this model of costly self-control bias. We
find that she engages in costly endeavors like buying expensive cars and paying
for expensive meals in upscale vacation resorts. She does this at the expense
of investing. In fact, she would do all the best she can to live a luxurious
life while doing little on her mortgage and other investments. Her approach is
behavioral and contrary to how traditional theorists would behave since they
would fear the risks of tomorrow and would spend less on consumption and be
concerned about the future.
Loss Aversion
The bias is comparative to some reference
point like current consumption, or friends’ consumption. Loss aversion may also
be seen as a potential threat to consumers leveraging their savings rates.
People fear more to invest in their view of avoiding losses (Thaler, Richard, and Shlomo 164-187).
Loss aversion occurs when people easily
notice the reduction in investment portfolio more than how they view gains, and
this may be even when the profits are greater. They frequently get upset when
they lose money during the market recession such that they remember those
losses forever, but they would hardly remember the time they made 40-percent
increase, just the time they lost 30-percent. We can state that Violet has an
outspoken loss aversion bias when she says she detests making losses. Given
that she has very little investment but high expenditure, this might be the
reason why she rarely invests. Her approach reflects a traditional finance
theory that assumes people are risk-averse.
Siosian’s Retirement Portfolio and Justification
Violet’s retirement portfolio is such that
she maintains a minimal retirement plan where she deposits half the sum of
money coming from her annual bonuses and none-salary incomes. On the other, we
notice that she runs a very small mortgage and limited investments that can
sustain her. Basing on such decisions, her retirement portfolio is so
inefficient.
The Social Security Administration posits
that on average, a 65-year pensioner can expect to stay for the next 18–20½
years after quitting the job (Benz par 3).
Nonetheless, health advancements now make people stay for more years, and it
would be advisable that you schedule a retirement portfolio of 30 or more
years, and in such a case, the retirement saving plan becomes so essential.
Rather than just depositing money in the portfolio, it should be used in
investment opportunities to generate more wealth for old age. The objective is remaining invested—and
that implies having some part of the money assigned to stocks, but in the right
standing with other investments.
The objective of investing retirement
portfolio is to generate a mix of investments that merge to preserve capital,
create income, and expand. Such a combination of stock, bond and cash investments
must be in line with age, income, financial needs, time, and risk. For this
reason, we can say Violet’s retirement portfolio is very weak and inappropriate (Williams par 6).
Behavioral Corporate Finance
MEMO
TO: CFO
FROM:
DATE: 28/04/2019
RE: Recent Behavioral Finance Literature dealing with the Board of Directors.
We can study behavioral finance
featuring the panel of executives under the concept of corporate governance ((Shivdasani, Anil, and
Marc Zenner). Management of financial institutions has taken a different
approach given the attrition of the significance of corporate governance in
guiding financial decisions. Albeit, this is very recent studied by
contemporary economists who assert the role of the board of governors in
guiding the company’s value creation and improved financial performance
particularly during this onset of consistent corporate flaws. Many companies
have since collapsed, examples of Lehman Brothers, Rank Xerox, and Enron just
to name a few, all blamed the faulty board of governors (Shivdasani, Anil, and David Yermack).
We have several lessons to learn
from this shrinking–specifically–there is one lesson that stands out clear–the
role of corporate governance in determining its capacity to contest positively
particularly in stormy environmental conditions where others strive hard to
exits.
Contemporary literature on
behavioral finance vis-à-vis corporate governance emanates from Adolph, Berle and Means (23) study where they assert
that, in reality, managers of companies sought their interest at the expense of
the shareholders’ interests. Their
investigation stressed the need for an effective plan to help aid in mitigating
the conflict of interests between company owners and managers. Therefore, while
the concept of corporate governance might appear new, it addresses typical
concerns present since time long (Ayuso, Silvia, and Argandoña 2-19).
Many countries, corporations, and
agencies across the globe have started to respond to the corporate flaws by
initiating a series of legislation and guidelines that guide decisions of the
board of governors in financial implications. Such rules are referred to as the
codes of best practices. These legislations guide the behavior and structure of
the board of directors while doing their monitory and supervisory duties (Shivdasani, Anil, and David Yermack).
Such codes, though, issued in
different regions, they have similar peculiarities regarding corporate culture
and general corporate environment, and alignment of the interest of parties
(Shareholders and Management). Corporate governance codification of governance
aims at mitigating the corresponding deficiencies in or lack of appropriate
shareholders shields (Shivdasani, Anil, and David
Yermack).
Your Future and Behavioral Finance Post 2008
Behavioral Finance Lessons during
and after the Great Recession
Several themes emerge drawing from
the issues aired by Stephanie pertaining behavioral finance during and after
the great recession. While the economic downturn attracted several consequences
on the corporate world, I believe the corporate directors and other
stakeholders had the mandate to prevent its occurrence, and correspondingly,
they can stop the reoccurrence of the same by studying behavioral finance
theories. The recession affected the entire globe since businesses collapsed,
and many people lost jobs and houses. However, I believe that if financial
behaviorist can avoid a repeat of the 2008 great recession, they should derive
from behavioral finance theories, Shefrin and Staman reports this in their
book, ‘Behavioral Finance in the Financial
Crisis’.
