Tailor Made Products and Services: Customization
The idea of a tailor’s presence over the presence of a boutique is the simplest example that correlates to this concept. With consumers becoming aware of the global competition, the local producers were bound to offer value added services as a bundle with their products. These value added services, were generally customer driven. Customization was the concept that initiated. A phenomenon in its early stage, customization was restricted to segment of customers demanding addition of particular features to the existing product line, thereof, demanding product extension.
Product extensions are variants of the same product, catering to the customer demand and needs. Likewise mentioned, ...
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...this technique is a customer focus or demand driven production. The simplest example of this can be the automobile variants. A single product of a brand, e. g. Toyota Corolla, comes in several variants. The top of the line is the one with maximum features, while the bottom has the least. This implies catering to different segments who want Corolla but with or without certain specifications.
This still exists in the Asian part of the world, where the markets are still the supplier’s market. In a supplier’s market, demand is inelastic, leading to the customers catching all balls thrown by the supplier. In broader terms, particularly valid for services sector, customization is rated quite high. This primarily comes from the fact that services directly interact with the customer. Taking an example of a stock advisor, the advice is surely to vary with direct relation to the customer age segment and approach. There cannot be fix lines of advice that suit all needs.
It is quite possible that services might have to create a new extension each time a customer walks in. This would be an extreme case of customization. Dell and Ford are the most widely used examples of extreme customization in terms of products, where customer may design their own computer specifications and design their own cars as well, in terms of deciding its interior, color combinations, etc. When the phenomenon of customization came into the world, there was a feeling of shrinking profits, primarily due to increased production costs.
Economies of scales, in most of the cases, were decline due to the trade barriers. This gave birth to another phenomenon, i. e. of globalization – spreading the business across geographical boundaries, going global, accessing customers across the world, rendering services across the world, spreading the product knowledge across the world, and competing in the international arena, with providers of similar or differentiated alternatives and substitutes. Reaching International Markets
With increasing cost structure, it become increasingly important to expand the market and increase the customer base so that maximum revenues could be generated (to increase net sales) and costs could be minimized (economies of scale). These would lead to increased profits. International markets are reached primarily through the concept of globalization. Globalization means turning the world into a global village; thereby eliminating the geographical boundaries for trade and eliminating (or reducing to the minimum) the barriers to trade.
Globalization is a picture with two sides; the customer and the supplier side. Globalization increases customer reach, opens doors to variation and variety, reduces prices, improving the standard of living, provide options, and the list of benefits goes on. On the supplier side, however, there is strict demand for efficiency and effectiveness. It is important for a supplier to produce a good enough quantity, and by cheaper mode because globalization leads to immense competition, reduced sales price, and having a negative impact on the returns (profits).
This is truly valid till a business creates a USP (Unique Selling Proposition) in itself, to attract the masses into brand loyalty and paying premium prices. The impact of globalization is not restricted to physical products; but is also valid for services. It goes without saying that the same is also valid for a bundle of products and services as well. On a general note, it is the value added services (the bundled services along with products) that create the competing edge for organizations.