All firms that operate in a single, domestic context have to design and implement product, pricing, promotional, and distribution strategies to compete effectively in their respective markets. On the other hand, firms that operate on an international scale face an additional challenge that must be tackled before they cross borders. The main dilemma for the marketing strategy of such multinational entities is the decision to either follow the same marketing program across all foreign markets or employ a different approach that corresponds to each foreign market’s idiosyncrasies. This dilemma is the backbone of the global commercial policy of multinational corporations, and in the business literature it is called “standardization versus adaptation” of international marketing strategy.
In particular, local adaptation is the act of employing a marketing strategy that is unique for the market under scrutiny and thus different from the marketing strategy used in other countries. Such a difference denotes modifications in the marketing mix with the purpose of adapting to the cultural diversity of international markets. Local adaptation includes modifications on marketing elements such as the following: (1) the product’s tangible elements such as size, taste, packaging, or ingredients used; (2) the product’s intangible elements such as brand name and brand positioning; (3) the promotional message and promotional media; (4) pricing toward middlemen and final consumers; and (5) number and type of middlemen.
Locally adapted activities such as the use of different brand names or the use of different promotional efforts within retailing outlets across countries are numerous and have led firms to both success stories and major marketing blunders. For example, the ice cream unit of a giant firm like Unilever is called by different names (either Eskimo or Ola or Algida) in countries such as Sweden, the United Kingdom, Greece, or Spain. Additionally, large U.S. retailers have realized that successful types of promotional activities in the United States (such as “buy two extra-large sizes and get one free”) have no equal appeal among consumers in a country like Germany, and so they have adapted their in-store promotional strategy.
The main purported advantage of an adapted strategy is that such local responsiveness meets local customers’ needs more efficiently than a standardized strategy that employs a common marketing program for all countries and thus ignores local markets’ specificities. On the other hand, though, local adaptation bears a major disadvantage compared to standardization. It is a very expensive task to undertake, since modifications for each country in which a firm operates increase costs enormously. As a result, the effect of such a strategy on typical performance measures such as profitability is debated. However, there are suggestions in the literature that firms that locally adapt their marketing strategy perform better in other measures such as total sales or market share due to their closer look at local markets’ needs.
Thus, the decision as to whether firms should eventually employ a marketing program that is partly or wholly adapted to local idiosyncrasies is not an easy one and involves many considerations. These considerations influence the degree to which the firm will eventually adapt its marketing elements and include factors that have to do with both the intra and extra firm environment such as the delegation of decision making within the multinational enterprise and the market size, respectively. A synoptic categorization of factors, internal and external to the firm, distinguishes among influences that are either mandatory or discretionary and have to do with (1) characteristics of each market in which the firm operates (e.g., weather conditions, local ethical rules, and legal guidelines); (2) the synthesis of the consumer base the multinational firm addresses (e.g., demographic/psychographic characteristics of consumers and their attitudes toward foreign products); (3) the nature (price versus nonprice) and intensity (high or low) of competition; (4) the nature of the product (e.g., consumer versus industrial goods, luxury versus no luxury products, culture versus no culture-bound products); and (5) organizational and managerial characteristics (e.g., openness of the firm toward international operations or international experience of business executives).
For example, legal restrictions in several countries necessitate a locally adapted promotional strategy on behalf of tobacco firms, which cannot advertise their brands on TV and thus must employ alternative means of advertising. Additionally, many multinational firms face increased competition by their local counterparts and may need to adapt their pricing strategies in order to become more attractive to local consumers. An example of an intrafirm influence is the polycentric orientation of the mother firm, which “forces” local subsidiaries to employ their own, locally adapted product policies that match local consumers’ preferences.
Summarizing, it must be noted that the decision whether to adapt or not is not necessarily antithetical to the decision to standardize. A firm usually employs diverse reasoning before actual strategic decision making, and adapted elements may coexist with standardized elements in the same marketing strategy. It is therefore more appropriate to talk about the general degree of adaptation and not in terms of a dichotomy between adaptation and standardization.
- Roger J. Calantone, Daekwan Kim, Jeffrey B. Schmidt, and S. Tamer Cavusgil, “The Influence of Internal and External Factors on International Product Adaptation Strategy and Export Performance: A Three-Country Comparison,” Journal of Business Research (v.59/2, 2006);
- Subhash C. Jain, “Standardization of International Marketing Strategy: Some Research Hypotheses,” Journal of Marketing (v.53/1, 1989);
- Masaaki Kotabe and Kristiaan Helsen, The Sage Handbook of International Marketing (Sage, 2009);
- David A. Ricks, Blunders in International Business (Blackwell Publishers, 2000).
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