Several factors drew the crisis, and such factors persist that
perpetuate the current crisis. They include; a weak government regulation,
investment banks that exceedingly leverage debts, and strained homeowners’
finances. We can explain the consequences of 2008 crisis from a financial
theory basis. While traditional economics base their assumptions of
rationality, they assert that people make rational economic choices as they try
to maximize their earnings. On the contrary, behavioral economists assume that
people make their financial selections based on their emotions psychological
conditions, as well as on cognitive errors.
The 2008 crisis is
best explained by the principles of behavioral economics. Here, we find a
correlation of the crisis with the overly optimistic lending behaviors of
people since such is connected to the stock market fluctuations even as
witnessed currently. Psychologists have effectively documented the propensity of
people to perceive the through
rose-tinted lenses, often referred to as the optimism bias.
Much of the 2008
crisis revolved around financial psychology. We can study psychology as part of
the behavioral finance theory. In essence, it incorporates aspects like
overconfidence, perception and cognition, aspirations, emotions, and culture (Morgenson, Gretchen and Joshua Rosner).
Overconfidence– Behavioral
economists had warned of the inhibiting economic crisis. While banks,
businesses, and many corporations received such warnings, many were
overconfident in their investments. Overconfidence Before the great 2008
recession, economists warned that the economy was going under. Entrepreneurs
were such overconfident such that they hardly analyzed the risk of holding such
huge portfolios in mortgage-backed securities, provided the threat of being in
a bubble. Most of the homeowners took out loans just to satisfy the American
dream — they purchased during a bubble overconfident that housing prices would
skyrocket and remain persistent.
However, an increase in the housing
market, and the stock market, only works to raise people’s overconfidence since
they would ascribe the gains or losses they achieve as a result of their
proficiency in finance, although, it results from market moods.
Recency bias was one
implication that cultivated the crisis. That’s because entrepreneurs make
choices based on the most recent information. Decisions may be constructed on
the very latest feedback. Although, such information may not be primarily
relevant. During the time, investors overreacted because of the congress’s
finance rescue project.
Similarly, people’s
emotions such as anger, fear, and sadness influence the type of decisions made,
including economic choices. More fearful people become risk-averse, but more
angry people become more enthusiastic to incur risks, even financial risks. As
for the economic downturn, people had others in mind to accuse of the financial
crisis. Take the example of Wall Street banks that became so angry such that
they easily took the financial risk to punish the offenders.
Behavioral
economists assume that the kind of financial errors made aren’t haphazard, and
the choice made too aren’t fundamentally rational. Rather, they are built on
psychological conditions such as cognitive errors and biases.
In our attempts to
evade the similar crisis in our market, we can learn a lot from the economic
downturn of 20008 and the related occurrences of the past. For instance, the
1974-75 economic recession almost resembled the 2007-2009 crisis. On the same
note, the twin Reagan-era recessions of the 1980s had profound consequences
such as joblessness and a subsequent S&L and sovereign debt crunch. The
1990s foreign currency crisis mandated an immediate discarding of the Long-Term
Capital Management without interfering with the worldwide economic system. Just
like Lipsky reports, the 2008 housing bubble was a consequence of a simmering
stock market.
Hindsight bias wrongly predisposes us to imagine we can see and analyze the future crises pretty well the way we do the previous and establish strategies that would impede future crises. However, we are limited to devise policies that can avert future crises should we even be able to identify them since those who would lose are in our paths standing against us. No doubt restraining bank leverage would do some good; nonetheless, bankers have the smack to strangle it. Consequently, we have a few decision left–our psychological fallibility. Assessing our psychological biases will work a great deal in averting and mitigating some crises.
Conclusion
From the discussion above, behavioral finance case studies focus on determining the clear-cut direction to which various market forces—such as rational analysis of organization-specific and macroeconomic basics; cultural, human and social psychology trends—affect investors and managers expectations and define their level of confidence.
Works Cited
Adolph, Berle, and Gardiner Means. The
Modern Corporation and Private Property. New York, NY, Macmillan, 1932.
Allais, M. “Le Comportement De L’homme Rationnel Devant Le Risque: Critique Des Postulats Et Axiomes De L’ecole Americaine.” Econometrica, vol 21, no. 4, 1953, p. 503. JSTOR.
Ayuso, Silvia, and Antonio Argandoña. “Responsible Corporate Governance: Towards A Stakeholder Board of Directors?” SSRN Electronic Journal, 2009, p.2-19. Elsevier BV.
Benz, C. “The Bucket Investor’s Guide to Setting Asset Allocation for Retirement.” News.Morningstar.Com, 2016, par 3.
