ISSN 1115-960X
ILORIN JOURNAL
OF
BUSINESS AND SOCIAL
SCIENCES
VOL. 2
1990
Published by the Faculty of Business and Social Science,
University of llorin, Nigeria.
THE ILORIN JOURNAL OF BUSINESS AND
SOCIAL SCIENCES
Editor-in-Chief Deputy Editor
O. J. Olaniran J.O. Olujide
Associate Editors
O.D. Atte
A.O. Afolayan
R.A. Seniyi
Habib Sani
Business Editor
M. Okorosobo
VOL. 2
1990
TABLE OF CONTENTS
Articles
1.
2.
3.
4.
International Marketing Standardization:
Evidences from a High Risk Market Environment
— Jackson Olusegun Olujide.
Pages
1
The Concept of Average Inventory in Economic Order
Quantity Models: A Mathematical Derivation
— T. 0. Adewoye.
21
A Survey of Management of Performance of Egg
Producing Enterprises in Kwara State
— O. A. Omotesho and A. A. Ladele.
31
An Evaluation of the Agro-climatological Potential of
the Guinea Savanna Belt of Nigeria for the Cultivation
of Sorghum — J. N. Bella.
39
INTERNATIONAL MARKETING STANDARDIZATION:
EVIDENCES FROM A HIGH RISK MARKET
ENVIRONMENT
JACKSON OLUSEGUN OLUJIDE
Department of Business Administration,
University of llorin, Ilorin.
Abstract
Today's development in International Marketing
make a better understanding of marketing decision
processes in the Multinational Corporation (M.N.C.)
imperative. Who makes what marketing decisions in the
M.N.C.? Headquarter staff or local marketing managers?
This paper analyzes one of the two identifiable
modes of integration in the M.N.C. — the
STANDARDIZATION of Marketing Programmes for 66
British and French multinational affiliates operating in
Nigeria (a high risk market environment).
Results show that the degree of standardization
varies across the four elements of the marketing mix and
that prospects for a successful programme of
standardization arc most likely to be feasible and
effective for product and limited to sub global market
clusters for price, communication and distribution.
Finally, observed standardization are the results
of temporary compromises between the necessity to
adapt to specific local market conditions while
maintaining competitivity rather than a deliberate attempt
to enfore rigid formulae.
1.0
Introduction
The integration of the marketing programmes of overseas
subsidiaries of the Multinational Corporation (MNC) has emerged as one
of the most widely discussed developments of the past decade. The
growing importance of his subject has therefore stimulated a flood of
comment and advice such that conferences, seminars and surveys have
probed the distinctive problems of the standardization of international
marketing in this breed of enterprise.
To date, much of the research effort on the standardization of
marketing decisions in the MNC has been limited to European and
American operations and one or two element? of the marketing mix in
IJBSS VOL 2,1990
Ilorin Journal of Business and Social Sciences
the low risk market environments or Europe and America (Aytaoer, 1970;
Wiechman, 1974; Picard, 1977; Ward, 1977; Hill, 1973; Sorenson &
Wiechmann, 1975; Gamier, Cai^se & Bondeville,1973), Only one
research had been undertaken in a moderate risk market environment
covering the four elements of the marketing mix (Ann, Lasserre &
Chandon, 1987). No research of this nature has been carried out in a
high risk market environment. This geographic limitation has therefore
eliminated the different types of standardization of marketing decisions
and programmes that could exist between countries that are culturally,
politically and economically different and with different degrees of risk.
Thus, the question of whether to use multinational
standardization or to customer-tailor marketing programmes in each
country has continued to trouble practising international managers,
academicians and researchers alike, and has produce 1 a wide array of
divergent view-points (Simon-Millar, 1986; Sheth, 1986; Kotler, 1986;
Porter, 1986; Wind, 1986; Levitt, 1983, etc.).
This debate on the standardization of international marketing
turns around two contradictory hypotheses about the international
consumer. The first is that consumer needs are basically the same
worldwide. Thus MNC finds it economically advantageous to use
identical marketing procedures in each country. This point of view is
based on the proposition that worldwide standardization contributes to
overall objectives of cost minimization, coherence of image and
competivity.
According to the second hypothesis, consumer needs, cultural
and social economic factors vary widely from country to country. Thus,
under these diverse market conditions, marketing decisions,
programmes and practices must be flexible in order to meet the needs of
each country. Therefore affiliates can pursue differentiated approaches in
host countries.
In view of this debate, and the fact that up to the present, the
debate has been couched in abstractions with limited empirical research,
practitioners pleas for data on which countries are converging and how
companies might respond remain unanswered.
