A Typology of Marketing Strategies for Export
Yaron Timmor*
Jehiel Zif**
* Yaron Timmor is the Academic head of the international business
studies and the Marketing Communication program at the Arison Business
School, the Interdisciplinary Center Herzliya.
** Jehiel Zif is an Associate Professor of Marketing and International Business at
The Ono Academic College in Israel and a member of the faculty of Hult
International Business School in Boston. For many years Professor Zif was a
member of the Faculty of Management at Tel-Aviv University.
Address for correspondence:
Dr. Timmor Yaron
The Arison School of Business
The Interdisciplinary Center Herzliya
P.O.B 167 Herzliya 05164
E mail: timmor@idc.ac.il
Tel: 972-9-9602716, Fax: 972-9-9568605
2
ABSTRACT
This study has two goals. The first goal is to develop and present a framework for
analyzing and characterizing export marketing strategies. The second goal is to
examine the proposed framework. The framework is based on three key dimensions:
innovation, adaptation and involvement. In the first part of the paper a typological
approach of strategic groups is applied to export marketing. In the second part an
exploratory research is reported. 101 export ventures were clustered according to the
three dimensions. We then test the validity of these dimensions by examining whether
they generate prototypes that are significantly different in the adaptation, innovation
and involvement. We identify and characterize four strategic prototypes based on the
proposed framework. The correlation between the different prototypes and marketing
variables is examined and compared with a set of hypotheses. We also explored the
relations between the firm’s goals, competencies and industry to the strategic
prototypes, and the performance achievements of each prototype. We conclude by
discussing the theoretical and managerial implication of the framework and the
strategic prototypes.
Keywords: export, strategic prototypes, innovation, involvement, adaptation,
international marketing strategy
3
A Typology of Marketing Strategies For Export
The paper discusses marketing strategies for exporters that are mainly of small and
medium size. Export is defined here as the transference of goods or services across
national borders using direct or indirect methods (Leonidou & Katsikeas 1996). The
academic literature reveals a growing number of studies and frameworks for large and
multinational firms (Zou & Cavusgil 2002; Aulakh & Kotabe 1997; Cavusgil & Zou
1994), however there is less attention to the small ones. Most studies had focused on
one or several attributes of the marketing mix through which a firm can achieve a
competitive advantage at the target market abroad. Among these attributes are:
supporting the distributor (Bello & Gilliland 1997), competitive price (Christensen;
Da Rocha & Gertner 1987), segmentation and focus (Porter 1980; Cooper &
Kleinschmidt 1985). In spite of their relevance for a firm's marketing strategy these
questions are not specific to export.
One group of papers discusses the "adaptation" issue. This view is based on the
approach that international marketing deals with the same dilemmas as domestic
marketing and should focus on one key question: should the firm adapt its home
marketing strategy to its overseas markets or should it rather keep a standard policy
(Jain 1989; Walters & Toyne 1989; Samiee & Roth 1992; Cavusgil, Zou & Naidu
1993). Another group of studies deals with the firm’s mode of entry into foreign
markets, and its attitude to risk and control (Leonidou & Katsikeas 1996; Kumar &
Subramanian 1997; Aulakh & Kotabe 1997). A broader conceptualization of global
marketing strategy has been suggested by Zou & Cavusgil (2002). Their
conceptualization of global marketing strategy is based on three main perspectives in
the literature: standardization, configuration-coordination and integration. The
antecedents for applying these approaches and especially that of integration and
4
coordination are global orientation and participating in major markets (Zou &
Cavusgil 2002; Craig and Douglas 2000;Yip 1995; Birkinshaw, Morrison & Hulland
1995; Aulakh & Kotabe 1997). Though global oriented firms may consider these
perspectives, they are of less relevance for small and medium size firms looking to
expand internationally, lacking the resources, capabilities and experience to compete
on a global basis.
This study has two goals. The first goal is to develop a framework for analyzing and
characterizing export marketing strategies. Strategy encompasses the decisions and
activities that enable the firm to achieve and sustain a competitive advantage
(Varadarajan &Jayachandran 1997; Teece, Pisano & Suen 1997). The suggested
framework is based on the way a firm copes with the following strategic dimensions:
1. The innovation level a firm exhibits with its product in the export market –
Innovation. 2. The degree of firm’s involvement in the marketing planning and
execution at the target market – Involvement. 3. The extent to which the product is
adapted to the specific export market - Adaptation.
It is proposed that P1: the decisions a firm makes regarding these dimensions create
a strategic prototype from which marketing tactics can be derived.
P2: The strategic prototypes are related to three main factors: the firm’s goals, the
firm’s competencies and the target market/industry characteristics.
Our second goal is to explore the relations between some of the strategic prototypes
and specific marketing tactics and to identify exporters that represent these strategic
prototypes.
In the following paragraphs we discuss each of the three strategic dimensions its
relevancy and importance to export marketing. It is then explained how strategic
5
prototypes are generated based upon these decisions; we present and discuss specific
strategic prototypes and their related marketing tactics.
For the second goal of this study an exploratory research was conducted. A set of
hypotheses was developed for the specific strategic prototypes and some of the related
marketing tactics. A sample of 101 export ventures has been gathered with
information of marketing and situational variables. This sample has been clustered
according to the three strategic dimensions: innovation, involvement and adaptation.
We then test the validity of these strategic decisions by examining whether they
generate groups that are significantly different in their strategic prototype from all the
other. The correlations between the different strategic prototypes and marketing
tactics have been examined and compared with the hypotheses. Following the
proposed framework, we explored the relations between firm’s specific competencies,
goals and industry and the identified strategic prototypes. The paper concludes by
discussing the study limitations and addressing questions for future research.
The Adaptation decision dimension
Adaptation is defined in this study as the level of changes that a firm applies to its
product (i.e. ingredients, packaging, labels, brand name) for its marketing at the target
market abroad. Adaptation vs. standardization is a subject that has been broadly
discussed in the literature (Cavusgil, Zou, & Naidu 1993; Walters & Toyne 1989; Jain
1989, Cavusgil & Zou 1994; Shoham & Albaum 1994; Shoham 1995; Zou &
Cavusgil 2002; Samiee & Roth 1992). It has been argued that markets have become
so homogeneous that the firm can market identical products and services around the
world, using a single standardized marketing plan (Hamel & Prahalad 1985; Levitt
1983; Ohmae 1985). Several studies have pointed out that firms tend toward a policy
of product standardization (Walters & Toyne 1989; Aylmer 1970; Sorenson &
6
Wiechmann 1975; Bakker 1977; Aydin & Terpstra 1981). However, critics of
standardized marketing processes and plans claim that the political, economic and
cultural differences, which are unlikely to disappear in the foreseeable future, will
oblige firms to adapt their marketing policy to the conditions and characteristics of the
particular market to which they are exporting (Cavusgil, Zou & Naidu 1993;
Boddewyn, Soehl & Picard 1986; Hill & Still 1984; Quelch & Hoff 1986; Sorenson &
Wiechmann 1975; Wind 1986). Douglas and Wind (1987) and Wind (1986) have
argued that a policy of developing unified global brands with uniform advertising is
very limited. Walters and Toyne (1989) maintain that if local competitive advantage
is to be maximized, distribution, service and promotion need to be adjusted to better
answer consumer needs.
The international marketing literature contains much evidence of significant
differences in consumer behavior from country to country (Walters & Toyne 1989;
Douglas & Urban 1977; Thorelli & Sentell 1979).
Among the crucial barriers to standardization noted by Walters (1986) and Sorenson
and Wiechmann (1975) are cultural differences, differences in legal regulations,
conditions of product use, firm characteristics and competition. Samiee and Roth
(1992) found that product characteristics affect standardization decisions. Of the few
empirical studies investigating the relationship between performance and product
adaptation, most found a positive correlation between the two (Shoam & Albaum
1994; Cavusgil 1984; Diamantopoulos & Inglis 1988; Kleinschmidt & Cooper 1988;
Cavusgil & Zou 1994).
Product adaptation can be viewed as part of a flexibility policy in the international
arena. It can be an important competitive advantage of small firms (Fiegenbaum &
Karnani 1991; Woo & Cooper 1981) and can compensate for some of their
7
disadvantages. Big firms may convince their target markets across countries to
consume a unified product by using mass advertising and sales promotion relying on
their mega and global brands. On the other hand, small and medium size firms can
tailor their offering to the specific tastes and demands of the foreign customers. Lack
of capital and marketing infrastructure make it difficult for small and medium-size
manufacturers to market their products directly to consumers. Thus, they tend to
export indirectly through export agencies and other middlemen (Bello & Williamson
1985; Brasch 1981). The latter may ask for changes in the products and the packaging
to compete better at their local markets or as a part of their private label development.
Adaptation can be viewed as a continuum moving from high (tailor made) to low
level (minor or non changes in the product and its packaging). Exporters decision
where to be on this continuum may not only affect their competitive position but also
requires for different investments and financial support, hence it should be considered
a key decision dimension.
The innovation decision dimension
Another strategic decision suggested in this study is the innovation level a firm
exhibits at its export market. The importance of innovation and R&D for the firm’s
competitive advantage and profitability has been addressed by various theories in
marketing, economics and management. The Industrial Organization perspective
regards innovation as industry dependent and focus on how innovation can improve
firm’s productivity in a given industry i.e. lower manufacturing costs (Cooner 1991;
Porter 1980). The Resource based perspective sees innovation as one of the firm
distinctive competencies in its competitive environment, whether it is technological or
managerial (Cooner 1991; Winter 1984; Nelson & Winter 1982). It has been argued
that small and medium size firms have an advantage over big and global firms in
8
exhibiting innovations, due to management flexibility and shorter decision-making
process (Naisbit 1994). Innovation can be related to the product, marketing method or
segmentation and service (Porter 1990; Cooner 1991; Lado, Boyd & Wright 1992;
Nelson & Winter 1984). In this study Innovation is primarily related to the product
that a firm presents when entering a foreign market. Thus if a firm decide to cope with
foreign markets based on its product innovation, it will look for markets where the
product offer can be viewed as new. Innovation, whether it is fundamental
(Schumpeter 1950;, Cooner 1991) or adaptive (Porter 1990,1980; Kotler 1999), can
be a source for a differentiation policy and can improve profitability. The literature
supplies a substantial evidence for the positive relation between product innovation
and profitability (Varadarajan & Jayachandran 1999; Capon, Farley & Hoenig 1990).