Ising, Alexander. “Pompian, M. (2006): Behavioral Finance And Wealth Management – How To Build Optimal Portfolios That Account For Investor Biases.” Financial Markets and Portfolio Management, vol 21, no. 4, 2007, pp. 491-492. Springer Nature.
Lipsky, J. Overcoming the Great
Recession An Address to the Japan National Press Club, Remarks by John Lipsky,
First Deputy Managing Director of the International Monetary Fund, at the Japan
National Press Club, Tokyo, May 18, 2009. Tokyo: Japan National Press Club,
2009.
Morgenson, Gretchen, and Joshua Rosner. Reckless
Endangerment: How Outsized Ambition, Greed, And Corruption Led To Economic
Armageddon. New York, New York, St. Martin’s Griffin, 2012.
Shefrin Hersh, &Meir Statman. Behavioral
Finance in the Financial Crisis: Market Efficiency, Minsky, and Keynes.
Santa Clara: Santa Clara University, 2011.
Shiller, Robert J. “Bubbles, Human Judgment, and Expert Opinion.” Financial Analysts Journal, vol 58, no. 3, 2002, pp. 18-26. CFA Institute.
Shivdasani, Anil, and David Yermack. “CEO Involvement in the Selection Of New Board Members: An Empirical Analysis.” The Journal of Finance, vol 54, no. 5, 1999, pp. 1829-1853. Wiley-Blackwell.
Shivdasani, Anil, and Marc Zenner. “Best Practices In Corporate Governance: What Two Decades Of Research Reveals.” Journal of Applied Corporate Finance, vol 16, no. 2-3, 2004, pp. 29-41. Wiley-Blackwell.
Thaler, Richard H., and Shlomo Benartzi. “Save More Tomorrow™: Using Behavioral Economics To Increase Employee Saving.” Journal of Political Economy, vol 112, no. S1, 2004, pp. S164-S187. University Of Chicago Press.
Williams, Rob. “Plan, Allocate and Distribute: Structuring Your Retirement Portfolio for Your Income Needs.” Par 6. Schwab Brokerage, 2017.
If you enjoyed reading this post on behavioral finance, I would be very grateful if you could help spread this knowledge by emailing this post to a friend, or sharing it on Twitter or Facebook. Thank you.
Measurement is a very critical aspect of any psychology topic or basically, in all psychology sub- areas. Every psychologist is usually concerned with measuring the children`s intelligence, creativity and also in measuring their moral development. The psychological tests are used to help the clients learn what careers are best for them. This is based on the interests and the abilities of the clients. Similarly, in this course, description of how learning occurred and how learning can be facilitated in the near future. Therefore, psychological testing is the use of psychological tests, which are ideally designed to be an objective and the standardized measure of a sample of behavior (Garber and Simon, 2017).
Psychological assessment is the main process of testing that makes use of a combination of techniques to help realize some given hypothesis about a person and their behavior, personality, and capabilities. From the description of psychological assessment, it has been defined as an act of performing a psychological battery on an individual. It is also the process of psychological testing (Garber and Simon, 2017). This research paper will, therefore, address different types of psychological tests, various theories in psychological tests and also a variety of standardized tests of intelligence, personality, achievement, interest, neuropsychology and several other areas of psychological testing as described in the Course description.
Psychological Testing Principles
Emphasizes the principles by which psychological tests are conducted is quite important. There are several contradictions when it comes to the use of psychological tests. Psychological tests should be well examined to ensure that, there is valid, appropriate and also the fair use of psychological tests.
There are key concepts that are discussed in this research paper and these include studying the importance of psychological testing (Garber and Simon, 2017). Psychological testing allows researchers and psychologists to make concrete decisions about people, early school placement, military job selections and also in other fields like college entry behavior. Secondly, based on our course teachings, psychological testing allows us to vividly describe and also understand an individual`s real behavior (Garber and Simon, 2017). Below are several other additional reasons for carrying out psychological testing/ assessment;
-It is a measure of a person`s personal attributes- Psychological testing helps the learner to understand an individual`s behavior. Understanding a person`s behavior is quite important since it helps researchers and learners realize/ judge a person based on his/ her way of behaving.
Psychological Testing
It is a way of measuring performance- Individual performance is quite important. People would often need to be assessed how they have performed within a specified period of time. Therefore, in this case, psychological testing would help us realize a persons performance in his or her field of specialty. This is one of the key reasons why psychological testing was devised and should be embraced.
Saves time. It is a
time-saving means of evaluating an individual`s performance in a certain field.
It is, of course, the
most economical means of achieving a person`s performance.
Similarly, the process
of psychological testing is basically scientific. Therefore, testing is
expected to have the best results in any experiment.
There
are basic psychological testing terms that have been explored in this course. As
part of the course objectives, it is important to define, describe and also identify
these basic testing terms (Garber and Simon, 2017). Such terms include theory,
assessment, attitude, personality, measurement, validity, reliability,
operational definitions, statistics, average, central tendency, correlation,
bias, battery, criterion, decile, standardization, derived score, Level of
significance, sample, prediction, randomness, measurement scale,
stratification, norms, distracters and factor.
