INTERNATIONAL MARKETING CHANNELS FOR BRAZILIAN
BEEF: COMPARISON BETWEEN RUSSIA AND THE UNITED
KINGDOM
Abstract
This paper compares international marketing channels for Brazilian beef in two different
markets: Russia and the United Kingdom. The study is a multiple case study with qualitative
variables where data were obtained through semi-structured interviews Brazilian meatpacking
and the retailers and distribution agents in the Russian and British markets. The results show
that the model hereby developed allowed to understand the relationships between different
theoretical perspectives and was able to identify the differences and the reasons for the
organizational form of the marketing channels.
Keywords: international marketing channels, Russia, UK, Brazilian beef.
1. INTRODUCTION
The last decades were marked by changes in the international economic scenario and
business environment. The main changes include the emergence of newly industrialized
countries such as Singapore, South Korea and Hong Kong and, more recently, the emerging
Brazil, Russia, India and China. These countries became players able to create and develop
new commercial transactions, forming what researchers call the third wave (JANSSON, 2007;
MARTELL, 2007).
Firms inserted in this macro environment had to adapt to new and complex situation of
global business, eventually creating a wide range of possible gains beyond national borders
(FLAHERTY, 1996). This is the phenomenon that has driven companies to competitiveness,
including becoming able to of cross borders. In Brazil, although late, we note that the
internationalization of companies is growing rapidly and becoming a reality in several
industries (BORINI, FLEURY, 2011; SCHERER; GOMES; KRUGLIANSKAS, 2009).
However, entering and remaining active in international business is not a simple
activity. On the contrary, it is considered a difficult task for many firms (ROOT, 1987; YIP;
BISCARRI; MONTI, 2000; CUERVO-CAZURRA; MALONEY; MANRAKHAN, 2007). In
most cases, this could be justified by difficulties that firms have to set up and manage
operations in international markets (FLAHERTY, 1996). These difficulties are related to the
existence of barriers found in market structures (ROOT, 1987), unavailability of
organizational resources (CUERVO-CAZURRA, MALONEY, MANRAKHAN, 2007) and
even by institutional barriers (PENG; LEE; WANG, 2005). These factors induce the firm to
entry or, even enhance, expansion in international markets through international marketing
channels that are already structured (ANDERSON; GATIGNON, 1986; KLEIN; FRAZIER;
ROTH, 1990).
The use of structured marketing channels as a widespread alternative in the
agribusiness, they were formed to exploit the advantages that result from factors provided by
comparative specific locations. Loader (1997) illustrates this phenomenon citing the case of
Egyptian potatoes that are traded with the United Kingdom (UK) consumer market.
Following the growing importance of emerging economies, it is noticed a significant
increase in exports of Brazilian agribusiness, especially of beef, contrasting traditional
destinations of these products (USDA, 2009). In addition to this fact, it was observed the
phenomenon of internationalization of Brazilian meatpacking firms which use, among other
resources, marketing channels already structured to operate in international markets
(THOME; MACHADO; VIEIRA, 2011).
In order to better understand the structure of international marketing channels, this
study aims to describe differences in the organization of channels of Brazilian beef,
contrasting two markets: Russia (a new one) and UK (more traditional but dynamic). In this
description we used the model created by Tesfom, Lutz and Ghauri (2004) increasing the
considerations of institutions at Dharwadkar and Grewal (2002). Another purpose is to
analyze the performance of firms in emerging economies that are becoming internationalized
in another emerging economy, what contrasts with the predominance of studies that focus
only on the internationalization of firms from developed economies into emerging markets
and viceversa (WRIGHT et al., 2005).
Russia and the UK were chosen as target markets because of their significant
consumption of Brazilian beef. These markets can also be characterized as a new and a
traditional destination for beef exports offering the possibility to compare channels between
an emerging economy and a developed economy. These comparisons may help answer the
following research questions: Why and how international marketing channels differ between
Russia and United Kingdom?
To elucidate these questions, a multiple case study was employed focusing on
Brazilian beef firms that operate in both markets. The assumptions of this study are: (i) there
is difference in the organization of international marketing channel for efficient transaction
between Russia and United Kingdom, (ii) the availability of resources is different between the
channels, (iii) there are inequalities in channel size between these two destinations, and (iv)
institutional attributes can be used by different actors of the international marketing channels
and generate distinction in the way of organization of the channel.
2. LITERATURE REVIEW
Marketing channels, also called distribution channels, are defined as sets of
interdependent firms, involved in making available a product or service for consumption/end
user (STERN; EL-ANSARY; COUGHLAN, 1996). A marketing channel can aggregate
different agents, directly related to the nature of the product/service as well as other functions,
strictly commercial, in this case: brokers, wholesalers, retailers and other distributors
(ROSENBLOOM, 1999).
