Article Review Antecedents of Performance of Multi-level Channels in Transitional Economies

For Partial Fulfillment of the Course Marketing Channels Management (MAMM 502-2)

Prepared by:

Million Tekeste
Tenagnework Taye Tinbit Worku Wossen Belete Yenus Fedlu Yetseday Haregewoin GSE/0109/03 GSE/0110/03 GSE/0116/03 GSE/0118/03 GSE/0119/03

Submitted to:

Getie Andualem (Dr.)

Addis Ababa University School of Commerce Department of Marketing Management Post Graduate program October 2011
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Table of Contents
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Full Bibliographic Reference

Authors: Laura Salciuviene (Lancaster University Management School, Lancaster, UK) : James Reardon (Monfort College of Business, University of Northern Colorado, Greeley, Colorado, USA), and : Vilte Auruskeviciene (ISM University of Management and Economics, Vilnius, Lithuania) Title: Antecedents of performance of Multi-Level Channels in Transitional Economics Journal Name: Emerald, Basic Journal of Management Volume: 6 No. 1

Page number: 89-104 Year : Key words: 2011 Multilevel marketing, distribution channels and markets, relationship marketing, Lithuania. Paper type: Research paper

1.

Abstract

All of the necessary information required for a review was presented. In our opinion, it could have been better if some more key words had been used.

2.

Introduction

This article, Antecedents of performance of multi-level channels in transitional economies written by Laura Salciuviene (Lancaster University Management School, Lancaster, UK), James Reardon (Monfort College of Business, University of Northern Colorado, Greeley,
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Colorado, USA), and Vilte Auruskeviciene (ISM University of Management and Economics, Vilnius, Lithuania); appraises the antecedents of channel performance in a multi-level marketing (MLM) channel. The title of the research, Antecedents of performance of multi-level channels in transitional economies, matches with the content of the research. For instance, when we see the theoretical background part, it covers about

Introduction It is our belief that the authors claims of were supported. However, the authors use of

citations was incorrect in the first paragraph. Towards the end of the first citation, Chen et al., 1998 (Chen et al., 2000a, b) should have listed all of the authors Chen, Y.F., Drezner, A., Ryan, J.K. and Simchi-Levi, D. 1998 or 2000a, b .)

the various marketing strategic composites, based upon the linkage of domestic and export marketing strategies of small, medium sized manufacturing firms. This study has contributed to the literature on export marketing strategy in several ways. First, it has demonstrated that common strategic composites are used by firms operating out of different domestic markets. Second, it illustrates the nature of the linkages between domestic and export marketing strategies. Third, the study is focused on the strategic behavior of small and medium sized exporting firms, rather than the larger organizations often found in empirical work upon exporters. Finally, the study has illustrated the important role played by certain environmental factors in determining the selected strategy.

The authors are keen to point out the contention that a common taxonomy of strategic composites exists for SMEs involved in manufacturing.

In this paper it is argued that the congruence between two domains - domestic marketing strategy and export marketing strategy - plays a role in determining the performance of an export venture.
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The paper seeks to determine whether a variety of strategic types exist, and if so, whether export performance differs across these types and also to see the impact if any that the congruence between domestic and export strategies has upon export performance. The research is conducted within the context of small, medium sized enterprises since resource issues are more critical for such organizations.

2.

Statement of the Problem

The basic question of interest in this research concerns the impact, if any, that the fit between these two strategies (domestic and export) has upon export performance. It is argued that the congruence of the domestic marketing strategy utilized by the firm and the adopted export marketing strategy plays a crucial role in determining the performance of an export venture.

The article focuses to fill the gap that was not answered through literatures by trying to answer to the following question:
What is the impact of the relationship between domestic and export strategies on export performance? What actual marketing strategic combinations could be used by firms for the smooth performance of domestic and export activities? Are there particular composites of domestic and export marketing strategies used by firms that operate in their home market and also export? If there are, what is the nature of these composite strategies? Are there common strategic composites used by exporters from different countries? What role, if any, does the type of industry, and the type of export market play in determining the choice of strategy for an exporting firm? Does export performance differ across the strategic composites, for each of the national groups of exporters?

3.
3.1

Objectives
General Objective

The general objective of this Article is to examine the strategic behavior of SMEs that export, and whether that behavior impacts upon the performance of an export venture. The article is also focuses on the relationship between competitive strategy and performance, whether this interface is affected by the national origin of the firm, and investigates the strategy-performance interface for SMEs.