Thus, this study is designed to provide empirical data and to
shed some light on the standardization of marketing and to offer specifies
on which marketing mix elements are likely targets for a standardized
2
International Marketing Standardization: -Evidences from a High Risk market Environment
approach in a multinational context. We shall also undertake a comparative analysis results with Sorenson & Wiechmann (i977)1on Americanmultinationals in Europe (a low risk market environment) and Ahn,
Lasserre & Chandon (1987) on South Korean subsidiaries of the MNC (a
moderate risk market environment2). This would enable us respond to
the proposition made by Levitt (1983) concerning the globalization of
international marketing.
This study is distinct in that it analyzes the degree of marketing
standardization in British and French subsidiaries based in Nigeria, a
high risk market environment3, as measured by the risk scale of
Gatignon and Anderson, 1986: and covers the four elements of the
marketing mix.
2.0 Methodology
Our sample is made up of British and French affiliates of the
MNC in Nigeria at the end of 1986. sixty-six subsidiaries (31 British & 35
French) are included. Altogether they represent the most important
private sector foreign investments in Nigeria. The selection was nonprobabilistic but controlled by the researcher.
Data were collected by means of personal interviews based on a
form-type questionnaire with the Marketing manager of each company
for about 2 to 3 hours. Personal interviews seemed to be the most
effective way of gathering this kind of data. Company records and books
of accounts were examined in order to obtain information that could not
be collected by this method.
The information gathered from the marketing managers was
recorded at the interval-scale level for the variable standardization.
Twenty-three operational marketing decisions were drawn from the four
elements of the marketing mix. They were chosen by examining both
written materials by specialists in this field and by means of a preliminary
discussion with several managers of the subsidiaries in question.
3.0
Results
3.1.
Degree of Standardization of Marketing Decisions
Table 1 shows the results for each of the 4 elements and 23 sub-
3
Ilorin Journal of Business and Social Science
elements of the marketing mix. According to the analysis, in very small
proportion (5.05%) of the subsidiaries constituting our sample consider
the totality of their marketing strategy standardized; only 1.85%
recognize a flexible marketing programme while a large percentage
(93,10%) consider their marketing strategy adapted to the environmental
and cultural conditions of the Nigerian market. These results
demonstrate that the Nigerian subsidiaries of the British and French
MNCs have allow degree of standardization in contrast to Sorenson and
Wiechmann's study on American MNGs in Europe (63%) and Ahn,
Lasserre & Chandon's study on South Korean subsidiaries of the MNC
(36%).
Each element of the marketing mix is standardized to a different
degree (See Figure–1). Product strategies are relatively highly
standardized (38.75%), whereas price, communication and distribution
programmes are significant Adapted to the conditions of the Nigerian
market.
3.1.1 Product Decisions
Table 1. shows that the sub-elements of product: (physical
characteristics, brand, packaging), remain relatively highly standardized,
with rates of 45%, 38.75%, and 32.20& respectively.
3.1.2
Pricing Decisions
The results of this study show that the marketing decisions
relating to price and its sub-elements are significantly adapted to the
Nigerian market environment. A marketing manager in the beer industry
interviewed said "among the four elements of the marketing mix,
programmes relating to price are the least standardized. Production
costs, competitor prices, state price controls, company taxes and custom
and excise regulations vary greatly from Nigeria to France and Great
Britain."
Thus, the less peculiarities offered by host country markets, the
more MNCs' tend to standardize marketing practices. Sorenson &
Wiechmann noticed that a high degree of similarity in market conditions
between the host country and countries of origin leads to a strong
standardisation.
This is not the case with the Nigerian affiliates. This could be
4
International Mattering Standardization: Evidence! from a High Risk market Environment
attributed to the great disparity between the market conditions of
industrialized and less developed countries.
3.3.1 Communication Decisions: Advertising and Promotion
As in the case of pricing strategy, those relating to advertising
and promotion are adapted to the Nigerian market environment by all the
subsidiaries.
An opinion largely shared by all the marketing executives interviewed is that there exists substantial differences in the availability and
depth of the diverse means of advertising and promotion and then?
effectiveness between Nigeria, the host country, and the countries of
origin. One of them gave the following example: "television advertising, a
very important vehicle of promotion in industrialized countries, does not
reach more than a few households possessing television in Nigeria.
Added to this, is the problem of irregular power supply in the big towns
and its non-availability in the countryside. This situation poses serious
problems for television advertising in under-developed economies. Even
in the case of the print media (newspapers, magazines etc.) the situation
is not any better; the low literacy rate limits its accessibility and
effectiveness. This is why companies emphasized the necessity of
adapting the advert message, media mix and sales promotion
programmes to the Nigerian market".
