Chat with us, powered by LiveChat Critically discuss standardisation and adaptation strategies for international marketing with the use of appropriate examples.? ?2) How you can ac | WriteDen

Critically discuss standardisation and adaptation strategies for international marketing with the use of appropriate examples.? ?2) How you can ac

 1)Critically discuss standardisation and adaptation strategies for international marketing with the use of appropriate examples. 

 2) How you can achieve adaptstandation? Explain adaptstandation with the help of examples and explain how this strategy can balance between standardisation and adaptation.

3) Discuss bottom of the pyramid marketing and critically assess its applications in three different projects. 

International Marketing Review Emerald Article: International marketing adaptation versus standardisation of multinational companies Demetris Vrontis, Alkis Thrassou, Iasonas Lamprianou

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To cite this document: Demetris Vrontis, Alkis Thrassou, Iasonas Lamprianou, (2009),"International marketing adaptation versus standardisation of multinational companies", International Marketing Review, Vol. 26 Iss: 4 pp. 477 – 500

Permanent link to this document: http://dx.doi.org/10.1108/02651330910971995

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International marketing adaptation versus standardisation

of multinational companies Demetris Vrontis

School of Business, University of Nicosia, Nicosia, Cyprus

Alkis Thrassou Department of Marketing, School of Business, University of Nicosia, Nicosia,

Cyprus, and

Iasonas Lamprianou Department of Education, The University of Manchester, Manchester, UK

Abstract

Purpose – The purpose of this paper is to position multinational companies on a linear continuum indicating their overall attitude towards standardisation/adaptation, examines the reasons influencing multinational companies’ tactical (7Ps – marketing mix) behaviour towards it, and finally presents the underlying managerial implications of the results.

Design/methodology/approach – A rating scale Rasch model is used in order to place the multinational companies’ attitude towards standardisation and adaptation on a linear continuum. Structural equation modelling is subsequently used in order to investigate the relationship between the adaptation and standardisation variable against other variables. An extensive literature review is also undertaken to provide the theoretical foundation.

Findings – The paper corroborates the findings of past research by placing multinational companies on a linear continuum; by identifying their overall attitude towards adaptation/standardization; and by describing the relationship between AdaptStand and other variables. Furthermore, it categorises the reasons pulling towards adaptation or standardisation into “significant” and “peripheral”; and provides valuable insights towards practical application.

Practical implications – The paper provides marketing researchers and practitioners with an overview of the main factors that influence marketing tactical behaviour in international markets. Additionally, the research transcends descriptive analysis to identify vital behavioural issues and to prescribe marketing approaches regarding internationalisation.

Originality/value – Though the subject of “adaptation versus standardisation” has been extensively researched, this paper provides original work through in-depth quantitative analysis of a sufficient sample of multinational companies. The paper reaches specific and explicit conclusions that scientifically test existing theory on the subject, categorise factors according to their significance in the adaptation/standardisation decision process and offer valuable prescriptions of marketing tactics based on the findings.

Keywords International marketing, Marketing strategy, Multinational companies, Marketing theory, Standardization

Paper type Research paper

1. Introduction Within the field of international marketing, the debate over the extent of standardisation or adaptation has occupied a significant part of past research.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0265-1335.htm

Adaptation versus

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Received September 2008 Revised February 2009

Accepted February 2009

International Marketing Review Vol. 26 Nos 4/5, 2009

pp. 477-500 q Emerald Group Publishing Limited

0265-1335 DOI 10.1108/02651330910971995

The subject, though extensively researched, has not been exhausted yet, since, in-depth statistical analysis and measurement of the relative weight of elements affecting the decision are still necessary to enhance our knowledge on it. This research makes a significant step towards eliminating this gap and provides a valuable addition both to theoretical understanding and to managerial applications on the subject.

Vignali and Vrontis (1999) indicate that this debate commenced as early as 1961, when Elinder (1961) considered it with respect to worldwide advertising. During that period, advertising and the need for international standardisation was at the heart of the debate (Kanso and Kitchen, 2004). International advertising standardisation would have necessitated a common advertising approach for promotional campaigns of multinational organisations. This debate then expanded from advertising to the promotional mix and now encompasses the entire marketing mix (Schultz and Kitchen, 2000; Kanso and Kitchen, 2004; Kitchen and de Pelsmacker, 2004).

Remarkably, nearly half a century later, the debate on standardising marketing internationally, is ongoing (Vrontis and Kitchen, 2005). Even a cursory review of the literature identifies two main approaches with remarkable longevity, namely, adaptation and standardisation of international marketing tactics.