3.2

Specific Objectives

The specific objectives of this study are: To investigate if there are particular composites of domestic and export marketing strategies used by firms that operate in their home market and also export. If there are, to know what the nature of these composite strategies is. To look into common strategic composites used by exporters from different countries. To explore the role, if any, that the type of industry, and the type of export market play in determining the choice of strategy for an exporting firm. To examine whether export performance differ across the strategic composites, for each of the national groups of exporters. To investigate the strategy-performance interface for SMEs.

Setting the above specific objectives helps the researcher to fulfill the gap that was not covered by literatures.

4.

Hypothesis

The following hypotheses were addressed by the study: The congruence of the domestic marketing strategy utilized by the firm and the adopted export marketing strategy might play a crucial role in determining the performance of an export venture. Some of the results obtained in the standardization/adaptation literature are applicable to small and medium sized enterprises but it might also be applicable for exporting firms that are the major form of foreign market entry.

5.
5.1

Methodology/Research Design
Sampling Techniques and Population Size

In this article, the authors have relied on the data collected from the UK and Canada firms and from the related studies done by different scholars. The study classifies its population in to two strata: 1. 2. Export contacts in SMEs manufacturing firms in Canada. Export contacts in SMEs manufacturing firms in UK.

The authors used WIN database (Export database compiled by Industry Canada), and FAME database (a financial database containing information on major public and private British companies) with regard to the huge volume of data about exporting firms that are used to select sample firms. In the Canadian survey out of 30,000 exporters list found from WIN EXPORTS database, 517 firms were randomly selected as sample, and in the UK survey out of 270,000 firms found in FAME database 600 firms were randomly selected as sample. In this article firms were sampled according to the following criteria:

Canadian survey: total annual sales less than $10 million; number of employees less than 100; export sales of between 5-75 per cent of total sales.

UK survey: Total annual sales less than 5 million BGP; Number of employees less than 100; Export sales between 5-75 per cent of total sales.

The researcher believes that the last criterion was imposed because it was necessary to sample firms that were neither exclusively domestic nor totally internationally oriented, to enable the investigation of potential relationships between domestic and export strategies.

Table 1: Samples Firms taken from Each Country

Population Canadian UK Total No. of Exporters 30,000 270,000 300,000 Sample 517 600 1,117 % 1.7% 0.22% 1.92%

5.2

Data Collection

The data for the study were collected through mail survey with questionnaires being sent to export contacts in random samples of small and medium sized manufacturers. Hence out of the total of the Canadian sample 227 responses were obtained, of which 207 were usable, giving a total response rate of 40%, and out of the total UK samples 173 responses were received of which 160 (26.6 %) were usable. Even though the study uses different measures to reduce the effects of non-response in both surveys like promising to send a summary of the findings to respondents, waiting for late respondents to complete and return the questionnaire, etc, it couldnt reduce the non-respondability of the questionnaires.

Two groups of strategic variables were included in the study. The first reflected aspects of domestic marketing strategy whereas the second measured the firms export marketing strategy. Both variables were assessed in terms of scope and competitive positioning.

5.3

Data Analysis & Interpretation

In the article, a total of 29 variables (17 for domestic and 12 for export) were used to assess the domestic and export marketing strategies of SMEs to avoid the likely problems in interpreting the results for 29 variables the researchers decides to use factor analysis to achieve some parsimony. The 29 strategy variables were standardized and submitted to a factor analysis. For both data sets, nine factors were isolated. For the Canadian exporters, four of the nine factors are concerned with aspects of export marketing strategy and the remaining five explains aspects of domestic marketing strategy. For UK data sets, three of the nine factors are concerned with
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aspects of export marketing strategy and the remaining six describes aspects of domestic marketing strategy. Also Cluster analysis was applied to factors isolated in each data set to try to isolate strategic composites.

The domestic marketing strategy was measured using the instrument developed by Dess and Davis (19984; Robinson and Pearce (1988) and McDougall and Robinson, 1990). Whereas export marketing strategy was measured using the instrument developed by (Cavusgil and Zou, 1994).

A smaller sample of both countries exporting firms would have aided in the data analysis, particularly when looking for possible correlation between domestic and export strategies of SMEs. The results reported in this article referred to this population of firms, and not to all small, medium sized manufacturers involved in exporting. This shows that it is not possible to infer the findings to the whole SMEs.

The following analyses were done using different statistical tools throughout the study: Factor analysis was done to assess the domestic and export marketing strategies of SMEs. Also Cluster analysis was applied to factors isolated in each data set to try to isolate strategic composites.

Two statistical techniques were used to try to determine strategic types that were similar between the national groups. First, a proximity matrix based on Euclidean distances was calculated. Second, several post hoc tests (least significant difference (LSD) and Scheffe's) were conducted to see which strategic dimensions did not differ significantly.

Single factor analyses of variance were used to investigate whether there was export performance difference among the four strategic types for both the Canadian and UK exporters.