As
part of this research paper, definitions of some of these terminologies will be
analyzed. For instance; -Theory- theory refers to an idea that is used to
account for or even justify a psychological situation.
Sample- it refers to a
set of collected data that is used for psychological testing and analysis.
Measurement scale- it
is the basis that is basically used for the psychological tests.
This
research paper also addresses uses and various varieties of the personality
tests. The main aim of this is to determine which tool is the best for
predicting and also measuring the behavior of an individual/ a person
(Rappaport et al, 2017). Establishing the validity of the personality tests is
again quite important in psychology. Personality tests are an example of
psychological tests that have been handled in this course. It is usually used
to measure and also evaluate the behavior of a person in school and several
other social places. This test basically identifies differences in personality
between persons who are being subjected to the similar test.
Personal tests are basically the best psychological tests to use according to a number of psychological researchers. Again in this research paper, the question, “which is a better tool to predict the behavior of an individual, is it the personality test or the projective test?” This is one research problems that have been identified in the course. The research problem can, therefore, be reviewed (Garfinkle and Richardson, 2018). This can be reviewed in terms of whether the personality tests, observation and also the inventories are more reliable and also predictive in determining the behavior of a person.
The hypothesis for this research paper is based on using personality inventories and the projective tests and determining which is better in assessing of a person`s behavior. Using research design and the descriptive correlational methodology is the best approach for the researcher. Descriptive psychological tests are therefore tools that are used to measure and predict the behavior of humanity (Garfinkle and Richardson, 2018). However, both personality tests and the projective tests are used to assess the personalities of individuals in different environments, for instance, school and community. Psychological tests can be applied in various instances. For example, organizations worldwide are busy striving to be successful in the best ways possible.
Aptitude testing is another form of testing that has been described in the course. It is the second widely used form of psychological test after the personality test. It can interchangeably be used with the term ability. The concept of ability in the aptitude test can be described as a general character of an individual that can ideally facilitate the learning of the various skills.
From aptitude definition, it is then easier to state that, psychological tests are basically standardized measures of a small sample of an individual`s behavior (Garfinkle and Richardson, 2018). For instance, a chemist can infer the characteristics of a large compound by only testing a few cubic centimeters of a liquid. Similarly, quality engineers only test a small sample of the finished products and not all of them. The same concept is applied by psychologists in coping with test results. They only base their work on a small sample to come up with results for a larger population.
In
aptitude testing, there is a need to establish the difference between aptitudes
and the abilities. Ability tests are basically given with an option of giving a
dire prediction about a person`s future success in his or field of work, mostly
occupational activity or even group of activities. However, it’s possible to
use the term aptitude in place of the term, ability (Garfinkle and Richardson,
2018). There are several ways of describing aptitude tests. These include being
described in the mode in which they are being presented and also be grouped
based on their content.
Conclusion
Psychological
testing and assessment are conducted for a number of reasons. For instance;
Detection of specific
behavior- psychological tests are basically used to determine the abilities of
a person.
Individual differences-
Psychological tests are again used to determine the individual differences.
This ideally shows the difference in a person`s ability. The person`s
performance is also determined through psychological testing (Rappaport et al,
2017).
To diagnose by the
psychological test- These tests are also used in clinical psychology. This can
be used to diagnose mental disorders among individuals.
Legal classification-
Psychological tests basically help researchers to identify people into
different categories. These categories can be normal and abnormal, criminal and
innocent, intellectual and mentally disabled and lastly, the able and the disabled.
Promoting Self
-understanding- this is another function that psychological testing does. It,
therefore, provides standardized knowledge about the person`s behavior,
aptitudes and also capabilities.
Program evaluation-
Psychological testing can be used for such measures as program evaluation
(Kaplan and Saccuzzo, 2017).
Scientific research-
psychological researchers use psychological testing for the purpose of
research. It, therefore, provides knowledge about the person`s mental level (Chukhraiev, 2017).
Military selection-
Psychological testing is used during military selection.
References
Chukhraiev, N., Zukow, W., Chukhraieva, E., & Unichenko, A. (2017). Integrative approach to reduction of excess weight. Journal of Physical Education and Sport, 17(2), 563.
Garber, B. D., & Simon, R. A. (2017). Individual Adult Psychometric Testing and Child Custody Evaluations: If the Shoe Doesn’t Fit, Don’t Wear It. J. Am. Acad. Matrimonial Law., 30, 325.
Garfinkle, M. S., & Richardson, S. L. (2018). Psychological Testing for Psychoanalysis. Psychoanalytic Trends in Theory and Practice: The Second Century of the Talking Cure, 269.
Kaplan, R. M., & Saccuzzo, D. P. (2017). Psychological testing: Principles, applications, and issues. Nelson Education.
