Download Extending Marketing Activities and Strategies from Domestic to

Extending Marketing
Activities and Strategies
from Domestic to Foreign Markets
Gerald Albaum
David K. Tse
George C. Hozier, Jr.
Kenneth G. Baker
ABSTRACT. Extending marketing activities and strategies from a
firm’s domestic market to its foreign markets is often viewed as being
synonymous with standardization of activities/strategies. However, they
can be distinctly different. Standardization generally is an end result and
a process, while extension (also a process and end result) can be viewed
as being concerned with the source of the standardization. This paper develops a model of the extension phenomenon which links specified antecedents to extension and extension with firm specific advantages, which
then lead to performance. Propositions derived from this model are
Gerald Albaum is Visiting Scholar, Robert O. Anderson Schools of Management,
University of New Mexico, Professor Emeritus of Marketing, University of Oregon
2
and Senior Research Fellow, IC Institute, University of Texas at Austin (E-mail:
[email protected]). David K. Tse is Professor of International Marketing, School
of Business, The University of Hong Kong. George C. Hozier, Jr. is Associate Professor of Management and Chair of the Department of Marketing, Information, and Decision Sciences and Kenneth G. Baker is Associate Professor of Management and
Associate Dean, Robert O. Anderson Schools of Management, both at the University
of New Mexico.
The authors wish to thank Catherine Roster, University of New Mexico and the
anonymous reviewers for their helpful comments and suggestions.
Journal of Global Marketing, Vol. 16(3) 2003
http://www.haworthpress.com/store/product.asp?sku=J042
 2003 by The Haworth Press, Inc. All rights reserved.
10.1300/J042v16n03_06
105
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JOURNAL OF GLOBAL MARKETING
tested by examining the behavior and perceptions of a sample of managers of Hong Kong companies. [Article copies available for a fee from The
Haworth Document Delivery Service: 1-800-HAWORTH. E-mail address:
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© 2003 by The Haworth Press, Inc. All rights reserved.]
KEYWORDS. Marketing strategies, Hong Kong, standardization, extension, export, market entry
INTRODUCTION
During the past 20 years two topics that have been of fundamental interest to international marketing researchers are global marketing standardization or adaptation (Levitt, 1983; Samiee and Roth, 1992;
Szymanski, Bharadwij, and Varadarajan, 1993) and export marketing.
In order to be able to assess export marketing behavior attention has
been directed to export performance (e.g., Brooks and Rosson, 1982;
Cavusgil and Nevin, 1981; Cavusgil, 1984; Madsen, 1987; Samiee and
Roth, 1992). Unfortunately, there has not been agreement on a conceptual or operational definition of export performance (Madsen, 1987;
Shoham, 1998).
Levitt (1983) argued that world markets were becoming homogeneous and, thus, global. This meant that for a company to reap the benefits of such a marketplace, standardized marketing activities and
strategies would be needed. If global markets did indeed exist it was believed that companies using standardized strategies would outperform
companies using adapted strategies by either economies of scale or
managerial experience. Reporting on an empirical test of this relationship in the early 1990s, Samiee and Roth (1992, p. 1) summarize their
findings as follows: “However, in the critical area of performance, no
difference is observed between firms stressing global standardization
and others.” Cavusgil and Zou (1994) found a positive relationship between export performance and product adaptation but an unanticipated
moderate and inverse relationship between performance and promotion
adaptation. Szymanski, Bharadwij and Varadarajan (1993) examined
the extent to which it would be desirable for companies to standardize
their strategic resource mix across marketing mix variables when serving multiple Western markets. Their findings show that the strength and
form of the relationships between the various marketing mix, other
competitive strategy, market structure, and business performance fac-
Albaum et al.
107
tors are relatively similar across the U.S., U.K., Canadian, and Western
European markets. In short, a standardized approach of resource allocation evoked similar performance responses from these markets.
Standardization occurs when a marketing activity is conducted the
same, or a marketing strategy is the same, in all (or a set of) foreign markets. Standardization can result by either developing a “unique” marketing activity, program, and/or strategy and then introducing it into
foreign markets or by extending activities, programs, and strategies
from a base market to other markets. This latter approach, what we call
extension and which is sometimes referred to as transference (see Sheth,
1978), typically involves the home market as the base market. Standardization and extension are both a process and an end result. Extension is viewed as being on a continuum ranging from total-extension to
no-extension-at-all. More formally, we define extension for operational
and conceptual purposes as:
the amount of change from home market use of a marketing activity, program, or strategy when used in a foreign market.
There are some basic advantages in extending (i.e., transferring)
marketing activities and strategies in such a way. First, it may be very
difficult to routinely generate successful tactics and strategies. If a company can successfully extend something to as many foreign markets as
possible, considerable time and effort will be saved. Second, extension
can lead to lower cost of developing and implementing marketing activities. Greater economies can be achieved by using existing expertise to
service a foreign market (McNaughton and Bell, 2000, p. 25). Product
characteristics may influence the decision on the marketing program,
and unless a product has been designed for a specific market, these are
likely to be the same for both domestic and foreign markets. Finally,
some managers may be more comfortable in handling their duties if
they are less complex and varied.