The international marketing channels maintain the same basic structure used in the
domestic market described by Stern, El-Ansary e Coughlan (1996) and Rosenbloom (1999),
however adding a greater number of possibilities in the mode of entry (ANDERSON;
GATIGNON, 1986). Other authors such as Root (1987) and Peng, Lee and Wang (2005)
perceive the presence of a greater number of difficulties and peculiarities in the maintenance
and expansion of international operations. Part of these difficulties in establishing and
developing international marketing channels is related, accordingly to Peng et al (2008), to
the institutional environment that surrounds the different agents that make up the channel.
This assumption is best developed in Dharwadkar and Grewal (2002), specifying the
institutional factors that influence the marketing channel and shape the organization of
transactions.
In addition to the institutional basis, it is perceived that the international marketing
channels are strongly influenced by Transaction Cost Economics (TCE) as shown by Heide
and John (1988). This theory traditionally addresses issues related to the boundary of the firm
(WILLIAMSON, 1985), thus its application in international marketing channels keeps the
same line of reasoning, as noted in the model of Klein, Frazier and Roth (1990).
As a limitation of TCE, and therefore the model of Klein, Frazier and Roth (1990), it
is assumed, based on Pfeffer and Salancik (1978) that not all the necessary resources for firms
are available or accessible, and this fact may lead to situations of dependence between
channel agents.
Besides the theoretical development, we have noticed a significant number of
researches involving emerging and developed economies (ROSENBLOOM; LARSEN;
MEHTA, 1997; BATRA, 1997; KAYNAC; KARA, 2001; TESFOM; LUTZ, GHAURI,
2004; PENG, et al, 2008). However, we noted that further studies are concerned with the
possibility of some convergence of theories capable of explaining the differences in
international marketing channels from countries considered as emerging and developed.
One also sees great antithesis between authors who address this issue, such as: i) the
channel length, Batra (1997) stands as the longest channels of emerging economies, Tesfom,
Lutz and Ghauri (2004) conclude the opposite and ii) the domain of the channel in emerging
economies is practiced by the distributors in Tesfom, Lutz and Ghauri (2004) and by the
manufacturers/processors in Kaynac and Kara (2001).
Thus, this article aims to contribute to the integration of theories capable of
understanding international marketing channels, taking advantage of two current phenomena:
a) the increased presence of emerging countries in the global economy and b) the growing
internationalization of Brazilian firms. It takes as the point of origin the Brazilians beef
exports and the British and Russian markets. A proposed framework for the analysis divided
into the Transaction Efficiency, Availability of Resources and Institutional Environment is
presented below.
2.1 Efficiency of Transaction
TCE is concerned mainly with the study of firms boundary (Williamson, 1985), which
in turn has generated great explanatory power, especially in the form of transaction between
the partners involved in international marketing channels (ANDERSON; GATIGNON, 1986;
KLEIN; FRAZIER; ROTH, 1990; BELO; LOTHIA, 1995).
The validation of the analysis based on the TCE as a mechanism for vertical
integration decision and position of Brazilian beef processors in the channel is expressed in
Vieira (2008) and is reflected in contracts with other channel members, which specify
obligations and counterparties. It is understood therefore that the unit of analysis, as shown
Klein, Frazier and Roth (1990), is the transaction and the costs thereof (WILLIAMSON,
1985, 1991).
Klein, Frazier and Roth (1990) and Tesfom, Lutz and Ghauri (2004) build analytical
models based on TCE, and in similarity are strongly influenced by Williamson (1985; 1991),
showing that the operations in international marketing channels can be conducted through the
market, or carried out internally in the firm, so mixed (hybrid) as an intermediate form of
flexible transaction. The choice of operation is nominated as a mechanism of governance and
should seek to minimize the transaction cost and therefore maximize the economic efficiency.
As categories of analysis, the choice of Klein, Frazier and Roth (1990) and Tesfom,
Lutz and Ghauri (2004) was to keep the framework developed by Williamson (1985; 1991),
used here as well as critical to the efficient form of governance, expressed in asset specificity,
uncertainty and frequency. Governance through the market is mainly used to facilitate
transactions that do not require specific assets and/or have low frequency of occurrence; on
the other way round, greater specificity and frequency may lead to the prioritization of
activities by a firm.
The asset specificity corresponds to investments dedicated to a business relationship,
in this study expressed in a market. Such assets would be so specific that they could not be
reallocated to operations and/or alternative markets without losing value (WILLIAMSON,
1985). The specific assets analyzed, involving investments in market research,
certified/quality seals, equipment and human resources.