Rappaport, S. R., Gould, J., & Dale, M. D. (2017). Psychological Testing Can Be of Significant Value in Child Custody Evaluations: Don’t Buy the Anti-Testing, Anti-Individual, Pro-Family Systems Woozle. J. Am. Acad. Matrimonial Law., 30, 405.
Did you find any useful knowledge relating to psychological testing in this post? What are the key facts that grabbed your attention? Let us know in the comments. Thank you.
Approaches for all research, whether qualitative or quantitative, requires interpretation and contextualization by the researcher. Narrative statements or a series of figures will not give the answer to the research question or statement (hypothesis) by themselves.
Therefore it is important to choose a research approach (or
approaches) that will give the correct ‘type’ of data to answer your research
question.
A number of approaches are available when gathering data,
but these don’t have to be used in isolation. For instance a focus group can
elicit viewpoints which may need exploring further will a larger research
cohort using a closed question survey. For this reason, it is important to plan
your approach thoroughly before you start, to ensure your research question can
be answered and to let your respondees know what is expected of them.
Don’t forget that whichever research method is chosen, it
needs to have a robust ethics form that has been approved before contacting
participants and starting to gather data.
Approaches that can be used:
Focus groups
This is where a group of people discuss a particular
problem, facilitated by the researcher. The group interaction and the sharing
of ideas not only means that rich and meaningful data can be pulled out from
the focus group but also during the course of the focus groups, ideas can be
co-constructed between participants which can be used to further the depth of
research.
Structured
interviews
When using structured interviews, the questions are written
beforehand and are strictly adhered to regardless of the answer.
Semi-structured interviews
Whilst pre written questions are also used in semi
structured interviews, this approach allows for the researcher to spontaneously
build on answers given, allowing the base question to be answered but also
elaborating on any areas which may impact on the research answer.
Survey
Surveys are an excellent way to reach a large number of
people. This approach works if there is a clear idea of the questions that will
elicit research to support the hypothesis. A mix of qualitative (open text
fields) or quantitative (set questions and answers) can be used.
Case study
This approach is valuable when more in depth research is
required and allows the researcher to investigate the issues in the place or
time that they occur. The researcher will observe the participant and often
will have follow up meetings to clarify or build on the information gained.
Narrative enquiry
This method works on the ideology that it is less important what is said, then how it is said. The story a participant will tell may not be
entirely factual but it will be their perception of what happened which gives
greater in sight. This approach is linked to discourse analysis methodology.
Appreciative enquiry (AI)
AI shifts the traditional focus of looking for the negative
impacts of an issue and instead approaches the issue from a positive
perspective.
Ethnographic
Ethnographical methodology requires the researcher to embed
themselves in the participatory groups own setting, for a sustained time in
order to observe, talk and learn from participants.
There are a number of branches from the ethnographic
methodology:
Auto ethnographic
More than just an autobiographical account, an
auto-ethnographic researcher should reflect on events and use these to uncover
meanings and feelings that a purely narrative account may miss.
Visual ethnographic
Using video, photos and artefacts as the main source of
research data rather than supplementing it.
Netography
Researchers using this methodology are involved and
participants or ‘lurkers’ in virtual groups and communities. Ethical issues
need to be carefully considered with this approach.
Soft Systems Methodology (SSM)
Instead of studying isolated issues, SSM is a holistic way
of looking at and solving problems. These are often presented in mind map
formats, making this a good research methodology for visual learners.
Questions to ask before choosing a research approach:
Will we learn more about this topic using
quantitative or qualitative approaches?
Which approach will produce more useful
knowledge?
Which will do more good?
References
Taken from: Cousin. Glynis, (2009) Researching Learning in Higher Education. Routledge. UK.
If you enjoyed reading this post on approaches for research dissertations, I would be very grateful if you could help spread this knowledge by emailing this post to a friend, or sharing it on Twitter or Facebook. Thank you.
Standardization versus Adaptation Debate in International Marketing
In the international business market field, standardization versus adaptation debate is not new, where thus far researchers have not agreed on which strategy is effective to be adopted in international market. Taking a business into international market and successfully selling its products and services can attract a range of challenges. For many years, many multinational corporations make costly mistakes when trying to sell to the global consumers or audience. Such mistakes are mainly described by a lack of awareness of the role and contributions of adaptation and standardization in international markets. This paper seeks to analyse the issues of adaptation (customization) and standardization (global strategy) within international marketing strategies and proposes specific approaches that can help companies compete efficiently and effectively within these global setting.
Available Evidence
Since the start of the 1980s, globalization issue has developed significantly and critical to modern businesses. Globalization has helped in reducing the differences between countries. Both international of businesses and an increasing level of globalization have had a significant impact on how businesses plan and view their global marketing strategy (Wang & Yang, 2011). As a result, various research studies have been done on whether companies need to standardize or adapt certain behaviours in international market. As these multinational businesses start to market their products and services in foreign markets, one important strategic decision is whether to change the marketing strategies and mix to match the unique aspects of each local market or whether to adopt a standardized marketing mix (people, promotion, place, price, product, process management, and physical evidence) and a single marketing strategy in all international markets (Vrontis & Thrassou, 2007)
One consideration shows that markets are becoming more integrated, increasingly more global and similar and consider that the main element to business survival is its capability to standardize. In contrast, the other consideration identifies the challenges in adopting a standardized strategy, and thus, supports market adaptation or customization. Nevertheless, evidence proposes that following adaptation or standardization strategies depends on the positioning and dimensions present in respective international market.
