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Global Standardi/ation Js a Success Komiula 141
to a standardization strategy can be
identified. All companies studied follow
(in their international brand units) a
value-oriented strategy and attempt to
stay away from price-based competi-
tion. They stress the superior quality
and performance of their products and
build on the brand image of being a
leading Western company or even a
world-class company. A strong global
brand identity allows and at the same
time requires a common marketing ap-
proach across markets. Therefore, the
core product and the brand elements
remain unchanged, slight adjustments
can be found among the more "periph-
eral" elements (e.g., packages, labeling
contents). The price position of the non-
service products is close to the levels in
West European markets. A common
European price policy (e.g.. in the form
of an "European price corridor" at 3M
and Philips) is supposed to protect the
companies against the threat of reim-
ports. But this leads to a difficult price
positioning in the price sensitive CEE
markets where local brands are often
sold at half the price or even less. As a
consequence, the products are mainly
targeted at the affluent middle and up-
per class or, in industrial goods markets,
at the biggest companies of a country.
Among the latter, the firms that are fully
or partly owned by Western companies
are of major interest. Especially service
companies like Ogiivy & Mather follow
their Western multinational clients into
the CEE markets or even "sell" them
the entry into these markets.
Moving product and brand position-
ing of international brands towards the
lower priced segments of the market is
regarded as a strategic mistake. The
perception of Western products by CEE
consumers, company image and values
and the cost structure draw them auto-
matically to the high-end segment.
Given this "natural" positioning in the
high-end and quality segment, the firms
try to skim the (small and overcrowded)
market. Other typical strategies include
the education of prospects and custom-
ers to appreciate better quality and per-
formance (and to be willing to pay for
it). In this strategic "strait jacket." the
praised pioneering strategy becomes an
important means for a company to dif-
ferentiate itself from the host of West-
ern competitors.
Adaptation to I.ocal Markets
Adjustments in the marketing-mix
occur mainly among the noncore ele-
ments and are often kept to a minimum.
The following areas and mechanisms
were found:
Labeling content, package design
and names of consumer products are
changed to meet legal requirements.
Product instructions are translated
into the local language.
The product-mix offered in the na-
tional market is adapted to the local
market by "creative selection."
Working together, local and regional
management select, from the whole
range offered, those products that
have the highest purchase probabil-
ity in a national market. In the case
of 3M even the business-mix is cho-
sen by the local management (e.g.,
3M Poland currently carries about
9,00() items in its portfolio out of the
total 60,000 3M products).
142 Journal or World Business / 35(2) / 2()(K)
This principle of "creative selection,"
also called "opting in/opting out ap-
proach," is used in the communications
area too. In this case, a group consisting
of local and regional managers and ad-
vertising agency representatives selects
those TV commercials or promotional
materials from a centrally produced
portfolio that tit the specific country's
market best. Another approach in com-
munications is "pattem advertising" in
which the creative idea and core mes-
sage remain the same, only how it is
carried out is adjusted to different de-
grees of brand awiireness. consumer at-
titudes, usage pattems and cultural and
legal restrictions.
Regional management centers {Phil-
ips Electronics, McDonald's, Hen-
kel CEE, Ogilvy & Mather) are an
attractive organizational device to
transform a global strategy to re-
gional characteristics. They allow
the pooling of the resources {e.g.,
production, logistics and delivery
systems), a better exploitation of
market similarities and provide sup-
port and expertise to the local of-
fices. Because CEE mainly consists
of small states with small markets,
geographic concentration of busi-
ness activities helps to reap econo-
mies of scale and scope. The estab-
lishment of regional management
centers also seems to mark a transi-
tion point, namely from a rather op-
portunistic to a strategic behavior in
the marketing to CEE countries.
Internal and External Context
Compared with the framework in
Eigure 1, which we used as a guideline
for our research, the factors "progress in
transition process", '"perceived business
risk", and "ease of entry" were not re-
ally decisive in our sample. The transi-
tion process to a Western style democ-
racy and market economy is seen as
irreversible. The countries in our sam-
ple are the most liberalized among the
transition economies and a major polit-
ical crisis in this region is not expected.
The other factors vary in relevance. Fig-
ure 2 highlights the critical internal and
external context factors as well as the
strategic marketing elements that affect
the marketing program standardization
decision. Among the internal factors,
the existence of a globalization or re-
gionalization strategy and strong corpo-
rate values favor a higher degree of
marketing standardization. In the strate-
gic plans of all studied firms, the emerg-
ing markets play a major role in corpo-
rate growth and long-term viability.
Their goal is to develop their business
in the local markets and to achieve at
least similar levels of market share and
brand awareness in CEE as in their
home markets. Superior product and
process technology combined with fi-
nancial strength and marketing
excellenceespecially in the case of
the global firms 3M. McDonald's, Phil-
ips Electronics and Henkelgive them
a competitive advantage vis-a-vis local
competitors. The activities and further
increasing market penetration of West-
ern companies in CEE (which also in-
cludes the retail, transportation and me-
dia scene) will, in the long run, lead to
the emergence of similar market struc-
tures and marketing infrastructures as in
Western Europe.
Global Standardization as a Success Formula 143
Figure 2
Critical Context Factors and Marketing Strategy Elements That Lead to a High
Program Standardization in CEE.