The concept of uncertainty is also extracted from Williamson (1985) and corresponds
to changes outside the firm, resulting from individuals’ limited cognitive ability and from
possible actions of opportunistic agents involved in commercial transactions. This factor
shows significance, especially by the criteria of oscillation in cyclical changes in emerging
markets reviewed by Peng (2003) and identified by Aidis and Adachi (2007) in one of the
countries chosen as the focus of research, Russia.
The industry chosen to investigate, present diverse possibility to beef supply, although
Brazil is the largest exporter of beef (USDA, 2009), other nations have significant export
capacity to supply customers that demonstrate different buying habits. To increase the
possibilities for analysis, the international environment becomes more difficult to enforce
contracts, and creates room for opportunistic behavior (ANDERSON; GATIGNON, 1986).
Nevertheless, TCE reveals possible actions opposed to opportunistic actions, such as
the possibility of establishing confidence between partners in an international trading of beef,
as in the case analyzed by Vieira and Traill (2008). These authors studied the business
relationship and confidence in their direct relation to governance, concluding that confidence
reduces uncertainty and minimizes transaction costs. Institutions such as certification,
professional standards and benchmarking and enhance trust.
The last factor is the frequency and corresponds to the number of times that the
transaction happens as well as its volume (WILLIAMSON, 1985). With high frequency
trading, Williamson (1991) indicates that it is more advantageous for the
manufacturer/producer to explore direct marketing, which in international marketing channels
would be equivalent to the internalization of activities made by intermediate distributors, and
to transact directly with final distributor (KLEIN; FRAZIER, ROTH, 1990).
2.2 Availability of Resources
The availability of resources and dependence were not used by Klein, Frazier and
Roth (1990), but correspond to the theoretical advancement created by Tesfom, Lutz and
Ghauri (2004). The basic argument here is guided by Pfeffer and Salancik (1978) and reveals
that TCE leaves analytical failures such as lack of access to all resources on the market and
the firm's inability to provide the resources needed to operate in international marketing
channels (HEIDE; JOHN, 1988; TESFOM; LUTZ; GHAURI, 2004).
In the model of Tesfom, Lutz and Ghauri (2004) Theory Resource Dependence is used
to take advantage of its explanatory power in the organization of international marketing
channels deriving a question of how to generate the resources needed to manage the
marketing functions of the channel, emphasizing the importance of interdependence between
the firms involved in the distribution process.
This line of reasoning was initially developed by Pfeffer and Salancik (1978), focusing
on strategies used by firms to raise funds and manage the uncertainties due to incompleteness
of control over the supply of resources. In this perspective, the analysis uses the firm's ability
to generate resources needed in these two studies, operationalized by Tesfom, Lutz and
Ghauri (2004) as financial, human and physical, and how firms have access to resources that
reduce their participation in the international market.
Often, access to resources in international marketing channels are due to third parties
or intermediaries (HAVILAH; JOHANSON; THILENIUS, 2004), however, this involvement
creates dependence, divided into by Tesfom, Lutz and Ghauri (2004) on: i) important resource
for the firm, ii) the power of discretion over the use, iii) number of alternatives to obtain the
feature and iv) unrecoverable costs arising from the exchange of trading partner.
2.3 Institutional Environment
With the growing presence of emerging economies in global business, a large number
of researchers began developing analyses with this new object of study. Some of these authors
came to believe that to better explain the performance of firms in these economies as well as
firms that appear in them, the researches would take a supplement that is based on the
analysis of institutions (PENG, et al. 2008; PENG; LEE; WANG, 2005; PENG, 2004; 2003).
The main reason is based on Peng (2003) and warns that, as one of the characteristics
of emerging economies, the propensity to cyclical changes in formal and informal rules of the
game that affect firms as players, which he labeled as “transitional institutions”. This fact is
also noted by Meyer and Peng (2005) and is explained as a consequence of transformation of
the capitalist to socialist countries of Eastern Europe, especially in Russia, which can incur
difficulties/barriers to the performance of foreign companies in this market (AIDIS;
ADACHI, 2007; FEY; BEAMISH, 2000).
There is room to disagreement with Peng (2003), Meyer and Peng (2005) and Peng et
al. (2008) regarding the exclusivity of the institutional oscillations in emerging economies.
This position is supported by the paper of Ramagopal and Averyt (1999) which describes the
architecture developed by U.S. automakers in the deconstruction of the Japanese governance
mechanisms (Keiretsu) thrifty transaction costs in exporting Japanese cars to the United
States of America
The use of institutional contributions was necessary, because the institutions are the
structures of business conduct (NORTH, 1990). Based on this assumption of North (1990)
and the empirical evidence described by Averyt and Ramagopal (1999) and Aidis and Adachi
(2007), this study justifies the incorporation of institutional attributes to the analytical model
of Tesfom, Lutz and Ghauri (2004).