There also is the risk that extension might not work out as intended.
First, the nature of foreign environments differ and might be harder to
understand than the home market environment. Also, if management
does not fully understand why its domestic strategy has been successful–i.e., there is no model or theory explaining its success–it will be
risky to extend to less familiar foreign markets.
A company may extend marketing activities and strategies and yet
not have a fully standardized marketing approach unless it does this in
all markets. In contrast, it is possible for a company to have standard-
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ized operations in foreign markets, yet not have these developed on the
basis of extension from the home market, or from any other market for
that matter.
The major purpose of this paper is to develop a model of the extension phenomenon which links selected antecedents to extension and
then links extension with performance (consequences). Extension is
viewed, operationally, in two time dimensions: (1) initial market entry,
and (2) market behavior at the present time.
The model is “tested” by examining the behavior and perceptions of
a sample of companies based in Hong Kong, which is a major world
trading economy.
PRIOR RESEARCH ON EXTENSION
Prior research on the extension phenomena has been concerned primarily with transference of advertising and marketing communications.
Dunn (1966) used case studies to examine the transfer of successful domestic advertising campaigns to foreign markets. This was followed by
a laboratory experiment testing potential factors that affect the success
of advertising campaigns’ transference (Schleifer and Dunn, 1968).
Later, Dunn (1976) conducted a study on the transfer of a promotion
strategy. Killough (1978) studied advertising transference by conducting depth interviews with more than 60 senior managers.
Two articles made important conceptual contributions to the transference issue. Sheth (1978) discussed eight advertising transference
strategies based on three dimensions: (1) the expectations (i.e., benefits
expected) people use to evaluate a product class; (2) the mechanics of
encoding and decoding of communications as reflected in the media;
(3) the “silent language,” as used in the background for advertising messages. In contrast, Keegan (1969) proposed five strategic alternatives
for expansion into foreign markets on the basis of the extension or adaptation of the product and communications variables.
A more recent study is one that examined transfer behavior of Danish
exporting companies (Shoham and Albaum, 1994). The study looked at the
extent of transfer of marketing methods and activities and the relationship
of such transfer with alternative measures of export performance. Seven
marketing variables were examined, and export performance was defined
as “the composite outcomes of the export sales of the exporting companies” (Shoham and Albaum, 1994, p. 226). The performance composite
was based on three dimensions: (1) sales, (2) growth, (3) profitability. Each
Albaum et al.
109
dimension was operationally measured by multiple indicators. For example, profitability was measured by perceptual measures such as satisfaction with meeting profit expectations. One overall finding is that
companies that transfer marketing strategies and activities from one market to another do not perform as well as companies that adapt to each
market. This relationship holds regardless of the type of product and the
cultural distance between the countries.
The most recent study is of extending domestic marketing channels
into a foreign market (McNaughton and Bell, 2000). This study examined the export channel choices of Canadian software companies. A
transaction cost analysis model was developed to identify conditions
that increase the likelihood that a company will switch from the mode
used in the home domestic market to a different mode in a foreign market. A basic premise was that the channel used in the domestic market
has an influence on the channel selected to enter a foreign market. Results are consistent with the idea that the domestic channel is likely to be
extended to the foreign market unless there is a compelling reason to
switch. Nearly two-thirds of the sample firms used the home market
channel to enter the largest foreign market.
The present study extends and expands on the work of Shoham and
Albaum (1994) by examining a greater number of marketing activities
and, more importantly, by proposing a conceptual framework that links
selected antecedents with extension and outcomes, and tests propositions about these links.
CONCEPTUAL FRAMEWORK
We propose a contingency-based conceptual framework in which extension of marketing activities plays sequential roles in determining
firm performance, as shown in Figure 1. The contingency view of strategy assumes that no universal set of strategic choices is optimal for all
organizations and circumstances (Ginsberg and Venkatraman, 1985)
but that optimal strategy is subject to a certain set of organizational and
environmental conditions (Harvey, 1982). Researchers have attached a
broader meaning to contingency by considering factors responsible for
differences in strategy outcomes as contingency variables (Ekeledo and
Sivakumar, 1998, p. 277). Consequently, we argue that our conceptual
framework can be considered a contingency framework because it includes factors that can lead to variations in performance.
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FIGURE 1. A Conceptual Framework of Extension and Performance
Antecedents
Decision-Making
Orientation
(EPRG)
Foreign Market
Entered
Initial Change in
Marketing
Variables
Extent of Difference
Today in Marketing
Variables
Importance of
Marketing Variables
to Success
Dimensions of
Firm Specific
Advantage (product,
promotion, distribution
service, pricing, research)
Firm
Performance
(sales growth,
sales volume,
market share,
operating profit)
Dimensions of
Corporate Strategy
(resources, flexibility)
First, there is the extension from the domestic market that occurs
when the firm begins export to a specific market (“Initial Change”).
