Explaining international performance: marketing mix,
planning, and their interaction
Aviv Shoham
Lecturer of Marketing, Technion-Israel Institute of Technology, Haifa, Israel
Fredric Kropp
Assistant Professor of Marketing, Bond University, Gold Coast, Queensland,
Australia
The extent of globalization of
many world markets has
made international marketing
a crucial determinant of
firms’ performance. Most
prior research used few
measures of performance and
explanatory strategy variables
and, in some cases, did not
discuss their reliability and
validity. The research
reported here includes a
more comprehensive set of
performance variables and
investigates the reliability and
validity of these measures of
performance, as well as
explanatory variables’ measures. Research hypotheses
about export performance as
an outcome of international
firm strategies covering
channels of distribution,
product, promotion, pricing,
and planning are tested by
data from a mail survey and
from in-depth interviews. The
findings are used to suggest
managerial implications in
the context of international
marketing strategy.
The authors thank
Gerald Albaum, Warren
Brown, Mark Spriggs and
Paul Slovik for helpful
comments.
Marketing Intelligence &
Planning
16/2 [1998] 114–123
© MCB University Press
[ISSN 0263-4503]
[ 114 ]
Introduction
Globalization of world markets has resulted
in increased demand for international marketing knowledge. This increase in demand
has not been met by a matching increase in
international studies of marketing (Silk,
1993). Especially disturbing is the inconsistency of findings about the relationships
between international marketing strategy
and performance (Aaby and Slater, 1989;
Madsen, 1987). Shoham (1991) attributes these
inconsistencies to conflicting conceptual and
operational definitions of international performance.
An accurate understanding of the crucial
link between international strategy and performance is especially important in the face
of world markets that are increasingly global
(Jain, 1989; Levitt, 1983). Consequently, international marketing research has moved from
being descriptive – studying the differences
between exporters and non-exporters (Joynt,
1982; Tesar and Tarleton, 1983) – to providing
performance explanations (Madsen, 1987;
Samiee and Roth, 1992). Unfortunately, most
prior studies of international performance
tended to use few measures of performance
and a limited set of explanatory variables.
Furthermore, many earlier studies did not
establish the psychometric properties of the
measures of central constructs.
This paper has three purposes. First, it
includes a variety of performance measures
along four sub-dimensions (Madsen, 1987;
Shoham, 1991). Second, it incorporates international planning and international firm
strategies on facets of channels of distribution, product, promotion and pricing, and
models their direct and interactive influences
on performance. Third, it assesses the reliability and validity of the major constructs.
Theoretical bases and research
hypotheses
Two recent export performance review
papers synthesize the extant literature (Aaby
and Slater, 1989; Madsen, 1987). Both discuss
important gaps in the cumulative knowledge
generated by research about the factors
underlying performance. Madsen (1987) notes
that consistent effects have been reported for
only eight of 20 factors that affect performance. Aaby and Slater (1989) review 55 studies
and Madsen (1987) reviews 17 studies of
export performance, but both make a small
number of managerial recommendations.
Categorizing studies of international performance involves some form of the StrategyStructure-Performance paradigm (Madsen,
1987). The paradigm posits that organizational performance depends on its structure,
environment, and strategy. Only one of five Ostructure constructs, three of six environment constructs, and four of nine strategy
constructs were consistently related to export
performance (Madsen, 1987). Thus, Madsen
(1987) has little to recommend to export managers. Aaby and Slater (1991) also make only
two managerial comments about the importance of export commitment and planning.
Madsen (1987) makes numerous recommendations for future research about international performance, three of which pertain to
this study. First, future research should
attempt to avoid errors of specification by
using more comprehensive sets of constructs.
Second, it should try to avoid errors of measurement. Third, it should include interaction effects. We explain how these recommendations were incorporated into this study in
subsequent sections. We begin the discussion
by reviewing the literature about the direct
and interactive impact of international planning on performance. This is followed by a
discussion about relationships between contents of the marketing mix and performance.