For such, the framework of Dharwadkar and Grewal (2002) was used, largely affected
by Baum and Oliver (1991, 1992), Scott (1987), DiMaggio and Powell (1983), Pfeffer and
Salancik (1978), which shows that differences in the basic nature of the institutions would
allow different forms of organization of the marketing channel.
The use of institutions in channels is linked to processes that Dharwadkar and Grewal
(2002) named and divided as (1) regulation, creation of visible forces arising from regulatory
bodies, (2) validation, developed by social pressures and professional expectations (3)
habitualization, brings out the import of the invisible aspects of social reality and routine. The
processes discussed by Grewal and Dharwadkar (2002) are expressed in Table 1, variables in
their analysis, a brief description and finally its operationalization in this article.
Variable
Description
Operationalization
Processes of Regulating
Imposition
Use of legal or regulatory mechanisms
on the part of one or more institutional
constituents to force structural and/or
procedural changes in distribution
channels.
Imposition: Extent to which channel
members believe that the regulatory
environment reduces their ability to
operate efficiently or the number of
regulations and regulators with which
channel members comply.
Attractiveness: Types and volumes of
incentives offered by institutional bodies
to channel members.
Inducement
Use of incentives on the part of one or
more institutional constituents to
influence channel members to make
specific structural and/or procedural
changes.
Processes of Validating
Authorization
Channel members voluntarily seek
approval of authorizing agents with the
primary objective of establishing
legitimacy.
Power of Trade Associations:
Homogeneity and extent of membership
or extent of professionalization.
Acquisition
Channel members mimic structures and
Acquisition: Degree of ambiguity in the
processes of a particular benchmarked
goals of a benchmarked organization
distribution channel(s) deemed
deemed successful
successful.
Processes of Habitualizing
Imprinting
Retaining channel characteristics that
originated at the time of channel
inception.
Channel members using cultural norms
and shared beliefs developed
collectively as a substitute for formal
control and coordination mechanisms.
Bypassing
Time of founding: The period at which
the channel was created and shaped.
Shared cultural norms: The extent of use
of informal mechanisms for channel
management
Table 1: Descriptions and operationalizations of the institutional processes
Source: Adapted of Grewal e Dharwadkar (p. 93, 2002).
In each of the three processes and their variables, we see the possibility of using
different mechanisms governing the actions of channel members, setting a standard that tends
to guide the behavior of channel members, as well as their organization in specifics directions.
Together, the three processes and their variables allow an analytical framework not yet used
to elucidate the institutionalized rules and routines that organize the form of transactions, the
behavior of the channel, processes and structures.
2.4 Conceptual model and hypotheses
The model developed in this study, expressed in Figure 1 shows three theoretical
perspectives that can influence the organization of the form of transaction in international
marketing channels, specifically corresponding to the efficiency of the transaction, the
availability of resources and institutional environment.
Efficiency of Transaction
Asset specificity
Market research
Certificates/Seals
Human resources
Uncertainty
Market volatility
Asymmetry of information
Instruments to increase
confidence
Frequency
Frequency of transaction
Volume of transaction
Institutional Environment
Process of regulation
Imposition
Inducement
Process of validating
Authorization
Acquisition
Process of habitualizing
Imprinting
Bypassing
O
u
t
s
o
u
r
c
i
n
g
I
n
t
e
g
r
a
t
i
o
n
Hierarchy
Joint venture
Subcontracting
Flexible contract
Spot market
Figure 1: Conceptual model
Source: Authors, based on Tesfom, Lutz e Ghauri (2004) and Grewal e Dharwadkar (2002).
The hypotheses arising from the analytical framework developed are expressed as:
H1: There is a difference in the organization of international marketing channel for efficient
transaction between Russia and the United Kingdom.
H2: The availability of resources is different between the channels.
H3: There is inequality in the size of the channels between the two destinations.
H4: Institutional Attributes can be used by different agents studying international marketing
channels and create distinctions in the way of organization of the channel.
3. METHOD
This study is exploratory and descriptive, with qualitative variables based on Miles
and Huberman (1994) and fitting into multiple case studies by Yin (2003), appropriate for
express issues of analysis based on the phenomena asked "how" and "why".
Following the same logic of Yin (2003), Ghauri (2004) points out that the case study
allows longitudinal studies that generate bases of contextualization of the phenomenon of
interest and permit the researcher to explore the environment where business happens, either
to build theories and/or testing them. Case studies have bases of qualitative analysis are
widely used in research involving international business, particularly in matters of
management, organizational economics and marketing channels (GHAURI, 2004;
PAUWELS; MATTHYSSENS, 2004).