Second is the amount of extension that exists today, which is the difference today between what a company does in its home market and in a
foreign market (“Extent of Difference Today”). What firms do today is
affected by what they did upon initial entry into a market. Also current
extension behavior leads to the importance attached to each export marketing activity in the success today of operations in a foreign market.
The importance of a marketing activity/strategy to the success of the
operation is postulated to lead to specific differential advantages in
marketing activities over competitors. The proposed conceptual framework states that firm performance is a function of firm specific advantages in marketing, and competitive advantages that emerge from
corporate or company strategy.
The conceptual framework suggests that the entire process may be influenced by two antecedent variables, whose specific effect would be on initial
market entry. First, whether a firm has an ethnocentric, polycentric,
regiocentric, or geocentric (EPRG) orientation in its international decision-making (Perlmutter, 1969; Wind, Douglas and Perlmutter, 1972) is rel-
Albaum et al.
111
evant. In their study of 456 Danish companies, Shoham. Rose and Albaum
(1995) reported that orientation is related to the transference of marketing
strategies, particularly for advertising, distribution and market research.
Second, the specific target foreign market can be expected to affect
the extent to which marketing activities are extended from the home
market. Of relevance is the psychological (or psychic) distance between
the foreign market and the home market. Psychological distance is a
summary construct that represents the perceived dissimilarity between
foreign and domestic markets (Evans and Mavondo, 2002). Prior research has established a conceptual link between psychological distance and EPRG export orientation. Both are related to stage of
internationalization, organization structure, and the development of and
implementation of marketing strategies. Shoham, Rose and Albaum
(1995) have shown empirically that psychological distance and orientation are significantly related, at least for Danish companies. However,
there has been no empirical test of the relationship between psychological distance and extension strategies.
Propositions
Because the theory (i.e., contingency theory) that underlies the
model is very general and the empirical research very limited, we formulate the following propositions for examination:
P1A: Initial marketing extension strategies will vary by the decision-making orientation of the firm.
P1B: Initial marketing extension strategies will vary by the specific
host market entered.
P2A: The extent of extension of marketing strategies existing today is
positively related to extension for initial foreign market entry.
P2B: Perceived importance of marketing activities/strategies is positively related to amount of extension existing today.
P3A: Firm-specific competitive advantage is positively related to the
perceived importance of marketing activities/strategies to successful operations in a foreign market.
P3B: Firm-specific competitive advantage is positively related to competitive advantages derived from corporate or company strategy.
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P4: Firm performance is positively related to firm-specific competitive advantages and to corporate strategy-based competitive
advantages.
It should be noted that there is no proposition that directly links extension to firm performance. Rather, extension is hypothesized to influence performance through competitive advantages derived from firmspecific marketing activities.
The proposed model fits within the broader context of contingency
theory and the relations asserted in the propositions seem to be consistent with occasional observation in the real world. In effect, this study is
more theory development than theory testing.
METHODOLOGY
A survey of managers responsible for international marketing activities was conducted in Hong Kong. Firms there actively export a wide
spectrum of products to all the world’s major regional markets. Thus, a
survey of exporters provides a data set with sufficient diversity in products and markets to adequately test the propositions. A “modified” mail
survey technique was used to study extension of marketing strategies
and use of strategic alliances in foreign markets. A four-contact process
was used for data collection:
1. A letter was sent as a preliminary notification of the survey.
2. A few days later a telephone call was made to solicit participation.
3. Questionnaires were then mailed to all those who indicated a willingness to participate, and return was to be by mail.
4. After a period of two weeks, a follow-up contact was made with
respondents, including another questionnaire.
The original sample of companies was selected randomly by the Hong
Kong Trade Development Council, the agency of the Hong Kong Special Administrative Region Government that facilitates Hong Kong’s
external commercial activities, from their database of all exporters
(about 1,500) actively involved in Hong Kong’s six major export product categories–clothing and textiles, electronics, watches and clocks,
jewelry, plastic products, and printed materials. Only companies with at
least 5 employees in the firm were included in the original sample of
400 companies. The four-step process resulted in responses from 196
Albaum et al.
113
companies yielding a response rate of 49%. This response rate exceeds
what has been reported in the literature for similar populations (Fraser
and Hite, 1990; Samiee and Roth, 1992; Shoham and Albaum, 1994;
Shoham, 1999; McNaughton and Bell, 2000).
Measurement
Eleven items were used to measure extension of marketing activities
from the domestic market to a foreign market. A split-ballot, also
known as split-sample, approach was used to obtain the responses to the
extension variables. Each respondent was assigned randomly to respond for one of the following market areas: China, USA/Canada,
Western Europe Countries, Asia (other than China). If a company did
not have any operations in the assigned market area, it was free to
choose any market, and the company was asked to indicate for which
foreign market it was responding.