Planning
Earlier research included strategic export
planning but only assessed its direct impact
on performance (e.g. Evangelista, 1994). However, as seen in the strategy literature, strategic planning has a direct impact on performance (Ramanujam and Venkatraman, 1987),
but also moderates the relationships between
Aviv Shoham and
Fredric Kropp
Explaining international
performance: marketing mix,
planning, and their interaction
Marketing Intelligence &
Planning
16/2 [1998] 114–123
strategy and performance (Govindarajan,
1988; Gupta and Govindarajan, 1984). Export
planning is a set of activities that serve to
determine future export strategies of the firm
(Robinson and Pearce, 1988). Thus, it provides
a global assessment of the international
strategic management process (Robinson,
1983; Robinson et al., 1986; Robinson and
Pearce, 1983, 1988).
While planning was found to affect international performance positively (Cavusgil, 1984;
Evangelista, 1994; Kirpalani and Macintosh,
1980), its moderating role should also be recognized (Robinson, 1983; Robinson and
Pearce, 1983, 1988). This role is due to the fact
that strategic planning has two facets. First,
it includes a strategic orientation (content)
facet. Second, it includes a planning sophistication (process) facet. Whereas the impact of
the former is direct (as modeled in previous
studies of international performance), the
impact of the latter is indirect and operates
during the implementation phase to moderate the relationship between strategy and
performance. In sum, it is hypothesized that:
H1: Export planning has a positive effect
on performance. Export planning moderates the relationships between export
strategies and performance.
Marketing mix
Product
The importance of domestic (Schoeffler, 1977;
Woo and Cooper, 1981) and international
(Cunningham and Spigel, 1971) product quality and design is widely recognized. Product
quality determines export levels (Piercy, 1981;
Schneeweis, 1985; Szymanski et al., 1992,
1993). Pre- and post-sale services are an
important part of the product package and
can contribute to enhanced performance
(Czinkota and Johnston, 1981; Lalonde and
Czinkota, 1981; Marr, 1987; Piercy, 1981).
Campbell and Rao (1988) report that wide
product lines provide an opportunity for
increased export sales. Broad product lines
enhance profitability (Morrison and Travel,
1982; Robinson and Fornell, 1986) and market
share positions (Szymanski et al., 1992, 1993)
in domestic and export markets.
In sum, it is expected that export product
quality, its service, and broad product-lines
will be positively related to performance. We
note here, as is the case in later planningmoderated hypothesized relationships, that
we expect to find high planners at all levels of
other explanatory variable. In other words,
high planners may market high or low quality products, with high or low service packages, and with broad or narrow product-lines.
Thus:
H2: Export performance is related positively with: (a) the quality of the product,
(b) the service-package bundled with the
product, and (c) broader product-lines. The
relationship is moderated by planning,
such that high planners outperform low
planners by a larger margin for high quality, high service, and broad product-lines
than for low quality, low service, and narrow product-lines.
Price
Findings about pricing are inconclusive
(Bilkey, 1982, 1985; Koh and Robicheaux, 1988).
Bilkey (1982, 1985) finds that higher prices
lead to higher profitability (see also Koh and
Robicheaux, 1988). However, Cavusgil and Zou
(1994) report that the relationship between
price competitiveness and performance is not
significant. It may be that time horizons differed across studies. Higher prices may
increase short-term profitability (before the
market reacts) but, in the long-term, may lead
to lower sales and profits thus explaining the
conflicting findings. However, no details
about the time frames as they relate to the
impact of price on performance were given in
these studies. For the purpose of this crosssectional research, which assesses short-term
relationships, we hypothesize:
H3: The relationship between export performance and relative price is positive.
The relationship is moderated by planning
such that high planners outperform low
planners with larger margins at high
prices than at low prices.
Promotion
Land (1978) reports that the relationship
between advertising and performance is
negative when market prices are low. However, brand awareness, which is enhanced by
promotional activity, is related positively to
market share (Burke and Newman, 1980;
Land, 1978; Schoeffler, 1977). Bilkey (1982)
notes that advertising harms performance,
whereas Kirpalani and Macintosh (1980) and
Szymanski et al. (1993) find a positive relationship. It may be that the short-term impact
of advertising is negative, as its costs are
immediate, whereas some of the pay-off is in
the future. This argument is similar to the
one made earlier (about the relationship
between pricing and performance). Since the
research reported here is cross-sectional, it is
posited:
H4: The relationship between export
advertising and performance is negative.
The relationship is moderated by planning
such that the high planners outperform
low planners with larger margins at low
levels of advertising than at high levels of
advertising.
