Download The Paradox of Standardization and Localization

The Paradox of Standardization and
Localization
A case study on Kvadrat´s success of standardized marketing
communication strategy in China
Kitti Szekeres (403016)
1/6/2014
Supervisor: Sara Hamid Alwan
403016
Master Thesis
MA in Corporate Communication
Table of Contents
Table of Figures .............................................................................................................................. 4
Abstract ........................................................................................................................................... 6
Introduction ..................................................................................................................................... 8
Problem statement ..................................................................................................................... 11
Delimitations ............................................................................................................................. 12
Scientific Approach & Methodology ........................................................................................ 12
Scientific paradigm ................................................................................................................ 12
Methodology.......................................................................................................................... 14
Validity .................................................................................................................................. 15
Research design and method ................................................................................................. 15
Data collection ....................................................................................................................... 16
Data analysis .......................................................................................................................... 16
Thesis Structure ......................................................................................................................... 17
Choice of theories...................................................................................................................... 19
Importance and Implications of this Research .......................................................................... 23
Theoretical Framework ................................................................................................................. 25
Globalization of markets ........................................................................................................... 26
International Marketing Standardization ................................................................................... 33
Critiques to the strategy of international marketing standardization ..................................... 38
International Marketing Localization Strategy ......................................................................... 40
The Strategy-Fit Approach ........................................................................................................ 42
Critiques to the Strategy-Fit Approach .................................................................................. 44
Business-to-Business (B2B) vs. Business-to-Customer (B2C) Sector ..................................... 45
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Blue Ocean Strategy .................................................................................................................. 46
Planning in Management ........................................................................................................... 53
Environmental Analysis ........................................................................................................ 53
Types of decisions ................................................................................................................. 54
Stakeholder theory & The Stakeholder Salience Model ........................................................... 55
Case Study .................................................................................................................................... 59
Introduction to Kvadrat ............................................................................................................. 59
Stakeholder Identification ......................................................................................................... 60
Foreign Market Characteristics ................................................................................................. 62
Strategic Environment of Kvadrat A/S in Denmark .............................................................. 62
Strategic Environment of Kvadrat in China .............................................................................. 64
Firm/Management Characteristics ............................................................................................ 68
Tactical Level ........................................................................................................................ 68
Operational level.................................................................................................................... 69
Product Characteristics .............................................................................................................. 70
Strategy-Fit? .............................................................................................................................. 70
The Blue Ocean Strategy and Kvadrat ...................................................................................... 72
Discussion ..................................................................................................................................... 76
Advertising transferability......................................................................................................... 76
How to survive the future Red Ocean? ..................................................................................... 79
Balancing the paradox of standardization and localization ....................................................... 81
Conclusion .................................................................................................................................... 85
Appendix ....................................................................................................................................... 87
Bibliography ................................................................................................................................. 88
Number of characters without spaces: 136417, corresponding to 62 standard pages
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Table of Figures
Figure 1 - Visual Overview of the Thesis Structure ..................................................................... 18
Figure 2 – Framework for Determining International Marketing Strategy. Source: (Cheon, Cho,
& Sutherland, 2008). ..................................................................................................................... 34
Figure 3 – Framework for Determining International Advertisng Strategy. Source: (Cheon, Cho,
& Sutherland, 2008). ..................................................................................................................... 35
Figure 4 – Conceptual Framework for Meta-Analysis. Source: (Tan & Sousa, 2013) ................ 37
Figure 5 – An External Environment Analysis. Source: (Ramarapu, Timmerman, & Ramarapu,
1999). ............................................................................................................................................ 43
Figure 6 – Strategy-fit Analysis. Source: (Katsikeas, Samiee, & Theodosiou, 2006). ................. 44
Figure 7 – How to Create the Blue Ocean Strategy. Source: (Kim & Mauborgne, 2005). .......... 48
Figure 8–The Strategy Canvas. Source: (Kim & Mauborgne, 2005). .......................................... 49
Figure 9 – The Four Steps of Visualizing Strategy. Source: (Kim & Mauborgne, 2005). ........... 50
Figure 10 – The Three Tiers of Noncustomers. Source: (Kim & Mauborgne, 2005). ................. 50
Figure 11 – The six conventional boundaries of competition. Source: (Kim & Mauborgne, 2005).
....................................................................................................................................................... 51
Figure 12 – Analysis on which Blue Ocean Idea is worth implementing. Source: (Kim &
Mauborgne, 2005). ........................................................................................................................ 52
Figure 13 – Fair Process. Source: (Kim & Mauborgne, 2005). .................................................... 53
Figure 14 – 10 Steps of Analyzing the Strategic Environment. Source: (Lynch, 2011). ............. 54
Figure 15 – Types of Business Management Decisions. Source: (BBC.co.uk, 2014). ................ 55
Figure 16 – Stakeholder Salience Model. Source: ........................................................................ 57
Figure 17 – Selected Financial Data. Source: (Abbott & Groysberg, 2013). ............................... 61
Figure 18 – Rationalization Strategy of the T & C Industry. Source: (Olsen, Ibsen, &
Westergaard-Nielsen, 2004) ......................................................................................................... 62
Figure 19 – Porter´s Five Forces Analysis on Kvadrat A/S in Denmark. Based on: (Porter M. ,
1990) & (Bayer, 2008). ................................................................................................................. 64
Figure 20 – Key Success Factors for Kvadrat in China. Based on: (Lynch, 2011). ..................... 66
Figure 21 – Porter´s Five Forces Analysis on Kvadrat in China. Based on: (Porter M. , 1990). . 67
Figure 22 – The Strategy Canvas of Kvadrat in China. Based on: (Kim & Mauborgne, 2005). .. 73
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Figure 23 – Strategies of Advertising Transferability in Multinational Marketing. Source: (Sheth
J. N., 1978). ................................................................................................................................... 76
Figure 24 – A Checklist for Transferring Ads between Markets. Source: (Ipsos, 2013). ............ 78
Figure 25 – SWOT Analysis on Kvadrat. Source: (Bayer, 2008). ............................................... 80
Figure 26 – The Paradox of Globalization. Source: (Bird, 2007). ................................................ 81
Figure 27 – Products: Global scale versus local customization needs. Source: (Bird, 2007)....... 82
Figure 28 – Innovation: need to build truly global networks instead of R&D islands. Source:
(Bird, 2007) ................................................................................................................................... 82
Figure 29 – Kvadrat´s Weibo presence as of 01.05.2014. Source: http://weibo.com/kvadratchina
....................................................................................................................................................... 87
Figure 30 – Kvadrat´s website. Source: www.kvadrat.dk ............................................................ 87
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Abstract
The aim of this thesis is to contribute to the discussion on the paradox of the international
marketing standardization and localization and by examining the case of Kvadrat in order to find
out why the use of the international marketing standardization strategy could be more beneficial,
even though the external environmental factors suggest the implementation of a more localized
approach.
The background of this paradox is the trend of globalization. Lewitt (1983, p93) defined the
globalization of markets as “companies benefit[ting] from enormous economies of scale in
production, distribution, marketing and management”. Despite the criticism, which claim that the
globalization of markets is dependent upon the market characteristics and conditions, Lewitt´s
(1983) was used as the background to be kept in mind throughout the thesis.
International marketing standardization can be defined as the use of the same marketing mix and
distribution and products across different national markets (Jain, 1989). According to the
advocates of this strategy, it is based on the homogenization of the consumers worldwide, further,
the economies of scale and scope provides competitive advantage for the companies choosing
this approach. Critiques argue that despite the greater economies of scale, the companies might
suffer due to suboptimal sales if the standardization is incompatible with the market specifics.
The proponents of this international marketing localization approach highlight the importance of
local adaption (Svensson, 2001).
There are several analytical frameworks which discuss how a company could determine which of
the above mentioned two strategies to use. Katsikeas, Samiee, & Theodosiou (2006) and
Ramarapu, Timmerman & Ramarapu (1999) offer insight into what aspects to consider before
choosing a strategy. Both of these frameworks are based on the premise that if the host and target
markets are similar than a standardized approach is beneficial, but in case they are profoundly
different, the localization strategy should be applied.
Furthermore, it has to be ackowledged that both strategies intend to generate competitive
advantage for the companies. However, the bestseller management book by Kim & Mauborgne
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(2005) argues that the competitive advantage is an overstated concept and instead of focusing on
fighting the competition, the companies should dedicate their resources to value innovation and
thereby making the competition irrelevant.
Since the ´opening up´ of China in 1978, thousands of foreign companies decided to set up
businesses due to favourable economic conditions and prospects for great return on investment.
However, as Gong (2003) argues the Chinese market still remains a difficult one for Western
companies to penetrate into, due to te profound dissimilarities in market conditions. Therefore,
this thesis sets out to analyze one of the success stories, the Danish textile manufactorer, Kvadrat.
It is currently the leading textile manufactorer in Europe and their products are available in the
Chinese market since 2010. The turnover, referential projects and the success of two showrooms
in Shanghai andd Hong Kong and the plans for a new showroom in Beijing indicate that the
company has managed overcome the difficulties with the use of a standardized approach
(Kvadrat, 2014).
One of the main premises of this thesis was that the Danish and Chinese market characteristics
are different, and even though a globalised approach can be used to resolve these differences, my
choice will fall upon the localized approach as a strategic solution and as a point of comparison.
The external environmental analysis verified this hypothesis. However, when examining
Kvadrat´s value proposition, it became clear that Kvadrat makes use of value innovation that
indicates to deliver products rendered of a higher quality than the competitors albeit in the
analysis section this will be reflected more upon in order to determine if the current competitors
can match that. In the metaphorical terms of the Blue Ocean Strategy, currently, Kvadrat
operates in a competition-free ´blue ocean´, which might become a ´red ocean´ over time. In the
Discussion section, this issue will also be addressed.
The main findings of this thesis include the beneficial aspect of international marketing
standardization and also the debatable notion of the paradox of the international marketing
standardization and localization, since the company should center on value innovation instead of
gaining competitive advantage.
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Introduction
There is no single formula for creating and implementing a successful business communication
strategy. Since the trend towards globalization of markets turned out to be one of the most
significant processes in the 21st century (Tan & Sousa, 2013), it has become increasingly difficult
to ignore this in both the long-term oriented and day-to-day business operations, resulting in
more opportunities as well as challenges with regards to the development of profitable business
solutions across multiple national markets. Consequently, the international business community
remains divided and heavily debated regarding the topic of whether international marketing
strategies should be either more standardized or more localized and their intended effects
regarding the market of wither gaining competitive advantage through economies of scale or
trend more toward acknowledging the differences of the various national markets (Jun &
Zhiqiang, 2008).
International marketing standardization can be defined as the use of the same products,
distribution, price, promotion programs and marketing communication strategies across different
markets (Jain, 1989). According to Yip (2003), standardization may offer economies of scale,
but in certain cases it might lead to suboptimal sales, because it may be incompatible with the
characteristics of the host market. Therefore, Katsikeas, Samiee & Theodosiou (2006) proposed
a conceptual framework on examining the characteristics of a host market in order to determine
whether the standardization or localization strategy should be implemented. This analytical tool
concerning the strategic fit to the new situation and environment will be one of the major pillars
of this thesis.
According to Tallman & Yip (2001), there are three major strategic issues to consider when
multinational corporations (MNCs) go global. Firstly, the geographic spread, secondly, the local
adaptation and localization, and thirdly, the global integration, meaning to what extend MNCs´
business operations in different national markets are integrated. The last two problems entail the
paradox of standardization or localization. As pointed out above, even though this topic bears
great importance for both researchers and managers, marketing theorists and practitioners still
remain divided about the advisability of using a standardized or localized marketing
communication strategy. As Coope (2004) argues, success is not only dependent on the
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implementation of localized or standardized strategic solutions, but it is also vital to
communicate these choices to the stakeholders.
One of the main reasons behind the fact that the companies are extremely focused on balancing
the paradox of standardization or localization is to gain competitive advantage. However, one of
the most sold management books in the US and China, The Blue Ocean Strategy by Kim &
Mauborgne (2005) argues that instead of focusing on fighting the competion, the companies
should put their efforts into value innovation, meaning that the company´s offering becomes
unique by delivering a different value set than the competitors, thereby making the competition
irrelevant (Kim & Mauborgne, 2005). The current state of competition is labelled as ´red ocean´,
and the competition-free stage is the ´blue ocean´. The theory has received several criticisms,
especially when it is compared with Porter´s Five Forces (Porter, 1986), since it has been argued
that a unique offering through value innovation does not make the competition irrelevant (Porter,
1990). Nevertheless, this theory still offers a different point of view, therefore it becomes
relevant when discussing why a standardized communication strategy could be beneficial.
Furthermore, another advantageous point of this theory is that it can be utilized at strategic,
tactical and operational levels, which corresponds to the analytical levels of external and internal
environment, which the decision about implementing the international marketing standardization
or localization communication strategy is derived from. Based on this ideal, it is vital for a
company or an organization to communicate these strategic choices, which gives a new
challenge for today´s businesses. This is due to the reason that if the communication strategy is
carried out in an inappropriate or insufficient way, it might damage or even break the
relationship with the various stakeholder groups, but a successful communication strategy has
great potential for strengthening the collaboration (Cornelissen, 2011). This is in line with the
argumentation of Pollach & Schlegelmilch (2005) who claim that too much communication
could turn out to be counterproductive, especially in the case when the words do not reflect and
mirror the company´s actual efforts. In line with Cornelissen (2011), within the framework of
this thesis, marketing communication is seen as being comprised of corporate and mass media
advertising, direct marketing, sales promotions, product publicity and sponsorship, further, the
marketing communication strategy is rather the planning phase, whereas the marketing
communication is the execution (Asche-Edmunds, 2014).
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One of the cases frequently analyzed is when Western companies are entering Asian markets.
Due to the market reforms, growing middle class and disposable income, China has become an
increasingly popular market to enter (Gong, 2003). Additionally, Rall (2007, p255) names China
as “one of the world´s most attractive heavens for foreign investments that are looking for
colossal returns”. Nevertheless, Chinese market is complicated to enter and even big Danish
companies with great know-how have experienced vast difficulties (Hall, 2012). Communicating
to the local market in an international manner does present its challenges that need to be
considered along the lines of business expansion, as cultural differences are what can make or
break a company’s success of entering the market and maintaining competitive advantage
(Coope, 2004).