Most often, innovation requires high investment in R&D (Varadarajan &
Jayachandran 1999; Boulding, Morgan & Staelin 1997; Shcerer & Ross 1990),
therefore it can be justified if it leads to long term competitive advantage for the firm
(Varadarajan & Jayachndran 1999). Expanding to foreign markets can justify further
investments in innovation.
Technological advantages and product innovation have been suggested as factors,
which can positively affect a firm when performing in international markets. (Terpstra
& Sarathy 1997; Cooper & Kleindshmidt 1985; McGuiness 1978; Porter 1980; Hirsch
1970). The properties and uniqueness of a product can have an influence on its
competitive positioning (Day & Wensley 1988; Cavusgil & Zou 1994) as well as the
ability to enter a new market.
In international marketing a firm can benefit from the opportunity to exhibit different
levels of innovation at various export markets. This variation can be applied as a
result of different regulations regarding patent registration, product expiry dates and
9
differences in customer behavior. The international product cycle argument (Vernon
1979) suggests that a firm should look to expand internationally to get incremental
profits on its excess capacity (Aulakh & Kotabe 1997). The diffusion of innovation
perspective provides an insight for the adoption process of new products and the
different characteristics of customers along the diffusion (Rogers 1983). An
Innovation may be in a different diffusion phase at various markets. Thus when
cultures are similar, exporters may learn from their experience in their home markets
and accelerate the innovation acceptance in the export market.
Following the product life cycle perspective (Kotler 1999; Day 1981) a new product
may be in its launching phase at one market and in the maturity phase at another,
hence the innovation can be extended for a longer time period in the export markets
than at the local arena.
Firm’s strategic decision can be for high level of innovation that is usually of new
technology, moving towards lower degrees like adaptive innovation, or no innovation
at all. Such a decision, as detailed, may affect exporter’s competitive position and
actions like market segmentation, expansion and entry mode..
The Involvement decision dimension
The third strategic decision suggested in this study is Involvement, which is defined
as a firm's level of active participation in the marketing at the overseas market (i.e.
planning, financing, implementing, controlling). Formal planning was found to have a
positive effect on export outputs (Shoham 1995, Evangelista 1994, Cavusgil 1984,
Kirpalani & Macintosh 1980; Christensen de Rocha & Gertner 1987). Cavusgil & Zou
(1994) reported that management commitment to export, in allocation of time and
money, has contributed to better export performance (see also Rosson & Ford 1982).
The ability to control and be involved in the marketing activity in foreign markets is
10
often related to firm’s entry mode or channel integration (Aulakh & Kotabe 1997;
Kumar & Subramanian 1997; Klein et al 1990). Joint ventures, acquisition of a local
company and subsidiary formation and development, enable greater involvement than
indirect export methods such as using export management companies or international
trade organizations (Kumar & Subramanian 1997; Root 1994).
From the transaction cost perspective the firm’s decision regarding channel
integration focuses on minimizing the sum of transaction and product costs (Klein et
al 1990; Aulakh & Kotabe 1997), while the organizational capabilities perspective
looks primarily to better utilize firm’s skills and resources (Madhok 1997). According
to the latter perspective, specific experience in promoting the product, managerial
knowledge and additions may affect the firm in preferring forward integration even if
the alternative cost is lower. Involvement is also related to such strategic
considerations as export intensity (Cooper & Kleinchmidt 1985; Diamantopoulos
1988 Naidu & Prasad 1994; Leonidou & Katsikeas 1996) and export experience
(Naidu & Prasad 1994; Crick 1995). Naidu & Prasad (1994) distinguished between
“Regular” and “Sporadic” exporters in their export sales rates. They found that
regular exporters exhibited more involvement, support and quality service than
sporadic exporters. Forward integration usually requires financial resources and
commitment that are not available for many small and medium size firms (Agarwal &
Ramaswami 1992; Aulakh & Kotabe 1997). Nevertheless exporters, unlike global
oriented firms, are less affected by global positioning and coordination consideration
(Zou & Cavusgil 2002; Goshal 1987) and can concentrate on a limited number of
foreign markets. Alternatively they can achieve better control through contractual
agreements and output control (Kumar & Subramananian 1997; Bello & Gililand
1997) as well as process control (Bello & Gililiand 1997; Fram 1992). The latter is
11
intended to affect distributor's marketing actions like promotion methods or sale
procedures. Supporting the overseas distributor has been shown to have a positive
affect on the export result (Bello & Williamson 1985; Cavusgil, Zou & Naidu 1994).
Such supports can be implemented through financing the marketing activity,
supplying advertising and sales promotion materials. While multinational or global
oriented firms tend to be involved in the marketing at the various countries, it should
be considered a key strategic decision for exporters. The degree of which the
exporters want and can be involved may affect their competitive position .and their
standing in front of the customers and distributors at the foreign markets.
The Three-decision dimensions interaction
Each of the three dimensions: innovation, involvement and adaptation can be assessed
on a continuum ranging from low to high levels. For an example firm’s strategic
decisions can be: 1.To focus on R&D and exhibit new technological product – high
level of innovation.2. Not to make substantial changes or adaptations in the product
for specific markets – low level of adaptation. 3. To focus on development and
producing in the local market and not to be involved in the marketing process at the
export market – low degree of involvement. Alternatively, the firm may decide to be
very flexible in changing the product according to specific market requirements –
high level of adaptation or to be highly involved in the marketing process. In some of
the strategic prototypes the decisions regarding innovation, adaptation and
involvement may be correlated where as in other prototypes they can be of no
correlation, standing on different points on each of the three continuums.
Theoretically, there is a large number of strategic prototypes in the three dimensional
spectrum. In the following paragraph we explain how the prototypes are generated
within the proposed framework.
12
**********************
Put figure 1 about here
******************
Generating the strategic prototypes
Figure1 illustrates the framework for generating export-marketing strategies. When
the three strategic dimensions: adaptation, innovation and involvement are defined, a
strategic prototype is generated It is proposed that specific marketing tactics like
private labeling vs. developing a brand, market expansion, price – relative to market,
are derived from this prototypes. The strategic prototypes can be viewed as mediators
between firm and environmental factors (see next paragraph) and marketing tactics in
export. In the following paragraph we discuss a selection of strategic prototypes and
their expected marketing tactics, these expectations are formulated as the research
hypotheses. To exemplify the framework, we have chosen strategic prototypes that
are of dichotomous sort, getting either a high or low degree in each one of the three
dimensions that generate these prototypes. Another consideration was the theoretical
basis and related studies that could fertilize the discussion of each strategy.
What are the factors that may affect the firm’s decisions in regard to adaptation,
involvement and innovation? In the proposed framework we exhibit three main
factors: 1.The specific industry and market in which the firm is operating or is
intending to perform (Varadarajan & Jayachndran 1999; Cooner 1991; Porter 1980).
2. The firm’s goals for the export venture (Terpstra & Sarathy 1997; Varadarajan &
Jayachndran 1999; Ghoshal 1987). 3. Firm’s specific competencies that can be relied
on when executing the export marketing strategy (Zou & Cavusgil 2002; Varadarajan
& Jayachndran 1999; Barney 1991; Lado, Boyd & Wright 1992). It is proposed that
each factor can affect the dominance of the strategic decisions and thereof the firm’s
13
export marketing strategy. For example: in a competitive market (Industry factor) a
firm may opt for higher involvement in order to be able to respond quickly. On the
other hand if the firm is small and less experienced (competencies factor) it may
prefer to use independent local distributors (Aulakh & Kotabe 1997) and to export
under private label with a minimal involvement in the foreign market.
The more common theoretical grounds of these three factors and their apparent
influence on the firm’s strategic decision are the Industrial Organization perspectives
(I.O) and the Resource Based View (R.B.V). From the I.O perspective a firm can gain
a competitive advantage by offering the same product at a lower price or a
differentiated product at a premium price (Porter 1980). Exhibiting new products to
export markets is aimed to gain premium prices or to enhance acceptability due to
different product offering. On the other hand economies of scale may affect a firm’s
decision to minimize product adaptation and to challenge the export market with
lower prices (Cavusgil & Zou 1994). The RBV suggests that there is a wide range of
competencies upon which firms can achieve competitive advantage: technology and
managerial innovation (Nelson & Winter1982; Winter 1984; Cooner 1991), channel
control (Itami’s 1987; Cooner 1991; Aulakh & Kotabe 1997), organization,
knowledge, firm’s assets and additions that can be controlled by the firm to improve
the effectiveness and efficiency of the applied strategy (Barney 1991; Zou & Cavusgil
2002).
A more exhaustive review of the IO and RBV perspective and their relations to
international marketing and business strategy, are covered by the following sources:
Cooner 1991, Barney 1991, Zou & Cavusgil 2002, Varadarajan & Jayachndran 1999,
Aulakh & Kotabe 1997. Following below we focus our discussion on six strategic
prototypes.
14
Characterizing the strategic prototypes
Prototype 1: high innovation, involvement and adaptation.
The innovation is
mainly technological and the adaptation is required for the specific requirements of
the chosen segment at the target market (Walters & Toyne 1989). As the products are
unique and highly technological, the firm's involvement in marketing planning and
actions may be crucial for the launching phase and sales growth. Due to the cost of
innovation and adaptation and the advantage of product uniqueness, high prices are
expected (Porter 1980, Kotler 1999). Nevertheless, because this strategic prototype
requires substantive financial and human resources, exporters should be more willing
to take risks in terms if returns on their investments. Firms that adopt this prototype
are expected to preserve their names/brand-names in the marketing process. They are
likely to distribute their products through their own operations or by setting up a joint
venture (Kumar & Subramanian 1997, Aulakh & Kotabe 1997). This is due to the
importance of being in close contact with the end user, understanding his specific
needs and supplying guidance and support for product use.
The strategic prototype, mainly because of the adaptation property, is most
appropriate for firms whose products are governed by different regulations and
standards across markets or when cultural differences may affect product use (Jain
1989; Cavusgil, Zou & Naidu 1993). By adapting their products, firms will look to
expand their technology across countries. The emphasis on innovation criteria is most
likely to draw firms that may be identified as "prospectors" (Miles and Snow 1978).
The prototype is more likely to be practiced by the "world marketers" (Cooper &
Kleinschmidt 1985) that are more involved with the marketing process and planning
in the international arena. It also suits firms, which fall under the "regular exporters"
classification (Naidu & Prasad 1994) mainly because of the experience factor.