But the drive for cost minimization and competitiveness and the
necessity to build a coherent international image to the "world-wide"
consumer push parent companies to want to maintain some influence.
They wish to preserve the content of the advert message. Some companies also require that their Nigerian subsidiaries coordinate their /advertising campaigns with those of affiliates in neighbouring countries in order
to keep some continuity from country to country.
Thus, MNCs send to their Nigerian subsidiaries ideas and
suggested content for advert campaigns. They also send copies of
advert documents used in the country of origin. Seven of the companies
interviewed received advertising foot ages from their headquarters. They
are however flexible as to the means of delivering advert message and
the media mix.
7
Ilorin Journal of Business Social Sciences
3.1.4
Distribution Decisions
MNCs in Nigeria maintain a less standardized approach to
distribution activities than do those operating in Europe and the U.S.A.
As in the case of pricing and communication programmes, marketing
strategic relating to distribution are significantly differentiated from those
of the parent companies.
It is often argued by specialists in development economics that
the structures and functions of distribution channels reflect the stage of
economic development of a country. In other words, there is a relationship between the level of industrialization and the structures of distribution. This implies that there is a significant difference in the structure of
distribution between developed and under-developed countries. This
assertion seems to be confirmed not only by the results of Sorenson &
Wiechmann's study which shows that distribution decisions and
programmes of subsidiaries operating in Europe or the U.S. A. are highly
standardized, (here market environments are-very similar), but also by
this study which shows that distribution decisions and programmes are
differentiated by affiliates, (here market environments show great
disparity).
Sales techniques and distribution channels are very similar in
industrialized countries, be it in North America or in Europe. Indeed,
these nations are characterized by highly developed economies*
distribution and transportation systems, by a free market system and by
the presence of a highly developed marketing infrastructure. These make
a high degree of standardization feasible. On the other hand, MNCs
operating in less developed countries like Nigeria must take into account
local peculiarities in the market and are therefore forced to differentiate
distribution programmes.
3.1.5
Comparative Analysis of Strategies of Integration in the
Three Market Environments
The objective of this section is to undertake a comparative
analysis of the results of studies conducted in the three market
environments as they affect the standardization of international
marketing. This would enable
8
International Marketing standardization: Evidences from a High Risk Market Environment
us respond not only to the proposition of Levitt (1983) concerning the
globalization of international marketing but also to make generalization
concerning the elements of the marketing mix that are most least
amenable to standardized marketing.
According to the study of Sorenson & Wiechmanfi on the
European subsidiaries of American MNCs (a low risk market
environment), a large proportion, 63% of the subsidiaries consider that
the whole of their marketing strategy is highly standardized; 11% utilize a
flexible programme while 27% adapt their strategy to local conditions,
(see Table 2).
However, there are considerable variations in the degree of
standardization of the four elements of the marketing mix. Product
strategies are highly standardized in 83% of the cases, 56% for Printing,
58% for communication and 68.3% for distribution strategies.
In the case of the study of Ahn, Lesserre & Chandon on the
South Korean subsidiaries of the MNC, (a moderate risk market environments), 36% of the affiliates have a highly standardized marketing
procedure. In 23.8% of the cases, the degree of standardization is
moderate and low for 4036 of the subsidiaries.
Each element of the marketing mix is standardized to a different
degree. Product strategies are highly standardized (81.5%) while pricing
procedures are only standardized in 10% of the companies in the
sample. The rates are 353% and 36.1% for communication and
distribution respectively.
The results shown in Table 1. indicate that 5.05% of the Nigerian
subsidiaries of the British and French MNCs, (a high risk market
environment), have highly standardized marketing procedures. The
degree of standardization is moderate for 1.85% of the affiliates and low
for 93,10%.
We note from this analysis mat die Nigerian affiliates of the MNC
have the lowest degree of standardization of marketing procedure & The
marketing procedures are more standardized in the South Korean
subsidiaries and most standardized by European affiliates of American
MNC (See Figure 2).
This analysis shows that MNCs tend to adopt standardized
marketing procedures when cultural differences between the host
country and the
9
International Marketing Standardization: Evidences from a High Risk Market Environment.
country of origin arc very minimal. For instance, Sorenson & Wiechmann
found that highly standardized marketing techniques were used by
American MNCs with subsidiaries in Europe. This result was explained
by Ac high degree of similarity between American and European market
environments.