One of the success stories is the Danish textile company, Kvadrat, which entered the Chinese
market in 2010. Kvadrat is Europe´s leading manufacturer of design textiles. Due to their
contract-based business model, they are working together with the world´s leading textile
designers and artists and architects in order to generate unique products and solutions to the
projects they are working on. Their referencial work includes the Reichstag, the Guangzhou
Opera House or the Museum of Modern Art in London (Kvadrat, 2014). With regard to the
Chinese market, the growing sales, turnover and plans for opening new showrooms in Beijing
besides the existing ones in Hong Kong and Shanghai suggest that Kvadrat has mastered the
challenges of the Chinese B2B market (Bayer, 2008). Consequently, the findings of a case study
on Kvadrat might serve as guidelines for other companies in order to overcome the paradox of
deciding between the international marketing standardization or localization aspect by looking at
it through a communicative point of reference when engaging in the local Chinese market.
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Problem statement
Taking a point of departure at the dilemma facing the international companies, which are
entering new markets, this thesis will examine: The Danish textile company, Kvadrat´s
marketing communication strategies in the Chinese market in order to answer the
universal question: Why is it beneficial to use international marketing standardization, in
case the market and environmental characteristics should point to alternate market strategy
adaptation?
Research questions:
1. To help the thesis understand the context of its problem statement, it will first attempt to
explain the conceptual framework, which dictates marketing communication. It does so
by answering the following problem statement: What is globalization and how does it
affect the choice on marketing communication standardization or localization?
2. Due to the above mentioned circumstances in a globalized marketspace, one of the
premises of successful corporate communication is to gain competitive advantage and
communicating this via an up-to-date and relevant message to the most important
stakeholders (Cornelissen, 2011). Therefore, the Theoretical Framework part of this
thesis (p26) will answer to the following question: How does the choice of the
international marketing standardization or localization in line with the Blue Ocean
strategy reflect the strategic communication aspect of marketing globally in a specific
location as China?
3. Successful communication outcomes do not only depend on the chosen strategy, but also
on the characteristics of the audience. In order to answer the problem statement on which
approach would be prefered regarding Kvadrat the following research question needs to
be answered: How did Kvadrat deal with the paradox of international marketing
standardization or localization from a communicative perspective and is this choice in
with with the Blue Ocean strategy and the needs of the audience?
4. Based on the analytical findings, the Discussion part of this thesis (p74) will attempt to
debate the marketing communication strategic choices of Kvadrat by answering the
following question: How do the analytical findings from the case study on Kvadrat reflect
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on the above mentioned theories in general and what are the future prospects for
development?
Delimitations
As mentioned above, international marketing standardization is comprised of several aspects,
such as price or distribution standardization (Jain, 1989), however, the following thesis will be
based on the communication aspect, thereby excluding the other issues which could be
standardized or localized, such as Kvadrat´s positioning strategy. Furthermore, Kvadrat has
recently engaged in B2C sales, but their main focus is still on the B2B segment, therefore this
thesis is also limited to the B2B context.
In this thesis, the empirical results will be focused on Kvadrat´s marketing communication
strategy in China and it will exclude the other markets, such as Singapore or USA. In line with
this, the geographic focus will be the People´s Republic of China. Consequently, the aim of this
thesis is not produce an all-encompassing theory, but to formulate some industry-, country-, and
market- specific trends, which – after further research and verifications – might be generalized.
Due to the number of pages, this thesis will not encounter a comparative study, however, this
will be proposed as a future research option in order to test the results of this thesis in a crosscountry or cross-industry perspective.
Scientific Approach & Methodology
Scientific paradigm
The purpose of this section is to introduce the chosen scientific paradigm of this thesis and to
present the opportunities and challenges of this decision.
This thesis is based on the social constructivist paradigm. According to Guba (1990, p326), this
paradigm can be defined as: “a basic set of beliefs that guides action”. Furthermore, social
constructivism is about “reconstructing the ´world´ at the only point at which it exists: in the
minds of constructors” (Guba, 1990, p327). The main advantage of this approach is that
according to the constructivist paradigm there are different set of realities, not just one (Guba,
1990), which indicates that not only a certain set of possible answers can be generated for the
problem statement, but it also entails that the findings of this thesis need to be treated from a
dynamic and case-specific point of view. This is in line with (Hansen, 2010), who claims that in
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the field of corporate communication, equally valid answers or solutions can coexist. Therefore,
this paradigm allows the researcher to produce several answers to the problem statement,
consequently, to generate broader recommendations with regards to the marketing
communication strategy when operating in different national markets. The conclusion and
findings of this research will not be ´definitive truth´, but rather ´real´ reality, or as Bryman
(2008, p25) puts it, “the researcher always presents a specific version of social reality, rather than
one that can be regarded as definitive”. Nevertheless, it should be acknowledged that this
characteristic does not make the results of this study less valid or relevant, since: “Realities are
multiple, and they exist in people´s minds” (Guba, 1990, p327).
Social constructivism originates from various sources; it was influenced by social psychology,
social history and hermeneutics. It also influenced different writings, such as Immanuel Kant or
Karl Marx. The sociology of knowledge or the history of ideas share similar understandings as
the thoughts of the social constructivism. In general, social constructivism analyzes the the
individual and communal life from the social influences point of view. There are several
different adaption of social constructivism; however, all focus on the interconnectedness and
complexity of the individuals and community and refuse the idea of causality. According to
social constructivism, the interactions shape and create all parts of human life (Owen, 1995).
The “theory of knowledge” (Bryman, 2008, p15) is constructed by ontological, epistemological
and methodological levels. The ontological level refers to the existence of the world, whereas the
epistemology represents the relationship between the observer and the world; the methodology
clarifies the means through which the knowledge becomes accessible (Anonymous, 2014).
In line with Wenneberg (2002), social constructivism will be considered throughout this thesis as
an epistemological stance. Consequently, this thesis will regard the knowledge as “a human
construction, never certifiable as the ultimate truth but problematic and ever changing” (Guba,
1990, p329). Thus, the social reality is seen as social construction of knowledge, which is the
result of our thoughts, conversations, explanation and understanding (Wenneberg, 2002). This
constitutes the major drawback of this research paradigm, meaning that even though this thesis
intends to generate valuable results on the case study, these cannot be regarded as static or
universal findings.
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Since Hackley (2010) argues that advertising and marketing communications are socially
constructed, taking a point of departure at the social constructionism as an epistemological
position in a thesis on marketing communication strategies is a beneficial and legitimate
approach. This chosen stance has crucial implication for this thesis, since it has to be
acknowledged that the theoretical framework and the findings of the case study shall be viewed
as social facts and furthermore, these social facts are generally agreed upon.
The chosen scientific paradigm links strongly to the communication as a discipline, mainly by
defining a particular reality in which the communication process takes place. The constructive
perspective views all stakeholders and members of the communication process as being actively
engaged in producing meaning, which indicates that they work together through this process by
analyzing and information sharing. In order for the communication strategy to be successful, all
the participants need to collaborate together, thereby creating generally agreed upon social facts.
Consequently, this points out that within this social reality the companies have great
responsibility in making sure to shape the discourse in a way that it does not only make sense for
the various stakeholders, but they will be given the change to actively collaborate during the
whole process (Tobin & Tippins, 1993).
Methodology
In order to create consistency between the reflections and explicitness, the chosen scientific
paradigm does not only define the epistemological and ontological levels, but it also classifies
the methodological approach, namely the qualitative research. Furthermore, the qualitative
research is in accordance with the purpose and objectives of this thesis which is to gain new
knowledge by gathering in-depth data. As Maylor & Blackmon (2005) puts it, quantitative
research analyzes the relationship between variables, whereas the qualitative research is based on
observation of the gathered in-depth information in order to formulate knowledge about a
specific case (Bryman, 2008).
It has to be noted that in order to acquire a more focused and unbiased understanding of the case,
quantitative measures will also be employed so as to delimit probability errors. As the main
research design is the qualitative approach with an element of quantitative, these together will be
used to not only detect the presence of certain strategies, but also to what extent these strategies
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are relevant. This will result in analyzing whether Kvadrat uses a standardized or a localized
marketing communication strategy, what the reasons are behind this choice and how beneficial it
is for the company.
Validity
As argued above, the communication strategy will be viewed in a certain set of reality, and it is
essential to discuss the validity of the findings within this ever evolving context. As Maylor &
Blackmon (2005) puts it, the validity can be grouped into two types: a) internal validity and b)
external validity. The internal validity can be defined as causal relations within the study itself
(Bryman, 2008), indicating an underlying connection of the problem statement and the research
questions, based on the validity of the researcher´s pre-understanding reflected in the following
Theoretical Framework (p26). Furthermore, the internal validity also refers to the research model,
which is the fundament of solving the problem. All in all, it can be said that the internal validity
means that the whole study should be logical and clear in order to get sufficient and reliable
results.
Maylor & Blackmon (2005) claim that the external validity is about whether the research is
generalizable. With regards to this specific thesis, the internal validity is present within this
framework; however, as discussed above, due to the chosen research paradigm of social
constructivism, the findings generated here will only be valid to a certain set of reality, which is
ever changing. However, this does not mean that the thesis looses its importance; it only means
that it does not intend to formulate universal theories, but it rather aims to contribute to the
ongoing discussion and create valid points for future research.
Research design and method
The research design chosen will be the case study design within the social constructivist
paradigm. Bryman (2008, p56) defines the case study method as “a detailed and intensive
analysis of a single case”, which is also in line with the purpose of this particular thesis. The
Danish textile company, Kvadrat´s business operations in China, will be the used as a specific
case when it comes to the analysis of the standardized marketing communication strategy in the
host market.
According to Bryman (2008), the case study design gives a possibility to the researcher to
conduct a deeper and more profound analysis. The main aim of the case study is gain an
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insightful understanding of Kvadrat´s marketing communication strategy in China with special
regards to the needs of the target group.
Drawing upon the problem formulation, the qualitative research method is suitable for this
research, since its explanatory nature purposes to understand the words rather than the number
which is in accordance with the aim of this thesis as well.
In general, the Theoretical Framework (p26) will take a normative approach to the description of
the theories. This approach has been chosen; since it has been argued above that the companies
operate in a certain social reality according to the social constructivist paradigm and the
characteristics of this social reality – including reflections and argumentation why it is the most
relevant in this case – need to be introduced.
Data collection
Njusja de Gier, VP of Branding & Communication argued that in order to “lower marketing
expense or moving a lot more of our communications efforts online” (Abbott & Groysberg, 2013,
p17), consequently, the communication data will be derived from the official website of Kvadrat,
whereas the theoretical framework will be based on academic articles and books.
Data analysis
With regard to the data analysis, it is also important to define whether the thesis will employ a
deductive or an inductive approach. As Bryman (2008) points it out, inductive reasoning moves
from the specific hypothesis to the more general one, however, its main weakness is that the
conclusion might still be false even through the premises are true. Since this thesis moves from
the general arguments, such as the theoretical framework, to the specific case, namely the
analysis of the marketing communication strategy of Kvadrat in China, this thesis follows a
deductive logic.
Regarding the analytical process, the next subsection will clarify the theoretical foundation
which will be later on compared and contrasted with Kvadrat´s marketing communication
strategy. The theoretical concepts will be centered on localization/standardization; B2B sector,
and Blue Ocean Strategy. This will form the causal relationship between the theoretical
framework and the case study and the findings of this thesis will be drawn upon the correlation
between the practice and theory within the chosen research paradigm.
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Thesis Structure
The following thesis is divided into 5 Chapters. As shown above, the purpose of the First
Chapter is to give a brief introduction to the following research. As a part of this, the problem
statement and the research questions have been formulated, whereas the main scientific paradigm
and methodology were introduced as well. This serves at the background to the research,
moreover, the literature review will present the readers with a suitable frame for the thesis.
The Introduction is followed by the Theoretical Framework (p26), which will function as a
fundament for the Analysis, whereas it also intends to provide a brief literature review regarding
the topic of standardization versus localization, strategic management and the Blue Ocean
Strategy. This will allow a deeper understanding of the case of Kvadrat in China. The main
topics covered by the Theoretical Framework will be the following ones: first of all, it is going to
discuss the current trend of the globalization of markets and its implications on businesses
(Lewitt, 1983). Afterwards, a discussion on international marketing standardization and
localization (see e.g. Cheon, Cho, & Sutherland (2008); Tan & Sousa (2013); or Svensson,
(2001)) will be presented followed by an introduction to the B2B marketing (see e.g. Bingham,
Gomes, & Knowles (2005), or Garber & Dotson (2002)). This will be supplemented by the
introduction to the field of strategic management (Lynch, 2011) and the theory on how to create
uncontested marketspace by Kim & Mauborgne (2005). Additionally, the Theoretical
Framework (p26) will also clarify the analytical notions of strategic, tactical and operational
levels of communication.
Chapter Three will be devoted to the case study (p58). It will begin with a brief introduction to
the company Kvadrat, followed by analysis of the macro- and microeconomic environment in
both Denmark and China. This comparison will serve as the basis for determining to what extent
the Chinese design textile market differs from the Danish one; moreover, it will also include an
investigation at strategic, tactical and operational levels. This analytical data will be then put into
the framework posed by Katsikeas, Samiee, & Theodosiou (2006) and it will be determined
whether Kvadrat should use its marketing communication strategy based on an international
marketing standardization or localization strategy and how the success of Kvadrat fits into the
conceptual framework of this theory.
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Furthermore, applying the Blue Ocean Strategy by Kim & Mauborgne (2005) would give insight
into the strategies used by Kvadrat and since it theory is applicable to all the three levels –
strategic, tactical and operational -, it would generate valueable results on the benefits of a
standardized approach to marketing communication.
Chapter Four will give room for several topics of discussion (p74). First of all, it will be debated
on how to balance the paradox of standardization or localization and whether there are some
ways to combine there two approaches (Parnell, 2006). It will also be talked about to what extent
the advertisements are transferable from one market to another and what the main strategies are
in relation to making sure that the audience can make sense of standardized and translated
marketing communication materials (Ipsos, 2013). This section will end by an argumentation on
– given the not static notion of the ´blue oceans´- what the possibilities are for Kvadrat in
moving to another blue ocean, in case the current market will turn into a red ocean, meaning that
the company needs to face with increased competition (Kim & Mauborgne, 2005).
Chapter Five will end this thesis by concluding remarks (p84).