Standardization versus Adaptation
Based on some studies, followers of standardization consider that there is an integration of cultures with the same customer demand and environmental demands across the world. They also state that trade barriers are being reduced and advancements in technology, where multinational companies reveal global integration in their strategies. Under standardization, providing a single strategy for the international market, along with standardizing the marketing mix components, can enable constancy with customers and also reduce costs. Brei, et al (2011) state that businesses managed effectively have shifted away from customizing their products to serving internationally standardized items that are low priced, reliable, functional, and advanced. Brei, et al (2011) further state that businesses can attain long-term success through focusing on what customers need instead of being afraid of the particulars of what customers think they might need.
In contrast, followers of international adaptation strategy focus on the significance of customization. The key base of the adaptation strategy is that when a business enters an international market, it needs to reflect on all environmental aspects, constraints, and factors, such as societies, cultures, different laws, taste, education, occupations, race, climate, and language (Akgün, et al., 2014). Nonetheless, studies have reported significant source of constraints that may be challenging to measure, for example, customs, manners, attitudes, values, religion, aesthetics, education, and cultural variations originated in history, along with variations in legal systems, economics, wants, and needs. Vrontis and Thrassou (2007) stated that multinational corporations need to realize how they should alter their whole marketing strategy and include how they order, distribute, and sell to match the new international or local market demands. It is also very vital to adjust the marketing strategy and mix to fit local preferences and tastes, customer non-equivalent requirements, and special market needs.
Advantages and Disadvantages of Standardization
Global uniformity and standardization have various benefits. First, customers can anticipate similar quality level of any particular brand in all outlets across the globe. Moreover, Hise and Choi (2013) posit that standardization facilitates positive consumer perceptions towards certain product. If companies that have a strong reputation and brand identity decide to follow the standardized approach, they will certainly gain success. In a global setting, positive word-of-mouth can imply an improvement in sales. Another benefit embraces cost reduction that provides the economies of scale (Hise & Choi, 2013). Selling huge amounts of non-adapted, same product and purchasing certain constituents in bulk may help in reducing the cost-per-unit.
Other benefits linked to economies of scale consist of reduced investment costs, marketing operational costs, and enhanced research and development. Additionally, standardization is a rational strategy in an era in which trade barriers are diminishing. Adopting a standardized approach assists multinational businesses to direct their emphasis on a uniformed marketing mix particularly concentrating on one single product or service, enabling adequate space for quality improvement. By focusing on one single uniformed product, employees will be trained to improve the product quality, which enables manufacturers to make equipment and technological investment that can protect the quality of the standardized product being served.
Nevertheless, standardization poses a range of shortcomings. Aforementioned, different international markets mean different consumer’s preferences. As a result, selling or offering one unified item poses lack of uniqueness. This enables competition to acquire bigger market share through adjusting their products to fit the need of a certain segment or market. Given that different markets have varied tastes and needs, by adopting the standardized strategy, businesses can become more at risk. One company example is Walmart’s failure when it entered international markets (Kim, 2008). Walmart encountered various challenges when it entered foreign markets such as Japan, South Korea, Brazil, and Germany as it realized that its recipe for success in the US (a huge set of merchandise, inventory control, and low prices) did not actually activate the same level of success in foreign markets with shoppers with varied habits and own discount chains. The key problem for the retail giant was that the company tried to inflict its values globally. Particularly, Walmart’s incident is Germany, where the company lost large sum of dollar as of 1998, has become an example or reference point for how not to expand internationally.
Another disadvantage is that it relies mainly on economies of scale. In nature, companies that are global often engage in manufacturing in various countries. This may also pose a great problem because some countries adopt trade barriers such as the EU and the US (Dimitrova & Rosenbloom, 2010). For such a case, adaptation is predetermined. However, even though the standardization strategy is more used, its adoption is not absolute. Standardization approach raises the performance of a firm. Nevertheless, this is only true for businesses where competition occurs in a global range, such as perfumes, luxury goods, fashion, electronics, consumer durables, among others. In such cases, similar product may be sold across all markets. In contrast, there are other sectors where this same action does not apply and thus, this needs to be considered.
standardization versus adaptation of international advertising strategies
Moreover, consumer non-durables, such as food products, are highly responsive to variations in national habits and tastes, making the companies to consider some adjustments to fit different markets. For instance, Unilever realized a greater opportunity among Indian low-income consumers who intended to purchase personal care products and high-end detergents, but might not afford them. To respond to this, Unilever produced a low-cost packaging product and various other alternatives that enabled it to provide radically cheaper alternatives. According to Theodosiou and Leonidou (2003), such a flexibility not only increase a new market for the business, but enabled also it to produce brand loyalty that customers benefit from it when their income increased and might afford higher-end products from similar manufacturer.