Within a context of a specific foreign market, respondents were
asked to indicate the extent to which they changed each marketing variable from that used in the domestic market when first entering the market, using a five-point scale (1 = very significant change, 5 = no
change). Similarly, respondents reported the extent to which each variable was being performed today (date of data collection) in the foreign
market differently than that for the domestic market, using a similar
five-point scale (1 = very significant difference, 5 = no difference).
Finally, perceived importance of each of the 11 activities in the success
of company operations in the specific market was reported using a
five-point scale (1 = very significant, 5 = none).
Respondents were also asked to indicate how unique company performance was compared to competitors in the specified market for a
number of company marketing characteristics and strategic behaviors
(see Appendix Table A1). A five-point scale was used for these measurements (1 = much worse, 5 = much better). In operationally measuring performance, the present study builds on the export-performance
paradigm proposed by Aaby and Slater (1989) and Madsen (1987).
They use the strategy-structure-performance (SSP) paradigm in synthesizing past research on export performance. Madsen (1987) argues for
three performance sub-dimensions: sales, growth, and profitability. In
the present study company performance for the preceding year compared to competitors and to their own expectations as measured by sales
growth, sales volume, market share, and operating profit was reported
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by responding managers using the same five-point scale that ranged
from “much worse” to “much better” (see Appendix Table A2).
Responding Company Characteristics
Selected characteristics of the responding companies are presented in
Table 1. The companies can be characterized as small- and medium-sized.
More than one-half of the companies had less than 50 employees. Responding companies range in age from less than five years to more than
100 years, with the mean age being 12.7 years. More than three-fourths of
the respondent firms were independent-owned Hong Kong companies and
less than 10% were subsidiaries of foreign-owned companies. The vast
majority (65%) reported that at least one-half of their exports represented
re-exports, with most coming originally from China. In many cases re-exports were by companies that had shifted their production for Hong Kong
and other markets to China. Thus, re-exports per se did not directly affect
extension behavior regarding foreign markets.
Turning now to the specific individuals who provided the data about
their firms’ behavior and decision-making characteristics, we see that
slightly more than three-fourths were male with 60% having completed
at least a university or polytechnic educational program. Slightly more
than 80% of respondents were Hong Kong Chinese and 70% were at a
managerial level of at least senior manager. There is no evidence from
the companies or elsewhere to suggest that individual respondents
would not be knowledgeable about initial market entry conditions, particularly since such a high percentage were senior managers.
Since a split-sample approach was used to obtain the desired information about transfer of marketing activities a question can be raised
about differences in characteristics of responding companies and individuals. The distribution of each characteristic was cross-tabulated with
market area and contingency tests were conducted. There were significant differences at p < .05 only for ownership of company and for decision orientation. Regarding ownership the major difference seems to be
that a greater proportion of companies responding for China as their
market area were subsidiaries, particularly subsidiaries of foreign companies, than was the case for companies responding for other market areas (see Table 2). As far as decision-making orientation is concerned, a
greater proportion of companies responding for China and for Western
Europe reported being ethnocentric in their decision making by being
concerned with impact on Hong Kong; polycentrism was more preva-
Albaum et al.
115
TABLE 1. Characteristics of Responding Companies and Individual Respondents
Company and Respondent Characteristic
Number of Companies
Percent Distribution
COMPANY:
Number of Employees:
Less than 10
44
22.4
0-49
57
29.1
50-99
21
10.7
100-249
33
16.9
250-999
23
11.7
1,000 and Above
18
9.2
Less than 5 Years
35
18.7
5-9 Years
68
36.4
10-14 Years
33
17.6
15-24 Years
33
17.6
25 Years and Above
18
9.7
Age of Company:
Ownership of Company:
Independent-Owned Hong Kong
153
78.5
Subsidiary of Hong Kong
15
7.7
Subsidiary of Foreign
16
8.2
Joint Venture of Hong Kong and Foreign
7
3.6
Others
4
2.1
25% or Less
42
23.0
26-50%
22
12.0
51-75%
20
10.9
More than 75%
99
54.1
Percent of Export That Is Re-Export:
Nature of Office:
Regional Headquarters
68
34.7
128
65.3
62
34.6
Foreign Market Involved
45
25.1
Group of Foreign Markets
14
7.8
All Markets
58
32.4
Not Regional Headquarters
Decision-Making Orientation:
Hong Kong
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TABLE 1 (continued)
Company and Respondent Characteristic
Number of Companies
Percent Distribution
Market Area Responded for:
China
54
28.1
Asia, Other than China
38
19.8
USA/Canada
39
20.3
Western Europe
58
30.2
3
1.5
44
23.0
147
77.0
Other
INDIVIDUAL RESPONDENT:
Gender:
Female
Male
Education:
Below University
76
39.8
University/PoIytechnic
78
40.8
Postgraduate
37
19.4
155
80.3
15
7.8
West Europe
8
4.1
USA/Canada
5
2.6
Non-Chinese Asian
7
3.6
Other
3
1.6
93
48.7
Ethnic/National Background:
Hong Kong Chinese
Other Chinese
Position in Company:
Top Manager
Senior Manager
42
22.0
Functional Manager
43
22.5
Other
13
6.8
lent for the market described as Asia Other than China; and companies
responding for USA/Canada were most dominantly geocentric.