Great differences exist between the market environments of
industrialized and developing countries such as Nigeria. This is perhaps
why the marketing practices in the Nigerian market environment are the
least standardized. Environmental factors, such as product use
conditions, income levels, custom and tradition, literacy, technological
context, legislation, etc., help to explain such modifications.
We shall examine the standardization of marketing procedures in
respect of the four elements of the marketing mix.
3.2
Degree of Standardization of Marketing Procedures
3.6
Product Decisions
Table 2 shows that physical characteristics, brand name and
packaging of the product remain relatively highly standardized in the
moderate and high risk market environments of South Korea and Nigeria
with rates of (86%, 73.6%, 86%) and (45%, 37,75%, 32.5%) respectively.
These results correspond with those found by Sorenson & Wiechmann in
the tow risk market environment (81%, 93%, 75%).
While it is true that the environmental factors mentioned above
vary significantly between developed and under-developed countries, the
figures above indicate a high degree of standardization of marketing
procedures with respect to the three sub-elements of the product. The
hypothesis of product modification is therefore not proven.*
The explanation is that more than 50% of the companies in the
sample of Ann, Lesserre & Chandon and 12.6% of the subsidiaries
constituting the sample of this study were established less than 10 years
ago. This fairly large proportion of the sample group has only a short
experience in the South Korean and Nigerian markets and therefore they
borrow heavily from the parent companies' expertise in marketing. This
result is corroborated by Wiechmann and Hill who found greater
adaptation
11
Ilorin Journal of Business and social sciences
and lesser standardization in more mature subsidiaries. In other words,
the original product idea is gradually shaped to fit the culture of the final
consumer.
Secondly, our sample includes several companies in the
pharmaceutical industries are relatively highly standardized because
their products are not sensitive to cultural differences. This has probably
raised the degree of standardization for the products very slightly.
Finally, several marketing executives explained that the quality
and reputation of their products count a lot for the Nigerian consumer.
Here, foreign products have a better reputation than local ones — "die
made abroad mentality." This is probably why the sub-elements of the
product are standardized in order to produce goods of high quality and
reputation. This will give to products an image of "made abroad." In these
circumstances, a high degree of adaptation of the product could signify a
deterioration in quality.
3.2.2
Pricing Decisions
Among the four elements of the mix, decisions concerning price
are the least standardized: 56% for Europe, and U.S.A., 10% in the case
of South Korea and 0% for Nigeria. These figures show that pricing
strategies are highly differentiated in the moderate and high risk market
environments. This is probably due to the great disparity in production
costs, competitor prices, government price controls, custom and excise
duties, etc., between industrialized countries of Europe and America and
the developing countries such as Nigeria and South Korea.
3.2.3
Communication: Advert & Promotion
Table 2. shows that 58% of the sample have a highly
standardized advert and promotion strategy in the low risk market
environment of Europe and the U.S.A. only 35.3% in the case for South
Korean subsidiaries while no Nigerian affiliate has a standardized advert
and promotion procedure. This area, like pricing shows a tendency
towards adaptation, particularly in the less industrialized countries.
12
International Marketing Standardization: Evidences from a High Risk Market Environment
3.2.4
Distribution Decisions
MNCs in Nigeria and South Korea maintain a less standardized
approach to distribution than do those operating in Europe and the
U.S.A. Distribution, like pricing and communication, does not lend itself to
uniform procedures. For example, 68.3% of the companies in the low risk
market environment, 36.1 % of those in the moderate risk market
environment have a standardized distribution strategy. No single subsidiary utilizes a standardized distribution strategy in the high risk market
environment.
These results are not surprising in that specialists in
development Economics say that distribution on structures reflect the
level of industrialization of a country. This is why there is such a
significant difference in the results obtained for MNCs operating in the
three market environments.
This comparative analysis of the results of the three studies
shows clearly that marketing procedures are globally more standardized
in the low risk market environment, less in the moderate risk market
environment and the least standardized in the high risk market
environment (see Figure 2).
4.0 Conclusion
The results of our research bring out several important
conclusions concerning the strategy of marketing integration of MNC
operating in Nigeria on the one hand, and in the three market
environments on the other.
First of all, it is evident from this study that the centralisation and
standardization of marketing decisions and procedures are not uniformly
utilized across the four elements of the marketing mix (see Figure 3).
Only product decisions seem to be the object of direct control on the part
of the headquarters. In this area, the parent company prefers, in general,
to impose on its subsidiaries a relatively highly standardized approach,
by using a centralized procedure of decision making.