Ryans et al. (2003) claim that in the last 40 years there has been an extensive growth of academic research in the area of international marketing standardisation. Throughout this period, researchers applied more sophisticated statistical methodology. Moreover, they explain that economic and competitive circumstances have changed over this period of time. Earlier, economic development was concentrated on the surplus of exports over imports. Firms were focused merely on minimizing cost and increasing exports. Nevertheless, due to changes in economic circumstances, firms realized that cost minimization alone is insufficient. By way of evolving, firms became more consumer oriented and more sophisticated techniques were created and applied to determine and satisfy consumers’ needs.

Supporters of standardisation viewed markets as increasingly homogeneous and global in scope and scale and believed that the key for survival and growth is a multinational’s ability to standardise goods and services (Fatt, 1967; Buzzell, 1968; Levitt, 1983; Yip, 1996). Supporters of standardisation stipulate that consumers needs, wants and requirements do not vary significantly across markets or nations. The overall conceptual argument is that the world is becoming increasingly similar in terms of environmental factors and customer requirements and irrespective of geographical locations, consumers have the same demands. For example, Levitt (1983) in a milestone paper, argued that standardisation of the marketing mix and the creation of a single strategy for the entire global market, offers economies of scale in production and marketing and moreover is consistent with what he described as the “mobile consumer”.

On the other hand, proponents of adaptation such as Kashani (1989) indicate difficulties in using a standardised approach and therefore support market tailoring and adaptation to fit the “unique dimensions” of different international markets (Thrassou and Vrontis, 2006). More specifically, supporters of the international adaptation school of thought argue that there are insurmountable differences between countries and even between regions in the same country (Papavassiliou and Stathakopoulos, 1997). It is argued that marketers are subject to a number of macro-environmental factors, such as climate, race, topography, occupations, taste, law, culture, technology and society

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(Czinkota and Ronkainen, 1998). Paliwoda and Thomas (1999) expand this list to include consumer tastes, disposable income, taxation, nationalism, local labour costs, literacy and levels of education. Followers of this school stipulate that multinational companies should find out how to adjust their marketing strategy and tactics (marketing mix elements) in order to fit market requirements.

Both schools of thought in themselves appear to be sensible, logical and coherent, highlighting the advantages and benefits that a multinational company could gain by using either approach. It is only when one focuses on the extreme position of either that they often become impractical and incoherent. Marketing reality for multinationals does not lie in either of these two polarised positions, as both processes are likely to coexist, even within the same company, product line, or brand (Kitchen, 2003; Vrontis, 2003; Soufani et al., 2006).

This paper expands on existing work on the subject to research the complex interrelationship of various factors involved towards the adoption of the two approaches (adaptation and standardisation). It adds valuable insights into the degree and nature of this relationship and identifies practical issues relating to international marketing tactics. Specifically, this paper investigates the approaches adopted within the largest one thousand UK-based multinationals in relation to different market entry methods. “Multinationals” in the context of this research refers to companies which have been operating in or exporting to foreign markets over a period of a minimum of five years.

The originality of this research stems from its advanced statistical modelling approach, which corroborates past research through more in-depth statistical analysis; and from its findings, which have shown that the marketing reasons pulling towards adaptation or standardisation do not bear the same degree of significance in tactical behaviour (marketing mix design). Moreover, the research separates these into “significant” and “peripheral” ones and incorporates findings into prescriptive conclusions and managerial implication.

2. Theoretical background International adaptation versus global standardisation Multinational companies, in their effort to expand their global presence and market share, increase profitability and to overcome problems related to saturation of existing markets, continually seek opportunities for growth (Vrontis and Thrassou, 2007).

Within the field of international marketing, when a company decides to begin marketing products abroad, a fundamental decision is whether to use a standardised marketing mix (product, price, place, promotion, people, physical evidence, process management, etc.) with a single marketing strategy in all countries, or to adjust the marketing mix to fit the unique dimensions of each potentially unique local market. However, literature quoting practical evidence suggests that companies make contingency choices, which relate to key determinants in each circumstance (Vrontis et al., 2006).

Chung (2007) argues that the basis for marketing standardisation is the comparison of market operation in the home market to market operation in a foreign host market. He goes further, to claim that factors related to the extent of standardisation in a foreign market must be identified. He highlights the importance of the interaction

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method that helps to identify the indirect influence of factors in the selection of standardization strategies and tactics (Ryans et al., 2003).

Buzzell (1968) and Buzzell et al. (1995) state that in the past, dissimilarities among nations led multinational companies to view and design their marketing planning on a country-by-country basis (i.e. as a local marketing problem). However, as Buzzell et al. (1995) note, this situation has changed and the experiences of a growing number of multinational companies suggest that there are potential gains to be obtained by standardising marketing practices. In addition to this, Chung (2007) argues that culture has no main effect on product, price, place and process. Instead, the main effect is on promotional efforts, meaning that firms should use an adapted promotional approach when entering a different cultural environment.

