Importance of Standardization in Business Organization

Standardization and grading are two important marketing functions which facilitate the sales of the products. The term ‘standardization’ applies to the manufactured goods and involves the establishment of certain physical standards to which the product must conform. To standardize is to determine the basic limits of quality standard and classes of products. It includes not only setting up of standards or specification of a product’s quality but also maintaining those standards during the period for which they are effective.

It is based on the consolidated results of science, technology and marketing experience. Standardization protects and benefits consumers by assuring them of products that are pure and uniform in quality and performance and often lower in price.

Standard— The first step in the process of standardization is to set standard. A standard is a specific declaration in terms of acceptable levels of quality (which often implies performance and safety) at reasonable cost. It is a tool of facilitate quality control also. A standard may be defined as follows : “A standard is a physical, written, graphic or other representation of a product established by authority, custom or general consent with which other products of a like nature are compared for identification or measurement or to which they are made to conform.”

According to Cundiff and Still, “A standard consists of the specifications or basic limits of the qualities or characteristics that a product must have to be designated grades.” Standards should be based on the qualities desired by buyers or on the use to which the article is to be put. For example, in the marketing of clothing it is useful to establish standard of size, so that all size-12 dresses will fit the same individual. Grading is the act of inspecting and separating the goods according to the specialized specifications to determine their grade. The specifications are set by the standards established and may include size, weight, color or quantity, etc. The

Elements of Standardization

The marketing function of standardization includes (i) the determination of the standards to be established; (ii) grading or dividing of goods into lots according to standards previously established; and (iii) labeling the products or containers in such a way that the grade or quality is evident without further examination. Labeling is an important problem in consumer goods. Grade affixed on the label or package is the only way to inform the ultimate consumers about the grade of a specific product. This provides the necessary protection against adulteration too.

Importance of Standardization

1. Easy and Simplified Sales— Goods are sold in four ways; by (1) inspection; (2) sample; (3) description; and (4) grades. Nonstandard goods are sold by inspection. Standardized products can be sold by sample or description, and thus on the basis of a grade or symbol. Hence, purchase and sales be simplified. Sale by grade may not need sample or description of goods.

2. No Risk— Quality is an unknown factor in most trading transactions. Grading will reduce this risk, because quality is thus known to the prospective buyers.

3. Wider Markets— Sale by grade name or symbol can widen the market for standardized and graded commodities as there is no need for inspection of the product or its samples. Standardization enables mass selling.

4. Future Trading— Heading and future trading are totally dependent on standardization and grading. When quality, size and quantity of a lot of goods are known price and terms of sale are the undetermined factors essential for the competition of the transaction.

5. Low Transport Costs— Grading also reduces the costs of transport because inferior quality products may be discarded at the place of production. 6. Consumer’s Goodwill Graded articles have standard quality, quantity and price. Buyers can blindly purchase graded articles. There is no danger of adulteration. The sellers of graded products also gets higher price for his superior grades.

7. Easy Claims against Losses— Standardized and graded goods are easily evaluated. Claims against losses or damages during transport or warehousing can be easily settled.

8. Easy Loans— As graded goods have a ready market and relatively minimum price fluctuations (due to advantages of future trading) they can have a good collateral loan value and bank loans can be easily secured against the security of graded goods even at a lower rate of interest.

9. Low Sales Costs— There is no problem of return of inferior or unsold goods, and quality of transport and selling can be reduced. Storage cost and risk can also be reduced. Graded goods occupy less space.

10. Long Period Contracts— Since buyers and sellers are absolutely assured about the quality of the graded goods, they can easily enter into long period contracts of purchase and sale either in the physical or cash markets, or in the forward or future market. In organized markets not only goods are standardized and graded, sale contracts are also standardized in all respects.

11. Universal Standardization— All commodities entering into organized markets, all forms of contracts, all types of processes and services, all trade practice, all types of weights and measures, all types of coins and notes, etc., need standardization where in agriculture or in manufacture, in commence or in office management. In short, standardization has ample scope in all branches of our economic life and plays a very important role in the marketing of and goods services.

Standardization and quality control may be compulsory by law, e.g. in export trade. The sue may prescribe certain standards to be adopted by trade in general, e.g., weights and measures, standards of purity, strength durability, etc. It may be done voluntarily by trade Associations, chambers commerce or individual manufacturers, etc.

Many countries have not yet felt it essential to give the benefits of standardized and graded quality products to customers at home. In India, standardization and quality control are compulsory for export trade but permissive or optional in home trade. Businessmen, too, with service on their lips and profits at their heart, must change their attitude. The time is ripe for evolving consumer-oriented trade practices. Consumerism welcomes quality control and standardization in a country.

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