[ 115 ]
Aviv Shoham and
Fredric Kropp
Explaining international
performance: marketing mix,
planning, and their interaction
Marketing Intelligence &
Planning
16/2[1998] 114–123
Physical distribution and channels of
distribution
Lalonde and Czinkota (1981) suggest that
export obstacles such as parts availability
and documentation can be handled best by
indirect channels. Brady and Bearden (1979),
however, argue that direct channels provide a
high level of control and improved information flow. Craig and Beamish (1989) report
that direct channels are preferred to indirect
channels in the UK, but not in Canada. Seifert
and Ford (1987) find that the use of distributors and sales representatives is the most
profitable. Cunningham and Spigel (1971) and
Tookey (1964) identify personal visits to
export markets as positively affecting performance. Contact intensity between exporters
and channels (Bilkey, 1985; Ford and Djeflat,
1983; Ford and Rosson, 1982; Rosson and Ford,
1980, 1982) and channel support (Cavusgil and
Zou, 1994) improve performance. Bilkey (1982)
and Kirpalani and Macintosh (1980) report
that channel quality was unrelated to performance. Penetration strategy varies between
concentration and spreading. Hirsch (1971)
and Piercy (1981) report that a diversifiedmarket approach was more popular in their
samples. However, no study tested the relationship between market diversification and
performance.
In sum, prior research suggests that the
level of support maintained by exporters
leads to improved performance. Channel
length and quality and have been used in
prior research with conflicting findings,
whereas the impact of the number of export
markets has not been tested. It is hypothesized that:
H5a: The level of export performance
increases with high levels of manufacturer
support. The relationship is moderated by
planning such that high planners outperform low planners with larger margins the
higher the level of support.
H5b-d: The level of export performance
differs across: b. use of direct or indirect
channels; c. channel quality; and d. market
diversity.
Methodology
Measurement
Performance is operationalized on four
dimensions: international sales, international profits, and changes in each (Shoham,
1991). Performance is measured objectively
(financial data) and subjectively (satisfaction
with performance). Subjective managerial
satisfaction is important because it affects
future strategies (Evangelista, 1994). Including both types in the four performance scales
also answers the call for multiple types of
measures (Cameron, 1986).
[ 116 ]
Operationalization of the four sub-dimensions followed Shoham (1991). Measures of
international sales include the ratio of export
to total sales, dollar export sales, and market
share for the most important product/
market, and satisfaction with the three.
Changes in sales were measured similarly
over five years. International profitability
was measured by return on assets (ROA),
return on investments (ROI), and profit margin and satisfaction with them. Changes in
profitability were measured similarly over
five years.
We used Robinson and Pearce’s (1988)
approach to operationalize international
planning. They developed a six-item scale
that measures the extent of planning done in
the firm. This choice was due to the fact that
the reliability and validity of their measures
have been established under various conditions (Pearce et al., 1987; Wood and Laforge,
1981).
Marketing mix is measured on its product,
place, promotion, and price sub-dimensions.
We used the measures developed by Dess and
Davis (1984) and Robinson and Pearce (1988).
The population and research instrument
Data were gathered from US manufacturing
exporters. A firm that specializes in creating
mailing lists was contacted and names from
their master list were generated with a onein-four systematic sample with a random
start. The pilot included a random sub-sample of 100 exporters; the list and the main
study included all other firms.
A preliminary questionnaire was developed
and pre-tested. Oregon’s State Foreign Trade
Agency, three experienced export managers,
and two marketing professors were asked to
assess face and content validity, wording, and
structure of the questionnaire, resulting in a
revised questionnaire for the pilot. Following
the pilot, a few changes were made and the
revised questionnaire was used for the main
study. Because of a limited budget, the pilot
and major studies consisted of one mailing
only. The cover letter was addressed to the
export manager and was mailed with the
questionnaire and a self-addressed stamped
envelope.
The first question measured the use of marketing strategies on seven-point scales
(1 = we hardly ever use this strategy, to 7 = we
use this strategy very often). Another question included 12 objective performance items
and eight subjective satisfaction items on
seven-point scales (1 = not at all, to 7 =
extremely satisfied). Planning was measured
by six items on seven-point scales
(1 = we hardly use this planning tool, to 7 = we
use this tool all the time).