Russia and the UK were chosen to be destinations of international marketing channels
for four reasons: i) they are countries with distinct economies (emerging and developed),
viewed in the Brazilian beef industry as new and traditional client respectively (USDA,
2009); ii) they are important players in this sector as major importers of beef (USDA, 2009),
iii) in particular they have a history of trade relations with the product studied, as well as the
beginning of Brazilian imports and the growth and oscillation of the transactions (USDA,
2009); and iv) both countries materialize cases of international marketing channels. Brazil
was chosen because it is the largest exporter of beef and a growing presence in international
markets (VIEIRA, TRAIL, 2008, USDA, 2009).
In this study it was possible to collect information on three Brazilian meatpacking
firms, four trading companies (two of the Russian market and two of the UK market) three
wholesalers (two from Russian market and one from the UK) and four retailers (two from
Russian market and the two from British market). Data-collection occurred through a script of
semi-structured interviews and document analysis, between the months of January and
February 2010 and December 2010 to May 2011. It is important to stress that the firms
chosen act in channels with a high concentration of trade volume in the last five years.
The interviews were conducted with representatives of the firms connected to
subjects/international trade or the trade management, conducted as suggested by Miles and
Huberman (1994) in what concerns data and content collection and analysis on comparison
among firms in which international marketing channel, oriented to: i) describe the differences
in the organizational method of channel efficiency of transactions between Russia and the
United Kingdom, (ii) identify the availability/resource requirements and differences among
the channels, (iii) identify whether there is inequality in the size of channel between Russia
and the United Kingdom, and (iv) investigate the institutional attributes that can be used in
international marketing channels, both in Russia and the United Kingdom, and perceive their
importance in the organizational form of the channel.
4. FINDINGS
4.1. Brazil, Russia and the United Kingdom within the international beef sector
Historically, Brazil has established itself as the largest beef exporter, with almost 32%
of the total volume in 2008, which yielded approximately US$ 4.5 billion in the same period
(USDA, 2009). Some studies emphasize structural factors that enabled Brazil to take the lead
in this sector. For example, the Bulletin number 785 of Dyck and Nelson (2003), which
stresses the low cost of raw material production, the Brazilian Real's devaluation in relation to
other currencies, and the public health problems faced by Argentina , Uruguay, the European
Union and United States of America.
Besides these positive aspects, there are other factors which contributed to an increase
in the participation of Brazilian beef in the international market over the past 10 years. The
organizational situation of Brazilian companies operating in the beef sector was undergoing
great change at the same time that external factors gave them more international visibility. In
this aspect, Vieira and Traill (2008) comment that one of the important factors for the
expansion of Brazilian exports in this sector was the creation of an agency - named the
Association of Brazilian Beef Exporters, ABIEC - to organize the flow of information
(technical and marketing) as well as to internationally promote Brazilian beef.
ABIEC, an association of private interests, seeks to develop horizontal partnerships
and reduce opportunistic behavior among Brazilian companies in the same industry, which is
considered to be a good strategy by Vieira and Traill (2008) because among other purposes, it
has managed to increase their bargaining power in international beef transactions.
As in Brazil, Russia also has an association of private interests, called the Meat
Industry Association. However, unlike the Brazilian formation, which is composed only by
companies in the same horizontal level, in Russia, the Meat Industry Association includes
other agents of the meat supply chain (refrigerators, wholesalers, trading companies, retailers
and farmers) and not only in beef, but also pork and poultry (Association of Meat Industry,
nd).
Russia is a major importer of beef, and until 2004, the European Union was its main
beef trade partner. The USDA (2009) shows that trade in beef between the two countries in
question only began in 2001; in 2004, Brazil became its largest trading partner and the
amount traded in 2008 was approximately 1.5 billion dollars and 380 thousand tons of the
product, which corresponds to almost 62% of all beef imports in Russia in that year.
Differently from Russia, the United Kingdom is a traditional destination for Brazilian
beef, however, the product is mostly traded in processed forms (USDA, 2009). Another point
of contention is the commercial position adopted in the United Kingdom, because this market
is a signatory to the WTO, whereas Russia isn’t.
As mentioned by Dyck and Nelson (2003), the United Kingdom was one of the
countries that had problems of healthy beef, emphasizing here the bovine spongiform
encephalopathy (mad-cow disease), which also reduce its flock, caused great suspicion in
countries purchasing that product, such as Russia. After this incident, several changes were
made within the supply system in the UK, as well as describing Harvey (2004) that
culminated in the use of private systems of management of food retailers in the UK and
public apparatus for measuring food security (HORNIBROOK; FEARNE, 2001).