Figure 1 - Visual Overview of the Thesis Structure
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Choice of theories
The thesis has several parts which logically intend to contribute to solving the problem statement.
The main aim of this thesis is to examine the marketing communication strategies of Kvadrat.
Since the purpose of this thesis is to investigate the Chinese market, Kvadrat´s marketing
communication in China will be discussed and the other markets the company is operating at will
be excluded from this analysis. As argued above it has been a difficult to market to enter for a
number of Danish companies and Kvadrat´s turnover shows that it managed to operate
successfully on this market (Hall, 2012), indicating that it could serve as an example for other
companies.
The thesis began by introducing the problem statement, objectives, and research paradigm. The
social constructivist paradigm entails that this thesis will be conceptualized within a certain
version of reality. In order to set this reality, the theoretical framework will introduce the most
important scholars and the reason why they are relevant in the framework of this thesis.
The Theoretical Framework (p26) will begin by a conceptualization of the globalization of
markets by Lewitt (1983). Since he first coined this term and he greatly influenced the future
research, his original article has been chosen. He is an advocate of the global convergence
approach, which is one of the main pillars of this thesis, since it claims that the globalization
takes places due to the technological advent and the key for gaining a competitive advantage is to
realize this tendency and standardize all the marketing strategies. This theory is suitable, because
it claims that it is enough to translate the messages and other alterations are not necessary, which
is one of the crucial questions of this thesis. Lewitt (1983) based his argumentation on he
technological advent that has driven the world towards a new commercial reality, where the
global markets, which are bombarded with standardized consumer products, emerged. The
concept of global strategy and globalization of business came forward in the 1980s. Lewitt (1983,
p92) argued that: “Companies must learn to operate as if the world were one large market –
ignoring superficial regional and national differences”. According to Sheila & Croucher (2006)
globalization can be defined as a process resulting in the unification of the people – on economic,
technological, socio-cultural and political levels - into a single society. In the framework of this
thesis, globalization will not only be conceptualized as the common understanding in the
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mainstream media, namely as economic globalization leading to an international global economy
(Jagdish, 2007), but it will rather be referred to as an approach to global convergence, indicating
that the world is treated as one market (Wit & Meyer, 2010). Additionally, Lewitt (1983) claims,
that those companies, who fail to adapt to new circumstances, will suffer an enormous
disadvantage to those who succeed. In general, Porter (1990) argues in line with Lewitt (1983),
however, he (1990) advocates that the standardized strategy should involve localized elements in
order to acknowledge the differences across national markets.
The critical scholars to this approach advocate the localization approach. Chronologically seen,
the localization approach was developed before the standardization approach of global
convergence by Lewitt (1983) (Smith, 1956). For analytical purposes, this thesis will only take
into account the most cited scholars, since these are the most developed and all-encompassing
theories available. Moving onto the perspective of localization, the concept can be defined as the
opposite of globalization, namely that the companies become responsive to local demands and
national differences (Wit & Meyer, 2010). The advocates of this approach promote that there are
still vast cultural and political differences across the regions and countries; therefore it is crucial
for the businesses to adapt to local uniqueness. Furthermore, they also argue that the universality
of the customer needs is only valid in limited circumstances, so it is essential for the companies
to be flexible to change their operation or order to suit the local needs (Wit & Meyer, 2010).
In line with Parnell (2006), localization means that the company´s main concerns are the local
matters, indicating that the managers do not regard activities outside the host country as
important issues. The strategy of “acting local” requires “thinking local”, means that the
company´s efforts should mirror the localized and tailor-made decisions addressing the specific
needs of the situation.
In order to capture all possible aspects of this social reality, it is essential to take into account not
only the two opposite strategies, but also how this strategic choice should be made. There are
scholars who are only advocates of one of the perspectives, however, there are others, for
instance Katsikeas, Samiee & Theodosiou (2006), who root their point of views from the
contingency theory and thereby stating that the situational factors should decide whether a
localization or standardization strategy is more suitable for the company. Since only 12% of the
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academic articles mention this approach, this thesis also set to determine the relevance of this
approach within the paradox of international marketing standardization or localization (Katsikeas,
Samiee, & Theodosiou, 2006). There will be several approaches and models presented in the
Theoretical Framework which attempts to model and investigate the decision behind a
standardized or localized communication.
Many researchers have conducted a meta-analysis in order to examine the status of international
marketing and advertising (e.g. Jain (1989), Agrawal (1995) or Estelamia, Lehmann, & Holden
(2001)). However, these researches have not produced consistent findings (Cheon, Cho, &
Sutherland, 2008). The most all-encompassing data-set is used by Cheon, Cho, & Sutherland
(2008); therefore, this thesis will use their analytical results. Cheon, Cho, & Sutherland´s article
(2008) is centered on the comparison of standardized and localized strategies based on a metaanalytic methodology, which is further based on qualitative statistical results since an initial
study was conducted by Elinder (1961).
As mentioned above, the main aim of the standardized or localized strategical decision is to gain
competitive advantage. However, the bestseller management book in the US and China by Kim
& Mauborgne (2005) claim that instead of focusing on the competitive advantage, the companies
should utilize their resources in order to create a different product offering. Operating on various
international markets implies fierce competition and the choice between using a standardized or
localized marketing strategy. These are all based on the market characteristics; therefore, the
analysis intends to compare and contrast the the Danish and Chinese market characteristics and
thereby contributing to the literature on the paradox of standardization or localization.
Furthermore, the marketing communication strategy does not only need to take into account the
stakeholders (for which a stakeholder analysis will be conducted) but also the competition when
it designs its business communication strategies. Therefore, the Blue Ocean strategy will be
employed to analyze whether Kvadrat faces fierce competition and whether it is reflected in the
communication efforts.
This thesis intends to investigate the marketing communication strategy, further, the
globalization affects greatly the strategies of the organizations; therefore the field of strategic
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management needs to be introduced as well. The major scholar within this field is Lynch (2011)
who proposed several valuable models in order to investigate the strategic environment. These
models will be in detail depicted in the Theoretical Framework section, since they will contribute
to determining whether Kvadrat´s marketing communication strategy fits its strategic
environment. Strategic management can be defined as: “The field of strategic management deals
with the major intended and emergent initiatives taken by general managers on behalf of owners,
involving utilization of resources, to enhance the performance of firms in their external
environments” (Nag, Hambrick, & Chen, 2007, p943).
According to Lynch (2011) strategy formulation is referred to the company´s determination of
where it wants to go and how to get there, whereas it involves a list of practical steps, the tactics
on how to reach this business vision and the regular day-to-day management of these steps is
called the operational level. Furthermore, the strategic move is a “set of managerial actions and
decisions involved in making a major market-creating business offering” (Kim & Mauborgne,
2005, p10). Strategic management involves a crucial aspect, namely the perspective of
communication. One of the most important scholars within this field is Cornelissen (2011). The
reason behind integrating his book into the theoretical framework is that it integrates both the
academic and practitioner notions, thereby merging the practical issue with a comprehensive
theoretical framework in order to propose solutions for strategic and tactical communication
choices (Cornelissen, 2011).
The term of corporate communication can be defined as a
“management function that offers a framework for for the effective coordination of all
international and external communication with the overall purpose of establishing and
maintaining favourable reputations with stakeholder groups upon which the organization is
dependent” (Cornelissen, 2011, p5). This has crucial implications for this thesis. The strategies
will be examined from a communication point of view, since as the problem statement above
pointed out, furthermore, this indicates that it will be examined whether the marketing
communication strategies are sufficiently carried out and whether it suits the most important
stakeholders´ needs, thereby creating a favourable reputation for the company.
As mentioned above, one of the crucial aspects of examining the marketing communication
strategy is the stakeholder identification. Since the research paradigm of social constructivism
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provides an ever changing framework, a dynamic model of stakeholders has been chosen,
namely the Stakeholder Salience Model by Mitchell, Bradley and Wood (1997).
Importance and Implications of this Research
As previously referred above the debate over which approach is more viable as a preference to
market expansion regarding standardization or localization is not a new topic, however,
academia still has not yet reached a clear-cut conclusion on when to localize and when to
standardize. Therefore, this thesis intends to contribute to this debate by outlining the most
important findings and points of views, whereas the success of Kvadrat presents a suitable
example for analyzing the marketing communication strategy and the findings of this analysis
could produce valuable results not only for further research, but it might serve as a ´best practice´
case, generating guidelines on how to deal with different markets. Regarding the choice of the
company, a lot of businesses failed to set up a successful business in China, consequently,
Kvadrat can be regarded not only as a successful case, but also with its analysis it can contribute
with valuable case-specific relevant results for future debate and conceptualization.
Furthermore, since Kvadrat operates in a niche market, the Blue Ocean Strategy could help in
understanding what the reasons are behind the success of an international marketing
standardization strategy in case the market characteristics point to alternate market strategy
adaption. Consequently, this thesis might add to the debate on whether gaining competitive
advantage through the utilization of an international marketing standardization or localization
strategy or eliminating the competition through employing a Blue Ocean Strategy, which
indicates value innovation by providing quality product, service and after-sale service, could be a
more beneficial strategy when operating across various national markets.
Moreover, the ´Rise of China´ can be seen as one of the most important events of this century
(Rall, 2007). Today, China has the world´s 2nd largest economy; it is the biggest trading partner
of the EU and US, whereas its economy is expected to surpass the US´ by 2020. Compared with
the modernization of any country in the world history, China´s case is still a miraculous one due
to its size, political leadership, population and the rapidness of the development from a planned
to a socialist market economy (Gong, 2003). Since China still has a huge growth potential and it
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is profoundly different from the national markets in Europe, it is essential to examine a company
operating in this fast-growing and –changing environment.
To sum up Chapter 1, the aim of this section was to answer the first research question by
formulating the problem statement and clarifying the main context through which this problem
can be solved. This thesis intends to investigate the standardized marketing communication
strategy of Kvadrat in China and see whether the standardized or localized communication
strategy could be more beneficial, when companies are entering new markets and they are faced
with this dilemma. There will be several theorists and model used throughout the paper and this
section also shed light to the most important scholars applied, followed by stating the importance
of this paper. All in all, this chapter defined the main research paradigm as social constructivism
and depicted a brief conceptualization of the intended problem and the way to its solution within
this framework. However, it did not manage to give a deeper introduction to the models used
later in the case study; therefore, the following section will establish the theoretical foundation
for this paper.
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Theoretical Framework
The following section aims to provide the reader with a literature review in order to build a
theoretical foundation for the case study. Drawing upon the structure proposed by the second
research question, the objective of this part of the thesis is to clarify the concept of globalization
and its relation to the standardization or localization of the marketing communication strategy,
whereas it will also discuss the issue of gaining competitive advantage as proposed by the Blue
Ocean strategy, furthermore, the contract-based sales of Kvadrat indicates that this section will
also include an introduction to the B2B sector.
According to Bourner (1996), the literature review is an essential element of every research,
since it deepens the researchers´ knowledge about the certain field by pointing out the gaps and
opposing views in the literature, further, it also helps the researcher avoid the same mistakes
made by others before. Furthermore, Cooper (1988, p104) characterizes the literature review the
following way: “a literature review uses as its database reports of primary or original scholarship,
and does not report new primary scholarship itself. The types of scholarship may be empirical,
theoretical, critical/analytic, or methodological in nature”.
In academia, the concepts are continuously developed in order to be up-to-date with the real
world phenomena (Bryman, 2008). Therefore, it is essential clarify the notions used in this thesis
in order to avoid confusion and misunderstandings among the potential receivers.
The literature review will have the following structure: first of all, the globalization of markets
will be discussed followed by the international marketing standardization or localization and the
introduction of the strategy-fit theory. Later on, the difference between the B2B and the B2C
sectors will be defined and it will be depicted to what extent it is valid to use B2C theories for
the B2B sector. Afterwards, the Blue Ocean Strategy and its implications for the thesis will be
illustrated. At the end, there will be a brief summary about the strategic, tactical and operational
levels of analysis.
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Globalization of markets
In Chapter 1, the origins of the globalization theories have been pointed out; therefore, this part
of the thesis intends to review the concepts introduced above in a more profound and critical way.
As argued above, this section will take a normative approach in order to depict the historical
development on how the paradox of standardization and localization has been crucial. The most
important theorist in the following section will be Lewitt (1983). Even though his theory might
seem to be outdated, Svensson (2001) argue that Lewitt (1983) is one of the most important
scholars within this field and the theories are based on his ideas, therefore, the following section
will introduce his point of view.
One of the most important concepts of this thesis is the perspective of global convergence.
According to this approach, there is an increased internationalization of the world, due to which
the key to success lies in developing global brands and standardized products, which are sold
worldwide (Wit & Meyer, 2010).
As summarized above, Lewitt (1983, p93) claims that “a powerful force drives the world toward
a converging commonality, and that force is technology”. The technological advent will lead to
increased international communication and transportation, which will allow the customers to
purchase superior goods at affordable prices from other national markets, resulting in the
homogenization of the consumer behavior on the globe. This does not only affect the marketing
mix, but there is also an evolving tendency for communication standardization by increasing
economies of scale. Lewitt (1983) also makes a distinction between the multinational and global
companies, arguing that the first adapt its practices to the local environments, whilst the latter
operate in order to maintain consistency. Moreover, there are four groups of variables that drive
the companies towards globalization. These categories are the following ones: a) market, b)
competition, c) cost, d) government (Johansson, 2000). Originally, Yip (1989) discussed these
four drivers and concluded that the market drivers consist of homogenous needs of global
customers, global channels, resulting in transferable marketing, whereas the cost drivers are
comprised of the economies of scale, further, the government boosts the globalization by
favourable policies and regulations, whilst the competitive drivers are fostered by the
interdependence between the markets.
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Another main argument on why the globalization has become so essential is the rising
universality of the customers´ needs (Sheth, 1986). The factors behind this emerging trend could
be defined as access to foreign markets and international standardization of products and services
(Sheth, 1986).
As Parnell (2006, p22) puts it, globalization can also be viewed as the “intensification of world
consciousness where mass communication has the potential to break down national borders to
better satisfy the needs of consumers, markets, and organizations”. In this sense, globalization is
a process, during which the technological advent entails in political and economic liberalization
by bringing the world closer together, indicating that this process fits into the paradigm of social
constructivism, which has also a changing nature. Furthermore, this notion has certain
implications for the communication as a discipline, meaning that it needs to be able to serve
constantly homogenizing stakeholder groups across various markets (Parnell, 2006). Moreover,
it is essential to clarify the division between the concepts of action and thought. “Thinking global”
includes a global mindset indicating that the leaders of the company are instantly looking
forward to engage in new opportunities even outside the borders of the host country. However,
“acting” refers to the notion of how managers approach and handle these opportunities (Parnell,
2006).