Aviv Shoham and
Fredric Kropp
Explaining international
performance: marketing mix,
planning, and their interaction
Marketing Intelligence &
Planning
16/2 [1998] 114–123
The list supplier indicated at least 25 percent list inaccuracy (address unknown,
moves, and clerical errors). Thus, the effective sample included 1,638 firms. Eighty-one
responses were received by the cut-off date,
representing a 5.0 percent effective response
rate. This rate is low, but within the range of
previous studies (e.g. Bilkey, 1987). To assess
the potential effects of non-response, surrogate measures and comparing early and late
respondents were used (Armstrong and Overton, 1977; Tull and Albaum, 1973). The sales
and geographical distributions of the sampling frame and respondents show minor
differences. Comparing substantive answers
with other studies can be used to provide a
measure of concurrent validity (Tull and
Albaum, 1973). The questionnaire included
the five measures of market globalization
used by Samiee and Roth (1992; 46 percent
response rate). The five means in the two
studies do not differ significantly. Answers of
the first 75 percent of the respondents were
compared to those of late respondents (Armstrong and Overton, 1977), resulting in five
significant differences (of 49 comparisons).
No discernible trend was identified.
To provide a second methodology, ten indepth interviews with top managers in international firms were conducted after the mail
survey. Interviews can help to identify performance differences between firms (Tull and
Hawkins, 1987). Five pairs of firms were
selected: two very small (up to $50,000 per
year), two small ($50,000-$500,000), two
medium ($500,000-$2,500,000), two large
($2,500,000-$5,000,000), and two very large
(over $5,000,000) firms.
Results
Survey
Reliability and validity
We used Cronbach’s alpha to assess reliability (except for two-item scales where correlations were used). Content validity was established by conducting a comprehensive literature review and by opinions of experienced
researchers and managers.
International performance was measured
by five items for each of the four sub-dimensions. Item means are reported in Table I.
These 20 items were standardized and used to
create four summated scales. Confirmatory
factor analyses yielded only one factor for
each performance sub-dimension. The four
scales exhibit acceptable reliabilities (α sales
= 0.79; α profits = 0.78; α change in sales =
0.88; α change in profits = 0.89).
We used the ethno-, poly-, regio-, and geocentrism framework to assess discriminant
Table I
Means (standard deviations) for export
marketing mix
Export marketing
strategy
Mean (standard
deviation
Broad lines
4.91 (1.98)
High quality products
6.13 (1.11)
Extensive customer
service
5.38 (1.78)
Strict quality control
5.76 (1.46)
High inventories
3.20 (1.90)
Unique product features
4.99 (1.88
Specialty products
4.91 (1.82)
High prices
3.15 (1.58)
Low prices
4.36 (1.80)
Long credit terms
2.89 (1.75)
Market price leaders
3.86 (1.97)
Heavy advertising
2.17 (1.37)
Building brand awareness
3.76 (2.10)
Building reputation
5.50 (1.68)
Using short channels
3.95 (2.04)
High level of control
over channels
4.14 (1.90)
Diverse geographical
markets
5.02 (1.94)
Variety of customers
5.23 (1.73)
High customer visit
frequency
4.32 (1.89)
Direct sales to end-users
4.26 (2.23)
Using high quality channels
4.88 (1.65)
Using well-trained salespeople
5.21 (1.72)
validity (Keegan et al., 1987). These orientations have not been linked with performance
in the literature and should be unrelated to
the four performance scales. We tested the
relationships by four ANOVAs, none of which
was significant in support of the argument
for discriminant validity.
On the basis of Porter’s arguments (1990)
that performance may decrease with globalization, we expected international performance and the extent of market globalization
(Samiee and Roth, 1992) to be weakly related.
The eight correlations between world market
globalization (measured by existence of standardized product technology and marketing
of standardized products) and performance
were significant and of medium strength as
expected in support the criterion validity of
the scales.
The questionnaire included six items to
measure export planning. These items were
summated and the total was standardized to
[ 117 ]
Aviv Shoham and
Fredric Kropp
Explaining international
performance: marketing mix,
planning, and their interaction
Marketing Intelligence &
Planning
16/2[1998] 114–123
form the planning scale (α = 0.88). Since the
scale was validated extensively in previous
research, we do not discuss its validity here.
The means for the items used to measure
the marketing mix are reported in Table II.
Seven strategy scales were formed. The first
was formed by sumating the standardized
scores for the seven items measuring quality,
broadness of line, service, and uniqueness of
the product (α = 0.58). High scores on the
scale imply that the exporter emphasizes
quality, service, line breadth, and special
products.