15
Prototype 2: high innovation and involvement, low adaptation. The minimal
adaptation performed on the product and its promotion across markets, enable a firm
to reduce its production costs and increase profitability (Cavusgil; Zou & Naidu 1993,
Levitt 1983). Thus when entering new markets, the price of the product can be
attractive (i.e. software). Innovation with minimal product adaptation may accelerate
the expansion to other markets, providing that the firm’s rivals can not imitate the
product and enter markets with more tailor-made goods. (Dickson 1992; Varadarajan
& Jayachndran 1999).
This strategic prototype is more appropriate for firms with international orientation
for whom standardization is important for multinational positioning and customer
preference (Terpstra & Sarathy 1997; Jain 1989). Likewise, looking for minimal
adaptation, it is suitable for high and medium technology industries such as computers
that aim at relatively homogeneous segments (i.e. businesses). Firms adopting this
strategic prototype may tend to lean on their own distribution channels (Aulakh &
Kotabe 1997), sales force and global brand. This prototype is more appropriate for the
"Analyzers" (Miles & Snow1978), companies that can rely on a solid aggregation of
customers and keep a balance between flexibility and stability. The strategic prototype
is more likely to be adopted by the "regular exporters"(Naidu & Prasad 1994) because
of their high involvement and experience in international markets.
Prototype 3: low innovation and adaptation, high involvement. This strategic
prototype is more suitable for firms that possess mega brands (like Coca Cola or
McDonalds) or exporters, whose country of origin and "made in labeling ", play an
important part in its positioning and quality perception at the export target market
(e.g. Swiss made chocolate, Japanese electronics). The prices of the product reflect
brand strength and perceived quality and are usually higher than their local
16
counterparts. High involvement in marketing activities and limited product adaptation
strengthen the global positioning of a brand.
Firms adopting this strategy are expected to use quick expansion tactics while
launching the product in several markets simultaneously and moving quickly from
one market to another. As the number of export markets grows so does the perceived
utility of the product. Strategic prototype 3 can fit generic "differentiation" (Porter
1980). The differentiation in this case is based on the exporter's competencies that are
primarily of reputation or expertise (Cooner 1991; Weight & Camerer 1988;
Ghemawat 1986).
Prototype 4: low innovation, adaptation and involvement.
This prototype is
geared to firms that have a relatively low manufacturing cost, or very limited
resources. From the Industrial Organization perspective, economy of scale may
encourage firms to look for overseas markets and enable them to challenge local
producers with low prices. It is more appropriate for export orientation of "market
extension" (Terpstra & Sarathy 1997). The main advantage of the strategy is the low
cost of export activities. But it should be kept in mind that the minimal efforts made
to adapt a product for overseas markets might prove a barrier in attempts to enter
markets in new countries.
Exporters adopting this prototype may be defined as “seller” rather than “marketers”
due to their low involvement in the marketing aspects. (Cooper & Kleinschmidt
1985). In some cases it is an ad-hoc opportunity, which can also be used by "sporadic
exporters" who lack international marketing competencies (Naidu & Prasad 1994) and
may therefore expect limited expansion. It may be more applicable to the marketing
of consumer goods of traditional industries where export can be done under private
17
labels. In these cases, the marketing cost (i.e. advertising, promotion) usually falls on
the overseas distributor who sells the product under his own label.
Prototype 5: low innovation and involvement, high adaptation. The adaptation is
made for a specific market or client. This strategy is typical of private label exporters.
It is more appropriate for small and medium size firms, for which the purchase deal is
substantially big, and as a result the firm is willing to be more flexible regarding the
product and its price. From the Resource Based View the managerial and production
flexibility are the firm’s competencies that affect its strategy (Cooner 1991; Itami’s
1987;Barney 1986).
The little involvement in marketing activities reduces the launching cost and ongoing
marketing expenses (Fitzell 1992), thus firms that are looking to minimize financial
risks at the export market may opt to apply this prototype. Firms can also benefit from
the overseas retailers’ experience and positioning in the market. On the other hand the
firm gains neither marketing experience nor positioning at the target markets abroad
and increases its dependence on the distributor. In certain industries where local
distributors hold their own brands, it may be the main alternative for firms to expand
internationally, especially for small and medium size firms that lack the resources to
establish global brands.
Product types most suitable for this prototype are consumer goods in traditional
industries like clothing or food and the strategy is applicable to sporadic as well as
regular exporters (Naidu & Prasad 1994).
Prototype 6: high innovation and adaptation, low involvement – Small firms with
high R&D are more likely to adopt this strategy. Their international marketing
strategies focus on adapting a product for the specific needs of customers at different
markets. Most often they are not involved in distribution and promotion aspects, and
18
tend to use independent representatives who are familiar with, and connected to the
foreign market. Degree of innovation and flexibility are key factors in gaining a
competitive advantage through this strategy.
From the Industrial Organization perspective the prototype is of differentiation
strategy that is based on innovation (Porter 1980, 1990). From the Resource Based
View it is a combination of technological and organizational competencies (Nelson
and Winter 1982; Winter 1984; Cooner 1991) that enable the firm to present an
innovative product and at the same time to be flexible in terms of its adaptation.
Price policy is expected to be of premium due to uniqueness and adaptation costs.
This prototype can be observed in hi-tech or biotechnological industries mainly in
small and medium size firms that making their major efforts in the development and
production stages. Some of them perform as R&D laboratories and some are startups.
These firms are usually young and lack of marketing and exporting experience. In
some cases they prefer to establish joint ventures for the international expansion with
an experienced partner and in others, to sell the distribution and sales rights to another
firm, and supply the technical support and service.
In the conceptual framework it is proposed that export-marketing tactics are derived
form the export strategic prototypes. These relations were discussed in the strategic
prototypes presented above. For the empirical exploration we have developed some of
the proposed relations into hypotheses. In the following paragraphs the specific
hypotheses are presented along with a brief rationality that is based on the theoretical
review of the strategic dimensions and the discussion of the strategic prototypes.
19
Research hypotheses
Relative price
Relative price in the exploratory examination refers to the price of the exported
product relative to parallel products in the export target market. Innovation can be a
source for premium prices based on unique and differentiate offering (Porter 1980,
Varadarajan & Jayachndran 1999). Adapting the product for specific markets usually
requires extra costs (cavusgil & Zou 1994). However when innovation is high and
adaptation is low, a firm can usually accelerate their rate of penetration into new
markets. When innovation is low but adaptation is high, involvement may play an
important factor on pricing tactics. If a firm is not involved in the marketing of the
product at the foreign country, its control on the distributor actions is limited (Aulakh
& Kotabe 1997; Bello & Gililiand 1997; Bello & Williamson 1985) Thus it is
expected that:
H1: Relative price is positively correlated to strategic prototype 1 and6, of high
innovation and adaptation, and negatively to prototypes 2, 3,4,5 of low innovation or
adaptation.
Expansion
Market Expansion refers to the number of markets to which the product is exported
simultaneously. Since innovations tend to require for substantive investment
(Boulding, Morgan & Staelin 1997) number of markets in which the product is sold
may increase returns potential. Based on its uniqueness, Innovation can also be a key
factor in opening new markets for the firms and contribute for its sustainable
competitive advantage. From the product life cycle and diffusion perspectives
entering new markets may stretch product life and its adoption. Being involved in the
marketing planning and implementation can increase the chances to launch the
20
product into new markets and to enlarge sales. For innovative product, guidance and
support are often needed to accelerate product adoption. For common goods
supporting the distributor imposes greater obligations and priorities (Bello & Gilliland
1997). Thus low innovation and adaptation along with high involvement may enable
firms to increase market expansion especially in industries with economy of scale
patterns. Following these arguments it is hypothesized that:
H2: The number of export markets is positively correlated to prototypes 1, 2. 6 of
high innovation, to prototype 3 of low innovation and adaptation but high
involvement, and negatively to prototypes 4 and 5 of low innovation and involvement.
Distribution
Distribution refers to the method the firm use for the product distribution at the export
market: external or local independent distributors vs. joint venture with local
distributor or firm’s subsidiary. Subsidiary or joint venture at the export market gives
the firm better control of the marketing performance and enable her to be more
involved in the planning and executing of marketing actions (Kumar & Subramanian
1997; Aulakh & Kotabe 1997; Bello & Gililand 1997). New and unique products
require closer contact with the clients, training and support before and after-sale
service. Thus it is expected that
H3: Own distribution or joint ventures are positively related to prototypes 1 and 2 of
high innovation and involvement and prototype 3 of high involvement but low
innovation, while external distribution is positively related to prototypes 4 and 5 of
low involvement and innovation and prototype 6 of high innovation but low
involvement.
21
Branding
Branding policy in this study refers to the firm’s decision to export and sell the
product under her own brand name or under the overseas distributor's brand and trade
mark – Private Label. As the firm is more involved in the export market so the
potential consumers have greater chances to know her (Aulakh & Kotabe 1997;
Terpstra and Sarathy 1997). The firm, from her side, can better develop its brand
positioning and relations with her clients, taking care and control for the marketing
communication activities. Thus we hypothesize that
H4: Developing the firm’s brand in export markets is positively related to strategic
prototypes 1, 2, 3, of high involvement and negatively related to prototypes 4.5.6 of
low involvement.
RESEARCH METHODOLOGY
Personal interviews
The research is based on personal interviews with international marketing managers
of Israeli firms who have at least five years export experience. These managers were
responsible for and directly involved in the export of a specific product line to a
foreign target market. Interviewees managed such marketing aspects of a firm’s
activities as distribution and promotion.
Unit of Analysis
The unit of analysis in this study was a product-market venture, whereby a
manufacturer exports a specific product line to a chosen country (target market). The
requirements for inclusion were: a) Each venture must have been in existence a
minimum duration period of five years. This condition relies on previous studies that
have shown little strategic movement across time (Fiegenbaum, Sudharshan &
22
Thomas 1987; Fiegenbaum & Thomas 1995). b) Only final products are considered
(no raw materials or products in process).
Population, Sample, and Data Collection
The sample was taken from the database of the Dun and Bradstreet international
business guide. All firms are of small and medium size in the international arena (see
appendix). Each firm was contacted by telephone to identify the manager who was
responsible for and personally involved in export marketing strategy. A telephone call
to the potential interviewee then confirmed that the case conformed to the research
requirements and, after eliciting consent to participate in the study a date was set for
the interview.
180 firms were contacted and 126 (70%) positively responded. For each refusal,
another firm, similar in terms of size and industry, was chosen. 106 cases answered
the research criteria (59%) and 5 interviews could not be conducted out of technical
reasons. Thus the final sample consisted of 101 product-market export ventures from
various industries (see appendix) across different export markets
The Study Questionnaire
A semi-structured questionnaire was prepared for the preliminary set of interviews.