There can be several reasons why companies shift their viewpoints from the domestic issues to a
rather global orientation. Operating globally might lead to reducing the per-unit production costs
due to the rising volume, whereas it also decreases the risk of competition by reaching
economies of scope including more efficient distribution and marketing operations. Even though
the global consumer culture is still a highly debated topic, trends point to the direction of
disappearing localized preferences replaced by cheaper standardized consumer goods at higher
quality. This development has facilitated the sales of the same products across different national
markets. On top of that, production is not only outsourced to low-wage countries, such as the
ones on South-East Asia, but due to their vast population these emerging economies provide
great business opportunities as well (Parnell, 2006).
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The theory of globalization has received several criticisms. For instance, Jeannet & Hennessey
(1992) write that the term globalization merely replaces the concept of ´international´. Whereas
Lorenz (1986, p102) suggests that the notion of globalization cannot be unanimously defined,
indicating that: “The permutations of meaning are confusing, not to say bewildering. To most
people the only certainties are that globalization has become fashionable, and that it represents a
daunting new challenge of indefinable proportions”. Despite these critiques, this thesis views the
concept of globalization as Lewitt (1983) has formulated it.
Communication is a vital mean of reaching and resolving the problems and challenges, the
companies need to face when working in different – though globalized - national markets (Coope,
Seeing the "Net potential" of online CSR communication", 2004). According to Cornelissen
(2011), the future perspectives of the company are dependent on how it communicates with its
stakeholders, furthermore, the globalization only strengthened this reality. As Anders Gronstedt
(in Cornelissen, 2011, p5) argues, corporate communication “inserts the various communication
disciplines into a holistic perspective, drawing from the concepts, methodologies, crafts,
experiences and artistries of marketing communication”. In general, this process is driven by a
certain reality: it could be market- or environment-based, fostered by internal challenges or
changes of communication technologies and strategies (Cornelissen, 2011). This is also in line
with the scientific paradigm of this paper, since social constructionism suggests that there are
multiple realities, indicating that the general communication process and its advancement is
subject to the characteristics of the dynamic formulation of social reality and environment
(Bryman, 2008).
There are a number of benefits and advantages of this global strategy approach. As Lewis (1983,
p93) puts it, “companies benefit from enormous economies of scale in production, distribution,
marketing and management”. In consistent with this point of view, Keegen & Green (2000) also
state that the global strategy approach gives significant competitive advantage over the other
companies. Additionally, Yip (1989) discusses the advantages of cost reductions, improved
quality and customer preference as well.
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Another proponent of the convergence perspective is Porter (1990). Porter (1990) agrees with
Lewitt (1983) that the world is becoming more and more integrated and global. The main
difference between these two theorists lies in the concept of international diversity. Porter (1990)
actually encourages this notion; whereas Lewitt (1983) claims that its importance is decreasing
which leads to international standardization. In accordance with this line of thought, Porter (1990)
concludes that the nation-specific characteristics are determinants when it comes to shaping a
country´s capacity, indicating that the companies should make an advantage of the specifics of
the national environments. To sum up, Porter (1990) advocates that the firms should not only
keep up with the trend of globalization, but they should also make a competitive advantage out
of the remaining unique characteristics of the different markets.
The global convergence perspective is a widely debated approach. For example, Douglas &
Wind (1987, p20) have an opposing point of view compared to Porter (1990). They call the
global convergence perspective as “somewhat polemic”, which is only valid in limited and very
particular circumstances.
Douglas & Wind (1987) criticize the global standardization on several levels. Firstly, they claim
that there is a lack of evidence on the homogenization of the customers worldwide and even
within the same country the consumer taste varies, secondly, low-price strategy has proven to be
a vulnerable one, whereas differentiation is more profitable and even a standardized product can
be priced and advertised variously in different countries. Most importantly, the economies of
scale can be a reason for global convergence, but it is not a plausible cause. Due to the modern
manufacturing process, the costs are lower, further, the manufacturing costs do not equal to the
final cost, but one needs to add the R&D, logistics and after-sale service. Consequently, Douglas
& Wind (1987) claim that the global convergence perspective is production-driven and it
neglects the other aspects of the marketing mix, such as place, product and price.
Douglas & Wind (1987) do not only criticize the global convergence approach, but they also
draw the attention to choosing between the strategy of adaptation or global convergence.
According to them, the adoption of a global perspective should not be regarded synonymously
with global products and brands but rather it should be a part of a more flexible, hybrid strategy,
meaning the existence of global brands with certain localized elements. This entails that
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businesses should not only enjoy increased economies of scale due to the standardized approach,
but they should also benefit from the adaption to the unique features of the countries, thereby
creating a favourable competitive advantage of optimized differentiation and economies of scale.
One of the reasons for this is that it is also crucial to take into consideration the trade barriers,
such as protective regulations and laws, not only the factors leading to global competition, such
as decreased logistic, marketing and production costs due to the economies of scale. This implies
that there is an evident question whether optimization of the production of communication
materials or investment in local communication and harvesting its advantages could be a better
option for companies operating across different national markets.
Nevertheless, Jeannet & Hennessey (1992) argue that the globalization of markets is subject to
market characteristics, and legal and industrial conditions. Yip (1989) also mentions certain
disadvantages of the standardized communication strategy. According to him, the global
approach can lead to unresponsiveness to the local needs and local customer behavior, since it
neglects the cultural differences, which can seriously impact the local competitiveness. However,
the companies face a crucial dilemma, when they decide about the standardized or localized
approach, since through the localized approach they might loose the competition with strong
global competitors, whereas a standardized approach might not be suitable when competing with
domestic businesses (Keegan, 1989).
It is a crucial to investigate the question of what it actually means to act locally within the
context of a globalized world. Parnell (2006) offers three main arguments for using the local
approach. Firstly, it has been argued that besides a few industries – such as consumer electronics
– the regional blocks are not integrated, which calls for a localized approach. Secondly, it might
be difficult to implement a consistent global communication strategy in certain industries, such
as the food and beverage industry. Thirdly, strict localization might be the key to reaching
competitive advantage. This could take a form of a joint venture or international strategic
alliance. These provide a number of advantages for the firms entering new markets, since the
partner´s knowledge could be essential for survival, further, it also minizes risk (Parnell, 2006)
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Sachdeva (2010, p15) argues in her critical review of Lewitt´s (1983) article that: “The
successful global corporation does not abjure customization or differentiation for the
requirements of markets that differ in product preferences, spending patterns, shopping
preferences and institutional or legal arrangements. But global corporations accept and adjust to
these differences only reluctantly, only after relentlessly testing their immutability, after trying in
various ways to circumvent and reshape them”.
However, this thesis views every organization as a different case; therefore, it does not try to
generate all-encompassing recommendations on how the companies should deal with this
dilemma. It rather attempts to list the possible outcomes, such as Parnell (2006) above suggested
and every organization should decide for itself according to its resources and environmental
characteristics which strategy to choose.
This notion also has a crucial impact on communication as a discipline. In order for the company
to act according to the social reality it operates at, it is a significant decision to introduce a
feedback mechanism into its communication practices. Due to this real-time data, the companies
will be enabled to react quickly and accurately in case the social reality of certain characteristics
is changing. Consequently, the key to a successful communication strategy does not necessarily
lie in “testing immutability” (Lewitt, 1983, p102), but rather in evolving with the ever-changing
globalized environment (Cornelissen, 2011).
To conclude, there are three basic arguments supporting the global convergence perspective by
Lewitt (1983). First of all, the main advantage is the economies of scale and more centralized
decision making within the company, whereas the homogenization of the customer needs, in
particular the trend that customers are willing to sacrifice national preferences for increased
product features at a more affordable price (Lewitt, 1983). Despite the criticisms, Lewitt (1983,
p96) argues: “What works well for one company or one place may fail for another in precisely
the same place, depending on the capabilities, histories, reputations, resources, and even the
cultures of both”.
With regards to corporate communication, this section has outlined that companies increasingly
realize the need for implementing those communication strategies, which are suitable for the
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different stakeholders. Furthermore, the characteristics of these stakeholders are shaped by the
social reality, the company is operating in, which is in line with the chosen research paradigm of
this thesis, namely with social constructivism. Moreover, it has also been mentioned that due the
fact that this reality is socially constructed and thereby changing on an ongoing basis, it is crucial
for companies aiming to implement a successful communication strategy to introduce a feedback
mechanism into the communication process, through which it become a two-way practice. This
will enable them to take accurate and timely actions in case the circumstances change
(Cornelissen, 2011). All in all, this thesis views the trends of globalization as the major
framework of the current reality, entailing that the companies will need to face global as well as
regional challenges, which can be tackled by a standardized approach in order to reach
economies of scale.
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International Marketing Standardization
As conceptualized above, marketing principles and practices have been challenged by the new
dynamic paradigm of international business and international marketplaces. One of the most
frequently debated issues within the literature on international marketing communication and
advertising is focused on the dilemma of the standardization or localization of marketing efforts
across markets. The paragraphs above already clarified the general theoretical foundation on how
this dilemma emerged; and in order to contribute to solving the problem statement, the following
paragraphs will illustrate one of the strategies, namely this part of the thesis will introduce the
most important theories within the field of international marketing standardization, whereas the
next subchapter will be centered on the localization strategy. Despite the nascent literature within
this field, the concept of international marketing standardization can still be defined unanimously.
According to Jain (1989), the concept can be classified as the use of common products and
marketing mix across different national markets.
Chronologically seen, the form of standardization approach evolved before the localization
approach, since naïve companies assumed that the foreign markets have similar characteristics as
their home ones (Ramarapu, Timmerman, & Ramarapu, 1999).
In order to create a more adequate picture on international standardization communication
practices, Cheon, Cho & Sutherland´s article (2008) investigates three issues: 1) it analyses the
marketing mix, target market, market position, environmental and organizational factors; 2) it
scrutinizes four types of moderators connected to the desired degree of standardization or
localization, namely, agency/company, consumer, media, ad message/execution; 3) it conducts a
combined evaluation on regional differences and marketing-related operational factors. They
used 128 statistical models in 152 studies published in 10 major business journals during 19602004, consequently, it can be argued that Cheon, Cho & Sutherland (2008) have conducted a
thorough analysis in the field of international marketing standardization. Their main finding is
that there is support for standardization strategy with regards to the marketing mix and
organizational factors, whereas the conceptual advertising moderators, such as sender, receiver,
values, channel, etc., are greatly influenced by the localization strategy.
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Figure 2 – Framework for Determining International Marketing Strategy. Source: (Cheon, Cho, & Sutherland, 2008).
According to Jain (1989), the international marketing strategy depends on diverse factors,
including the market position, target market, environment and organizational approaches. In
consistent with this argument, Cheon, Cho & Sutherland´s (2008) meta-analysis has shown that
the aspects of economic factors, market segmentation and market infrastructure have a
considerable impact on the localization strategy. Even though there is a positive correlation
between the characteristics of the host market and the localization strategy, Cheon, Cho, &
Sutherland (2008) claim that the localization approach fails to provide any significant difference
between how well the standard or the localized approach serves the needs of the target market.
Corresponding to this finding, Shoham (1999) also concludes that the standardized approach has
the advantage of maintaining a consistent worldwide image associated with high-quality; further,
despite that there are persistent differences between the consumers across different markets, and
these differences are vanished by high-quality products for lower prices. Nevertheless, Cheon,
Cho & Sutherland (2008) recognized that the biggest weakness of their analysis is that the global
target market relationship is open to doubt, therefore the standardization-performance might be
context specific. Additionally, a flexible market segmentation and adequate target market
positioning and the avoidance of national economic frictions drive towards localization (Cheon,
Cho, & Sutherland, 2008).
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With regard to the communication element, they also scrutinized the advertising-related
standardization. They adapted the definition of communication from Shannon (1949) and argued
that the communication is the passing of information between the source and the sender (Cheon,
Cho, & Sutherland, 2008).
Figure 3 – Framework for Determining International Advertisng Strategy. Source: (Cheon, Cho, & Sutherland, 2008).
This approach can be used in order to determine whether a more localized or standardized
communication strategy is suitable for the company. With relation to the case study, this model
will be used in order to theoretically determine which strategy Kvadrat should implement and
then compare and contrast it to the actual strategy conducted.
Other prominent authors within the field of international marketing standardization are Qun Tan
and Carlos Sousa. They have also published a meta-analysis regarding the estimation of
international marketing standardization´s antecedents and consequences (Tan & Sousa, 2013).
According to their article (2013), the researches examining the antecedents and impact of the
international marketing program standardization have produced fragmented literature without
clear insights on the field. In order to address this matter, Tan & Sousa (2013) qualitatively
scrutinized the empirical findings on the antecedents and consequences of the international
marketing standardization strategy. These empirical results are gathered from 110 independent
samples published in 108 articles. There has been conducted a multivariate analysis in order to
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find out the antecedents between the four elements of the marketing mix, whereas the metaregression analysis was used to determine the marketing standardization-performance
relationship and the characteristics of this performance. Tan & Sousa (2013) proposed a
conceptual framework for analyzing the international marketing program standardization. This
framework is based on the notion that the firm along with its strategies are influenced and
affected by the internal and external environment and the company´s goal is to allocate its
resource in order to match this environment, thereby achieving the best-possible performance.