The correlation between the two items
measuring emphasis on low price is 0.43.
Table II
Means (standard deviations) of export
performance
Performance measure
Mean (SD)
7.95 (2.87)
Export sales ratioa1
Five years change in export ratiob
3.71 (1..06)
Export sales (millions)a2
4.11 (2.66)
Five years change in export salesb
3.89 (1.12)
Export sales return on assets (ROA)c
3.73 (1.02)
Five years change in export sales ROAb
3.49 (1.15)
Export sales return on investment (ROI)c 3.67 (1.05)
Five years change in export sales ROIb
3.54 (1.13)
Export sales profit margina3
6.48 (2.56)
Five years change in export profit marginb 3.26 (0.93)
Market share for most important
product/market combinationa4
5.28 (3.33)
Five years change in most important
product/market combinationb
3.59 (0.92)
Satisfaction with export sales ratiod
4.69 (1.77)
Satisfaction with five years change in
export sales ratiod
4.64 (1.79)
Satisfaction with export salesd
4.71 (1.59)
Satisfaction with five years change in
export salesd
4.56 (1.72)
Satisfaction with export sales ROAd
4.41 (1.65)
Satisfaction with five years change in
export sales ROAd
4.35 (1.66)
Satisfaction with export sales profit
margind
4.36 (1.62)
Satisfaction with five years change in
export sales profit margind
4.30 (1.54)
Notes:
a1 Ten-point scale (1 = 0-9.9% to 10-90-100%)
a2 Ten-point scale (1 = $0-0.49 millions to %10 =
14.0 millions or more)
a3 Ten-point scale (1 = loss to 10 = 16% or more)
a4 Ten-point scale (1 = 0-4.9% to 10 = 70% or more)
b Five-point scale (–4 = large decrease to 4 = large
increase)
c Five-point scale (–4 = much lower than domestic to
4 = much higher than domestic)
d Seven-point scale (1 = not at all satisfied to 7 =
extremely satisfied)
[ 118 ]
Scores on the two were summated to create a
price scale. High scores on the scale imply
low-price strategy. Three items measured
promotion strategy. The scores on these items
were summated (α = 0.51).
High frequency of salespeople’s visits to
export markets and the use of trained sales
personnel indicate a high level of support to
the channel and were summated (r = 0.39).
High scores on the scale imply an emphasis
on supporting the channels. Channel length
was operationalized using the items for direct
sales and use of short channels (r = 0.44).
High scores on the scale imply an emphasis
on short channels. The scale for diversity of
served markets captures diversity of customers and markets. The two items (r = 0.51)
were summated to form the scale. High scores
on the scale imply an emphasis on diverse
markets and customers.
Criterion validity was assessed by interscale correlations. It was expected that a
medium number of these correlations will be
significant and that they will be of medium
magnitude. Ten of the possible 21 were different from zero and the largest was 0.40, supporting the case for criterion validity.
To establish discriminant validity, the correlations of the items with ten measures of
standardization of the 4P’s (not used for this
paper) were examined. Only ten (of 70) correlations were different from zero and the
largest was 0.30. Since the two sets should be
distinct, the small number of significant correlations supports the argument for discriminant validity.
Statistical technique
Testing the relationships between the 4Ps,
planning, and performance was done by four
regressions. For each regression, residuals
were plotted and only minor deviations from
normality were detected. The main effects
were entered first as a block, followed by stepwise entry of the interactions to minimize
multi-collinearity. We preferred this
approach to centering because it allows a
more intuitive interpretation (Belsley et al.,
1980). Given the sample size, the number of
variables, and the fact that main effects were
entered first as a block (thus removing their
effects prior to entry of interactions), the cutoff used for interpreting the regressions and
coefficients was set at p = 0.10 for the main
effects and at 0.20 for the interactions. Table
III reports the results of the regressions.
Findings
The direct effect of planning is positive in all
four regressions. It reaches significance for
three of the four regressions in support of H1.