The difference in ownership may not be that surprising since a major
reason for foreign companies being in Hong Kong is that it served as a
gateway to China, particularly Southern China. Subsidiary companies
who were first “assigned” another market area in the sampling process
probably did not do business in the assigned area so they responded for
Albaum et al.
117
TABLE 2. Ownership and Orientation by Market Area
Percent Distribution
China
Asia, Other
than China
USA/
Canada
Western
Europe
Independent Hong Kong Company
61.1
78.9
89.7
86.0
Subsidiary of Hong Kong Company
13.0
7.9
2.6
7.0
Subsidiary of Foreign Company
18.5
2.6
2.6
5.3
Joint Venture of Hong Kong and
Foreign Company
5.6
5.3
5.1
0.0
Ownership:
Other
1.9
5.3
0.0
1.8
100.0
100.0
100.0
100.0
Hong Kong (Ethnocentrism)
40.0
26.5
20.0
42.6
Specific Foreign Market
(Polycentrism)
28.0
44.1
17.1
18.5
8.0
0.0
11.4
11.1
Orientation:
Group of Foreign Markets
(Regiocentrism)
All Markets (Geocentrism)
24.0
29.4
51.4
27.8
100.0
100.0
100.0
100.0
China. This might also help explain the distribution of responses by
market area as the obtained sample distribution differed from the original sample distribution. Although Hong Kong is under Chinese Sovereignty, it is a Special Administrative Region and many of the “old”
relationships with China and elsewhere remain in force.
A question may be raised regarding whether Hong Kong-owned
companies differ from those that are foreign-owned in their use of extension strategies. One answer would be to examine extension at initial
entry in to the assigned (or selected) foreign market. No significant differences were found between the two ownership groups (Mann-Whitney U, P < .05). Thus, all company responses were combined into one
group for analysis.
FINDINGS AND DISCUSSION
Each respondent was asked to indicate for the foreign market area assigned to his/her company (or selected) how the company changed its
Hong Kong marketing approach for several marketing activities or strate-
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gies when first entering that market area, the extent to which marketing in
that area differs “today” from the domestic market, and how important
each activity/strategy is in the success of operation in that market. These
data are shown in Table 3. The smaller the mean value, the greater is the
change made for initial entry, the difference existing today, and the importance to success. Also shown in Table 3 are standard deviations. With
the exception of “brand name,” the magnitude of the standard deviations
are quite similar for each of the marketing variables within each of the
model stages, and they are not particularly large.
Extent of Differences
For initial entry into foreign markets, the data in Table 3 show that
the greatest change was made in pricing strategy (2.13) and in the product (quality, design, and strategy). The model presented earlier states
that the extent of change in initial market entry would be affected by a
company’s EPRG decision-making orientation and by the market area
entered. Only for “Service Strategy” did initial market entry difference
vary significantly by decision-making orientation, and the statistical
significance was at p < .07. Interestingly, no pair of orientations differed significantly (Scheffe' range test, p < .07). From a binomial probaTABLE 3. Mean Values of Extent of Transfer and Perceived Importance to
Success*
Initial
Entry**
Difference
Today***
Importance
+
to Success
Product Strategy
2.46(1.04)
2.60(1.02)
2.24(1.02)
Product Design
2.46(1.16)
2.61(1.16)
2.29(1.10)
Pricing Strategy
2.13(1.03)
2.32(1.03)
2.01(0.97)
Marketing Variable
Advertising/Promotion Strategy
3.01(1.12)
2.88(1.06)
2.80(1.12)
Personal Selling Practices and Strategy
2.94(1.12)
2.98(1.08)
2.68(1.12)
Distribution Strategy
2.82(1.12)
2.87(1.05)
2.72(1.11)
Product Quality
2.34(1.14)
2.60(1.17)
2.01(0.98)
Service Strategy
2.69(1.06)
2.85(1.12)
2.35(1.02)
Marketing Research
3.01(1.07)
2.99(0.97)
2.84(1.03)
Product Function
2.94(1.10)
3.00(1.08)
2.71(1.07)
Brand Name
2.99(1.34)
3.01(1.35)
3.00(1.28)
*Number of respondents varied from 165 to 181. Numbers in parentheses are standard deviations.
**Measured on a scale of 1 to 5 where 1 = very significant change and 5 = no change.
***Measured on a scale of 1 to 5 where 1 = very significant difference and 5 = no difference.
+
Measured on a scale of 1 to 5 where 1 = very significant importance and 5 = no importance.