There are some questions which most businesses in the international market expansion need to answer: what products do we aim to standardize? And do we standardize distribution channels, pricing, marketing communications, product support and customer service? The answer to such questions need to either all adapted or all standardized.
Advantages and Disadvantages of Adaptation
Customization is also commonly considered an adaptation. Moreover, product adaptation is more applicable in the case in which: (1) there is an intense competition, compelling differentiation of products; (2) there is a considerable variations in consumer wants and needs; and (3) to meet essential host country requirements, including legal, technical, and packaging issues. These are also essential reasons for product adaptation and modification; literacy, customer lifestyle, and consumer’s income level.
The key arguments towards implementing adaptation approach is that it entails the individual approach as it enables the company to be aware of the preferences, wants, and needs of each market or consumer. Followers of adaptation strategy credibly support the idea that there is a considerable variation in consumer’s lifestyle, political system, regulations and rules, economic condition, culture, and consumer belief and values across the globe. Such elements need to be reflected on for the success of the company (Hussain & Khan, 2013). The application of adaptation marketing strategy supports the companies to gain an increased competitive advantage. In addition, the ultimate aim of a business needs not to be the cost reduction using standardization, but the actual long-term corporate profitability through improved sales attributable to the enhanced use of the differing consumer needs globally.
Poturak & Duman( 2014) assert that the followers of standardization does not possess the conventional knowledge of contemporary marketing. Irrespective of various arguments of improved consumer homogeneity, various studies have reported that consumers are becoming progressively more complex or diverse and do not essentially intend to substitute quality over price. Moreover, product modification or adaptation approach will results in a boost in sales volume of the company in international market; by highly meeting the wants and needs of the consumers, but reflecting on the competing companies; and by also retention of the current customers through frequently updating the product.
There are also certain drawbacks of product adaptation or modification of different marketing strategy, including duplication of the practices across the company and additional cost needed for the promotional practices. In this strategy, the company will need extra resources for research and development. The increased costs are attributable to defender fights and developments, which are also more risky. Moreover, companies may lack knowledge and experience regarding the technical elements of the different products and understanding on how to market a product (Hossain & Yazdanifard, 2015). This strategy also promotes decentralization of management.
Most Appropriate Strategy
These two strategies emerge to be coherent, logical, and rational, outlining the benefits that a company intending to expand internationally can acquire through implementing either strategy. When an international company puts forth all its efforts of the extreme side of either strategy, it normally becomes incoherent and unfeasible. The point is that marketing for international companies is not based on either of the two opposite strategies, since both strategies are probably to coexist, even in similar multinational company, brand, and product line (Rocha & Silva, 2011).
Vrontis and Thrassou (2007) stated that standardizing some components of the marketing mix, while adapting other components to differing market conditions is required. Adaptation and standardization should not be considered an ‘all or nothing’ proposal; rather it should be considered a matter of degree. For instance, diversity across various countries and markets does not enable whole standardization. Nevertheless, Schilke, et al. (2009) opines that higher cost associated to adaptation can limit the application of adaptation strategy. Wei and Yazdanifard (2014) focus on three factors to analyse adaptation and standardization practices: transferability of competitive advantage; homogeneity of various consumers’ reponse towards the marketing mix; and similarities in the level of economic freedom.
Schilke, et al. (2009) point out that even in markets or countries with the same cultures, such as across the EU, there are variations in customer wants and needs. In addition, they state that standardization will be effective when the customer response homogeneity and the level of sameness in economic freedom are higher, with easily transferable competitive advantages. Components of both strategies need to be integrated so that it can enable international companies to achieve desirable success. Acquiring the benefits of both strategies needs various firms to not only standardize different components of marketing strategies and marketing mix, but to implement also adaptation when needed with the aim of meeting the evident market needs (Batraga & Pūķe, 2015).
McDonald’s Case Study
An example of a major corporation that has been able to demonstrate the benefits of both adaptation and standardization strategy is McDonald’s. With around 35,000 restaurants in around 120 countries globally, McDonald’s competently manages its franchise system, providing an outstandingly reliable branding and customer experience, while also enabling for locally appropriate service and menu differentiations in segments or markets globally. Moreover, all advertisements are provided in twelve different languages, characterizing the tailored products organized to each region or market (Vignali, 2001). McDonald’s launched the McArabia (a flatbread sandwich product) in 2003, to its outlets in the Middle East. In addition, in India, it launched the McVeggie, while introducing EBI-Fillet-O shrimp in Japanese markets.