This was followed by a pretest using a revised version of the questionnaire. In the
second stage, a final, structured questionnaire was used. This questionnaire included
three main sets of questions and variables directed at the three levels of firm, product
line, and target market. The interviewees described both the specific product line and
the target market before beginning the structured interview, and the interview
proceeded only if the basic conditions of the study were met (a final product and at
least five years of export venture experience). The following paragraphs describe the
measurement tools we used for the exploration of the suggested framework.
23
Operational measures
For the actual testing of the framework in the exploratory research, we tried to rely on
indicators and their measuring tools from earlier studies. In other cases, where
previous measurements were not available, or did not meet the proposed framework,
specific measuring tools were developed and they are detailed here.
Strategic decisions
Innovation. Refers to innovation level of firm’s product in the export market. We
used R&D expenditure that has been suggested and used by Capon, Farley & Hoenig
(1990) as a proxy for innovation (see also Staelin 1995; Varadarajan &Jayachandran
1999). R&D expenditure was measured as percentage of product sales.
Adaptation. Adaptation is defined as the level of changes that a firm applies to its
product for the specific export market (Cavusgil,Zou & Naidu 193; Cavusgil & Zou
1994). Measured by 5 points scale (1= no changes, 5= substantive changes).
Involvement. Based on the literature review, involvement is defined as a firm's level
of active participation in the marketing at the overseas market (i.e. planning,
financing, implementing, controlling). A Three item scale was performed: percent of
promotion budget financed by the firm, degree of firm’s management involvement in
the export venture and degree of firm involvement in the planning and executing of
marketing activities like sales promotion and distribution. Coefficient alpha is .786.
We used 5 points scale for the involvement factor (1=not at all, 5=highly involved).
Competencies
We examined four items that were repeatedly discussed in the literature to be of
potential for competitive advantage for the firm in the international arena.
International experience. Experience contributes to firm’s competencies in greater
knowledge and skills that are accumulated throughout the years. Though many studies
24
discuss the importance of this factor to international strategy of the firm,
measurements are not always consistent. For an example Zou & Cavusgil (2002)
examined international experience by two Likert type statements regarding
management international business experience and firm history of international
business involvement. Aulakh & Kotabe (1997) measured international experience
by the percent of dollar value of foreign yearly sales out of total sales. In this research
we measured the number of years the firm is involved in export as the indicator for
experience in export.
Firm size. The common indicators in the literature are sales and number of employees
(Aulakh & Kotabe1997; Cavusgil, Zou & Naidu 1993; Crick 1995; Naidu &Prasad
1994). We performed two items scale: average total sales of last three years and
number of employees working on a permanent basis. Alpha coefficient is .66.
Orientation. Refers to the firm’s business orientation that is whether the firm is
focused on the local market or on the export market. In this study the indicator for the
exporter's orientation was the export rate of total product sales. Previous studies have
shown the effect of this indicator on firm’s international strategy: Naidu & Prasad
(1994) defined it as export intensity and used it to distinguish between “sporadic” and
“regular” exporters. For the later they found greater involvement in the export market
activities. Aulakh & Kotabe (1997) used this indicator for measuring firm
international experience and found that it had an effect on channels integration
decisions (referred also as entry mode decisions- see Kumar and Subramanian 1997).
Patent – refers to an existing patent power for the firm. Technological innovativeness
has been argued to be a source for the firm competitive advantage (Cooner 1991:
Winter 1984). Its power however depends on whether it can be copied or developed
by other firms and how long its exclusivity can last (Lado, Boid &Wright 1992;
25
Varadarajan &Jayachandran 1999). While estimations of how difficult it is for
competitors to develop a similar product may be subjective, a protected patent has a
sustainable advantage as it promises exclusiveness at least till the expiration date. In
the international arena however this advantage also depends on the number of
countries or regions in which it is registered. Thus in this study, the interviewees were
asked if the product was protected by patent and in how many countries it was
registered or protected.
Goals
Exploring the relations between firm’s goals and export strategic prototype, we
examined three main goals a firm may address for the specific export market: growth,
leading the market and minimize risk.
Growth. We used sales goals for medium and long terms that were addressed by the
firm to measure the firm’s growth goal.
Lead the market. Market leaders usually hold substantive market share and enjoy
high recognition by the customer (Kotler 1999). If a firm whishes to lead even in a
limited product category it should look to gain customer awareness and liking as well
as high market share in this category. Thus two items scale was performed: degree of
importance managers assign to getting market share, and degree of importance
managers assign to increasing awareness among customers at the export market.
Coefficient alpha=. 691, Measured on 5 points scale (1. not at all – 5. very important)
Minimize risk. Ghoshal (1987) has argued that managing risk is of the firm main
strategic goals. When entering new markets there are potential risks that can stem
from political instability and economic fluctuations (Agarwal &Ramaswami 1992;
Kim and Hwang 1992). Such risks increase market and environmental uncertainty
under which firms are looking to minimize their resource commitments (Gatignon &
26
Anderson 1988; Aulakh & Kotabe1997). Uncertainty is usually greater when
investing for longer periods, thus if a firm is looking to minimize its risk it would go
for a shorter commitments and expect quicker returns. Hence we examined the firm’s
requirements for maximum time to get returns on its investments (ROI) in order to
export to a foreign market.
Industry
For the exploration of the industry and market factors three parameters were
examined
Economies of scale, has been suggested to contribute to the firm’s competitive
advantage and hence affect its strategic decisions (Porter 1980; Ghoshal 1987). In this
study we examined management assessment of the extent of which economies of
scales exist in the specific industry. Measured on 5 points scale (1=not at all, 5=in a
great deal).
Cultural similarities. Consumer behavior is often affected by cultural characteristics.
Thus when a firm’s cope with different markets they should consider differences
versus similarities of cultures before deciding on the proper marketing strategy
(Cavusgil; Zou and Naidu 1993; Walters & Toyne 1989). The examination was for
exporters perception for the degree of cultural similarities between the home market
and the export market. Measured on 5 points scale (1=completely different,
5=identical).
Competition. The level of competition can be derived from market structure,
governmental regulations, market size and buying potential. However, as competition
is more intense, it requires greater expenses while prices are getting lower, and thus
profitability is reduced. We used estimated gross profitability as a proxy for the
competitive intensity at the export market.
27
Marketing tactics
The marketing tactics in this study are detailed in the hypotheses setting and in the
paragraphs devoted to characterizing the strategic prototypes. Therefore their
measuring is briefly reported in the following paragraphs
Price. Refers to product price at the export market relative to the average price of
competitors. Measured in percents- above and below the average price.
Expansion. Measured by number of markets to which product is exported
simultaneously.
Branding. Refers to the firm’s decision to export and sell the product under her own
brand name or under the overseas distributor's brands and trade marks – Private
Label. Measured by exporting rate via private label vs. firm's brand on a 5 points scale
(higher score means higher rate of export under private label)
Distribution. International distribution methods were defined as entry modes and
channel integration (Aulakh & Kotabe 1997; Kumar & Subramanian 1997). The
question is whether the firm owns in total (subsidiary) or in part (joint venture) the
distribution operation or it relies on an independent system (external or local). In this
study we examined if the firm uses external or local independent distributors versus
joint venture with local distributor or a firm’s subsidiary.
Methods of analysis
Step 1: Identification and classification of the cases by the three dimensions:
innovation, adaptation and involvement. We used Cluster analysis, which has been
widely applied in research of strategic groups (Barney & Hoskisson 1990; Nathe &
Gruca 1997; Galbraith & Schendel 1983). In the Cluster analysis the K - Means
procedure was applied. This procedure is more suitable for this study than the
28
Hierarchical clustering, as most cases are incorporated in the analysis and there is no
consideration to omit extremes (Punj & Stewart 1983).
Step 2: Identification and testing of differences among the clusters generated in step
1. For this purpose two tests were conducted: First, we started with the Manova test to
see which of the three dimensions is significant in the classification of groups.
Second, a multiple comparison test for each of the decision dimensions was applied in
order to explore the differences between the groups (Cooper & Kleinschmidt 1985;
Nath & Gruca 1997).
Step 3: In this step the relationships between the strategic groups and the international
marketing tactics were tested. We applied the Anova test followed by multiple
comparison tests for market expansion, branding and price that were measured by
continuous indicators and we used Chi-Square for the distribution method (discrete
indicator).
Step 4. To examine the relations between the industry, firm’s competencies and goals
factors to the strategic prototypes a Discriminant analysis was conducted followed by
Leave One Out test to assess the reliability of discrimination.
In order to examine extreme as well as mid strategic prototypes, we used another
classification approach. Each of the three strategic decisions got three operational
levels: high medium and low, thus theoretically there are 27 possible prototypes. Each
of the empirical cases was assigned to the relevant prototype upon its rating scores for
the three dimensions. The results and analysis are reported in the appendix.
FINDINGS
Steps 1 and 2: The proposed framework suggests that there can be many strategic
prototypes generated by different levels of each of the three decision dimensions:
adaptation, innovation and involvement. However in order to better explore the
29
differences among the prototypes and compare them with the six prototypes in the
theoretical presentation of the framework, we focused on prototypes that were of
dichotomous levels. It means that each of the three dimensions is of the highest or
lowest values. Nevertheless this condition was not imposed for the data processing
and analysis. We started with six groups clustering and then reduced the clustering
number to five and four. In the six and five groups clustering we found mid levels for
one or more of the strategic decisions while in the four groups clustering, only polar
prototypes were exhibited. Table 1 shows the Manova and multiple comparison
results for the 4 groups' classification.
************
Put table 1 about here
*************
Four groups that contain 21-36 cases each were generated in the clustering. The
overall manova test indicates that the three strategic decisions are significant at p<.01.
The multiple comparison tests show that in the groups’ classification each of the
parameter gets only two levels (low or high). Thus the prototypes generated in the
empirical examination are of dichotomous structure.
The empirical Prototype 1 exhibits high level of innovation and involvement and
low level of adaptation thus this prototype is compatible with the proposed prototype
2.
The empirical Prototype 2 exhibits high level of innovation adaptation and
involvement that is compatible with the proposed prototype 1.
Empirical prototype 3 exhibits high level of adaptation and low levels of
involvement and innovation, thus it is compatible with the proposed prototype 5.
30
Empirical prototype 4 exhibits low levels of innovation, adaptation and involvement
thus it is compatible with proposed prototype 4.