Albaum et al.
119
bility perspective finding one significant difference out of 11 is at about
a chance probability level.
Turning to foreign market area entered we see from Table 4 that two
variables were significant at the .05 level or less and one variable at the
.10 level, when size of company was used as a covariate. For the most
part, the extent of change was less for entering Asia, including China,
than for the other areas, which is what one would expect. Out of the total
possible 66 paired tests, 10 were significant at p < .05, with most involving Asia, other than China, compared to USA/Canada and Western Europe. Since there are differences, the specific market areas where
differences were greatest are not surprising.
As far as P1 is concerned the results are mixed. The hypothesis is rejected for decision-making orientation (P1A), but cannot be rejected for
market area entered (P1B).
Extent of Extension Today
The extension model suggests that the extent of difference in performance of marketing activities today in the selected foreign market
TABLE 4. Mean Values of Extent of Change for Initial Market Entry, by Market
Area Entered (Size of Firm Is a Covariate)*
Market Area
China
(N = 52)
Asia, Other
than China
(N = 38)
USA/
Canada
(N = 58)
Western
Europe
(N = 38)
Product Strategy
2.38
2.74
2.46
2.30
Product Designs
2.62
2.97
2.17
2.15
Marketing Variable
Pricing Strategy
2.02
2.39
1.89
2.19
Advertising/Promotion Strategy
2.89
3.31
2.71
3.06
Personal Selling Practices and Strategya
2.87
3.44
2.60
2.94
Distribution Strategy
2.60
3.12
2.83
2.83
Product Qualitya
2.53
2.64
2.18
2.07
Service Strategy
2.81
2.83
2.57
2.53
Marketing Research
3.04
3.17
2.66
3.06
Product Functionsb
2.96
3.34
2.71
2.77
2.45
3.37
2.97
3.21
Brand Name
*
Measured on a scale of
a
Significant at p < .05.
b
Significant at p < .10.
1 to 5 where 1 = very significant change and 5 = no change.
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(compared to domestic market performance today) would be positively
related to changes made in initial market entry, and such differences as
those existing today are postulated to affect the perceived importance of
marketing variables to the firm’s success. These links are examined by
correlation analysis. As presented in Table 5 the relationships were all
significant at p < .001, and all were positive. Thus, the more significant
the change made for initial market entry the greater the extent of difference in conducting activities today compared to the domestic market.
Similarly, the greater the extent of difference today, the more important
the marketing activity/strategy is perceived to be to success. Consequently, P2A and P2B cannot be rejected.
One unexpected finding was that there is a tendency for the responding
companies to “return to what they know best” over time. That is, over
time many companies appear to be reverting the marketing program used
in the foreign market back to that being used in Hong Kong. This may or
may not be the same as the domestic program used at the time of initial
foreign market entry. Using the data in columns 1 and 2 from Table 3, initial entry change and difference today were compared using the t-test for
Related Samples. Significant differences were observed for product strategy (t = 2.22, p < .03), product design (t = 2.32, p < .03), pricing strategy
TABLE 5. Relationship Between Extent of Change Today and Initial Market Entry Change and Perceived Importance of Success
Correlation
Difference Today and
Importance to Success
(N = 48)
Difference Today
and Initial Entry
(N = 151)
Product Strategy
.41
.60
Product Design
.47
.65
Pricing Strategy
.49
.60
Advertising/Promotion Strategy
.53
.66
Personal Selling Practices and Strategy
.64
.75
Distribution Strategy
.65
.74
Product Quality
.42
.72
Service Strategy
.54
.72
Marketing Research
.58
.73
Product Functions
.61
.77
Brand Names
.68
.76
Marketing Variables
All are significant at p < .001.
Albaum et al.
121
(t = 2.43, p < .02), product quality (t = 3.97, p < .001), and service strategy (t = 2.89, p < .01). In all cases mean values were greater for extent of
difference today, and the greater the mean value the less there is a difference from the domestic Hong Kong market.
Firm Specific Advantage
Firms often times have specific advantages vis-à-vis competitors in
marketing in foreign markets. These advantages may be only for individual marketing activities or strategies rather than advantages that go
“across the board” and encompass the complete marketing mix. Respondent companies were asked to indicate how unique (i.e., different)
their company’s performance was compared to competitors in the foreign market they responded about for a number of company activities,
abilities, and behaviors. These were divided into two groups: (1) firm
specific advantages and (2) corporate perceived competitiveness. Measurement was obtained by using the following five-category numerical
scale: “much worse” (1), “worse” (2), “about the same” (3), “better”
(4), and “much better” (5).
Five dimensions were identified a priori for firm specific advantage,
some of which are composites of multiple measures. These dimensions
(and specific measures) are:
1. Product
2. Promotion
3. Distribution/Service
4. Pricing
5. Research
Quality of product, product technology,
strength of brand name.