This fact is described by Duffy and Fearne (2004) as one way of legitimizing
influence of food retailing in the UK developing alternative driving on its trading partners.
The strength of food retailing in the UK can also be felt in other spheres, as the industry
dominance of four brands (Tesco, Asda, Morrisons Sainsbury'se), which together concentrate
approximately 70% of sales in retail food (DUFFY; FEARNE, 2004). These same authors
showed that retail sales in the United Kingdom recognizes that transaction costs can be
reduced by decreasing the number of suppliers. Necessarily, suppliers should be able to
provide a greater volume of product demanded, thus reducing the risk of problems associated
with quality and food safety (HORNIBROOK; FEARNE, 2001).
4.2 Comparative analysis
Great heterogeneity among the markets was observed, particularly in terms of domain
and length of the channel. It also showed a fall-of-war between business actors of the
international marketing channels. The interviews confirm the characterization made by Duffy
and Fearne (2004) regarding the presence and strength of retailing in the UK for the
organization form of the transaction. In Russia, the trading companies may also exercise this
pressure level, supporting the results of Tesfom, Lutz and Ghauri (2004) where distribution
agents domain the channel in emerging economies.
Brazilian firms, in turn, remain active in organizing the transaction form of
international marketing channel, but interviews indicate wide disparity in activities and
positions within the channel. It is felt that this variety of activities and positions in the channel
is a reflection of attitudes that put Brazilian firms as decision-makers from other firms.
There is clear interest to impose specific ways of transaction organization by more
than one agent in each international marketing channel. This interest is discussed by
Williamson (1991), who argues about the possibility of reduce the uncertainty of transactions
while maintaining a high level of integration by the central agent of the channel and the
intention to keep the activities under the firm influence. It was evident in both destinations
that there are commercial agents who intend to impose the ways of organizing transactions,
seeking therefore to ensure interests.
Transaction characteristics
Analyzing the characteristics of transactions, it was found that in terms of specific
assets, although the beef product is considered a commodity, which should have low
specificity in the case of international marketing channels studied, the product acquires a
moderate specificity, mainly due to the existence of health constraints. The intersection theory
between institutionalism and TCE is clear, the fact of the imposition of certain rules and
routines can influence the efficiency of the transaction, and it evidenced in both destinations
of international marketing channels.
Investment in equipment, routines and special certificates are larger for the marketing
of meat in the British than in the Russia channel. British firms involved in the intermediation
seek to encourage the adoption of routines and certificates paying higher values for the
majority of Brazilian meatpacking firms. This fact is confirmed by the Brazilian firms during
the triangulation of data collected. The agents of the Russian market, have no significant
change in processes, routines and equipment already present in Brazilian meatpacking.
In regard to human resources, the research observes a low degree of specificity,
market research to develop product quality are not made by Brazilian firms, most of the
qualitative changes (cuts, types of processing or manufacturing) starts with outside actors to
Brazilian firms. The interviews indicate that the market research with qualitative agents is
exclusively developed by international partners. Unlike in quantitative research, Brazilian,
Russian and British firms have similar levels of investment, what enables the global analysis
of the different markets according to internal estimates of supply and demand of the product.
Regarding uncertainty, the study reveals that three factors can significantly influence
the level of transactions. Market volatility seems to be more pronounced in the marketing
channel involving Russia by the data on oscillation of the Brazilian trade balance (USDA,
2009) and confirmed by Brazilian firms. Russian agents when questioned on this issue,
ultimately minimized instability and justified the phenomenon based on circumstantial issues,
for example, the freezing of the ports in winter. The justification is that sustained oscillations
are due to purchasing strategies adopted by agents, especially Russian wholesalers, reflecting
in concentration of purchases and long intervals between them, which are mainly via flexible
contract.
The retail agents show problems caused by asymmetric information on the product
traded, mentioning the failure of the tracking system used in the Brazilian beef (SISBOV).
The need for the transfer of information leaves the British firms depending of suppliers in
Brazil, generating the possibility of subcontracting, what in turn increases the proximity
between the agents of this channel.
Confidence was found in two international marketing channels; however in the British
channel, the highest level of confidence was in the relationship of Brazilian meatpacking
firms and British retailers. In the Russian channel, the highest level of confidence was
associated between wholesaler and retailer. The reasons arising from the confidence also
show a distinction in the way of procedure of these two channels: the British side would be
focusing on certificates and professional standards, while in the Russian channel, business
relationships are based on earnings prospects and personal relationships.