Aviv Shoham and
Fredric Kropp
Explaining international
performance: marketing mix,
planning, and their interaction
Marketing Intelligence &
Planning
16/2 [1998] 114–123
Table III
Regression coefficient: marketing strategies with interactions
Planning
Diversity scale
Advertising scale
Price scale
High quality channels
Channel support scale
Direct sales’ scale
Planning X product
Planning Z advertising
Planning X high quality
channel
Planning X diversity
Adjusted R2
Sales
Sales’ change
Profits
1.27 (0.10)
–0.10 (0.83)
–0.46 (0.18)
–0.45 (0.04)
0.34 (0.64)
0.71 (0.10)
0.36 (0.46)
0.78 (0.01
–0.44 (0.19)
1.99 (0.04)
–).58 (0.24)
–0.61 (0.14)
–0.08 (0.72)
0.50 (0.54)
0.58 (0.22)
–0.07 (0.90)
0.63 (0.42)
–0.12 (0.77)
–0.55 (0.13)
–0.13 (0.51)
0.97 (0.18)
0.59 (0.17)
0.19 (0.70)
Profits’ change
1.57 (0.06)
–0.31 (0.51)
–0.82 (0.03)
–0.03 (0.89)
1.11 (0.15)
0.74 (0.10)
0.30 (0.56)
–0.50 (0.13)
1.48 (0.13)
0.43 (0.07)
0.42 (0.05)
Its moderating role is discussed below under
each of the 4Ps separately.
• Sales’ regression. The negative relationship for the product scale indicates that
high quality, unique products, extensive
services, and broad lines are associated
with reduced sales. This finding is best
understood in light of the interaction
between planning and product quality.
This interaction substantiates H3 concerning the moderating effect of planning.
Sales differences between firms with
extensive and minimal planning are larger
the higher the quality of the products and
services. The deterioration in sales is very
rapid for low planners. Apparently, the
negative effect of product quality is driven
by this deterioration, as sales for high
planners improve with quality as
expected. Offering a high level of channel
support enhances sales supporting H5a.
No significant differences were observed
between low and high planners. Advertising and planning also interacted as determinants of sales. The moderating effect of
planning is as hypothesized. The main
effect of advertising is negative as
expected, but fails to reach significance
due to it not having an effect on sales for
low planners.
• Change in sales’ regression. The interaction between planning and the use of high
quality channels suggests that the higher
the emphasis placed on such channels, the
larger the performance gaps between high
and low planners. The increasing gap is
due to an increase in performance for high
planners and a decrease in performance
for low planners, supporting H5c.
• Profits’ regression. The regression for
profits provides an F-value, which does not
differ significantly from zero.
•
0.56 (0.13)
0.32 (0.20)
0.95 (0.02)
0.53 (0.01)
Consequently, this regression is not interpreted here.
Change in profits’ regression. The positive
impact of channel support is similar to the
one reported for other performance measures providing further support to H5a.
The negative relation for advertising suggests that high advertising is associated
with a temporal reduction in performance
(H4). The interactions also show that the
gap in performance between low and high
planners is larger the more diverse the
markets, in support of H5d. Planning also
moderates the relationship between advertising and profits’ change similarly. While
the main effect of advertising is negative,
its interaction with planning suggests that
differences between firms with extensive
and minimal planning are smaller for high
levels of advertising, disconfirming H4.
This effect is due to the faster deterioration in performance for high compared to
low planners.
Summary
The data provide support for the main effects
of planning (H1), advertising (H4) and channel support (H5a). They also provide support
for the expected relations for high planners
for product quality, services, and broadness of
lines (H2), channel quality (H5c), and diverse
export markets (H5d) through the moderating
effect of planning. The data disconfirm the
main effects hypothesized in H3 (price) and
H5b (directness of sales) and H2, H5c, and H5d
for low planners.
Results of in-depth interviews
Firms were conveniently sampled for size,
products, and geographical location variability. All used sales as a measure of
performance. In a few firms, sales were the
only measure used. However, in most cases,
last year’s sales were used as a benchmark as
[ 119 ]
Aviv Shoham and
Fredric Kropp
Explaining international
performance: marketing mix,
planning, and their interaction
Marketing Intelligence &
Planning
16/2[1998] 114–123
[ 120 ]
well. Benchmarking makes it possible to
monitor performance over time. Somewhat
surprisingly, most firms did not use profits as
a measure of performance. When probed for
reasons, interviewed managers indicated that
costs are built into their pricing such that
achieving sales budgets would result in
acceptable levels of profitability.