Step 3: Table 2 exhibits the results of the Anova analysis and it’s related multiple
comparisons for the four empirical prototypes and their marketing tactics: expansion,
price and branding. Table 2-I exhibits the Chi square test results for the relations
between the empirical strategic prototypes and distribution methods.
************
Put tables 2,2-I about here
************
The results show that markets expansion and branding policy are significant at P<. 01.
Supporting our hypothesis-H2, the multiple comparison test of the mean values
indicates that market expansion, is significantly higher in prototype 2 (high degree of
innovation, adaptation and involvement) than for prototype 4 (low innovation,
adaptation and involvement). Firms that are applying prototypes 1 and 2 of high
innovation and involvement were found to use their own brand in export, significantly
more than firms which apply prototypes 3 and 4 of low innovation and involvement.
The later as can be seen tends toward private label exports, hence Hypothesis H4
regarding branding policy is supported.
The chi-square test (table 2-I) shows that there is a significant correlation between
strategic prototype and distribution method. Supporting H3, firms of prototypes 1 and
2 use their own distribution system or in a joint venture with an overseas distributor,
significantly more than firms of prototypes 3 and 4. The latter, following the
framework, were found to rely more on external independent marketing operations.
31
As for the product price relative to the export market, our exploratory research did not
find any significant differences among the various strategic prototypes.
Step 4: in order to explore the relations between the proposed influential factors
(industry, firm’s competencies and goals) and strategic prototypes, we conducted a
discriminant analysis. Table 3 exhibits the standardized coefficient of the various
factors, their correlations with the discriminant functions and the overall results of the
discrimination. Two out of three possible discrimination functions were found to be of
significant levels. Function 1 is significant at p < .001 and account for 83.7%of the
variance, while function 2 is significant at p < .05 and account for 12.5% of the
variance. Thus the two functions account for more than 96% of the variance. The
classification rate of the functions is 63% and the cross validation test (leave one out)
indicates correct classification of 54.2%. These classifications are much higher than a
proportional criterion of 25% and a maximum chance criterion of 36%. Eight out of
ten factors were found with significant different levels (p< .05) among the strategic
prototypes (their means and standard deviations S.d. are listed in the appendix). The
two factors that are not significant are growth that was measured by firm’s sales goals
for the export venture, and cultural similarity between the home (local) market and the
export market.
****************************
Put table 3 and figure 2 about here
*****************************
Figure 2 illustrates the territorial map for the four strategic prototypes by the two
discriminant functions. The map was drawn using the Centroids for each strategic
prototype and the cutting points to move from one territory to another. Looking at the
32
correlations between the significant factors and the discriminant functions, function 1
is defined primarily by existence of patent protected, lack of economies of scale and
low level of competition in the target export market. Function 2 on the other hand, is
primarily defined by bigger firms with greater willingness to invest at the export
market and lead the market.
Strategic prototypes and performance.
Testing of firms’ performance has not been a primary goal of this paper, however
some exploration of the export ventures' performance, based on interviewees reports,
have been examined across and within the strategic prototypes. The parameters were:
change of market share, sales growth and profitability growth over the export venture
and change in target group awareness of the firm in the export market. Table 4
exhibits the Anova test for the performance parameters. Two of them: market share
and awareness, are significant at p<. 05. The multiple comparison tests indicate that
the empirical strategic prototype 1(high innovation and involvement, low adaptation)
achieved the highest growth in market share and significantly more than prototype 3
(high adaptation, low innovation and involvement). For the change in target group
awareness, strategic prototype 2 (high innovation, adaptation and involvement) has
achieved the highest results and significantly more than prototypes 4 and 3. Prototype
1 gained significantly greater change in target group awareness than prototype 4 (low
innovation and adaptation, low involvement).
************
Put tables 4 and 5 about here
************
For each of the strategic prototypes that were identified in the empirical study we
examined the correlation between the strategic decision dimensions: innovation,
33
adaptation and involvement and the performance parameters: profitability and sales
growths (table 5). A positive correlation was found between involvement and
profitability for prototype 1 which is characterized by high involvement.
In strategic prototype 2 a negative correlation was found between sales growth and
adaptation. The strategy is identified with high adaptation. It is possible that high
requirements for adaptation, when the strategy is based on high innovation and
involvement, indicates difficulties in the market, which slows the ability to gain
market share quickly..
For strategic prototype 3, a positive correlation was found between adaptation and
profitability. The strategy is characterized by high degree of adaptation but low
involvement and innovation. It appears that firms that concentrated on adaptation to a
larger extent than other members in the group reported better profitability growth
rates.
In strategic prototype 4, a negative correlation was found between involvement and
profitability. The strategy is identified by low involvement, low innovation and low
adaptation. It is possible that either the increased involvement is insufficient (as a
result of an S-curve function), or that without other strategic elements the increased
involvement in not very productive.
DISCUSSION
The paper presents a theoretical framework for analyzing export-marketing strategies.
It is argued here that the export marketing strategy of firms can be identified upon
three strategic decisions - dimensions: adaptation, involvement and innovation. Each
of the dimensions lies on a continuum that moves from low to high degree. A strategic
34
prototype is a specific combination of certain degrees of the three dimensions,
generating many export strategies. In the empirical exploration, it was found that
when classifying the sample firms into 4 groups, all the strategies were of a polar
type. However, for a classification of more than four groups, strategies involving mid
levels were found in one or more of the dimensions. The concept of continuity
regarding the adaptation debate has been theoretically presented by Jain (1989), thus
this study provides empirical support for this concept. But more than that, empirical
support was found for the existence of continuums in the other framework dimensions
innovation and involvement. It is interesting that in this study the “involvement”
parameter contributed most to the creation of mid strategies. The explanation can be
related to the various alternatives a firm has for being involved in the marketing
activities at the target market abroad. Such activities can be performed directly in the
market by the firms’ own marketing force or by financing and supporting independent
channels (i.e. distributors, export companies). However technological developments
like the Internet, which have taken place in the communication field in recent years,
have opened new options for small and medium size firms, that can now be more
involved in the international business arena.
One of the criteria in evaluating the contribution of the model to identifying
marketing strategies for export is its correlation to specific marketing actions or
tactics. Three out of four marketing tactics examined in this study were found to have
a significant correlation to a specific strategic prototype. As to pricing policy no
significant differences were found across the groups. This finding may be explained
by the fact that the study was conducted among Israeli firms. Low price tactic is most
often related to cost breakdown (Porter 1980) and in Israel the cost of raw materials
and manpower is usually not lower than in many other countries. Premium prices, on
35
the other side, are generally related to leading brands and most Israeli firms find it
difficult and too expensive to develop an international brand.
What are the factors that affect the firm’s decisions regarding the strategic prototype?
Three sets of factors were proposed: the industry/market in which the firm operates
the firm’s goals for the export venture and the firm’s specific competencies. The
empirical study shows that a firm’s decision for the strategic prototype can be
predicted with 63% accuracy by these factors. Two factors were found with no
significant differences: cultural similarity and sales growth goals.
A possible
explanation for the first factor is that many Israeli firms in the sample export
advanced technologies and products where cultural differences are of less concern.
The emphasis on short-term sales goals could be a possible explanation for the
insignificant impact of the second factor that has been examined by sales goals for the
medium and long terms.
Reviewing the discriminant territorial map (Figure 2) can be helpful in examining the
factors that may affect firms’ strategic decisions. It can be concluded that firms will
opt for prototypes with higher levels of innovation and involvement when a patent
protects the firm’s product, when competitive intensity at export markets is lower and
when economies of scale are of limited impact. It can be also concluded that larger
firms, with leadership aspirations and willingness to invest and assume risks, will tend
to apply strategic prototypes that include higher levels of adaptation. Global
orientation was found with higher scores among firms that are more heavily involved
with the export markets. It seems that when firms are globally oriented they are less
willing to give up their actual presence and influence in the export markets. This is in
line with the literature findings that global strategies are identified with higher degrees
of coordination (Zou & Cavousgil 2002; Ghoshal 1987).
36
Another criterion that has been raised in examining the existence of strategic groups is
performance. Moreover do the group characteristics serve as entry barriers and make
it difficult for a firm to move from one strategic prototype to another and improve its
output (Hoskisson & Barney 1990). In this study, growth rates in market shares and in
target group awareness of the firm at the export markets were found to be
significantly correlated with group membership. These parameters can affect the
firm’s ability to launch other products, to lead a market, to get premium prices and to
enter other countries. Thus these variables may serve as barriers for a firm wishing to
expand internationally. An example can be viewed in Procter & Gamble policy that is
aimed to get high market shares and use massive advertising at its various
international markets.
Profitability and sales growth rates over time were not found to be significantly
different across the strategic prototypes. However they were found to be correlated
with the extent of applying the strategic decisions, mainly involvement and
adaptation, in each of the strategic prototypes. Profitability was found positively
correlated to involvement among firms in prototype 1 (high involvement type) and
negatively correlated to involvement among firms in prototype 4 (low involvement
type). It can be concluded that there is a need for a critical mass of involvement at the
export market. Without a critical mass , increases in export expenses does not
contribute enough to justify the costs.
In the following paragraphs we sum up the main properties of each of the four
empirical prototypes
Prototype1 – high innovation and involvement, low adaptation: firms in this group
are mainly small and medium in size and invest considerably in R&D. They operate
in markets with a relatively high profitability rate. Though they have relatively little
37
experience in export, they are globally oriented and achieve the highest growth rate in
market share. Firms in this group tend to use their own brand name and to rely on
their own distribution systems in the export process. They are mainly in the
computers, software and optical equipment industries.
Prototype 2 – high innovation, involvement and adaptation: firms are mainly big
and invest considerably in R&D. They tend to operate in markets with a relatively
high profitability rate. Firms are more willing to take risks in their international
expansion. They are globally oriented, looking to lead markets, and have achieved the
highest growth rate in target group awareness at the foreign markets. Adaptation in
this group has a negative effect on sales growth. The firms are mainly in the
technological industries: telecommunication, medical and measurement equipment.
Prototype 3 – low innovation and involvement, high adaptation: firms in this group
are mainly medium and large size. They are looking to minimize risks in the export
venture. Though they have much export experience, they are locally oriented and tend
to produce and export for private labels. Firms in this group have achieved a relative
small change in market share, and adaptation has a positive effect on profitability. The
firms operate in a broad and very heterogeneous range of industries such as
electronics, food, jewelry, steel, and plastics.
Prototype 4 – low innovation, involvement and adaptation: firms in this group are
with relatively high export experience, but nevertheless they are locally oriented.