About the frequency and volume of transactions, the study shows that the volume of
beef traded by international marketing channel directed to Russia is higher than the volume
exported to the UK, but the regularity of transactions and frequency of the channel facing the
UK market is higher than the Russian. It is important to stress the anticipation of commercial
demand by wholesalers and retailers in the UK international marketing channel have become
two months. In Russia, indicates an anticipated retail demand in a month, wholesalers never
above two weeks.
In the case of British international marketing channel, the fact reported above is seen
as positive by Brazilian firms and according to them, adds confidence by the partners in this
channel. It was perceived that the characterization made by Hornibrook and Fearne (2001)
regarding the restriction on the British trade partners remains in force, i.e., we can confirm
that wholesalers and retailers in this international marketing channel work with fewer
vendors, and these suppliers usually have large supply capacity. In contrast, the international
marketing channel in Russia has wholesaler agents with large number of suppliers in their
portfolio.
Analyzing the characteristics of transactions, H1 is accepted, because the variable
asset specificity, uncertainty and frequency and volume of transactions have the distinction
between international marketing channels. In common, the two channels appear to be
influenced in the organization to the efficiency of the transaction by the resource dependency
and institutional environment. The predominant form of transaction is the subcontracting in
the UK and the flexible contract in the Russian channels.
Availability of Resources
By the option of the methodological choice, focusing on firms with high level of
transactions in international marketing channels of Brazilian beef to Russia and UK, there
were no organizational disabilities. Thus, all firms have a high capacity according to the
indicators analyzed: human, physical and financial.
It was noticed that there are tangible organizational skills that influence the
organizational dependence, conduct the intangible traits and play a significant role in
organizing the international marketing channels studied.
The intangible assets vary, especially on the factors of importance and are related to
arbitration and institutional attributes that assist in the understanding of the transaction form
in international marketing channels. It was noted that the different agents of the channels avail
themselves on the validation process and habitualization to impose different ways in
organizing the channel. The validation and habitualization act in a number of alternative
attributes to obtain the feature and power of discretion over the appeal in favor of specific
firms in the destination of international marketing channel.
Sunk costs are low because the demands on the British side are similar to the
requirements of other destinations of Brazilian beef in the European Union. In the Russian
channel, lower sunk costs are due to the similarity to the actual system of production and
consumption in Brazil. On the other hand, the stranded costs arising from the exchange of
business partners are perceived as moderate by British retailers, thereby, underpinning the
development of trade relations based on confidence and reputation.
Thus, H2 is partially accepted. Firms capabilities are similar, but significant difference
was found in the category organizational dependence. It is necessary to stress that part of the
dependence found in the channels is influenced by the institutional environment.
Institutional Environment
a) Process of regulation
Within the regulatory process, it only was noted the factor of persuasion of the British
international marketing channel. This episode was evidenced by the declaration of the
respondents, whose use of monetary incentive (employed by firms retailers) forces
adjustments in the other channel members.
The variable of imposition was found in both destinations, however exerted by
different agents. In the British case was the legitimating of bypassing, whereas in the case of
the international marketing channel to Russia, the wholesalers have a legitimate and
representative interface to remain as a catalyst of transactions in the international marketing
channel.
This last relation confirms the assumption of Meyer and Peng (2005) that in
transitional economies, some agents may have their institutional interface to stay in their
activities facing market opening and hence entry of multinationals. Thus, this confirms the
hypothesis three (H3), i.e., the existence of inequality in the size of the channel. This result is
in agreement with the results of Brata (1997), where the channels in emerging economies
have greater length than those developed in this study expressed in international marketing
channel to Russia, where the agents number involved is greater than the British channel.
b) Process of validating
The acquisition can be observed in the British international marketing channel,
corresponding to imitation of structures and processes informally standardized by retailers in
alternative behaviors to enable them to ensure healthy food. It is clear from the interviews,
confirming the readings of Duffy and Fearne (2004) and Hornibrook and Fearne (2001), that
imitation of structures and processes of a specific retailer collaborated in the imposition of
this conduct in areas of regulation.
In Russian international marketing channel, wholesale firms that act as trading
companies maintain the channel in its original structure, i.e., with a large number of
intermediaries. Sometimes this number even may be increased by using the factor of
authorization, where the legitimacy of Russian wholesalers has an influence on the conduct
between firms. Findings indicate that these wholesalers has significant interface with public
agents.