On the other hand, Jae et al. (2002) differentiate between international and transformational advertising styles. They claim that transformational messages associate the brand with a unique set of psychological characteristics and therefore are universal. Conversely, informational advertisements are more often localized, as they concentrate on consumers’ practical and functional needs by emphasizing product features or benefits.

Backhaus and van Doorn (2007) claim that standardisation is a trade off between the possible economic benefits of a standardised approach, as well as the performance gains attained by adapting to the needs of local markets. Furthermore, they argue that different advertisements from different countries might create confusion amongst customers; therefore standardised advertisements may prevent this. Nevertheless, advertising managers may also face constraints by national legislation. What is needed to be done is to identify the drivers of standardisation perception and to design a campaign that meets their respective restrictions (Backhaus and van Doorn, 2007).

Supporters of global standardisation argue that consumers live in a globalized world in which nation-states are not the major determinants of marketing activities; and in which consumer tastes and cultures are homogenised and satisfied through the provision of standardised global products created by global corporations (Dicken, 1998). Levitt (1983) asserted that well-managed companies moved from an emphasis on customising items, to offering globally standardised products that were advanced, functional, reliable and low in price. In Levitt’s view, multinational companies that concentrate on idiosyncratic consumer preferences become befuddled and unable to see the forest because of the unique nature of individual flora and fauna. Pursuing Levitt, global companies will achieve long-term success by concentrating on what everyone wants rather than worrying about the details of what everyone thinks they might like.

Papavassiliou and Stathakopoulos (1997) suggested four main reasons that make Levitt’s thesis appealing. First, it allows multinational companies to maintain a consistent image and brand identity on a global basis. Second, it minimises confusion among buyers that travel. Third, it allows the multinational company to develop a single tactical approach. And, fourth, it enables the company to take advantage of economies of scale in production and experience and learning curve effects.

The use of global standardisation, on a tactical level, is of paramount importance as, according to Levitt (1983), the globalisation of markets is (or was) at hand. He argues that global corporations operating with resolute constancy, at low-relative cost, can treat the entire world as a single entity and sell the same things in the same way everywhere. With the emergence and growth of these new streetwise global entities,

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old-fashioned international adaptive strategies that adjust products and practices in every market around the world, are nearly extinct.

Keegan and Green (2000) state that standardised global marketing is analogous to mass marketing (undifferentiated target marketing) in a single country and involves the creation of the same marketing mix for a broad mass market of potential buyers.

The simplification and conceptualisation of standardisation is opposed by supporters of the international adaptation approach, who react directly to the sweeping polemic argument of Levitt (1983). Supporters of adaptation declare that the assumptions underlining global standardisation philosophy are contradicted by the facts. “Standardisation is at best difficult and, at worst, impractical” (Jain, 1989, p. 71). Globalisation according to Ruigrok and van Tulder (1995) seems to be as much overstatement as it is an ideology. Ruigrok and van Tulder (1995) went so far as to state that it is impossible to market effectively by using the same marketing mix methods and marketing strategies everywhere. In addition, Helming (1982) and Youovich (1982) challenge the basic assumption of the standardisation approach and argue that similar buying motives for consumers on an international basis may, at best, be simplistic and at worst, dangerous. Thus, supporters of international adaptation argue that tailoring marketing mix elements is essential and vital in meeting the needs and wants of target markets. To them, marketing mix elements cannot be standardised, as international markets are subject to differential macro and micro-environmental factors, constraints and conflicts.

Hassan et al. (2003) suggest different ways of global market segmentation that are useful for decisions on brand standardisation versus adaptation. They specify three main segmentations: group of countries demanding similar products, different countries with the same product and universal segments that present in many or most countries. Moreover, macro (economic, technological, geographic, political, etc.) and micro (lifestyles, attitudes, consumer tastes and preferences) forces are highly considered by multinational companies operating in the global marketing arena.

Lipman (1988) supports that for many the global-marketing theory itself is bankrupt and bunk. In fact, the concept that once sent scores of executives scrambling to reconfigure marketing strategies now has many feeling duped. Not only are cultural and other differences very much still in the ascendancy, but marketing products in the same way everywhere can scare off customers, alienate employees and blindside businesses to their customers’ real needs.