Critical internalfactors
Existence of a
globalization
strategy
Strong corporate
values
Balancing of
profitability and
risk considerations
Typical elements of a
standardization strategy for
CEE markets
Value-based positioning
{quality, performance, image)
Product and brand elements
and price positioning
are highly standardized
Pioneering strategy helps to
differentiate from competition
High-end segments are
"natural" target markets
Exporting as entry method
Areas and mechanisms
of adaptation
Adaptations of non-core elements
(packaging, sales promotion)
..Creative selection"
(product-mix, advertising campaigns)
,,Waiting for the market"
Regional management center
Critical external factors
Existence of
similar and trans-
national customers
Appreciation of
Western products
and life-style
Interdependence
with West
European markets
Currently small
market (and sales)
volumes
Prospect of
integration into
European Union
Strong corporate cultures and man-
agement practices with regard to qual-
ity, innovation and product perfor-
mance (e.g.. the "quality, service,
cleanliness and value" principle of Mc-
Donald's) are a further determinant of
marketing standardization. Deviations
from these core values are not tolerated
even when local conditions would de-
mand them (e.g.. sacrifice quality for a
lower price). A good example of the
impact of the strategic orientation on
marketing standardization is 3M, which
follows the practice of exporting Amer-
ican products that have global uses
rather than developing products for the
global marketplace. Although profit-
ability and risk considerations were not
shared with us, it is evident that the
balancing of investments and returns as
well as the management of risks in-
volved is a major concern. The follow-
ing are indicators of a risk averse and
cautious attitude and often a tense fi-
nancial situation: the defensive and of-
ten opportunistic approach in the first
stage of market penetration, the incre-
mental internationalization pattern, the
144 Juurniil 1)1 World Business / 3?(2) / 2{X)0
tendency to cooperate with local and
international partners and the reluctance
to invest heavily up-front in the mar-
kets. Marketing program standardiza-
tion fits excellently into this picture as it
keeps investments, additional costs and
risks low (when combined with export-
ing).
Perhaps surprisingly, several charac-
teristics of the CEE markets favor pro-
gram standardization too. The existence
of similar customer groupsbe it the
affluent local middle and upper class or.
in business-to-business markets, the
subsidiaries of Western companies
facilitate a strategy transfer, sometimes
eveti demand it. However, these seg-
ments account today for only a small
percentage of the total market (esti-
mates range from 10 to 15% of popula-
tion), so that market volumes anddue
to the fierce competition in most prod-
uct marketsalso sales volumes are
currently very low. When sales volumes
are low, profitability is also depressed
(considering the small profit margins of
an export strategy and the costs for run-
ning the local sales offices) and this
leaves no room for expensive product
adjustments. Geographic proximity to
Western Europe and a growing interde-
pendence of the markets (via increasing
tourism, existence of media overflow,
and retail chains operating in both re-
gions) force international marketers to
stick to Western price levels to avoid
cross-border shopping and parallel im-
ports. The favorable progress in the
transition process and the prospect of
integration into the European Union by
2005 have caused Western companies
to assume that the CBE markets will
constantly become more similar to
Western markets as far as market
structure and buying behavior (e.g.,
consumption/usage rates, quality con-
sciousness, brand loyalty) are con-
cerned. Based on this assumption they
seem to be "waiting for the market."
That means they are waiting until the
income situation and standard of living
improves and broader segments of the
population can afford their products.
CONCLUSIONS
The analysis of the case studies offers
an explanation for the reasons why for-
eign companies favor marketing stan-
dardization and how the various mar-
keting decisions are interrelated. It
provides a better understanding of why
Western companies reiy so heavily on
international marketing program stan-
dardization although market conditions
seem to favor localization. It is hard to
say if marketing program standardiza-
tion is a success formula in terms of
(short-term) profitability. But the study
shows that it is popular among Western
companies entering CEE and that the
underlying business logic is plausible.
One lesson is: Don't look only at the
market side. To understand the stan-
dardization decision, internal aspects
have to be linked to market characteris-
tics. The preference for a standardized
marketing strategy is rooted in the con-
ception that
Most CEE countries are small mar-
kets (except Poland) where customi-
zation does not pay off
These markets will converge to
West European market structures
Global StandardizLition as a SUI:L-OS.S I-onuula 145
and rules within the next decadeso
why invest in a "transitional" strat-
egy?
A differentiated marketing strategy
is inefflcient because it does not uti-
lize synergies and cost saving poten-
tials and would involve a lot of risks
(e.g., parallel imports, brand image
dilution)
Market structures and consumer be-
havior can be changed over time.
Western retailers, media groups,
banks, forwarding agents and other
marketing service providers operat-
ing in CEE are important change
agents. The massive market entry of
Western firms, thousands of product
launches and heavily funded promo-
tion campaigns have steadily "west-
ernized" the product, distribution
and media scene in these countries.
The case studies show that marketing
strategies for CEE are part of the glob-
alization strategies of the MNCs. Under
a global philosophy cost arguments and
competitive aspects gain in importance
at the expense of market related aspects.
International differentiation occurs
along other dimensions: the cross-
national orientation at customer groups,
applications and regions, the so-called
"intermarket segmentation" (Jain,
1990). outweighs the traditional think-
ing in country market dimensions. Na-
tional differences can, to a certain ex-
tent, be satisfied by a huge centrally
developed assortment covering differ-
ent price, application and lifestyle seg-
ments. In some product categories like
food, beverages or detergents the cov-
erage of mass-markets by a local assort-
ment seems to make sense. The exam-
ples of Henkel CEE and BBAG show
that a multi-tier product strategy is an
attractive strategy among Western con-
sumer goods marketers as it enables
them to cover also lower price segments
of the markets and to participate in var-
ious market developments. On the other
hand, assuming a continued conver-
gence of CEE markets to Western mar-
ket standards and structures, the "paral-
lel strategy" runs the risk of becoming
strategically obsolete. Even these firms
try to "regionalize" their local brands to
overcome disadvantages in scale and
scope. Their example shows us how
hard it is to escape the prevalent "global
business logic." In any case, the context
of the transitional economies of CEE
provides an excellent opportunity to ad-
dress the assumptions and propositions
of the international marketing program
standardization again.
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