Consequently, the framework is based on the examination of the components of international
marketing program standardization strategy and its relationship with the 12 antecedent aspects
and the international performance. As shown on the figure below, the analytical framework is
comprised of three distinctive categories, namely the foreign market characteristics, the
characteristics of the company and its management, and the product characteristics. These three
factors contribute to the international marketing program standardization, which entails the
standardization of the product, promotion, price and distribution leading to the overall economic
and strategic performance (Tan & Sousa, 2013). When examining the international marketing
program standardization strategy and its components, it is crucial to take a look at the
communicative aspects. The technological advent and the globalization of markets made it
possible to create a unified marketing communication in different markets throughout the world,
which not only saves time, but also resources and money. Taking into account the marketing mix
elements of product strategy, pricing strategy, communication strategy and distribution strategy,
it becomes clear that they overlap with the marketing mix elements and the components of
international marketing program standardization. Since this thesis intends to contribute to the
literature on international marketing standardization or localization strategy from a
communication point of view, the above described framework needs to be extended with the
concepts developed by Cheon, Cho & Sutherland (2008). Furthermore, the communication in
general refers to the media and tactics that are employed in order to coordinate with the
stakeholders (Cornelissen, 2011). The prerequisite for a successful communication strategy in
general and standardized or localized strategy in particular is the mission and the vision of the
organization. Mission refers to the purpose of the organization, whereas the vision means the
where the organization wants to be in the future (Cornelissen, 2011). With regard to the
framework of international marketing standardization, these communication strategies will be
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analyzed under the management characteristics, what is in line with the definition of corporate
communication above, namely that it is a management function (Cornelissen, 2011). Another
aspect of this analytical framework is the promotional aspect, which is also related to the
communication perspective of this thesis. The five elements of promotional mix include
advertising, personal selling, sales promotion, public relations and sales marketing (Cornelissen,
2011). This extended conceptual framework will be a significant tool in determining why
Kvadrat used an international marketing standardization strategy and whether it is the same
approach the theories would recommend using.
Even though contemporary research has shown that the embedded cultures are major obstacles to
standardization; this barrier is usually not considered as a reason why not to standardize, since
the benefits tend to outweigh the difficulties (Harris, 1996).
Figure 4 – Conceptual Framework for Meta-Analysis. Source: (Tan & Sousa, 2013)
There are several results, Tan & Sousa (2013) have formulated. First of all, there is no causal
relation between the development of the export market and the product and distribution
standardization, indicating that the export market is a rather irrelevant factor when it comes to
the international marketing standardization strategy. Further, competitive intensity is found to
play a determinant role in price, product and distribution strategies, whereas foreign market
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coverage has a negative impact on the promotion standardization, meaning that increased
international experience facilitates the implementation of a more market-oriented adaptation
strategy. Regarding the relationship between the marketing standardization and performance,
there has been found a significant mediating role of the price standardization. Moreover, the
findings suggest that the product standardization has a negative impact on the international
performance, whereas the standardization of price and distribution impacts the performance
positively. This negative relationship between the product standardization and the performance
implies that the consumers still prefer customized products to a standardized one; therefore
product customization is more attractive in the host markets. Moreover, another surprising
finding in the regional comparison is that there is not any noteworthy impact of the regional
variance on the standardization-performance relationship.
This indicates that the communication aspect becomes extremely crucial, when a company
intends to justify its decisions regarding product standardization or price and product localization,
all of which generally have a negative impact on the companies´ performance, as argued above
based on Tan & Sousa (2013).
Critiques to the strategy of international marketing standardization
Several professors and marketing practitioners criticize the strategy of the international
marketing standardization. The most prominent argument against a global strategy is that all
strategies require adaption to the local conditions in some degree. Furthermore, “The core of the
standardization/adaptation debate in international strategy is the question of how far, if at all, it is
appropriate to design, market, and deliver standard products and services across national
boundaries”, therefore, it can be argued that the concept of standardization is rather misused and
overused (Segal-Horn, 1996, p13).
In accordance with this argument, Porter (1986, p17) also claims that: “In some global strategies
marketing should play the role of tailoring and not standardizing to support an overall strategic
position. In some cases standardizing marketing can lead to competitive advantages that support
the overall global strategy”.
Other criticisms to the international marketing standardization strategy are based on more
explicit facts, such as economic nationalism or trade barriers. Simon-Miller (1986) maintains that
when a company is going global, it should take into account these protective measures and act
accordingly.
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Based on these arguments it can be concluded that adapting and tailoring the global strategy
might be unavoidable in certain cases. Putting this point of view into perspective, Champy (1997)
argues that: “Going global… It starts with recognizing that the world has no center… customers
will differ from country to country and that they will expect you to respect those differences.
Learn this or stay at home” (In: Svensson, 2001).
Based on these criticisms, Sheth (1986) declares that the notions of global and domestic markets
are misleading, except the concept of multiple markets. He (1986, p6) states that: “In conclusion,
we often mistake global competition for global markets. As most markets become more
divergent within each country, this approach tends to produce overlapping segment across
countries, giving the illusion that markets are becoming global”.
The debate on the international marketing standardization approach can be concluded by Daft´s
(2000, p2) words, namely “[t]he very forces that were making the world more connected and
homogenous were simultaneously triggering a powerful desire for local autonomy and
preservation of unique cultural identity… The world was demanding greater flexibility,
responsiveness and local sensitivity. […] nimbleness, speed and transparency and local
sensitivity had become essential to success”. These criticisms underline the essential notion that
the communication process between the stakeholders and the company needs to function in a
way that it justifies the decisions of the company. As shown above, there are several perceptions
towards standardization; therefore, the key to becoming successful and reputable is to make the
stakeholders understand how the chosen approach benefits them. This would also serve to make
sure that all the stakeholders are engaged in the same set of reality instead of existing in multiple
ones, as the paradigm of social constructivism suggests.
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International Marketing Localization Strategy
As described above, standardization is viewed as the rational and objective decision when
entering a new market, whereas it has also been noted that – even though the benefits might be
overestimated – standardized strategy was used by companies, simply because they were
pressured by the increased tendency of standardization among companies (Whitelock & Fastoso,
2001).
Localization can be described as the opposite of globalization; or as Pickton & Broderick (2005)
put it, the message and the channel is adapted to the needs of the individual receivers located on
the different national markets. This approach is frequently used when the convergence theory of
markets is ignored. One of the proponents of this strategy claims that there is a rational
consumption behavior, indicating that the noteworthy differences among the countries are
resulted from the cultural divergence. Furthermore, Pennington (2002, p87) writes that “global
human needs and wants must be distinguished from local, culturally defined needs and wants”.
Chronologically, the adaptation strategy to the local needs started to develop in the 1950s, which
entailed separate and distinctive marketing strategies for various home markets (Smith, 1956).
According to Gesteland (2012), the essence of the localization strategy can be captured by two
synonymous proverbs: ´when in Rome, do as the Romans do`, or as the Chinese proverb says:
´Ru xiang sui su´, meaning `Enter village, follow customs`.
The advocates of localization argue that there are only a few markets alike, therefore some
adaption to the local needs is inevitable (Quelch & Hoff, 1986), whereas El-Sayed (1989) points
out three reasons why not to go global: first of all, standardized products do not fit the need of
the customers, by being over-designed or under-designed for certain markets; secondly, the
existing company networks might be destabilized; and thirdly, standardization reduces and
weakens the entrepreneurial spirit. Nevertheless, localization cannot be applied as a ´static
orientation´, since each product market differs from each other (Quelch & Hoff, 1986). This is a
crucial point of this strategy, since it is in line with the dynamic notion of the chosen research
paradigm.
Additionally, Kanso & Kitchen (2004) found out that the companies, who follow the localized
approach, respect the cultural differences and variety more seriously. With regard to the culture,
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it is a relevant concept in studying marketing and advertising, since the symbols of the
advertisements and the promotional messages need to be recognizable and meaningful to a given
marketplace (Cateora & Graham, 2002). Moreover, Unwin (1974) writes that even though all of
the factors suggest the usage of international marketing communication standardization, it is a
favourable idea to allow the advertisements to be translated into the various countries´ own
advertising paradigm. All in all, understanding cultural diversity is to the key to avoiding
marketing blunders (Kanso & Kitchen, 2004). According to this argumentation, standardized
communication materials would never work, since in different cultures different meanings are
linked to the same concepts or metaphors. This issue will be further on elaborated in the
Discussion (p76) section, where the advertising transferability will be debated. Nevertheless, it
can be argued that the basic premise of localization approach within the framework of social
constructionism is that the company and its stakeholders are engaged in different set of realities;
therefore, it is rather impossible to implement a successful communication strategy based on
standardization.
To sum up the section on the standardization vs. localization literature, it can be argued that most
of the scholars consider them as opposing strategies. The main argument behind the
standardization approach lies in the globalization of markets resulting in the homogenization of
the global consumer behavior and increased economies of scale, whereas the advocates of
localization claim that due to the cultural differences and protectionist trade policies and barriers,
the companies will need to localize. With regards to the communication approach, this section
clarified that the advocates of the localized approach argue that mainly due to the cultural
differences, standardized advertising messages would not work.
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The Strategy-Fit Approach
Surprisingly, the research by Schmid & Kotulla (2011) has shown that only 12% of the articles
on international marketing standardization or adaptation have considered or mentioned the
concept of the situation-strategy fit, even though the notion of situation-fit seems to be logical
since the company´s performance outcome is dependent on the fit of the strategy to the
circumstances. As pointed out above, Cheon Cho & Sutherland (2008) argues that the
communication needs to fit to the audiences´ needs in order for it to be successful.
According to this point of view, it is inevitable to maintain a close link between the firm´s
strategy and the context where it is implemented (Venkatraman, 1989). The main argument
within this paradigm is that superior performance is the result of the matching strategy to the
context (Lukas, Tan, & Hult, 2001).
Schmid & Kotulla (2011) writes that since the normative theory does not integrate
comprehensively the ideal of situation-strategy fit, the literature on international marketing
adaptation and standardization has become nascent and even contradictory. In order to eliminate
this weakness, Ramarapu, Timmerman & Ramarapu (1999) proposed a theoretical framework on
identifying the best standardization/adaption strategy for each particular situation.
As the Figure below shows, Ramarapu, Timmerman & Ramarapu (1999) argue that the concept
of International Opportunity is comprised of three concepts: 1) Place, 2) People and 3) Products.
Place refers to the economy of the country, availability of local partners and the competition,
whereas the concept of people can be defined as the characteristics of the market segments
including the sophistication of the customers and their tastes; further, the notion of product
means the classification, reputation, technology and perception of products. The International
Marketing Strategy Choice of localization and standardization will be dependent on these
characteristics of place, people and products.
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Figure 5 – An External Environment Analysis. Source: (Ramarapu, Timmerman, & Ramarapu, 1999).
Katsikeas, Samiee & Theodosiou (2006) have contributed to the literature on strategy-fit analysis
by using the contingency approach in the context of the subsidiary level. Their regional focus
was the US, Japenese and German companies subsidizing in the UK. The results of their analysis
are in accordance with the contingency perspective, meaning that the international marketing
standardization or adaptation strategy fits the characteristics of the host market. Furthermore, the
success of marketing standardization is in causal relation with the similarity of the market
characteristics, such as culture, regulations, competition and customer characteristics.
Katsikeas, Samiee & Theodosiou´s (2006) analytical framework is similar to the one proposed
by Ramarapu, Timmerman & Ramarapu (1999), nevertheless, it can be argued that the one
proposed by Katsikeas, Samiee & Theodosiou (2006) is more comprehensive, since it takes into
account macro-and micro-environmental factors. The analytical framework can be divided into
two parts: 1) Macroenvironmental factors and 2) Microenvironmental factors. The
macroenvironmental factors are comprised of a) economic environment, b) regulatory
environment, and c) customs and traditions. The microenvironmental factors are: a) customer
characteristics, b) marketing infrastructure, c) product life cycle, and d) competitive intensity.
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Figure 6 – Strategy-fit Analysis. Source: (Katsikeas, Samiee, & Theodosiou, 2006).
Furthermore, Katsikeas, Samiee & Theodosiou (2006) suggests that the bigger the differences
between the characteristics of the host market, the more inevitable the need is for the companies
to localize their marketing efforts in order reach superior performance. Consequently, the
marketing practitioners need to identify the appropriateness of the international marketing
strategy at hand, let it be standardization, localization or the mixture of the two.
Critiques to the Strategy-Fit Approach
As every approach, there are also weaknesses of the strategy-fit approach. These limitations
include that the analytical framework is theoretically based and gives empirically testable
suggestions; however, it fails to provide descriptions, explanations or predictions on the choices
of the international marketing standardization strategies. Furthermore, it also cannot give
recommendations on pricing, distribution and other marketing-related processes (Svensson,
2001). Nevertheless, it still provides a useful framework in order to test whether Kvadrat uses a
strategy which is suitable for its environment and operational context.
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Business-to-Business (B2B) vs. Business-to-Customer (B2C) Sector
The purpose of this subsection is to introduce the framework for the business-to-business context.
Since Kvadrat´s main operations centers on the B2B sector (Kvadrat, 2014); therefore, it is
essential to depict the characteristics of the marketing communication strategies within this
sector.
It is often argued that B2B marketing communication strategy is – or should be – different from
the B2C one. One of the most prominent arguments behind this point of view is that the B2B
relations are generally considered as more rational decision making than the B2C one (Bingham,
Gomes, & Knowles, 2005). Additionally, the conventional wisdom also holds that B2B and B2C
marketing are distinctive units and should remain so (Dant & Brown, 2008).
Nevertheless, Kotler & Pfoertsch (2007, p357) argues the following way: “Does anybody really
believe that people can turn themselves into unemotional and utterly rational machines when at
work?” From this point of view it can be debated to what extent B2B differs from B2C. In
accordance with this view, Bingham, Gomes & Knowles (2005) also point out that business
buyers are humans, so they are subject to the same appeals – which are the basis of effective
consumer advertising – as the individuals.
As Bingham, Gomes & Knowles (2005) put it, B2B marketing communication has three
purposes: “to inform, to persuade and to remind customers and potential customers about the
product or a company”. The same can be said about the aims of the B2C communication.
Therefore, Dant & Brown (2008) argue that the division between the B2B and B2C sector is
obsolete, since it is impossible to isolate these areas from each other both within business and
research, whereas the field of retailing actually bring these concepts closer, not tearing them
apart. Additionally, Fern & Brown (1984, p69) write: “… [T]o date the observed differences
between industrial and consumer marketing (1) have not been causally related to marketing
practice or theory formulation, (2) have not been tested empirically, and (3) have not been
justified on logical grounds. In short, the purported differences have not played an instrumental
role in the development of marketing thought”. This argument is supported by the a) emergence
of Supply Chain Management and its demonstration that the B2B and B2C divisions are artificial
and b) consumer behavior in the B2B context shows similar trends as in the B2C sector (Dant &
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Brown, 2008). Another prominent claim behind the vanishing division between these two sectors
is that all B2C retailing includes B2B components, since the retailers must manage upstream
channel members besides serving the customers (Dant & Brown, 2008).