Thus, our study indicates that prospects for a successful
programme of standardization are most likely to be feasible and effective
when
13
International Marketing Standardization: Evidences from a High Risk Market Environment
operationalized in terms of standardizing the market planning and
procedures concerning the product. The prospects appear limited to subglobal market clusters for price, communication and distribution. This
conclusion indicates that the call by Theodore Levit for the globalization
of marketing is feasible as this affects the marketing mix element —
PRODUCT — but not supported by empirical evidence in respect of
price, communication and distribution.
We also found that in addition to cultural based barriers, which
have a major impact, market differences situation often constrain
opportunities for international advert and promotion standardization. It is
also apparent that differences in law, conditions of product use and
competitive situation are important barriers to product standardization.
Government price controls often limit pricing flexibility and-national differences in the distribution of infrastructure have obvious implications for
standardizing distribution strategy.
Secondly, and as a corollary, the Nigerian subsidiaries are quite
independent in decision making concerning price, communication and
distribution.
Thirdly, it appears that Nigerian affiliates of the MNC have much
more autonomy than do similar subsidiaries operating in South Korea,
Europe or the U.S. A.
Fourthly, the results of this research seem to. find a place in the
stream of current research on the marketing policies of the MNC. The
fundamental dialetic in the MNC is to find a decision making synthesis
between two essential strategic necessities:
— OVERALL COMPETITIVITY, which requires strong co-ordinating.
action from the parent company in order to ensure technological
uniformity, cost minimization and quick transfer of production
techniques and marketing procedures throughput the network of
subsidiaries.
— ADAPTATION TO LOCAL MARKETING ENVIRONMENT, which
requires differentiation in non-product related marketing strategies in
order to overcome the specific local constraints found in each host
country.
The resolution of this dilemma is not to be found in monolothic
formulae such as centralized or decentralized management. Conflict
15
Ilorin Journal of Business and Social Sciences
can only be resolved through specific and sometimes temporary
solutions and by the use of several mechanisms. Our study confirms this,
position in that none of the companies studied functioned according to a
structure entirely centralized and or standardized, or decentralized and or
differentiated.
Table 2.
Percentage
of
Marketing
Decisions
Highly
Standardized in the Three Market Environments.
Marketing
Decisions
Low Risk
Market
Environment
82.00
Moderate Risk
Market
Environment
81.50
High Risk
Market
Environment
38.75
81.00
93.00
75.00
86.00
73.60
86.00
45.00
38.75
32.50
Price
— Retail price
56.00
56.00
10.00
5.00
00.00
0000
Communication
— Advert, message
— Sales promotion
— Advert, budget
58.00
71.00
56.00
43.00
35.30
32.00
36.00
55.00
00.00
00.00
00.00
00.00
Distribution
— Role of sales
force
— Sales force
management
— Channel functions
68.30
36.10
00.00
74.00
50.00
00.00
72.00
59.00
55,00
19.00
00.00
00.00
Product
— Physical
characteristics
— Brand name
— Packaging
16
International Marketing Standardization: Evidences from a High Risk Market Environment
Finally, because of its highly regulated economy and its marked
social and cultural peculiarities, Nigeria imposes on MNCs an imperative
need for adaptation which outweighs the need for integration. On the
other hand, Western European and American economies which are more
open and less diverse, one from the other, require more integration and
less differentiation. This logic leads to the hypothesis that in the future as
the Nigerian economy develops, it market will become more international
and will therefore call for a more intense integration of management
techniques for subsidiaries while never abandoning the need for adaptation. This situation implies growing complexity in the headquarter/
subsidiary relationships. MNCs established in Nigeria should therefore
be prepared to modify their structures and techniques of integration
particularly in the wake of the privatisation and commercialization efforts
of the government in order to deregulate the economy.
Footnotes
1.
2.
3.
Low risk market environment: Is one that is politically stable,
industrially developed, high performer economically, culturally
homogeneous, possesses little or no physiographic barriers,
geographically accessible from U.S. and very little or no legal
barriers to entry and operations.
Moderate risk market environment: Is one that is moderately
stable politically, moderately developed industrially, moderate
performer economically, moderate cultural homogeneity, moderate physiographic legal barrier to entry and operations.
High risk market environment: Is one that is characterized by
high political instability, low level of industrial development, poor
performer economically, culturally heterogeneous, possesses
physiographic and legal barriers to entry and operations and
geographically inaccessible from the U.S.
Expect high standardization for low risk countries, moderate
standardization for moderate risk countries and low standardization for
high risk countries.
17
Ilorin Journal of Business and Social Sciences
5.0
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