A planning system, which is based on
annual sales budgets, is used in most firms. In
large firms, multiple budgets are used (sales,
costs, margins, and profits) and they are split
(by month, product-line, or region) to provide
control mechanisms. Results are fed back to
managers to allow readjustments. In sum,
these interviews support H1. Planning affects
performance directly and indirectly (through
its use in implementation and control). Most
firms export only high quality products.
Product and service quality appear to be
coupled. Channels of distribution (agents, importers, etc.) have a significant role in providing high-quality of services to end-users.
Smaller firms recognize this role of the channel (as a service provider), but do not control
it.
Exporters tend to charge prices that are
comparable to industry levels. This is done to
provide value-for-money. In some cases, this
is done explicitly but in others, customers
expect it. In these cases, a higher price for a
marginally higher quality is not a viable
strategic option. Larger exporters have more
power to set and achieve higher than market
prices.
Channels have high levels of influence on
the contents of advertising, either because
they promote locally or help the principal in
determining the contents of campaigns.
Trade-shows are the most important form of
promotion, followed by brochures. Large
firms exert more influence on determining
advertising strategy because they allocate
higher budgets to promotion. They also have
to build and maintain brand awareness and
firm reputation in many cases. An important
part of small firms’ budgets is spent in the
USA, but spills over to other markets (e.g. US
trade-shows that draw visitors from Canada
and Mexico). Small exporters also stretch
budgets by joint programs with distributors.
Except for the largest firms, foreign intermediaries (such as dealers or master distributors) are used. These intermediaries are
supported heavily. This is more important for
small exporters because they do not have
sales subsidiaries. In many cases, the local
channel is responsible for sales and services.
The number of levels between exporter and
end-user varies and depends most on the
geographical distribution of users in a given
country.
Discussion, limitations,
directions for future research, and
implications
Discussion
Export planning had a positive influence on
export performance (H1). All ten managers
interviewed for this research indicated that
at least some level of planning was done at
their firms, supporting its importance qualitatively. Both methodologies established the
importance of export planning as a predictor
of performance. Apparently, planning results
in the identification of superior contents of
the 4Ps that enhance performance.
Relationships between strategy contents
and performance were examined in
H2-H5. The positive relationship between
high quality products, extensive services, and
broad product-lines and performance (H2)
failed to materialize. An explanation is provided by examining the moderated effect. The
effect of high quality products was positive,
but only for high planners. Thus, high quality
enhances performance, but only for firms
with extensive export planning.
The relationship between high prices and
export performance was expected to be positive (H3) but was insignificant. A plausible
explanation emerged from the interviews.
Especially for small exporters, prices might
be constrained by the market. The survey
data might disguise an interaction of
exporter size and pricing. This effect could
not be tested with the survey data and only
the qualitative interviews substantiate it.
Contrary to expectations, planning did not
moderate the relationship between prices and
performance. This was attributed in the
interviews to low export pricing flexibility,
especially for small exporters. The interactive term was predicated on the implementation argument. If prices are constrained, the
opportunity to implement strategy on the
basis of market response is reduced.
The negative relationship between promotion and performance (H4) was substantiated
only for changes in profits. Firms with low
advertising outperform firms with high levels of advertising. A possible explanation for
the weakness of this relation emerged from
the interviews. Almost all managers indicated low levels of advertising and promotion,
except for large consumer-products firms.
The data might be disguising either a size by
advertising or a product-type by advertising
interaction that could not be tested.
The interaction between advertising and
planning was significant for sales and for
change in export profits. The coefficients
were negative, suggesting that high planners
outperform low planners by a larger margin
at high levels of advertising and promotion
contrary to what was expected (H4). It may be
Aviv Shoham and
Fredric Kropp
Explaining international
performance: marketing mix,
planning, and their interaction
Marketing Intelligence &
Planning
16/2 [1998] 114–123
that firms with sophisticated planning systems recognize the viability of extensive
advertising when applicable, whereas firms
with less sophisticated planning systems do
not. Based on the interviews, large exporters
advertise more. With extensive planning
systems, their probability of recognizing the
most profitable level of advertising is larger
than for their smaller competitors.