Even though this thesis will not make a profound distinction between the B2B and B2C sector in
terms of the analytical tools used, it acknowledges that there are clear distinctions between the
two sectors. First of all, there are key different between the actual advertisements. While it is
important to use jargon in the B2B sector, since the clientele requires detailed information, B2C
marketing should be understandable for everyone without an industry-specific education (Zenn,
2013). Consequently, when it comes to the message, B2B clients expect complex and
professional content, whereas the B2C customers need simple, emotional and general marketing
(Basich, 2013).
All in all, this thesis also will not make a clear distinction between the consumer level (B2C) and
the business-to-business (B2B) sector. Consequently, the theories and analytical tools used in
order to answer the problem statement will also be from both fields.
Blue Ocean Strategy
The purpose of the following part of the Theoretical Framework is to depict the Blue Ocean
Strategy (Kim & Mauborgne, 2005). This is a relevant theory regarding the case study, since it
offers a methodological framework and analytical tools in order to examine how Kvadrat used
value innovation and succeeds in not battling with the competitors, but in creating unchallenged
markets for achieving maximum growth. The main reason behind the choice of this strategy lies
in the value proposition of Kvadrat and in the crucial examination of why a standardized
approach can be beneficial in a market, which would normally require strategy adaptation.
As argued above, academia has proposed that the companies need to adapt to new circumstances
and trends as fast as possible. However, the advocates of the Blue Ocean Strategy believe that
projecting a mere trend does not create competitive advantage over the other companies. They
support the concepts of Red Oceans vs. Blue Oceans, indicating thinking one step further of the
current trends and gaining bigger market share by competing with others (Kim & Mauborgne,
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2005). The Blue Ocean Strategy is a profound analysis of more than 150 strategic moves across
30 industries over 100 years. The ideal behind this strategy is that the companies need to leave
the ´Red Oceans´, referring to the cut-throat competition and they need to move into the `Blue
Oceans´, where the market space is uncontested, therefore irrelevant. One of the advantages of
this model is that it is possible to apply it through corporate strategic, tactical or operational
levels. The advocates of this strategic planning and value innovation suggest that new demand
can be captured by differentiation and cost-cutting. However, blue and red oceans are not static,
but by the time, the current blue oceans will become red oceans; therefore, it is crucial for the
businesses to constantly monitor their activities and work on their value innovation. As Kim &
Mauborgne (2005) puts it, the study conducted by them (2005) shows that the right unit of
analysis is not the company or the industry, but rather the strategic moves in order to create blue
oceans and maintaining high performance.
This groundbreaking book was written 9 years ago and over this period of time more than 3.5
million copies were sold. The Blue Ocean Strategy by Kim & Mauborgne (2005) challenges the
understanding of management and competition, and it has become the best selling management
book in both US and China. In February, there will be an updated version of this book published,
which also shows the popularity and ongoing relevance of this conceptualization. The traditional
conception about market spaces is that companies need to differentiate themselves in order to
gain competitive advantage and thereby bigger market share. The Blue Ocean Strategy
challenges this conventional wisdom by stating: “Stop benchmarking the competition. The more
you benchmark them, the more you look like them” (Kim & Mauborgne, 2005, p12). The idea
behind this strategy is: “to create new market space and make the competition irrelevant” (p3).
This systematic approach is the “simultaneous pursuit of both differentiation and low cost” (p16).
This theory proposes that the main objective of the firms should be differentiating their
product/service offerings in a way that it significantly differs from the offerings of the other
companies within the industry. In this way, they will appeal to a larger amount of customers and
can become attractive to the potential customers, who –so far- have been dissatisfied or
uninterested in the products of the industry (Kim & Mauborgne, 2005).
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The theory is based on the following metaphor: today´s industries are overcrowded, where the
companies are fighting against each other. This is labeled as the ´red ocean´. However, the firms
can seek new ways, through which they do not need to compete against each other anymore, so
they move to the ´blue oceans´. The book is based on the examination of 150 strategic moves
during the period of 100 years across 30 different industries. The authors of the book argue that
tomorrow´s leading companies will not succeed by winning the competition, but by moving to
´blue oceans´ and making the competition irrelevant.
After scrutinizing the strategic moves across these 30 industries, Kim & Mauborgne (2005) draw
attention to six principles, including a) reconstruction of market boundaries, b) center on the big
picture, c) reach further than the current demand, d) recognition the accurate strategic sequence,
e) triumph over the organizational barriers, and f) implementation the right strategy.
Figure 7 – How to Create the Blue Ocean Strategy. Source: (Kim & Mauborgne, 2005).
The first step in order to move to the blue ocean is to change the firm´s offering. The ´Four
Actions Framework´ can be used to draw a new value curve by rethinking the buyer value
elements. In order to reach differentiation at a low cost when creating the new value curve, the
following questions can be answered: “1) which factors should be raised well above the
industry´s standard? 2) Which factors of the industry has long competed and should be
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eliminated? 3) Which factors should be reduced well below the industry´s standard? 4) Which
factors should be created that the industry has never offered?” (Kim & Mauborgne, 2005, p25).
So the essence of this framework is to decide on what can be eliminated, reduced, raised and
created. The new offering can be measured up to the competitors´ on the so-called “strategycanvas”.
Figure 8–The Strategy Canvas. Source: (Kim & Mauborgne, 2005).
However, defining the strategy canvas is just the first step, the company also needs to focus on
the ´big picture´ and align the strategic planning with the company´s strategic canvas. In order
reach this goal, the company should pursuit the four step process of visualization. This includes 1)
Visual Awakening, 2) Visual Exploration, 3) Visual Strategy Fair, and 4) Visual Communication.
First of all, it needs to be decided – based on the strategy canvas – where the company´s current
strategy needs to change. Secondly, the six paths of creating blue oceans need to be considered
and applied to the specific case, whereas, thirdly, the alternative strategy should be reviewed and
fourthly, it should be implemented with the help of visual communication (Kim & Mauborgne,
2005).
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Figure 9 – The Four Steps of Visualizing Strategy. Source: (Kim & Mauborgne, 2005).
The second step is finding the new customers. According to the Blue Ocean Strategy, the
companies should search for potential customers who are currently inadequately served by the
industry. There are three groups of ´non-customers´: first of all, there are the “soon-to-be” noncustomers, who are dissatisfied and ready to try the new offering, secondly, there are the
“refusing” non-customers, who are generally against the industry´s offerings, and thirdly, there
are the “unexplored” non-customers, who are served by distant markets (Kim & Mauborgne,
2005).
Figure 10 – The Three Tiers of Noncustomers. Source: (Kim & Mauborgne, 2005).
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Figure 11 – The six conventional boundaries of competition. Source: (Kim & Mauborgne, 2005).
There is the analytical tool of “Six Pathways”, which helps to locate the current non-customers.
According to this analytical framework, six conventional boundaries limit the current market
space and the new customers can be found by looking beyond these limitations. To conclude,
new customers are located in other industries, other market segments, influenced by different
decision
makers,
within
the
dissatisfied
customers
by
the
current
features
and
emotional/functional orientation of the offerings, further, the company can also benefit form a
noteworthy trend or development, through which new customers can be affected (Kim &
Mauborgne, 2005).
The third step includes testing the validity of the proposed offering. This refers to reviewing the
buyer characteristics, price, costs, adoption burdens, and on the basis of this analysis the Blue
Ocean Strategy can be implemented.
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Figure 12 – Analysis on which Blue Ocean Idea is worth implementing. Source: (Kim & Mauborgne, 2005).
The fourth step of this iterative process is the implementation phase. In order to maximize the
benefits of the execution, the approaches of ´Fair Process´ and `Tipping Point Leadership´ should
be utilized.
The main idea behind the Fair Process strategy is to make the people, implementing the strategy,
be enthusiastic about the execution by engagement, explanation and expectation clarity.
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Figure 13 – Fair Process. Source: (Kim & Mauborgne, 2005).
Tipping Point Leadership´s objective is to first of all work with the influential and potential allies,
whilst offset the resisters, instead of trying to make an impact of the broad mass within the
company. This way is tested to have the maximum impact with the minimum of resources.
To conclude, the main objective of the Blue Ocean Strategy is to redefine the competition. It is in
direct opposition to the theory of Porter´s Five Forces and it persuades the companies to center
their resources on moving to blue oceans instead of fighting the competition. This has a crucial
impact on the communication aspect, namely, that these new strategic decisions and changing
environment will need to be communicated sufficiently to the stakeholders.
Planning in Management
This part of the thesis intends to provide the reader with analytical tools which will serve as a
basis for carrying out a case study examination. These tools fall under the area of strategic
management, which has been defined above.
Environmental Analysis
According to the Strategy-Fit Theory by Katsikeas, Samiee, & Theodosiou (2006) the strategy
needs to be in alignment with the environment. In order to detect whether this is the case
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concerning Kvadrat, a strategic environmental analysis needs to be performed. As seen on the
Figure below, there are ten basic analytic tools in order to examine the strategic environment.
These include a general evaluation of market size, growth and market share, then the degree of
turbulence can be measured meaning the changeablity and predictability of the environment,
afterwards, the green strategy environmental analysis covers the government legislation, business
opportunities and customer and value chain issues. The fourth step is PESTEL, followed by a
growth and life-cycle analysis. The sixth step is to determine the key factors of success and then
Porter´s Five Forces can be examined. The scrutiny ends with a Four Links Analysis,
examination of the most important rivals and customer analysis (Lynch, 2011).
Figure 14 – 10 Steps of Analyzing the Strategic Environment. Source: (Lynch, 2011).
Types of decisions
Within business, the decision making levels can be characterized as: a) strategic, b) tactical, and
c) operational. The strategic decisions are long-term ones, which will have an impact on the
entire company. The tactical decisions are medium-term ones, decided by middle managers and
their purpose is to meet the objectives of the strategy, whereas the operational decisions are made
by junior managers and affect the day-to-day management of the company (BBC.co.uk, 2014).
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Figure 15 – Types of Business Management Decisions. Source: (BBC.co.uk, 2014).
As pointed out above, both international marketing standardization and the Blue Ocean Strategy
has certain implications for all the three levels business management and the communication
strategy. Therefore, it is essential to analyze the decision making at these levels in order to see
whether the decisions are implemented in a coherent way, which could be one of the success
factors for an organization.
Stakeholder theory & The Stakeholder Salience Model
The thesis has already clarified in the beginning of the Introduction, what corporate
communication means. One of the core concepts of this definition is the stakeholder, since they
are the ones who this organization is dependent on (Cornelissen, 2011). The concept itself went
through a historical development; therefore the following paragraph will introduce the term and
clarify how it will be understood within the framework of this thesis.
At first, the notion of stakeholder was conceptualized by Friedman (1973), who argued in his
profit maximisation theory (Friedman, 1973) that shareholders are the primary “stockholders” of
the organization; the company´s aim and key responsibility includes satisfying this group by
generating return on their investment. Later on, Freeman (1984) took a wider approach and
defined the stakeholders as: “any group or individual who can affect or is affected by the
organisation´s purpose and objectives”. Consequently, stakeholders are those groups, who have a
stake in the organization, which can be described as: “interest or a share in an undertaking that
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can range from simply an interest in an undertaking at one extreme to a legal claim of ownership
at the other extreme” (Cornelissen, 2011, p8). The concept of being a stakeholder will be defined
within this framework of this thesis according to Clarkson (1995, p106), who stated that:
“stakeholders are persons or groups that have, or claim, ownership rights, or interests in a
corporation and its activities, be they past, present, or future. Such claimed rights or interests are
the result of transactions with, or actions taken by, the corporation, and may be legal or moral,
individual or collective. Stakeholders with similar interests, claims, or rights can be classified as
belonging to the same group: employees, shareholders, customers and so on.” The groups of
stakeholders can be categorized though their interest priority in the organization, which results in
primary or secondary stakeholders. This entails in a priority listing, meaning that the
organization first should deal with those stakeholders, who can be identified as important
(primary) stakeholders.
In order to identify the stakeholders for the case of Kvadrat, the Stakeholder Salience Model
(Mitchell, Agle, & Wood, 1997) can be used. This model has been chosen, since it is categorizes
the stakeholders on the basis of three given attributes, namely a) power, b) legitimacy and c)
urgency. They core idea is that only those stakeholders who possess priority interests in
Kvadrat´s activities should be mainly communicated to. This is also in line with the research
paradigm chosen and the theoretical framework above, since it has been pointed out that the
academia still debated whether the communication strategy of standardization or localization
should be applied and recommended; therefore, - in line with the research paradigm – the
company itself needs to find a way to limit the social reality it operates at, consequently, it
should first satisfy and communicate to those stakeholders who have the biggest stakes in the
company and who have the biggest power the affect it.
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Figure 16 – Stakeholder Salience Model. Source:
The analytical process will have three phases: first of all, it will be counted how many times
certain stakeholder groups are mentioned in the communication material, and this frequency will
indicate the power of this stakeholder group. Later on, the legitimacy and urgency of these
groups will be checked and based on this analysis, the stakeholders can be put into the following
categories: a) dormant, b) discretionary, c) demanding, d) dominant, e) dangerous, f) dependent,
g) definitive and h) nonstakeholder. In the Case Study section, the stakeholders will be grouped
according to this conceptualization and thereby it can be determined to what extent they need to
be communicated to and what their characteristics are, thereby indicating whether Kvadrat
engages in a suitable communication strategy.
There are advantages and disadvantages for utilizing this theory in this case. The main reason it
has been chosen, since it provides a dynamic perspective on stakeholder management, which is
in line with the paragraphs above, since the blue ocean strategy points of that the ´oceans´ are not
static, furthermore, the perspective on communication and research paradigm has also indicated
that this thesis views the communication process as an ongoing one, which exists in multiple
realities. Consequently, the stakeholder salience model will enable the thesis to see the
communication process as an ever-evolving one; therefore, it needs to be highlighted that this
thesis intends to investigate the current state of stakeholder typology and it reveals that it is
subject to change.
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This categorization is crucial for the analysis of the marketing communication strategy, since in
the following parts of the analysis it will be further examined to what extent these stakeholders
groups are adequately communicated at.