The company also selects convenient locations for its franchises, which include local neighbourhoods, airports, and malls. Such marketing strategies have proven to be efficient, showed by the company’s 8% increase in profit margins within the last five years. Nonetheless, McDonald’s has placed various efforts to improve them using the latest marketing practices in regards to the 7Ps. The company has started to modernize its eateries, shifting from a plastic-appearance to a more wood and brick design with the aim of sustaining a modern image (Yeu, et al., 2012). McDonald’s has also chosen to “re-image” its business operations in their advertisements through integrating a hip-hop theme with young generation icons such as Lee Hom and Justin Timberlake in China as a way of attracting young people. Moreover, this company has started to serve healthier foods (e.g. oatmeal), provided consumers are highly health conscious.
Conclusion on Standardization versus Adaptation
The regular topic in international marketing is whether multinational firms need to plan for adapted or standardized marketing strategy is immensely debated in scholarly setting and is a major issue to all multinational firms and marketing individuals. Followers of standardized strategy state that the international market has become homogenized and thus, these firms can market their commodities similarly across the globe. Using similar approaches will lead to higher margins and reduced costs. On the contrast, followers of the adaptation strategy focus on the evident differences between the markets of various countries and markets, particularly those for consumer goods, and favour adopting global differentiated marketing initiatives
This paper listed some advantages and disadvantages of every strategy, suggesting that the solution to an effective market strategy lies between these two extreme strategies. Firms can promote a strong international marketing strategy with the relevant structure, attitude, and operating behaviours that attain an effective and efficient balance between standardization versus adaptation approaches. Companies intending to expand internationally need not to treat the world as one singular market. Rather, they should initiate market research and establish their customers, and their wants and needs.
References
Akgün, A. E., Keskin, H., & Ayar, H. 2014. Standardization versus Adaptation of International Marketing Mix Activities: A Case Study. Procedia – Social and Behavioral Sciences, 150(15), pp.609–618.
Batraga, A., & Pūķe, I. 2015. Integrating Standardization versus Adaptation in International Marketing Strategies: Companies in Latvia. Proceedings of the 2015 International Conference, pp.27-36.
Brei, V., D’Avila, L., Camargo, L., & Engels, J. 2011. The Influence of Adaptation and Standardization of the Marketing Mix on Performance: a Meta-Analysis. BAR, Curitiba, 8(3), pp.266-287.
Dimitrova, B., & Rosenbloom, B. 2010. Standardization Versus Adaptation in Global Markets: Is Channel Strategy Different? Journal of Marketing Channels, 17(2), pp. 157-176.
Hise, R., & Choi, Y.-T. 2013. Are US companies employing standardization versus adaptation strategies in their international markets? Journal of International Business and Cultural Studies, 1-29.
Hossain, A., & Yazdanifard, R. 2015. Which One of Standardization or Customization Works the Best When It Comes to Online Marketing? American Journal of Industrial and Business Management, 5, pp.45-52.
Hussain, A., & Khan, S. 2013. International Marketing Strategy: Standardization versus Adaptation. Management and Administrative Sciences Review, 2(4), pp.353-359.
Kim, R. 2008. Wal-Mart Korea: Challenges of Entering a Foreign Market. Journal of Asia-Pacific Business, 9(4), pp.344-357.
Poturak, M., & Duman, T. 2014. The Role of Marketing Standardization versus Adaptation Strategies on Managers’ Satisfaction with Export Performance: Proposal of a Conceptual Framework. European Journal of Economic Studies, 10(4), pp. 252-262.
Rocha, T. V., & Silva, S. C. 2011. The Standardization versus Adaptation Dilemma: The Case of an American Company in Brazil. Internext – Revista Eletrônica de Negócios Internacionais da ESPM, 6(1), pp.63-83.
Schilke, O., Reimann, M., & Thomas, J. 2009. When Does International Marketing Standardization Matter to Firm Performance? Journal of International Marketing, 17(4), pp. 24–46.
Theodosiou, M., & Leonidou, L. 2003. Standardization versus adaptation of international marketing strategy: an integrative assessment of the empirical research. International Business Review, 12, pp.141–171.
Vignali, C. 2001. McDonald’s: “think global, act local” – the marketing mix. British Food Journal, 103(2), pp.97 -111.
Vrontis, D., & Thrassou, A. 2007. Adaptation versus standardization in international marketing – the country-of-origin effect. Innovative Marketing, 2(3), pp.7-20.
Wang, X., & Yang, Z. 2011. Standardization or Adaptation in International Advertising Strategies: The Roles of Brand Personality and Country-Of-Origin Image. Asian Journal of Business Research, 1(2), pp.25-36.
Wei, S., & Yazdanifard, R. 2014. Comparison on the Impact of Standardization and Adaptation on International Marketing. Journal of Research in Marketing, 3(1), pp. 250-259.
Yeu, C., Leong, K., & Tong, L. 2012. A Comparative Study on International Marketing Mix in China and India: The Case of McDonald’s. Procedia – Social and Behavioral Sciences, 65, pp.1054–1059.
Did you find any useful knowledge relating to the impact of standardization and adaptation on International Marketing in this post? What are the key facts that grabbed your attention? Let us know in the comments. Thank you.