Advertising/promotion activities, personal
selling activities.
Distribution network, before- and aftersale service.
Pricing strategy.
Researching the foreign market.
Corporate perceived competitiveness also was composed of five dimensions: (1) marketing expertise, (2) quickness to respond to market
changes, (3) financial resources, (4) flexibility in responding to market
changes, and (5) market connections in the foreign market.
The model underlying this study states that a key direct determinant
of firm performance is firm specific advantage, which is related to corporate perceived competitiveness and the importance to success in the
foreign market that companies attribute to specific marketing activities/strategies. To test this relationship correlation analysis is used.
These results are shown in Table 6. Regarding corporate competitive-
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ness, the correlations range from a low of .10 (financial resources/pricing) to .59 (market connection and research). Of the 25 correlation
coefficients 24 are significant (p < .01) and only one is not significant.
The one potential firm specific advantage that appears to be least affected by corporate competitiveness is pricing. When corporate competitiveness is summarized in two strategic dimensions (resources and
flexibility) all correlations become highly significant.
A mixed pattern emerges for the effect of perceived importance to
success. First, research is not related significantly to the importance of
any variable except research. The correlation (r = .22, p < .01) indicates
that companies who do better than their competitors are more likely to
believe that research is important to their success. Interestingly, while
most other correlations are significant at p < .01 or lower, the positive
values indicate that the importance of these activities is inversely reTABLE 6. Correlations of Firm Specific Advantages with Corporate Strategy
and Importance of Marketing Activities/Strategies to Success
Firm Specific Advantage*
Product/
Brand
Selling/
Promotion
Distribution/
Service
Pricing
Research
.24
.51
.41
.29
.39
.39
Corporate Perceived Competition:
Marketing Expertise
Quickness
.27
.42
.42
.35
Financial Resources
.43
.39
.50
.10a
.39
Flexibility
.20
.43
.44
.33
.34
Market Connection
.44
.49
.57
.20
.59
.48
.58
.65
.20
.57
.24
.46
.45
.32
.38
.55
.32
.52
.36
Summary Constructs:
Resources
Flexibility
b
c
Perceived Importance:
Product
Promotion/Advertising
.33
.60
Distribution/Service
.34
.42
Pricing
Research
.27
.33
.17
.49
.19
.57
a
.36
*Unless otherwise specified, all correlations are significant at p < .01.
a
Not significant. p > .05.
b
Includes marketing expertise, financial resources and market connection.
c
Includes quickness and flexibility.
.19
.39
a
.21
a
.47
.11
a
⫺.10
a
⫺.10
a
⫺.08
a
⫺.02
a
.22
Albaum et al.
123
lated to their advantages. In short, their advantages seem to exist independent of how important they feel a marketing activity/strategy is.
Propositions P3A and P3B asserted that there would be a positive relationship between firm specific advantages and corporate competitiveness activities and importance to success of marketing activities in the
foreign market being examined. On the basis of the correlation analyses, P3A cannot be rejected statistically, except for perceived importance of activities to success and research as a firm specific advantage.
However, substantively we can state that none of the perceptions about
importance of marketing activities contributes to firm specific advantages. Proposition P3B cannot be rejected on any dimension.
Firm Performance
The last link in the extension model is the effect on firm performance
of firm specific advantages and corporate perceived competitiveness.
Three measures of performance were used: (1) performance compared
to competitors in sales growth, sales volume, market share and operating profit, (2) performance compared to expectations in sales growth,
sales volume, market share and operating profit, and (3) overall performance compared to expectations. In all measures a five-category numerical scale was used–much worse (1), worse (2), the same or as
expected (3), better (4), and much better (5).
It will be noted that these measures of performance are subjective
rather than objective such as actual sales and profit measures. Subjective measures incorporating management satisfaction provide a different perspective (Evangelista, 1994). Although actual sales and profits
are important, a given level of performance does not provide a standard
for judging whether the level is related to expectations and objectives
compared to competitors (Bonoma and Clark, 1988). In addition, expectations were used to simplify the analysis. These composites combined ratings for growth, volume, market share and profit.
As shown in Table 7, respondent companies believe their performance compared to competitors in the year prior to data collection was
slightly better. At the same time, performance about matched expectations, For not one measure was there a significant difference due to foreign market area being marketed to. Overall respondents felt their
performance had been just as expected and there were no differences
due to market area (p < .85).
The extension model postulated that export performance would be
positively related to the firm specific advantages and corporate strategy
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TABLE 7. Perceived Performance
Performance Relative
to Competitors
a
Performance Compared
to Expectation
Mean Value
pb
Mean Value
pb
Sales Growth
3.28
.92
2.99
.33
Sales Volume
3.30
.99
3.05
.39
Market Share
3.15
.86
2.92
.60
Operating Profit
3.11
.36
2.85
.52
Measure
a
Measured
b
on a scale of 1-5 where 1 = much worse and 5 = much better.