To sum up the section on the Theoretical Framework, the main objective was to answer the
second research question by understanding the context of the problem statement by defining
globalization and its relation to marketing communication standardization and localization with
regards to the stakeholder salience model and the blue ocean strategy. This thesis views the
globalization as being driven by technological innovation resulted in increased international
commercial activities. Consequently, the paradox of international marketing standardization and
localization emerged. The former highlights the homogenization of the consumer behvaiour
across national markets and emphasizes the economies of scale caused by standardized products
and distribution, whereas the latter focuses on the differences between the consumers and argues
for local adaption techniques and thereby gaining competitive advantage. These strategies are in
opposition with each other and the strategy-fit by Katsikeas, Samiee & Theodosiou (2006) argue
that the macro- and microeconomical conditions determine when the certain strategies should be
applied. Whilst these two approaches are centered on competition, Kim & Mauborgne (2005)
maintains that instead of concentrating on the competition, the companies should offer a unique
set of products or services coupled with value innovation in order to make the competition
irrelevant. All these strategies have implications on the marketing communication, namely there
is a debate on to what extent it should be standardized or localized in order to gain competitive
advantage and align the communication strategies with the needs of the stakeholders.
Nevertheless, this chapter only managed to see the problem from a theoretical point of view and
–as argued above – all the companies are different; the next chapter will serve as a case study in
order to get closer to solving the problem statement and answer the third research question on
how beneficial the communication strategy of Kvadrat is.
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Case Study
The following chapter intends to answer the third research question by making use of the
analytical models illustrated in the Theoretical Framework (p26) above in order to see whether
the standardized or localized approach is more beneficial for Kvadrat and whether this decision
is in line with the blue ocean strategy and addresses the most important stakeholders.
Consequently, the following part of the thesis will investigate whether Kvadrat´s standardized
marketing fits the environmental characteristics of the Chinese host market. First of all, Kvadrat
will be briefly introduced followed by a macro-and micro-environmental analysis both for
Kvadrat in Denmark and in China. This will enable the comparison of the environment in the
original and host market, which will determine whether – theoretically – the international
marketing standardization or localization strategy, would suit Kvadrat better. This environmental
analysis will include the stakeholder analysis as well. Afterwards, the Blue Ocean Strategy will
be applied to the case and at the end the findings of the two analyses will be summarized and the
following chapter will serve as the Discussion (p76) of these findings.
Introduction to Kvadrat
Kvadrat is the leading manufacturer of design textiles in Europe. The company was established
in 1968 and its main purpose is to create high-quality interior textiles and textile-related products
for both public and private spaces. Kvadrat is a family-owned business and its headquarters are
located in Ebeltoft. It is the main supplier of architects, designer and furniture manufacturers,
and its main product range include upholstery and curtains.
The mission of the company is: “We continually seek to push the aesthetic, artistic and
technological boundaries of textile design. We create high quality products that help architects to
shape architectural spaces, designers and furniture manufacturers to produce and craft furniture,
and consumers to bring tactility and colour in their private homes. This is our way of
contributing to contemporary design culture” (Kvadrat, 2014). The vision of the company
includes being among the five strongest architect and design brands in both Asia and Europe
(Abbott & Groysberg, 2013). Kvadrat is represented both in the contract and retail markets,
however, they center on the B2B sector (Kvadrat, 2014); therefore, this thesis will only analyze
the marketing efforts in that sector.
The core purpose of the company can be summarized as follows: “We develop high-quality
modern textiles and textile-related products for both architects to specify in the public spaces and
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for private consumers for the home. This is our core purpose – it is why we exist, it´s the
enduring essence of our company, upon which all our strategic thinking is based” (Kvadrat,
2014).
Additionally, Kvadrat also started to sell whole products, such as pillows and blankets. The
company does not have its own production facilities; it manufactures its high-quality products in
Western Europe and Japan and gives 10-year warranty for all the sold items. The main strategy is
based on constant product diversification and market expansion through partnerships. Even
though Kvadrat was established by the Rasmussen and Byriel families, today it evolved to be a
cosmopolitan company with a global customer-base and perspective, whilst they are inspired by
their long heritage of excellent service and design (Kvadrat, 2014).
The fabrics produced by Kvadrat can be found in the world´s important buildings, such as the
Copenhagen Opera House, the Walt Disney Concert Hal or The Gherkin, whereas it has
showrooms in the most important cities for design, such as Milano or London.
Not only the company´s turnover, but also the awards signalize the uniqueness and success of the
company´s products. Among others, Kvadrat won the Wallpaper Design Awards in 2009 for the
´Most Innovative Textile´, or the AIT Award Architecture Textile for its upholstery.
Regarding Kvadrat´s presence in Asia, it is available on the Chinese, Korean, and Singaporian
markets. Its main goal is to enhance the brand awareness whilst maintaining the strong service
concept, based on quality materials and short delivery times. The marketing communication
strategy in China is centered on the ideal of standardization, meaning that the website, brochures,
newsletters are created by one agency and these materials are translated to Chinese language
(Kvadrat, 2014). Furthermore, there are two showrooms, in Shanghai and in Hong Kong
(Kvadrat, 2014).
Stakeholder Identification
The Theoretical Framework (p58) pointed out the the significance of the correct identification of
the stakeholders and the dynamic typology why the stakeholder salience model has been chosen
as the analytical tool for the stakeholder identification. As the basis of analysis, the website of
Kvadrat (www.kvadrat.dk), with special emphasis to the news section has been chosen (see
Appendix). According to Kvadrat, it has three customer segments: a) contract, meaning the sales
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to the designers and architects, b) industry, referring to the sales to the furniture producers, and c)
the retail (Abbott & Groysberg, 2013). However, as discussed above, the retail sector is not
relevant to this thesis; therefore, the following paragraphs will only take into account the contact
and the industry as customer segments. When taking a look at the website, the most frequently
used stakeholder groups are the designers, which group can be split into two distinctive
categories: the designers working for Kvadrat and the interior designers, who the contract
customers are. This group has the legitimacy and power to affect and be affected by the
organization, since they are involved in the day-to-day management of the company. The
importance of the suppliers is also mentioned several times, since the main reputation of Kvadrat
depends on its quality products. Furthermore, there are other stakeholders, such as the employees
working at the distribution centers and offices and general investors (Kvadrat, 2014).
Figure 17 – Selected Financial Data. Source: (Abbott & Groysberg, 2013).
As the Figure above shows the company´s turnover is growing and it can be claimed that the
customers have the legitimacy, but at the moment rather lack power and urgency, therefore they
belong to the discretionary stakeholder group. Kvadrat claims that the employees are key to its
business operations and promotes and provides sufficient working conditions, so the employees
are dominant stakeholders; whereas the suppliers and designers are definitive stakeholders
(Kvadrat, 2014).
This has a crucial implication on the communication strategy, since the most dominant
stakeholders need to be communicated on an ongoing basis (Cornelissen, 2011). However, their
great presence on Kvadrat´s website suggests that they are frequently communicated to.
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Foreign Market Characteristics
According the the strategy-fit theory by Katsikeas, Samiee & Theodosiou (2006), one needs to
analyze the foreign market characteristics, followed by the management and product
characteristics in order to determine, whether the company should apply a standardized or
localized approach. Consequently, this part of the case study will take a look at Kvadrat´s
strategic environment in Denmark and in China in order to examine the differences and
similarities between the two markets.
Strategic Environment of Kvadrat A/S in Denmark
As pointed out in the Theoretical Framework (p26) section, in order to determine whether
Kvadrat´s
communication
strategy
fits
to
the
environment
it
operates,
first
the
macroenvironmental, then the microenvironmental aspects need to be investigated. The
following paragraphs will not only be based on Katsikeas, Samiee & Theodosiou (2006), but also
Lynch´s (2011) framework on strategic environmental analysis will be utilized as well.
Macroenvironmental Analysis
The textile industry is often referred to as the ´traditional industry´, since in the history of
industrialization, it is one of the oldest sector. Due to the serious pressure on prices worldwide,
the industry started to rationalize and centered the production on manufacturing high-quality
products and cutting the labour costs. This resulted in outsourcing the more manual parts of the
production to low wage countries, whereas the more capital intensive parts stayed in Denmark
(Olsen, Ibsen, & Westergaard-Nielsen, 2004). This is also visible on the Figure below.
Figure 18 – Rationalization Strategy of the T & C Industry. Source: (Olsen, Ibsen, & Westergaard-Nielsen, 2004)
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Regarding the current state of the Danish textile industry, it had a turnover of 38.6 billion DKK
in 2012, of which exports amounted to 22.7 billion DKK. When compared to the levels before
the crisis, the turnover has increased with 2.5 billion DKK, whereas the employment fell by ca.
1800 people. Consequently, there have been major cost reductions within the industry; however,
the increasing turnover shows that it has healed from the crisis (Hillmose, 2013).
The Danish regulatory environment is extremely concerned with the social and environmental
demands. These include environmental labeling and decent working conditions. This is one of
the reasons why the industry has changed its focus form manufacturing to know-how intensive
work functions, such as design, quality control or sale (Odgaard, 2011).
Concerning the Key Success Factors, they include the business and communication strategy,
trained employees who possess great know-how, maintaining good relations with the supplier
and distribution network, whereas ensuring service and quality control via meeting social and
environmental demands (Abbott & Groysberg, 2013).
Microenvironmental Analysis
As pointed out above, the industry is tightly regulated based on environmental and social
standards. Consequently, the green strategy is essential, in order to ensure compliance with the
industry´s high standards. Due to the fact that the compliance to these environmental standards is
crucial, there are rather no new opportunities in building an environmental strategy. However,
the relationships between the suppliers and distributors are extremely important, especially for
the reason that the social, environmental and quality demands need to be met and at the same
time this fulfillment needs to be communicated to the customers. The industry was shaken by the
recent economic crisis, however, it shows fast responsiveness and adaptation skills to new
situations and the recent rising turnover also gives evidence for this argument. With regards to
the competitors, there is a low chance for the potential entrants due to the high entry costs and
centralization of the industry through partnerships and purchase of the smaller and medium
enterprises, due to the EU common market and the ease it provides for substitutes, who have
similar alternative costs. The suppliers have medium bargaining power due to the high quality
and big orders they deliver, whereas the customers have rather low bargaining power due to the
fixed prices (Bayer, 2008).
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Figure 19 – Porter´s Five Forces Analysis on Kvadrat A/S in Denmark. Based on: (Porter M. , 1990) & (Bayer, 2008).
As discussed above, Kvadrat´s main customer segments include architects, interior designers and
furniture makers. Datamonitor (2013) predicts a decrease in the Danish construction market
resulting in a declining number of companies; therefore, it is increasingly important for Kvadrat
to communicate efficiently within these shrinking market conditions. Furthermore, it is predicted
that the furniture industry will become more concentrated as well (Datamonitor, 2013). As a
premium brand, Kvadrat could be vulnerable to these market conditions due to its higher prices
(Agrawal, 1995). Kvadrat basic strategy includes that it only moves to the retail market, if it has
reached the maximum number of contacts within the market (Kvadrat, 2014). Regarding the
contractual customer base in Denmark, it can be argued that the maximum number of contracts is
reached, since Kvadrat entered the retail market. Therefore, the clientele of large industrial
customers and public sector customers in Denmark needs to be maintained, since there are low
possibilities of expanding. One of the ways Kvadrat chose to build these relations is through
trade shows and its showroom in Copenhagen; further, the company´s communication strategies
include presence on various social media platforms, the website and newsletter (Kvadrat, 2014).
Strategic Environment of Kvadrat in China
Macroenvironmental Analysis
In 2012, the total output of the textile industry in China accumulated for 5,78 trillion RMB
(roughly equals to 869,7 billion USD). It has been predicted that the industry will increase about
10,5%. The textile market is a traditionally adventegous investment, since it is one of the
backbones of the national economy, accounting for 7,11% of China´s GDP in 2011.
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Furthermore, China´s construction accounts for 1/5 of the world´s construction projects,
therefore it can be concluded that there is a strong need for high-quality interior textiles in China.
(The Beijing Axis, 2014).
An important feature of this working environment is that the Chinese construction industry is
characterized by a boom and tense competition fostered by the fact that even though an architect
has won a project, it is not sure that he or she will actually be involved in carrying it out (Dyer,
2007). Additionally, with the development of the Chinese manufacturing quality, Chinese clients
are progressively hiring more local Chinese talents (Levinson, 2004).
Regarding the regulatory environment, the Chinese government is putting efforts into boosting
the Chinese textile industry by introducing favourable measures. There were two guideline plans
launched in order to enhance the industry´s competitiveness. These plans are the following ones:
1) Adjustment and Revitalization Plan of Textile Industry and 2) Textile Industry Twelfth Five
Year Development Plan. The guidelines until 2020 cover five main issues: a) emphasizing the
domestic consumption market and stabilizing the international trade share by development of
new products and developing the rural market; b) strengthening the brand building and focusing
on innovation and technology; c) increasing the production efficiency by decreasing the energy
consumption and eliminating the obsolete capacity; d) encouraging the relocation of production
plants from Western China to the Central and Eastern part; e) increasing the financial support
(Insight, 2013). Furthermore, the Twelfth Year Plan increased these expectations and proposedan
annual growth of 8% of the industry. As specified above, the market is growing fast, which
provides an attractive opportunity for investors. Kvadrat operates at the high-end of this market;
and that segment is also growing. The degree of turbulence within the industry is rather high, but
there is a bigger predictability in the high-end sector, therefore, Kvadrat´s segment is rather
medium turbulent (Abbott & Groysberg, 2013).
Regarding the Key Factors for Success, these factors include maintaining a consequent business
strategy, brand awareness needs to be increased, quality and the distribution/supplier network
needs to be maintained; further, the employees need to be trained and the company should focus
on the high operating capacity utilization, product differentiation and successful promotion
programs (Hansen, 2010).
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Figure 20 – Key Success Factors for Kvadrat in China. Based on: (Lynch, 2011).
Microenvironmental Analysis
Regarding the green strategy, Kvadrat is not in the possession of production facilities,
nevertheless, it ensures quality by through manufacturing in Japan and Europe; therefore the
customer perceptions on the quality is high and the value chain and distribution sector is closely
monitored in order to keep the company´s standards (Kvadrat, 2014). There is a great
opportunity for Kvadrat in China, since the increasing demand is driving up the prices of
products of wool (Abbott & Groysberg, 2013). Another opportunity includes the prospects of
opening up a production facility in China. However, there are great risks involved in doing so.