The study again underscores the importance of conducting a detailed environmental analysis when selecting a strategy. In particular, two environmental characteristics
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appear to be associated with strategic choice - the sophistication of the marketing infrastructure of the export market and the degree of technological sophistication in the industry.

In order to explore the nature of any relationships between the environment and selected strategic alternatives, Crosstabs and Chi-squared tests were run for each of the seven environmental variables against the four composites for both groups of exporters.

Crosstab analyses were done for the five export market variables indicated that one characteristic was significantly related to the choice of strategy for both samples

In order to investigate whether similar strategic composites were used by Canadian and UK exporters, comparisons were made between individual strategic types across the Canadian and UK groups. One objective of this research is to investigate how domestic marketing strategy is adapted for an export venture. Consequently, the domestic strategies used by firms in the two national groupings were compared first. The following process was used to compare strategic types within the national groupings.

The four Canadian strategic composites are: The competitor (Cluster 1): This group consisted of 56 firms (27% of the sample). It was characterized mainly by a relative lack of concern for developing brand identity and for keeping promotional expenditures low in the domestic market. The emphasis is upon maintaining current products rather than on product innovation. These firms provide a broad product mix that is competitively priced. These firms have moderate market scope and provide minimal support to the foreign channel. The top-end nicher (Cluster 2): This group consisted of 40 firms (10% of the sample). This group was characterized as hiving products that had been on the market for a considerable amount of time (on average 29 years). They believe in providing prime product at a premium price. The highlights of their exporting strategies are: their narrow scope, the moderate degree of product adaptation that they employ, and the relatively low level of support that they provide to the foreign channel.
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The innovative nicher (Cluster 3): This group consists of 44 firms (21% of the sample). These firms employ a niche strategy in the domestic markets, with an emphasis upon new product development, and brand recognition. They have the least amount of experience of international markets.

The branded broadliner (Cluster 4): This group consisting of 67 (33% of the sample). These firms have a very broad market scope and strong concerns about developing a brand identity. They provide average product quality at a competitive price. They are relatively experienced in international markets.

This research generally supports the contention that a common taxonomy of strategic composites exists for SMEs involved in manufacturing. The taxonomy covers a range of export entry strategies encompassing both broadly based and niche targeting. Empirical evidence from two national groups of exporters suggests that five distinct strategic composites are being used. These are Broadliner, Top-ender, Competitor, Innovator and Value strategies. Three strategies were common to both groups, namely the Broadliner; Top-ender; Competitor strategies. In order to investigate whether similar strategic composites were used by Canadian and UK exporters, the study made comparisons between individual strategic types across the Canadian and UK groups. In this study the first comparisons were based on whether the comparable strategies were built around commodity or specialty products. The second comparisons were based on the dimensions of domestic strategy, initially, to check for similar strategies across national groups.

In the article, potential effects of a variety of environmental factors like characteristics of the industry and the potential effects of characteristics of the selected export market were examined on the pattern of deployment of the various composites. Consequently, the effects of five characteristics of the export market were examined. These were: The degree of legal and regulatory barriers present; the demand potential; the sophistication of the marketing infrastructure; the competitive intensity; and the degree of product exposure in the market.
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As the Article was conducted by making use of the documentary analysis and mail-out questionnaire, its process are based on empirical evidences which provide detailed analyses. It tries to analyze the relationships between domestic and export market strategies. The qualitative and quantitative research design was applied for this research.

6.

Major Findings

The following findings are based on the cumulative result of the analysis done on UK and Canada sample firms: 56(27%) of the Canada sample respondents believe that emphasis is given upon maintaining current products rather than on product innovation. These firms also believe in providing a broad product mix that is competitively priced. Moreover, these firms believe in having moderate market scope and provide minimal support to the foreign channel. 40(19%) of the Canada sample respondents believe in providing a prime product at a premium price. Distributional intensity is selective rather than intensive. The highlights of their strategies are: their narrow scope; moderate degree of product adaptation that they employ, and the relatively low level of support that they provide to the foreign channel. 44(21%) of the Canada sample respondents employ a niche strategy in their domestic markets, with an emphasis upon new product development, and brand recognition. 67(33%) of the Canada respondents employ a very broad scope and strong concerns about developing a brand identity. They provide average product quality at a competitive price. They adapt their promotional approach to suit their target markets, and provide moderate support in the foreign channel.

In order to investigate whether similar strategic composites were used by Canadian and UK exporters, comparisons were made between individual strategic types across the Canadian and UK groups.

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Domestic Strategies
The domestic strategies adopted by these two groups are similar. The dimensions of domestic strategy were not significantly different on LSD tests Three specified domestic strategies are common across the national groups Broadliners, Top-enders, and Innovators.