They operate in markets with medium and low profitability rates, and tend to
concentrate their export activities in a small number of markets, to which they export
under private labels, using external/independent distribution channels and sales
forces. Firms in the group have achieved a relative small change in market share, and
38
involvement has a negative effect on their sales growth rate. They operate in the more
traditional industries like textiles and food, as well as the electronics industry
CONCLUSIONS AND MANA GERIAL IMPLICATIONS
Firms from various industries, export their products to different markets using quite
similar international marketing strategies. This study suggests that export marketing
strategy can be described in the following manner: A set of decisions that are
related to innovation, adaptation and involvement of the firm and its products at
the various markets. Each of the three strategic decisions can be assessed on a
continuum from a low to high degree. Thus the strategic prototype adopted by a firm
represents the meeting point of the three continuums. The first claim made in this
study is that specific export marketing tactics can be identified and characterized by
the three strategic decisions: innovations, involvement and adaptation. Empirically it
was found that the strategic prototypes, demonstrate different combinations of
marketing tactics like market expansion, exporting under the firm’s brand vs. private
label, using own distribution and selling force vs. external operations.
It has been argued in the study, that there are many strategies in the three dimensional
spectrum of innovation, adaptation and involvement. In presenting the theoretical
implications of the framework, six dichotomous strategic prototypes were exhibited.
This study found support for the existence of mid level strategies, which means that
the firm stands on a point, other than the edge, on at least one of the three continuums.
Testing marketing strategies tend to focus on one major parameter and even to
intensify it in order to emphasize differences among firms. In many cases a firm’s
behavior is not extreme in regard to any strategic parameters, and it is rather the
combination that creates the uniqueness. Moreover, exporters are more likely to
39
confront political, cultural and commercial barriers at the overseas market which may
limit extreme values.
Four strategic prototypes were empirically examined in this study. Two prototypes are
identified with high degrees of innovation and involvement and characterized by
global orientation. The other two prototypes are of low degree of innovation and
marketing involvement and the firms that apply these prototypes are mainly of more
traditional industries like textile, food and beverage. According to this study, and in
contrast to Naidu & Prasad (1994), export experience and firm size were not found to
be different between firms with a local vs. global orientation. On the other hand,
firms, which tend to invest more in R&D and are active in technological industries,
tend toward a global strategy. Thus, the decision whether and to what extent a firm
should become involved in international markets is related primarily to market and
industry specifications. Another distinction noted through the study relates to
distribution and branding policy. In the first two prototypes firms tend to distribute
products directly to their clients, and use their own brands. In the latter two prototypes
firms tend to use export companies, rely on foreign middlemen and distribution
systems and tend to produce and export under private labels. Closer examination of
the prototypes of high innovation and involvement has shown that firms which engage
in low adaptation include smaller and less experienced firms than the ones with high
adaptation. It may be concluded that there is a need for a greater sales volume to
justify the costs of adaptation,. Strategic prototype 4 of low involvement, innovation
and adaptation consists of firms, which are sales rather than marketing oriented. They
operate mainly at the local markets, taking export as ad hoc opportunities.
The proposed framework can assist managers in analyzing their export strategy. The
decision regarding the three dimensions leads to specific implications such as when to
40
use own brand name or own distribution operation in the export marketing process. A
mixed strategy of different strategies in different markets can also be considered as a
possibility. Another possibility can be an adaptive time-based strategy by which
strategies are modified with time and changing circumstances.
LIMITATION AND FUTURE RESEARCH
The study was conducted among Israelis firms. This may make it appear that the
empirical results and conclusions are more applicable to small countries or firms,
which are similar in terms of size and sales volume to those tested. Replicating the
study in other countries and regions would enrich the discussion as well as the
theoretical and practical implications. In the theoretical framework of the study it has
been suggested that there are many optional strategic prototypes in the three
dimensional spectrum of innovation, adaptation and involvement. For methodological
and practical matters the study focused on four strategic prototypes that were
identified in the empirical part. It would be interesting to explore and discuss other
strategic groups, which can be derived from the framework, and to compare them to
those exhibited in this study. Innovation, adaptation and involvement are aggregate
dimensions. Each one of them has sub classification of its own .In this study each
dimension has been identified and its measurement is specified. Thus it may seem that
the empirical results are limited for these sub classifications. The study examines the
relation between a particular set of strategic variables and the strategic groups. Future
studies may examine other related parameters like segmentation. In this study it is
proposed that three main forces that are the firm’s competencies, the specific
market/industry conditions and the firm’s goals may affect firm’s decision regarding
the strategic dimensions. Future studies may test and further discuss these as well as
other factors.
41
REFERENCES
Agarwal, S. and S. Ramaswami 1992. Choice of foreign market entry mode: Impact
of ownership, location, and internationalization factors. Journal of International
Business Studies 23, (1), 1-27.
Aulakh. S. Preet and M. Kotabe 1997. Antecedents and performance implications of
channel integration in foreign markets. Journal of International Business Studies, 28,
(1), 145-175.
Aydin, N. and V. Terpstra 1981. Marketing know - how transfers by MNCS: A case
study in turkey, Journal of International Business Studies, Vol. 12, Winter 35 - 48.
Aylmer, R. J. 1970. Who makes marketing decisions in the multinational firm?
Journal of marketing, 34,(10),25 - 30.
Bahrami, H. 1992. The emerging flexible organization: Perspectives from Silicon
Valley, California Management Review, 34 (4), 33 - 52.
Barney.J 1991. Firm resources and sustained competencies advantage. Journal of
Management, 17 (3), 99-120
Barney, J. B. and R. E. Hoskisson 1990. Strategic groups: Untested assertions and
research proposals. Managerial and Decision Economics, 11, 187 – 198.
Bello, C. Daniel and David, I. Gilliland (1997), “The Effect of Output Controls,
Process Controls, and Flexibility on Export Channel Performance,” Journal of
Marketing, 61, (January), 22-38.
Bello D. C. and N. C. Williamson 1985. Contractual arrangement and marketing
practices in the indirect export channel. Journal of International Business Studies,16,
(Summer), 65 - 82.
42
Birkinshaw. J; A. Morrison and J. Hulland 1995. Structural and competitive
determinants of global integration strategy. Strategic Management Journal, 16 98),
637-55.
Boulding, W; R. Morgan and R. Staelin 1997. Pulling the plug to stop the new
product drain. Journal of Marketing Research,34 (2), 164-176.
Capon. N; J. U. Farley and S.Hoenig 1990. Determinants of financial performance: a
meta-analysis. Management Science 36, 1143-1159.
Cavusgil T. S. and S. Zou 1994. Marketing strategy - performance relationship, An
investigation of the empirical link in export market ventures Journal of Marketing 58
(1), 1 - 21
Cavusgil T. S., S. Zou and G. M. Naidu 1993. Product and promotion adaptation in
export ventures: An empirical investigation. Journal of International Business
Studies.24 (3), 479 - 506
Cavusgil T. S. 1984. Differences among exporting firms based on their degree of
internationalization. Journal of Business Research, 12: 195-208
Christensen, C. H., A. da Rocha. And R. H. Gertner. 1987. An empirical
investigation of the factors influencing exporting success of brazilian firms. Journal
of International Business Studies, 18, ( fall ), 61-77.
Churchill, Jr. Gilbert A. 1999. Marketing research, methodological foundations. The
Dryden Press, seventh edition.
Cook, V. J.Jr.1983. Marketing strategy and differential advantage. Journal of
Marketing, 47,(spring), 68-75.
43
Cooner, R. K. 1991. A historical comparison of resource-based theory and five
schools of thought within industrial organization economics: do we have a new theory
of the firm? Journal of Management, 17, (1), 121 - 154.
Cooper, G. R. and J. E. Kleinschmidt. 1985. The impact of export strategy on sales
performance. Journal of International Business Studies, spring,37 - 55.
Craig. C. S and S.P.Douglas 2000. Configural advantage in global markets. Journal
of International Marketing, 8,(1), 6-25.
Crick, D. 1995. An investigation into the targeting of U.K. export assistance.
European journal of marketing,29, 8, 76-94.
Day, G. S. 1981. The product life cycle: Analysis and applications issues. Journal of
Marketing, 45, (fall), 60-67.
Day, G. S. and R. Wensley 1983. Marketing Theory with a strategic orientation.
Journal of Marketing, 47, (fall), 79-89.
Diamantopoulos, A and C Inglis 1988. Differences between high and low
involvement exporters. International Marketing Review, Vol. 5, 52 - 60.
Dickson. P.R 1992. Towards a general theory of competitive rationality. Journal of
Marketing 56 (10),69-83
Douglas, S. P and C. D. Urban 1977. Life - Style analysis to profile women in
international markets. Journal of Marketing. 41 (7) 46 - 54
Douglas, S. P. and J Wind 1987. The myth of globalization. Columbia Journal of
World Business, Winter: 19 – 29
Fiegenbaum, A. and A Karnani. 1991. Output flexibility - a competitive advantage
for small firms. Strategic Management Journal, Vol. 12, 101 - 114.
44
Fiegenbaum, A., D Sudharshan, and H Thomas. 1987. The concept of stable strategic
time periods in strategic groups research. Managerial and Decision Economics, 8, 139
– 148.
Fiegenbaum, A. and H Thomas. 1995. Strategic groups as reference groups: theory,
modeling and empirical examination of industry and competitive strategy. Strategic
Management Journal, Vol. 16, 461 - 476.
Fram, E. H. 1992. We can do a better job of selecting international distributors.
Journal of Business and Industrial Marketing 7 (2), 61-70
Galbraith C. and D. Schendel 1983. An empirical analysis of strategy types.
Strategic Management Journal, 4, 153 - 173.
Ghemawat, P. 1986. Sustanable advantage. Harvard Business Review. Septemberoctober, 53 – 58.
Ghoshal S. 1987. Global strategy: an organization framework. Strategic Management
Journal, 8: 425-440.
Hamel, G. and c. k. Prahalad 1985. Do you really have a global strategy? Harvard
Business Review, (July - August): 139 - 48.
Herbiniak, G. L. and J. F. William 1985. Organizational adaptation: strategic choice
and environmental determinism. Administrative Science Quarterly, 30, 336-349.
Hill, J. S. and R. R. Still 1984. Adapting products to LDC taste. Harvard Business
Review, 62 (March - April) 92 - 101
Hirsch, S. 1970. Technological factors in the composition and direction of Israel's
industrial export, in Raymond Vernon, Ed, the technology factor in international
trade. NY, Columbia University Press. 365-408.