Striking the right balance The above extreme schools of thought (adaptation and standardisation) are rejected by various authors who highlight the difficulty in applying them in practice and stress the importance and necessity of both adaptation and standardisation to be used simultaneously (Sorenson and Wiechmann, 1975; Prahalad and Doz, 1986; Boddewyn et al., 1986; Douglas and Wind, 1987; Kim and Mauborgne, 1987; Main, 1989; Choi and Jarboe, 1996; Terpstra and Sarathy, 1997; van Raij, 1997; Hennessey, 2001; Vrontis, 2003; Vrontis and Papasolomou, 2005).

When practising international marketing, a company goes beyond exporting and becomes much more directly involved in the local marketing environment within a given country or market. International marketers are likely to have their own sales subsidiaries and will participate in and develop new marketing tactics and strategies

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for foreign markets. At this point, the necessary adaptations to the firm’s domestic marketing strategies become a main concern.

The decision whether to standardise or adapt is not considered as a dichotomous one. For example, certain academics suggest that standardising certain tactics and adapting others to different market conditions is necessary (Quelch and Hoff, 1986; Peebles et al., 1977; Light, 1990; Vrontis and Vronti, 2004). For these authors, standardisation and adaptation is not an all-or nothing proposition, but a matter of degree. Heterogeneity among different countries does not allow full standardisation. On the other hand, the huge costs involved in adaptation and the benefits of standardisation, may not allow adaptation to be used extensively (Vrontis, 2005).

Nanda and Dickson (2007) concentrate on three factors to examine standardisation/adaptation behaviour: homogeneity of customer response to the marketing mix, transferability of competitive advantage and similarities in the degree of economic freedom. He notes that even in countries with similar cultures (e.g. across the European Union) there are differences in customer needs and wants. Furthermore, he argues that standardisation will be successful when the homogeneity of customer response and the degree of similarity in economic freedom is high and competitive advantages are easily transferable.

For multinational companies to be successful they should incorporate elements of both approaches. Thus, effectiveness and reaping the benefits of both concepts means that these companies must try on the one hand, to standardise various marketing mix elements and marketing strategies, but on the other hand to follow adaptation where necessary in order to satisfy apparent market needs. The goals of reducing costs and market complexity lead companies to consider standardisation, while customer orientation may sway them toward product adaptation (Vrontis and Kitchen, 2005; Vrontis and Papasolomou, 2005). Vrontis (2003) further argues that decisions on international marketing tactics depend upon a number of determinants. These determinants are grouped into “reasons” and “factors”. Reasons are those behavioural aspects “pulling” multinationals’ tactical behaviour towards one or the other side of the continuum, while factors are those determinants affecting the behaviour and its relative importance. The former are shown in Figure 1. It is further noted that the expanded marketing mix of seven “Ps” is appropriate to also relate to companies that belong to the service sector and/or have strong service elements.

3. Research scope and methodology Scope of the research As discussed, the scientific debate on whether multinational companies should adapt or standardise marketing mix elements in international markets is one of great importance and of long duration. International practitioners need to search for the balance between standardisation and adaptation as it is hypothesised that adaptation versus standardisation is not a dichotomous decision.

The aim of this research is to investigate the complex relationship of the two extreme approaches (adaptation and standardisation) and to evaluate the relative degree of significance of the marketing reasons pulling towards either direction. This research investigates the approaches adopted by large UK-based multinationals in relation to the marketing mix elements (7Ps). Specifically, the objectives of this research are to:

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. develop an “AdaptStand variable” based on companies’ tactical behaviour (marketing mix – 7Ps) in order to place multinational companies on a linear continuum, indicating their overall attitude towards standardisation and adaptation;

. examine through advanced statistical modeling, the extent to which a number of reasons are influencing multinational companies’ tactical behaviour (marketing mix – 7Ps) towards adaptation and/or standardisation; and

. discuss the findings and present the underlying managerial implications of the multinationals’ observed international marketing behaviour regarding standardisation and adaptation.

Research methodology This research is based on the largest 1,000 UK-based multinational companies across five industrial sectors (i.e. manufacturing, services, transportation and communication, construction and retail and wholesale). The fact that it includes UK-based companies only is a methodological limitation that does not allow for direct generalization of the findings. Questionnaires were mailed to and completed by the companies’ marketing directors.

With regards to the response rate, 372 completed questionnaires were returned and utilised towards the analysis. The sampling procedure used is non-probability and lies specifically within the category of purposive/judgment sampling (Crouch and Housden, 1996). One-third of the respondents belonged to the “Manufacturing” sector while 23 per cent belonged to the “Services” sector. The rest of the sample was split equally between the “Transport and Communication”, “Construction” and “Retail and Wholesale” sectors. The main selling activity of the sample was split between “Business to Business” (43.5 per cent) and “Business to Consumer” (56.5 per cent). The main product service category of the 41 per cent of the sample was “Services (business and professional)” whereas the rest of the sample was split between “Consumer durables” (13.4 per cent), “Consumer non-durables” (11.3 per cent), “Industrial goods (finished products)” (12.9 per cent) and other smaller categories. The research instrument comprised both open and close-ended questions and will be discussed later.