Export Strategies
Both countries followed similar export strategies. The major differences between the two national groups were with respect to targeting and pricing. Both groups followed the same export strategy. In the case of Innovator groups of both country: The major differences were with respect to training for the distributor, adjustments to labeling and the number of export customers. Canada exporters had a smaller number of export customers, placed more emphasis on training for the foreign distributor, and did not adapt their promotion activities as much as their UK counterparts. UK exporters use a market spreading

approach, entered more export markets than their Canadian counterparts. In the case of Top-ender of both groups the major differences were with respect to export goals training and promotional support for the foreign distributor. But both groups had similar degrees of product adaptation and tended to standardize their promotional activities.

7.

Conclusions

Based on the above findings and data analyzed, the article concluded as follows:

The findings should be viewed as restricted since the sample was drawn from a single industrial sector, namely manufacturing. More research across industrial sectors and additional national economies is needed.

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There are three specific domestic strategies that are common across the national groups of UK and Canada Broadliners, Top-enders, and Innovators.

Both national groups export strategies, that small, medium sized manufacturing exporters use three distinct composite strategies, namely the Broadliner, Top-ender, Competitor strategies.

This study has contributed to the literature on export marketing strategy in several ways. First, it has demonstrated that common strategic composites are used by firms operating out of different domestic markets. Second, it illustrates the nature of the linkages between domestic and export marketing strategies. Third, the study is focused on the strategic behavior of small and medium sized exporting firms, rather than the larger organizations often found in empirical work upon exporters. Finally, the study has illustrated the important role played by certain environmental factors in determining the selected strategy.

The article emphasizes that further testing is required of the reliability of the strategic composites constructs established in this study since they are based on self reporting measures only.

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8.

Summary of the Reviewers

From the student reviewers point of view, this article possesses most of the entire criteria that should be included in a scientific journal and all these elements are briefly discussed as follows;

A.

Title

The authors clearly spelled out the title and so it is Congruence of domestic and export marketing strategies - an empirical investigation of its performance implications.

B.

Problem Statement

The researchers clearly formulated the research problems and so seek to determine whether a variety of strategic types exists, and if so whether export performance differs across these types.

C.

Objectives or Purpose of the Study

One of the main questions or problems to be answered in the research was to examine the particular composites of domestic and export marketing strategies used by firms that operate in their home market and also export. Throughout the research this idea was discussed separately and together with other factors. The researchers able to show the magnitude of the relationships that exist between the above variables. As the result the conclusion arrived at the end of the research is conclusive and based on the empirical data which enable the main question of the research solved. The purpose of the article is described clearly.

D.

Review of Relevant Literatures

The literatures included in the articles are relevant and supportive the justifications behind this are, the available literatures are reviewed comprehensively and they are important to depict the view points of different authors on the title under discussion. Moreover almost all the references are journals which help to get useful research findings and debates even though they are published before ten years.

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E.

Researchers Research Methodology

Since this section is the corner stone of the research, the authors of the article have consulted primary and secondary data. The authors have clearly sated study participants that are small and medium sized manufacturing enterprises in UK and Canada, who have the capacity to export.

The researchers clearly state the populations and also make the sample appropriately. The authors conduct the study by using a mail out questionnaires sent directly to the sample export firms in both countries. prior to sending the final questionnaire to the respondents the

researchers tested the questionnaires upon a convenience sample of ten exporters and some items were eliminated on the grounds that they were not relevant to either the size of the firm included in the study, or the activities of exporters.

The data analysis method is clearly explained and the researcher utilized the appropriate data analysis methods such as factor analysis and Chi-square methods.

Empirical approach was used to conduct this research. The information collected was well analyzed in reaching valid conclusion.

F.

Insights to Further Studies

As we see from the article, the authors suggest fruitful areas for further research. First does the taxonomy of strategies isolated here, apply to services firms or do the distinct characteristics of service generates different strategies? Second, do firms switch from broadly based strategies towards more focused strategies as they move further in to internationalization process?

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G. Review of References
References are properly used and discussed in the main body of the article as well as cited in Harvard system. Comprehensive reference lists are not given in the article. Based on convention writers are recommended to incorporate forty and above texts in their work. Unfortunately in this article only thirty four references are cited. The other problems with respect to references are that most references are old. Based on convention ten years back texts are considered as old and sixteen of them were written before ten year.

9.

Weakness of the Articles

The weakness of the article in the minds of the reviewer includes:

The numbers of references are not adequate and old. The Authors did not mention the rationales behind the selection of research site, Canada and UK.

Our overall assessment concludes that the authors have represented the strategies in a useful way by employing a well-structured, logical and understandable methodology.

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