45
Itami’s, H. 1987. Mobilizing invisible assets. Cambridge, Harvard University
Press.
Jain, S.C. 1989. Standardization of International marketing strategy some research
hypotheses. Journal of Marketing. 53 (1), 70 - 79
Kirpalani, V. H. and N. B. Macintosh. 1980. International marketing effectiveness of
technology oriented small firms. Journal of International Business Studies, 10
(winter), 81-90.
Klein. S; G.L .Frazier and V.J.Roth 1990. A transaction cost analysis model of
channel integration on international markets. Journal of Marketing Research, 27, (5),
196-208.
Kleinschmidt, E. J. and R. G Cooper 1988. The performance impact of an
international orientation on product innovation. European Journal of Marketing, Vol.
22, No. 10, 56 - 71.
Kotler, P. 1999. Marketing management: analysis, planning, implementation and
control. Prentice - Hall, 10th edition.
Kumar, V. and S. Selavan 1997. A contingency framework for the mode of entry
decision. Journal of World Business, 32 (1)
Lado . A. A., G. N. Boyd and P. Wright 1992. A competency-based model of
sustainable competitive advantage: Toward a conceptual integration. Journal of
Management, 18, (1), 77 - 91.
Leonidou C. L. and S. C. Katsikeas 1996. The export development process: An
integrative review of empirical models. Journal of International Business Studies, 3,
517 - 551.
46
Levitt, T. 1983. The globalization of markets. Harvard Business Review. 61 (May June): 92 - 102.
Madhok. A 1997. Cost, value, and foreign market entry mode: The transaction and
the firm. Strategic Management Journal, 2,
McGuiness, N. W. 1978. The impact of technology and product characteristic on the
international sales of new Canadian industrial product: a diffusion analysis,
unpublished Ph.D. dissertation University of Western Ontario, Canada
.Miles, R. E. and C. C. Snow 1978. Organizational strategy, structure and Process.
MacGraw - Hill, New York.
Naidu. G. M and V. K Prasad 1994. Predictors of export strategy and Performance of
small - and medium - sized firms. Journal of Business Research, 31, 107 - 115.
Nath D. and T. S. Gruca 1997. Convergence across alternative methods for forming
strategic groups. Strategic Management Journal, 18, 9, 745 – 760.
Nelson, P.R. and S Winter 1982. An evolutionary theory of economic change.
Cambridge, MA, Harvard University Press.
Ohmae, Kenichi 1985. Triad power: The coming shape of global competition. New
York: The free press.
Porter, M. E.1980. Competitive strategy. New York, Free Press.
Porter. M. E. 1990. The competitive advantage of nations. The Free Press.
Punj G. and D. W. Stewart 1983. Cluster analysis in marketing research: review and
suggestions for application. Journal of Marketing Research ,10, May, 134-148.
Rogers.M.Everett. Diffusion of Innovation. New York, The Free Press 1983
47
Rosson,P. J. and L. D. Ford 1982. Manufacturer - overseas distributor relations and
export performance. Journal of International Studies,13,( fall), 57-72.
Samiee, S. and R. Kendall 1992. The influence of global marketing standardization
on performance. Journal of marketing, 56 (4): 1 - 17.
Scherer. F.M and D. Ross 1990. Industrial market structure and economic
performance. Boston, Houghton Mifflin.
Schumpeter, I. A. 1950. Capitalism, socialism and democracy.(3rd ed.) New York,
Harper & Row.
Shoham A. and G. Albaum 1994. The effects of transfer of marketing methods on
export performance: An empirical examination. International Business Review. 3, No
3, 219 - 41.
Shoham A. 1995. Marketing - mix standardization: determinants of export
performance. Journal of global marketing 9, January.
Sorenson, R. Z. and U. E. Wiechmann 1975. How multinationals view marketing
standardization. Harvard Business Review, 53 (May - June): 38.
Srewart, T. A. 1992. Brace for Japan’s hot new strategy. Fortune, 126, No.6, 62 - 74.
Teece. D. J; G. Pisano and A.Suen 1997.Dynamic capabilities and strategic
management. Strategic Management Journal, 18,(7), 509-534.
Thorelli, H. B. and G. D. Sentell 1979. “Consumer ecology in the LDC: The case of
Thailand”, Proceedings of the Academy of International Business, Honolulu, 324 332.
48
Varadarajan,P. R and S.Jayachandran 1999. Marketing strategy: an assessment of
the state of the field and outlook. Journal of the Academy of Marketing Science, 27, 2.
120-143
Vernon. R. 1979. The product cycle hypothesis in a new international environment.
Oxford Bulletin of Economics and Statistics ,41(11),255-67.
Walters, P. G. P. 1986. International marketing policy: A discussion of the
standardization construct and its relevance for corporate policy. Journal of
International Business Studies,. 17, summer, 55 - 69.
Walters, P. G. P. and B. Toyne 1989 product modification and standardization in
International Markets; Strategic options and facilitating policies. Colombia Journal of
World Business (winter) 37 - 44.
Weight, K. and C. Camerer. 1988. Reputation and corporate strategy: a review of
recent theory and applications. Strategic Management Journal, 9, 443 – 454.
Wind.j. 1986. The myth of globalization. Journal of Consumer Marketing, 3 (spring):
23 - 26.
Winter,S. 1984. Shumpeterian competition in alternative technological regimes.
Journal of Economic Behavior and Organization, 5, 287 - 320.
Woo, C. Y. Y. and A. C Cooper. 1981. Strategies of effective low share business.
Strategic Management Journal,. 2, 106 - 113.
Yip.G.s.1995. Total global strategy: Managing for worldwide competitive advantage.
Englewood Cliffs, NJ, Prentice Hall.
Zou.S and S.T. Cavusgil 2002. The GMS: a broad conceptualization of global
marketing strategy and its effect on firm performance. Journal of Marketing, 66 (10)
40-56.
49
TABLE 1
Strategic Decisions of Export Marketing
Comparison of Means (S.d) of the Four Strategic Prototypes
Prototypes
Strategic
4
n=36
3
n=22
2
n=22
1
n=21
Decisions measures
1.2
(.55)
1.4
(.80)
5.3
(.84)
5.6
(.80)
Innovation
1.6
(.59)
3.6
(.73)
3.5
(.60)
1.3
(.48)
Adaptation
2.0
(.66)
2.7
(.96)
4.2
(1.00)
3.6
(1.16)
Involvement
Overall Manova results: Wilk’s Lambda=. 022;F (9,231)=97.639,p<. 01
Means of Innovation in prototypes 1 and 2 are significantly different from prototypes
3 and 4, p< .05
Means of Adaptation in prototypes 2 and 3 are significantly different from prototypes
1 and 4, p< .05.
Means of Involvement in prototypes 1 and 2 are significantly different from
prototypes 3 and 4, p< .05.
TABLE 2
Export Marketing Tactics
Comparison of Means (S.d) of the Four Strategic Prototypes
Prototypes
Strategic
4
n=36
3
n=22
2
n=22
1
n=21
Marketing Tactics
3.4
(.94)
3.7
(1.11)
4.4
(.91)
4.1
(.73)
Expansion
3.0
(.89)
2.9
(1.02)
3.5
(1.06)
3.2
(1.18)
Price
2.9
2.6
1.2
1.6
Branding
(1.30)
(1.36)
(.70)
(1.20)
Anova results for:
Expansion: F(3.98)=5.28,p<. 01,Price: F(3.98)=1.70,n.s,Branding:F(3.98)=5.28,p<.
01
Means of Expansion in prototypes 2 is significantly different from prototype 4, p< .05
Means of Branding in prototypes 1 and 2 are significantly different from prototypes 3
and 4, p< .05.
50
TABLE 2-I
Export Marketing Tactics
Comparison of Distribution Methods used by the Four Strategic Prototypes
Prototypes
Strategic
Total rows in
no. Column %
4
n=36
3
n=22
2
n=22
1
n=21
60
59.5%
30
15
7
8
External/local
independent
41
40.5%
6
7
15
13
Own
subsidiary/
joint venture
101
36
22
22
21
Total columns
21.8%
20.8%
100%
35.6%
21.8%
Chi-Square = 21.14, 3df, p<. 01
Distribution
method
Raw %
TABLE 3
Influential Factors
Discriminant analysis Results
Coefficient
Correlation to Correlation to Function2
function 2
function 1
-.06
.37
.02
.16
.07
.03
-.42
-.48
-.44
.27
-.21
.12
-.39
.70
-.41
.03
.21
.12
.56
-.00
.46
41
-.00
.41
.36
.22
.23
.43
.30
.23
Standardized
Funcion1
-.29
-.05
-.42
-.18
.76
.08
.15
-.05
.09
-.21
Factors
Competition
Cultural Similarity
Economies of Scales
Export Experience
Patent Protected
Global Orientation
Firm Size
Growth
Lead the Market
Minimize Risk
.29
1.95
Eigenvalue
12.5
83.7
% of variance explained
.47
.81
Canonical correlation
.71
.24
Wilks lambda
29.93
125.25
Chi -square
18
30
Degrees of freedom
.05
.00
Significance
Correct classification to 4 strategic prototypes: 63%,
Leave one out (cross validation) test: 54.2%
Note: all factors except growth goals and cultural similarity are significantly different
at p<.05 in testing equality of group Means.
51
TABLE 4
Export Marketing Performance
Comparison of Means (S.d) of the Four Strategic Prototypes
Prototypes
Strategic
4
n=36
3
n=22
2
n=22
1
n=21
Performance
3.5
(1.40)
4.0
(1.26)
4.0
(1.57)
3.6
(1.79)
Sales growth
1.9
(1.25)
1.5
(1.18)
2.5
(1.46)
2.7
(1.60)
Market share
.42
(1.07)
1.1
(1.57)
2.5
(1.59)
1.6
(1.62)
Awareness
2.4
2.0
2.4
2.5
Profitability
(131)
(1.29)
(1.29)
(1.40)
Anova results for:
Sales growth: F (5.08)=0.74,n.s, Market share: F (20.00)=3.56, p< .05, Awareness: F
(63.43)=21.14,p<. 01, Profitability F (3.16)=0.60, n.s
Mean of Market share in prototype1 is significantly higher then prototype 3, p< .05
Means of Awareness in prototypes 1 and 2 are significantly higher then prototype 4,
p< .05. Prototype 2 is also significantly higher then prototype 3, p< .05.