The British food retailers have reduced the size of the international marketing channel
by creating alternative possibilities of conduct in the beef field that were later legitimized by
public sector. This phenomenon still has an impact of the imprinting factor, shaping
characteristics of such conduct.
c) Process of habitualizing
The cultural norms developed reflected the need for quest and selection of business
partners willing to accept the rules established by the British retail, therefore, part of
wholesalers has been removed from international marketing channels of Brazilian beef. It
must be emphasized, based on interviews, that this is due to the predisposition of Brazilian
meatpacking firms to internalize international activities previously performed by wholesalers.
The imprinting variable exerts significant force in international marketing channel of
Brazilian beef in the Russian market, the wholesalers of this channel positioned in Brazil as
supplier, from 2001, when the European suppliers have reduced their herds due to the
incidence of animal diseases. It supports such agents as first movers in the conduct of the
organization of the channel in synergy with authorization variable of the process of validating.
Faced with the evidence found in relation to the processes of validating, H3 is
accepted, showing that there is inequality in the size of international marketing channels. The
channels to Russia, in most cases, have higher number of agents than that of the United
Kingdom. H4 is also accepted, showing that the institutional attributes are used by
wholesalers in the Russian destination and by retailers in the UK channel. Great differences
were found even in institutional factors between the two channels.
Comparative analysis summary
For a better visualization of the results found in this research, we summarized and
highlighted the differences between the channels, expressing them in Table 2. The table
shows the factors that influence the organizational form of the transaction, considering the
international marketing channels of Brazilian beef in the markets of UK and Russia.
Factors that influence the
organization of the form of
transaction
International marketing channel of Brazilian beef in
United Kingdon
Russia
Asset specificity
Market research
Certificates/Seals
Human resources
Moderate asset specificity, withModerate asset specificity, with
sensitivity to the institutionalsensitivity to the institutional
environment
environment
Uncertainty
Market volatility
Asymmetry of information
Instruments to increase confiance
The main features of uncertaintyUncertainty factors are linked to
are in transaction of Brazilian market volatility
meatpacking firms with theConfidence was found in the
retailers, due to information transaction between the wholesaler
asymmetry
and retailer and is based mainly on
Instruments
of
increased personal relationships
confidence are important, as
adjustments of standards and
certificates
Frequency
Frequency of transaction
Volume of transaction
Greater frequency than the Russian Less frequency than the British
channels, however less volume
channels, however greater volume
Organizational capabilities
Human resources
Physucal resources
Financial resources
All firms have high organizationalAll firms have high organizational
capacity in the analyzed variables capacity in the analyzed variables
Dependence
Importance
Arbitration
Alternatives
Sunk cost
Brazilian firms depend on theBrazilian firms depend on the
British retail, with sensibility to the Russian whosale, with sensibility to
process of validating (acquisition) the
process
of
validating
and process of habitualizing(authorization) and process of
(bypassing)
habitualizing (imprinting)
Process of regulation
Imposition
Inducement
Inducement and imposition fromImposition from Russian whosale
British
retail
to
Brazilianto Brazilian meatpacking firms
meatpacking firms
Process of validating
Authorization
Acquisition
Acquistion factor noted in theAuthorization factor
British retail due to imitation of Russian whosale
structures and processes initiated
by the process of habitualizing
(bypassing)
Process of habitualizing
Imprinting
Bypassing
Bypassing factor noted in BritishImprinting factor noted in Russian
retail
whosale
Predominant organization of the
form of transaction
Subcontracting
noted
in
Flexible contract
Table 2: Differences evident in the comparative analysis between the international marketing
channels of Brazilian beef in the UK and Russia
Source: Authors
5. CONCLUSIONS
After analyzing the differences between international marketing channels of Brazilian
beef, contrasting traditional and new destination, it is concluded that the conceptual model
developed allow to better understand the relationships between different perspectives that
permeate the framework in international marketing channel and was able to identify the
differences and the reasons for the organization of the form of transactions in the studied
channels.
There is difference in the organization of international marketing channel for the
efficiency of transactions between the destinations of Russia and the United Kingdom. This
research revealed that the efficiency of the transaction is not dependent on factors derived
from excluding of the theory of transaction costs, but also on factors arising from
organizational capacity and institutional environment.
The institutional attributes are capable of influencing firms’ dependence and
efficiency of the transaction, and generated distinction between the channels on the efficient
organization of the transaction. This reflects in the size of the international marketing channel,
expressed in the third hypothesis, which shows inequality in the size of international
marketing channels. The Russian channels, in most cases, present a higher number of agents
that channels compared with the United Kingdom.
Despite the limitations of the case study, which does not allow extrapolation of results
for the total of Brazilian firms that engage in international marketing channels, evidence
exposed reiterate the importance of the developed model for understanding differences in
channel based on theoretical convergence. It is suggested for future studies the application of
the theoretical model developed here in other channels in order to test it on a larger scale.
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