Figure 1. Toward standardisation

or adaptation: a conceptualisation

Reasons pulling towards standardisation

1. Economies of scale in production, research and development and promotion 2. Global uniformity and image 3. Consistency with the mobile consumer 4. Easier planning and control 5. Stock costs reduction 6. Synergetic and transferable experience

Product

1. Product or service variety, design, features 2. Quality 3. Brand name 4. Packaging, styling 5. Size and colour varieties 6. Performance 7. Image 8. Pre-sales service 9. Delivery, installation 10. After-sales service warranties

Price 1. Price levels, list price, price changes 2. Discount allowances, payment period, credit terms

Promotion 1. Advertising 2. Sales promotion 3. Personal selling 4. Direct marketing 5. Public relations

Place

1.Distribution channels, distributors value, place of shops, logistics

People

Physical evidence

Process management

Reasons pulling towards

adaptation

1. Market development 2. Economic differences 3. Culture 4. Differences in customer perception 5. Competition 6. Technological 7. Sociological 8. Differences in physical conditions 9. Legal / political 10. Level of customer similarity 11. Marketing infrastructure

Tactical behaviour (Tactics – 7P’s)

S T A N D A R D I S A T I O N

A D A P T A T I O N

Source: Adapted from Vrontis (2003)

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Behavioural variables, in the questionnaire, record how respondents behave in international markets and the reasons associated with such behaviour. Such questions were designed to elicit multinational companies’ tactical level of adaptation and standardisation when crossing national borders. Attribute variables contain data about respondents’ characteristics and they are best thought of as something a respondent possesses, rather than something a respondent does. This allowed research on the different factors related to the tactical behaviour and to identify what sub-factors are more likely to be adapted or standardised.

This paper combines the use of the Rasch model and structural equation modeling (SEM) in order to address the research objectives. This section begins with the description of the technical details of the Rasch model and goes on with the details of the SEM. The methodology section elaborates on the technical details of the statistical analysis in order to allow other researchers to replicate the analysis using their own data, in order to confirm the results of the study.

The Rasch model has been in the service of marketing research for 30 years and it is mainly used to develop and validate attitude scales and to measure the attitudes of individual respondents to questionnaires (e.g. the attitude of consumers towards certain products). As a measurement model, it was first presented in 1960 by the Danish mathematician Rasch (1960/1980). Its use spread widely to health rehabilitation, medicine, sociology, education, psychology and other disciplines and hundreds of papers using variants or extensions of the Rasch model are being produced every year.

In the area of marketing research, one of the first uses was by Churchill (1979) who presented a “paradigm for developing better measures of marketing constructs” (as was the actual title of the paper). Soutar et al. (1990) used the Rasch model to analyse data of acquisition patterns of durable goods and encouraged other researchers to use this model when conducting research in that area. Along similar lines, Ewing et al. (2005, p. 17) “re-introduced” the use of Rasch model in the area of marketing research by suggesting that it “offers a new methodological framework to guide researchers attempting to quantitatively assess [. . .]” peoples’ reactions to marketing strategies (such as advertisement). Ewing et al. (2005) also referred to many other researches that used the Rasch model (or extensions of the model) to analyse data in marketing and advertisement research. It is important to mention that the Rasch model is usually used to validate constructs, i.e. theoretical concepts that explain observable behaviors (e.g. responses to a questionnaire) and refer to assumed unobservable (latent) characteristics of the respondents (Wolfe and Smith, 2007). In the context of our research, the Rasch model is used to reconstruct the underlying tendency of a company to adapt or standardize, using the observed responses to a relevant questionnaire (Section 2 of the questionnaire in Appendix 1). If the Rasch model is judged to be valid (according to appropriate model-data fit criteria), this will be further statistical evidence that the well-known marketing mix – 7Ps may indeed formulate a coherent and unidimensional attitude scale on which researchers may measure the standardization or adaptation tendency of a company.

More recently, Salzberger and Sinkovics (2006, p. 390) carried out empirical research in the context of international marketing research comparing the use of a Rasch model and a more “traditional” approach (i.e. the confirmatory factor analysis) and concluded that “the more widespread application of Rasch models would lead to a stronger

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justification of measurement [. . .] whenever measures of individual respondents are of interest” because, accordin

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