TABLE 5
Correlation of Strategic Dimensions and Performance Within Groups.
Note: Spearman Correlation Test., only the significant result for p< .05 are exhibited.
Sales Growth
Profitability
Strategic Decision
Dimensions
Group
prototype
Involvement: .60
High Innovation
Low Adaptation
High Involvement
1
High Innovation
High Adaptation
High Involvement
2
Low Innovation
High Adaptation
Low Involvement
3
Low Innovation
Low Adaptation
Low Involvement
4
P< .003
Adaptation -.52
P> .013
Adaptation .46
P< .031
Involvement -.42
P< .010
52
APPENDIX
Table A-1 Sample Profile by Industry
% of ventures/ incidence
Industry
Food and beverages
14.0
Jewelry
3.0
Medical equipment/measuring instruments
5.0
Rubber and plastic products
12.0
Chemical and petroleum products
12.0
Metals and metal products
12.0
Machinery
5.0
Electronic and electrical equipment
10.0
Textiles and clothing
14.0
Optical instruments
3.0
Computers and software
5.0
Communications and telecommunications
6.0
Total Incidents
101.0
Table A-2 Number of Full Time Employees
Range
% of ventures -incidence
Cumulative %
1-10
4.0
4.0
11-70
10.0
14.0
71-200
36.0
50.0
201-1000
30.0
80.0
1001+
21.0
100.0
Total Incidents
101.0
Table A-3 Annual Sales in Millions of Dollars of Selected Ventures
Range
% of ventures -incidence
Cumulative %
1-5
29.0
29.0
6-15
32.0
61.0
16-40
23.0
84.0
41-100
8.0
92.0
101+
8.0
100.0
Total Incidents
101.0
53
Table A-5 Strategic Prototypes By Industries
Percents are within the industries (raw percents)
Total
Prototype Prototype
4
3
10
11
3
)144%(
)6.85%(
)4180%(
Prototype
2
Prototype
1
Food and beverages
3
4
1
)144%(
)5585%(
)3380%(
6
0
1
)144%(
).484%(
)4484%(
14
0
3
4
3
)144%(
)3383%(
)4684%(
)1586%(
)4684%(
14
6
4
3
)144%(
)6.83%(
)1586%(
)4684%(
14
4
5
3
1
)144%(
)1586%(
)6484%(
)4684%(
).83%(
6
4
3
)144%(
)0484%(
)5484%(
11
6
4
1
3
)144%(
)0686%(
)1.84%(
)084%(
)4683%(
13
6
6
1
)144%(
)638.%(
)3.86%(
)686%(
3
1
4
)144%(
)3380%(
)5585%(
6
1
1
3
)144%(
)4484%(
)4484%(
)5484%(
5
5
)144%(
)144%(
141
35
44
Industry
44
Jewelry
Medical equipment
and measuring
instruments
Rubber and plastic
products
Chemical and
petroleum products
Metals and metal
products
Machinery
Electronic and
electrical equipment
Textiles and
clothing
Optical instruments
Computers and
software
Communications &
telecommunications
41
Total
54
Table A – 6 Influential Factors by Strategic Prototypes.
(Means and S.d values)
Prototype 4
N=35
Prototype 3
N=21
Prototype 2
N=21
Prototype 1
N=18
3.3
3.5
2.8
2.5
(1.30)
(.92)
(1.01)
(1.38)
3.3
3.7
4.0
4.5
(1.30)
(1.30)
(1.07)
(.98)
2.8
3.2
3.2
2.4
(.85)
(.95)
(1.04)
(1.02)
.80
.80
5.1
3.1
(1.45)
(1.73)
(3.90)
(3.68)
4.1
3.6
2.1
3.0
(1.20)
(.96)
(.98)
(1.21)
2.8
2.8
3.2
2.7
(1.38)
(1.03)
(.99)
(1.35)
1.7
1.8
486
2.7
(.78)
(.96)
(1.00)
(.95)
Factor
Export Experience
Global orientation
Firm size
Protected patent
Economies of scale
Cultural similarity
Competition*
(Gross Profitability at
the export market)
1.8
2.0
2.9
2.2
(.90)
(.83)
(.88)
(.80)
3.1
3.5
3.5
2.7
(1.39)
(1.22)
(1.32)
(1.70)
2.7
2.6
3.5
2.7
(1.30)
(.96)
(1.18)
(1.51)
Minimize Risk *
(Time span for ROI)
Growth
Lead the market
* For these two factors, scale measurements are in the opposite direction: The higher
gross profitability at the export market the less competition is considered, the greater
time span for investments returns the greater risk is considered.
55
Figure1
The Adaptation. Innovation. Involvement Framework of Export Marketing Strategies
Influential factors
Marketing Tactics
Industry
Competition
Cultural similarity
Economies of scale
Strategic decisions
Branding
Adaptation
Price
Innovation
Distribution
Involvement
Expansion
Competencies
Export Experience
Patent
Global Orientation
Firm Size
Goals
Growth
Lead the market
Minimize risk
Figure 2
Discriminant Territorial map
+
Low innovation
and involvement,
high adaptation
Function 2
Firm size +
3*
Minimize risk Lead the market +
*0
Low innovation,
involvement and
adaptation
*
4*
High adaptation,
involvement and
innovation
1*
High innovation
and involvement,
low adaptation1
- Group centroid -
+
Function 1
Patent protected +, Competition -, Economies of scales -
56
The Following Table Classifies the Export Ventures based on Extreme and Mid
Levels of the Strategic Dimensions: Innovation, Adaptation and Involvement.
Theoretically there are 27 possible strategic prototypes that can be generated by the
three strategic decisions and three levels of high, medium and low. Without prior
content knowledge the 27 types can be expected to be distributed by a 25-50-25 share
split of the three levels. Thus, for 101 cases only 1.6 cases would be expected to
present an extreme strategy (.25*.25*.25*101 = 1.6) of either high or low levels for
the all three strategic decisions. The following table exhibits the actual and expected
distribution of the empirical export ventures across the 27 types.
TABLE A-7
Distribution of Export Ventures across the 27 Types.
(Note: the number on the left side in each cell is the actual count)
Involvement
Adaptation
High
Innovation
Medium
Low
High
High
9/1.6
0/3.1
1/1.6
High
Medium
6/3.1
0/6.3
1/3.1
High
Low
10/1.6
1/3.1
1/1.6
Medium
High
3/3.1
0/6.3
7/3.1
Medium
Medium
2/6.3
0/12.6
5/6.3
Medium
Low
10/3.1
0/6.3
13/3.1
Low
High
1/1.6
1/3.1
3/1.6
Low
Medium
0/3.1
1/6.3
4/3.1
Low
Low
1/1.6
3/3.1
18/1.6
Table A-7 shows that the actual counts for the more extreme types are greater then the
expected counts. It maybe said that when deciding on its export marketing strategy, a
firm is making a statement. This statement is usually focused by emphasizing one or
more of the strategic decisions. Eight prototypes have 5 or more cases. Among these
prototypes, medium levels were found only in the adaptation and involvement
dimensions. For further exploration and analysis we concentrate on these 8
prototypes.
57
TABLE A-8
Comparison of Means (S.d.) for The Marketing and Performance Measures by
Prototype.
Note: H for high, M for medium and L for low identifies each type in the following
order: Involvement, Adaptation and Innovation. Thus 1-HHH identifies high
involvement, high adaptation and high innovation
Prototypes
Strategic
8-LLL
n=18
7-MLL
n=13
6-MLH
n=10
5-MML
n=5
4-MHL
n=7
3-HLH
n=10
2-HMH
n=6
1-HHH
n=9
Marketing &
Performance
3.28
(.98)
3.6
(1.03)
4.1
(.73)
3.8
(.83)
3.5
(.976)
4.2
(.78)
4.8
(.40)
4.3
(1.11)
Expansion
2.9
(.72)
3.2
(.83)
3.1
(1.19)
2.8
(.44)
2.7
(1.25)
3.3
(1.33)
4.0
(.89)
3.4
(1.13)
Price
2.9
(1.39)
3.0
(1.22)
2.4
(1.43)
4.0
(0.00)
2.4
(1.51)
1.0
(.00)
1.1
(.40)
1.1
(.33)
Branding
3.56
(1.46)
3.46
(1.50)
3.0
(1.56)
4.8
(1.30)
3.8
(1.06)
4.5
(1.78)
4.3
(2.06)
3.1
(1.05)
Sales growth
1.94
(1.25)
2.2
(1.36)
2.3
(1.56)
1.2
(1.30)
1.5
(1.51)
3.3
(1.49)
2.5
(1.04)
3.0
(1.93)
Market
share
.4
(1.69)
.5
(1.50)
1.3
(1.56)
1.2
(1.30)
1.57
(1.98)
2.4
(1.73)
2.8
(1.60)
3.0
(1.50)
Awareness
2.8
(1.29)
1.9
(1.32)
1.9
(.994)
1.8
(1.30)
1.8
(1.06)
3.3
(1.41)
2.17
(.983)
2.00
(1.00)
Profitability
ANOVA test indicates that the marketing tactics of Branding and Expansion are
significant at p< .05. Chi Square test for the distribution method could not been
applied due to high percentage (62.5%) of empty cells. The performance parameters
of awareness and profitability are significant at p<. 05 and market share is significant
at p< .1.
Three of the eight prototypes (HHH, HLH and LLL) are identified and discussed in
the empirical examination of the proposed model.
The number of cases of each prototype is small and there may be additional factors
which influence performance, but some comparisons can be interesting as possible
hypotheses. The most successful strategy appears to be prototype 3 (HLH). The
comparison with prototype 6 (MLH) suggests that when you have a high level of
innovation it is desirable to get heavily involved in order to make the most out of the
innovation. The comparison with prototypes 1 (HHH) and 2 (HMH) suggests that
when you have high innovation and high involvement a moderate or a high level of
adaptation may not be essential and it can slow the growth of sales and profits.
58
Prototype 2 (HMH) with moderate adaptation is successful with entry into more
markets than prototype 3 and is charging higher relative prices, but the effect on
profits or sales during the life of the studied venture does not justify the effort.
.It is interesting to note that prototypes 7 (MLL), 5 (MML) and 4 (MHL) are less
effective in terms of growing profits than the most popular prototype 8 (LLL with 18
cases). It appears that increasing involvement and/or adaptation without significant
innovation can increase sales, but the effect on profits is relatively small. Prototype 5
(MML) with moderate involvement and adaptation and private label branding is able
to achieve relatively strong sales growth but limited impact on the growth of profits..