The relationship between channel strategy
and performance was as expected (H5) for
high planners. There is a positive relationship between support to the channel and
performance (H5a). Using high levels of support, such as maintaining a program of frequent visits to export markets, was also evident in many of the interviews. It can be
argued that channel support may harm shortterm performance as its costs are immediate,
whereas its benefits are longer-term. Given
that the quantitative and qualitative data
support H5a, the impact of channel support
must have been temporally close to the costs
of this support. The association between
channel length and performance was
insignificant disconfirming H5b. However,
this relationship was noticeable in many of
the interviews. Managers, especially for the
smaller firms, indicated that the channel
structure is extremely important. It may be
that respondents to the survey perceived this
measure differently. Some may have counted
all levels, whereas others may have not
counted wholly owned subsidiaries. The
interviews provided an opportunity to probe
into the issue and identify its importance
more accurately.
The effect of channel quality failed to reach
significance (H5c). An examination of the
significant interaction suggests that channel
quality only affects performance for high
planners. It may be that high planners are in
a better position to understand the importance of the quality of the channel. Market
diversity was associated with performance
(H5d) for high planners. For this sample,
neither the critical mass argument for limited diversity nor the risk-diversification
argument for high diversity seems to hold. It
may be that the two theories cancel each
other out. If this is the case, then the worst
position to be in is caught in the middle, serving a medium number of markets. This possibility could not be explored with our data.
Limitations
This research has a number of limitations.
First, a question of generalizability arises
because an attempt is made to extrapolate
from a sample. The use of a sample can be
damaging to generalizability when nonrespondents or non-included firms differ from
respondents on key aspects of the study.
Respondents had similar sales and
geographical distributions as the frame; early
and late respondents did not exhibit consistent
differences; and mean scores on items used in
this and other, high-response studies were
comparable, in support of the argument for
generalizability. The interviews serve a similar purpose by supporting some of the
hypotheses under a different methodology.
Second, the letter was addressed to export
managers, but we have no control over who
answered the questionnaire. We believe that
the impact of this threat is minimal. Respondents were very interested in the study. Sixteen percent commented on the questionnaire and 27 percent affixed a business card
(to receive the findings), forgoing the
promised confidentiality. In-depth interviews
with top-ranking managers supported the
quantitative findings. Thus, it is believed that
the respondents were interested and knowledgeable.
Implications
This research identified some managerially
important determinants of performance.
Planning was consistently and positively
related to performance. It also moderated the
relationships of many strategy variables with
performance. Firms that do not plan (or that
do minimal planning) are advised to initiate a
planning process (or improve it). However,
sophisticated planning in and by itself is not
sufficient because strategies can generate
competitive reactions. Some performance
determinants (e.g. product quality, service
package, broadness of product-lines, advertising, and channel quality) operate through
strategy selection and implementation,
emphasizing the importance of continuous
monitoring. Therefore, managers are advised
to pay close attention to implementation.
High quality, extensive services, and broad
lines have a positive relation with performance, but only for firms with extensive
planning. The inability of low planners to
derive better performance from these strategies may be due to their failure to identify a
premium positioning strategy situation.
Managers are advised to constantly look for
and execute such positioning in international
markets.
Prices are situation-specific, as they were
unrelated to performance. This finding is
probably due to the additional competitive
constraints that international markets place
on exporters beyond those evident in
domestic markets. Furthermore, prices may
have conflicting short and long-term effects
on profits. Short-range, higher prices may
result in higher profits. However, long-range,
higher prices may result in lower sales and,
consequently, reduced profits. Managers
should be aware of both implications of pricing decisions.
[ 121 ]
Aviv Shoham and
Fredric Kropp
Explaining international
performance: marketing mix,
planning, and their interaction
Marketing Intelligence &
Planning
16/2[1998] 114–123
Promotion should be limited since there is
a negative relationship between advertising
and performance. This is important, especially for smaller exporters, whose advertising is co-controlled by their channels. The
direct negative effect of high promotion
reached significance only for change in profits, implying that the anticipated long-range
impact of promotion on sales and profits did
not materialize in this study. This suggests
that promotion budgets should be set at low
levels, at least for small exporters or those
just beginning to export. However, for high
planners, promotion results in increased
sales and changes in profits. Therefore, managers should closely monitor world markets
searching for possible premium product
positioning opportunities (as discussed
above) coupled with high levels of advertising.
Channel support is important. Exporters
are advised to visit markets frequently and
use high quality, trained salepeople. For firms
with extensive planning systems, using high
quality channels, exporting to multiple markets and multiple segments enhances performance.
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