Standardization Business Model – How Does It Work? (Explained)

For most companies or businesses today, efficiency is crucial. These companies require results-driven strategies that can drive effective results. It doesn’t only allow them to control their costs but also increases their revenues and profitability. Therefore, they can use various techniques to improve their efficiency.

One such technique that some companies utilize to achieve that is standardization. It is a proven method of achieving better efficiencies in a company’s processes. For companies that use this technique, the standardization business model may be applicable.

What is the Standardization business model?

With a standardization business model, companies try to achieve better efficiency in their processes. These companies create standards to use in the manufacturing process of goods or providing services. The standards may come from the company’s historical performances or the industry in which it operates.

Standardization is a crucial process in the manufacturing industry. However, it also has its benefits for service-based businesses.

Companies that use this business model produce a high-quality standard of goods or services consistently. For most companies, using the technique provides a way to obtain a competitive advantage or increase their customer base.

The objective of having a standardized production process within companies or businesses is to ensure uniformity in those processes.

Standardization focuses on the processes, operations, and technologies used in a company and its contribution to production. Companies may also use standardization within other departments to ensure maximum operating efficiency.

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How does the Standardization business model work?

The standardization business model works by establishing standards for processes. As mentioned above, these standards may come from historical performances or from within industries.

These standards then form a basis for comparison, monitoring, and control. Once the standardized process gets completed, companies compare their actual performance with the set standards to identify discrepancies.

This business model works best in manufacturing companies. Standardization for them may cover products sold in one geographical location or globally.

It is to ensure all their products have the same standard across various locations or markets. Some manufacturing companies may also follow some standards set by governments or agencies to ascertain consumer protection.

Some companies also use standardization in product marketing. These are companies that have products that are available in various countries or worldwide.

It ensures that customers receive the same product or services regardless of their location. It usually applies to several multinational companies that have multiple products. They also standardize their advertising, ensuring a similar theme throughout all the markets.

The standardization business model also helps in various other aspects of a business. For example, it allows companies to understand their processes better. It can also help in setting budgets or using control systems. Standardization also comes with various other procedures, such as variance analysis, budgeting, setting standards, etc.

What are the advantages and disadvantages of the Standardization business model?

There are various advantages and disadvantages that this business model provides. For most companies, the benefits outweigh its costs or drawbacks. Some of the primary advantages and disadvantages of the business model are below.

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Advantages

Using the standardization business model, companies can get standardized products throughout various markets. It allows them to present or market similar products across several locations. It also helps companies ensure a consistent quality over multiple markets.

This business model also enhances the performance of various other models. For example, companies can use this model with the franchise business model to ensure that all their franchises follow similar standards. Similarly, it can also apply to various other business models.

The standardization business model also helps in developing a brand name for companies. When companies offer customers a standardized product or service throughout their locations, they gain customer trust. Similarly, it allows companies to gain a competitive edge over others in the industry.

Disadvantages

The standardization business model can result in a loss of uniqueness. By following a set standard, companies and their employees don’t get a chance to make innovations. For some industries, introducing innovative changes in products can be a crucial factor for long-term success.

This business model may also cause a loss of responsiveness. When companies expand into foreign markets, they may not understand the local market. Therefore, using standardized products that go against local ideologies may cause a problem for them.

Examples

Multinational companies, such as Coca-Cola, Nestle, and Unilever, use the standardization business model. These companies have several products that they sell across various international markets.

However, these products have the same quality across all locations. It is due to a standardized production process. Similarly, companies such as McDonald’s, Subway, and Burger King use this business model to standardize their franchises worldwide.

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Conclusion

The standardization business model allows companies to use standardized processes for their processes. Most companies use it in their production process to apply the same consistency to their products.

Some companies, on the other hand, use it to standardize their products across various markets. It’s usually beneficial for both companies and their customers.

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