Significance of ANOVA for difference by market area responded for.
competitive advantages perceived to exist by a firm. A correlation analysis was run to examine the relationship. These findings are reported in
Table 8. All correlations are positive, which is the predicted direction.
Examining firm specific advantages we see that pricing is the only variable that is not significantly related to all these performance measures.
Both promotion/advertising and marketing research are not significantly related to performance meeting expectations. All other correlations are significant.
Turning to corporate strategy (i.e., corporate perceived competitiveness), the major dimensions were summarized into two variables. First,
what we call “resources” consists of competitiveness in financial resources, marketing expertise, and connections in the market. The second variable, “flexibility,” is comprised of flexibility and quickness in
responding to market changes. Examining Table 8 further we see that
all correlations between corporate strategy and export performance are
highly significant.
On the basis of these findings, P4 cannot be rejected, although there
are some weaker links in firm specific advantages’ effects on export
performance.
CONCLUSIONS
A contingency-based model of extension of marketing activities and
export performance was proposed. Seven propositions were generated
from this model and tested by the experiences of a sample of Hong
Kong-based companies. The only proposition that was rejected was
P1A. The results of the study did not support the contention that extent of
extension initially would vary by decision-making orientation, on the
basis of the EPRG schema.
Albaum et al.
125
TABLE 8. Correlation Between Subjective Export Performance Measures and
Firm Strategic Advantage and Corporate Advantage
Performance
Relative to
Competition
Performance
Compared to
Expectations
Overall
Performance
Firm Strategic Advantage:
Product
.35**
.23*
.19*
Promotion/Advertising
.24**
.14
.19*
Distribution/Service
.33**
.20*
.26**
Pricing
.03
.16
.10
Marketing Research
.32**
.16
.26**
Resources
.39**
.26**
.24**
Flexibility
.29**
.27**
.29**
Corporate Strategy:
*p < .01.
**p < .001.
Export performance is shown to be directly affected by corporate
perceived competitiveness and strategic firm advantages. Firm strategic
advantages are based on the importance the firm attaches to marketing
activities/strategies. This importance is derived from the extent of extension of marketing operations from the domestic market. The making
of changes in specific activities and strategies are a function of need to
change as well as ability to change. Obviously, we assume that extent of
extension initially and where a company is now was based on assessment by management of the need and that companies had the ability to
do so. Market places are not static, at least in the short-run. Changes
may occur in competitive conditions, consumers’ behaviors and attitudes, the governmental environment, and so forth. Changes in the environment as well as changes within the firm typically lead to changes in
firm behavior. Our analysis does not need to control specifically for external changes as where the firm is today and perceived importance to
success reflect company responses.
In addition to supporting–or failing to reject–the basic foundation of
the extension model, other interesting findings emerged. When comparing what firms are doing “today” with what they did in initial entry into
a foreign market we see that “current” activities in the foreign market
tend to be closer to activities in the domestic market. Thus, it may be
that firms are reverting to what they know best–a kind of core competence–or they have learned in the foreign market and have changed their
ways of doing things at home. This could be extension in reverse.
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There is a temptation to compare directly extension with performance.
To do so, of course, means that one ignores the literature. We did attempt
to assess the direct relationship between extension–initially and today–and performance. No significant relationship could be assessed.
Thus, the present study confirms what others have found in this regard.
There is need to further explore this phenomenon with samples of firms
based in other countries. This would address external validity concerns.
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SUBMITTED: July 2002
FIRST REVISION: September 2002
SECOND REVISION: October 2002
ACCEPTED: November 2002
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APPENDIX
TABLE A1
Marketing Characteristics and Strategic Behaviors
Quality of Your Product
Product Technology
Research and Developing of Your Product
Production Cost
Strength of Brand Name of Your Product
Marketing Expertise
Advertising/Promotion Activities
Financial Resources
Distribution Network
Personal Selling Activities
Before and After Sales Services
Pricing Strategy
Quickness to Respond to Market Changes
Flexibility in Responding to Market Changes
Connections in That Foreign Market
Researching for Foreign Market
Albaum et al.
129
TABLE A2
Performance Measures
a. Compared with your competitors, how would you rate your performance last year in each of the following areas:
Much Worse
Worse
About the
Same
Better
Much Better
Sales Growth
1
2
3
4
5
Sales Volume
1
2
3
4
5
Market Share
1
2
3
4
5
Operating Profit
1
2
3
4
5
b. Compared with your expectations, how would you rate your performance last year in each of the following areas:
Much
Worse
Worse
As
Expected
Better
Much
Better
Sales Growth
1
2
3
4
5
Sales Volume
1
2
3
4
5
Market Share
1
2
3
4
5
Operating Profit
1
2
3
4
5
c. Overall, how would you rate your company's performance last year:
___Much worse than expected
___Worse than expected
___Just as expected
___Better than expected
___Much better than expected