First of all, it is questionable, whether there is enough qualified and skilled workforce, who can
produce the expected quality and the same is true for the suppliers in general. Furthermore, the
textile industry is generally harmful to the environment, and given the Chinese government´s
efforts in combating pollution, the cost of establishing a production facility in China might be
topped with government fines. Furthermore, the motto of the company is: “At Kvadrat we
continually seek to push the aesthetic, artistic and technological boundaries of textile design. We
create high quality products that help architects to shape architectural spaces, designers and
furnituremakers to produce and craft furniture, and consumers to bring tactility and colour in
their private homes. This is our way of contributing to contemporary design culture” (Abbott &
Groysberg, 2013). Consequently, a potential production failure might seriously harm the
reputation of the company. All these taken into account, at this stage it is not advisable to move
the production to China.
Porter´s Five Forces Analysis provides a useful analytical tool when defining the competitive
environment. Regarding the potential entrants, there is a rather low threat due to the high entry
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costs. The customers generally have a high bargaining power, since the sizes of the orders are
huge and the art of bargaining is embedded in the Chinese business culture. It is difficult to
determine the number of substitutes, since there are a huge number of companies in the textile
industry, however, they cannot deliver the same high-quality standards; for the same reason the
threat of competitors is rather medium. With regards to the suppliers, Kvadrat reduced the 40
suppliers to 21 by 2013. Its biggest suppliers are Gaudium, Gudbrandsdalens and Wooltex
(Abbott & Groysberg, 2013). Since Kvadrat is the biggest consumer of these suppliers (Abbott &
Groysberg, 2013), it can be argued that the suppliers have rather medium bargaining power.
Figure 21 – Porter´s Five Forces Analysis on Kvadrat in China. Based on: (Porter M. , 1990).
Kvadrat faces competition at local, regional and global levels, involving companies specialized
in curtains, or upholstery, and those who operate in all these segments (Abbott & Groysberg,
2013).
Regarding the customer profiling, Kvadrat operates in the contract market, in China it especially
works with high-profile government projects regarding building public spaces. Due to the
uniqueness of these projects, it is impossible to analyze the customer profiling for the different
products, since these projects all require exceptional solutions via suitable design. Consequently,
the company´s main competitive advantage lies in adapting to the customers´ needs by giving a
practical realization for the building architects´ plans (Abbott & Groysberg, 2013). The present
customer strategies include maintaining a show room in Hong Kong and Shanghai and –as
mentioned above – the communication has increasingly been moved to online platforms, such as
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various social media platforms, including the Chinese microblog, Weibo, and it has a website in
English, German and Chinese language. As Gong (2003) argues the customers make purchasing
decisions on basis of experience. There are some critical features of this customer group in China,
namely “[s]everal years ago architects focused on cooperation. However, due to the development
of the market economy, competition has become more serious nowadays” (Zhikun & Fungfai,
2009, p133). Zhikun & Fungfai (2009) also point out that Chinese building architects are rather
unwilling to share their knowledge with each other, therefore Kvadrat can hardly rely on wordof-mouth marketing. Nevertheless, the Chinese culture is relationship-focused, consequently, despite the reluctance in information sharing – testimonies from social references are crucial, so
Kvadrat needs to focus on relationship building within its market segment (Zhikun & Fungfai,
2009).
Firm/Management Characteristics
Due to the fact that Kvadrat uses international marketing standardization and the management is
trained in the headquarters in Denmark, there are applied similar tactics and operations in
Denmark and China; consequently, there is no need for a separate analysis in this thesis.
The CEO of Kvadrat is Anders Byriel, who works in Ebeltoft, whereas the country director in
China is Jorgen Hansen. The deputy manager in the Copenhagen marketing department is Shawn
Cook, whereas Melody Lin is the Shanghai-based marketing coordinator (Kvadrat, 2014).
Tactical Level
The advertising tactics of Kvadrat in China are comprised of online media presence through
social media and their corporate website combined with two showrooms in Shanghai and Hong
Kong. Another general tactic for the businesses operating in the textile industry is to participate
in trade shows. However, Kvadrat has found that these trade shows in China do not represent the
same quality as the similar arrangement in Europe or America; therefore, so far it decided not to
exhibit its products. According to the marketing manager Melody Lin, only a few people visit
these trade events with the purpose of buying, more often the visitors only go there in order to
collect ´free stuff´ (Hansen, 2010).
Nevertheless, one could argue that it is still risky tactic not to attend the trade shows, since these
could increase the brand awareness; moreover, they also have the opportunity to meet the
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potential customers face-to-face, which is highly essential given the characteristics of the
Chinese business culture described above (Zhikun & Fungfai, 2009).
Regarding the social media presence, Kvadrat has strategically chosen to be found on the biggest
Chinese microblog: Weibo (see Appendix), furthermore, it has also created an account on Youku.
By searching through the posts, one realizes that the main focus is on the visuals, since Kvadrat
posts mostly pictures and videos of its recent ads with little or no explanation. This is another
risky tactic, since it does not utilize the advantages of storytelling and it is difficult to get more
information about the brand for those ones who are not aware of it. However, these all could be
intangible benefits, whose effects on sales are rather impossible to measure. Furthermore, despite
this tactic might be risky from one point of view, it could be beneficial, since there is no written
message, which could be mistranslated. Furthermore, Kvadrat´s both mission and vision
statements include the notion of art entailing in individual sensemaking, and this notion is highly
reflected in pictures on abstract forms in vivid colours (Kvadrat, 2014).
When looking at the timing of the social media posts, it can be argued that it is within normal
business hours, which can be debatable as well. Since the interior designers are busy at work, it
might be a more beneficial tactic to figure out the exact hours they are online and post during
these hours. In case this lies outside the normal working hours, there are certain social media
managing tools which can schedule the posts (Hackley, 2010).
Furthermore, another intesting tactic is that the videos posted on Youku do not have any music
or explanation, so there are silent ads. The impact of these on the Chinese viewers bombarded by
various types of media every day should be considered and maybe focus groups should be set up
in order to determine the success of the social media presence (Gong, 2003).
Operational level
All the Kvadrat employees need to undertake a training course, which will ensure that only
highly qualified workforce will be employed. For each employee there is a specific learning plan
designed, which guarantees that all the employees possess the relevant and up-to-date knowledge
about the company´s strategy. This training takes place at Kvadrat´s special academy, which
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holds annual workshop and seminars for all employees. Last year, 88% of the employees went
through trainings or seminars (Abbott & Groysberg, 2013).
As the following quote from the Kvadrat´s employee handbook: “Our Vision and Mission, 20122015” illustrates: “We try to make as few rules and policies as possible. In return we expect each
person to always act in accordance with our basic values and, in doing this, to: demonstrate
enthusiasm in his/her daily tasks; be open toward others and our environment; understand that
we act as one company; be quality-oriented in all decisions; and be proud of being a part of our
company” (Abbott & Groysberg, 2013), the management style of Kvadrat is highly decentralized.
This is facilitated by the project that all Kvadrat employees need to undertake a training course,
which will ensure that only highly qualified workforce will be employed. For each employee
there is a specific learning plan designed, which ensures that they are up-to-date about the
company´s strategy. This training takes place at Kvadrat´s special academy, which holds annual
workshops and seminars for all the employees (Abbott & Groysberg, 2013). With regards to the
communication strategy within the organization, “Top management is communicating the
strategy to all departments, all markets. We do that in January. I just had three departments in
today, where we go through all of our strategic roadmap. . . . And we’re doing the same in the
markets all over Europe and the world. I’m going to Australia next week to communicate our
strategy, and make sure that they have a sense of urgency out there also” (Abbott & Groysberg,
2013).
Product Characteristics
The product characteristics refer to the product cost, type and positioning. Kvadrat´s products for
the contractual market are uniquely designed with single solutions for the different projects,
therefore they possess innovative features; topped with the quality, the company charges high
prices for its products, therefore, it operates in the premium market (Kvadrat, 2014). Regarding
the product type, it can be regarded as an industrial product, rather than a consumer one.
Strategy-Fit?
As described in the Theoretical Framework section, the international standardization strategy is
suitable, when the foreign market characteristics fit the internal and external environment in the
host country (Ramarapu, Timmerman, & Ramarapu, 1999). If one takes the framework of
Katsikeas, Samiee & Theodosiou (2006) into account, it can be argued that the micro- and micro
environmental conditions are different in Denmark and in China. According to the theory, this
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should result in a localized approach. Regarding the foreign market characteristics, -from the
analysis above – it can be concluded that there is little environmental similarity between the
Danish and Chinese markets. Whereas in Denmark there is high competition, in China, it is
rather medium (low) with an increasing export market, further, the psychic distance between
these markets are huge, as well. Concerning the firm/management characteristics, the company
has long-standing international experience. Even though it is still a family-owned business, due
to the partnerships on the global scale, it can be claimed that the firm size is rather big and the
management is centralized in Denmark. The firm/management commitment to allocate resources
to exporting activities is high, whereas the foreign market coverage is extensive as well, whilst
the preceding year´s performance is positive due to the rising turnover. With regards to the
product characteristics, the product type is industrial product with high costs with unique and
innovative features (Abbott & Groysberg, 2013).
Nevertheless, Kvadrat is successful with utilizing a standardized approach, which points to the
direction that economies of scale might be more important in certain cases than adaptation to the
characteristics of the local markets.
When taking into account the external environmental analysis by Tan & Sousa (2013), the results
are the following. The foreign market characteristics suggest international marketing localization,
since there are dissimilarities in terms of environment, competitive industry, export market
development and the physical distance. The firm/management characteristics rather show the
possibility of international marketing standardization, since Kvadrat has a long-standing
international experience with various foreign market coverage, further, the management
approach is centralized with central training. The product characteristics suggest localization as
well, since they are unique and adapted to the clients´ needs. Consequently, this framework
suggests that Kvadrat should engage in an international marketing program standardization,
which entails product, promotion, price and distribution harmonization. Despite the results of
this meta-analysis, Kvadrat´s overall performance is –including economic and strategic levels –
is satisfactory, which implies that the strategy-fit point of view is not suitable in all the cases.
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Moving onto the communication aspect of this analysis, as pointed out above, Kvadrat uses a
standardized communication strategy. Njusja de Gier, VP of Branding & Communication of
Kvadrat stated that: “we want to be more efficient with marketing; to have a higher ROI and
lower marketing expense or moving a lot more of our communications efforts online” (Abbott &
Groysberg, 2013). Therefore, the communication channel is online, whereas the receivers, as
pointed out above, are the main stakeholders (Mitchell, et al. 1998). As analyzed above, the
company itself is rather decentralized, whereas Kvadrat´s strategic road states that the ads should
have affective appeals, therefore, they are based on abstract forms and colors (see Appendix)
(Abbott & Groysberg, 2013).
Cheon, Cho & Sutherland (2008) argues that in case the market characteristics profoundly differ
(which has been pointed out above), furthermore, the sender has a decentralized management
style and in case the purpose of reaching affective appeal, the localization strategy is more
appropriate (Cheon, Cho, & Sutherland, 2008). However, Kvadrat itself benefits from the
standardized communication approach, therefore, the following part of the section intends to
classify the reasons behind this. Since Kvadrat offers a unique product and makes use of value
innovation – thereby being in a blue ocean right now – the standardized approach to
communication might be supported by other characteristics.
The Blue Ocean Strategy and Kvadrat
When examining the tactics of Kvadrat, it was mentioned that it moves to retail markets after it
has reached the maximum number of contracts. Consequently, it can be argued that it uses value
innovation strategy in order to marke the competition irrelevant, entailing that it is a suitable
example for using the blue ocean strategy.The following section will scrutinize how Kvadrat
moved to the blue ocean and created uncontested marketspace.
As discussed above, the textile industry – along with the construction industry - is slowing down
in Denmark, therefore it can be concluded that it has become a red ocean with fierce competition
and decreasing number of orders (Bayer, 2008). As a result, Kvadrat focused on alternative
industries and redefined the buyer groups within that industry. As a first step, it is important to
define the strategy canvas and identify what can be eliminated, reduced, raised and created.
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Kvadrat
Kvadrat
Textile Industry
Figure 22 – The Strategy Canvas of Kvadrat in China. Based on: (Kim & Mauborgne, 2005).
As the Strategy Canvas for Kvadrat in China shows, Kvadrat has eliminated the burden of
owning its own production facilities, but it rather works in close relation with its 21 suppliers
(Abbott & Groysberg, 2013). Furthermore, it has reduced the delivery time, raised the quality,
the after-sale service and the warranty condition, whereas it created its own aesthetic design
(Kvadrat, 2014). Additionally, it works together with companies from the furniture industry as
well, through which it creates a new offering by merging the opportunities within these two
industries. Furthermore, it works together with famous designers and the fact that it is a Danish
company strengthens its competitive advantage of country-of-origin marketing. Another aspect
of Kvadrat´s business and communication strategy includes norm-breaking ways of dealing with
the contracts, regarding that it does not give any discount for the customers – which is a
customary way in China – and its brand is signalized of high prices and top quality (Gaarden,
2013). Currently, Kvadrat´s market segment includes different projects, among which there is
hospitality, healthcare and cultural spaces and it is important for them to communicate the
variety of textiles suitable for these public spaces.
With regards to the tactical aspects of the strategy, pamphlets and brochures are also distributed
during trade shows and in the showroom and it intend to strengthen its online presence. One of
the main messages in these advertising materials is that the vision of Kvadrat is to become a
world leader in the interior textile industry and therefore it delivers top class solutions (Hansen,
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2010). According to Ambler & Witzel (2004), one should never point out that they want to be
the leader or they are the leaders within the industry, when making business in China. In
accordance with this argument, Gesteland (2012) also argues that firms should never praise their
products in the Chinese business context. This is contrary to Kvadrat´s tactics, however, the
growing sales verify the applicability of this approach.
Furthermore, the Chinese culture is usually characterized as relationship (guanxi) and social
status (mianzi) focused. As Kvadrat´s example shows, the tendency of “[…] without guanxi the
door to business is firmly barred” (Ambler & Witzel, 2004) may not be true when a company
deliversa value innovated product.
On the website, the reference works have a special place, which also creates credibility (Kvadrat,
2014). This is especially important, since Larsen (2004) claims that Chinese building architects
are becoming more and more sophisticated; hence they increasingly look for excellent products.
Nevertheless, there are no customer testimonials included in the advertisements, which is usually
not considered as trustworthy advertising.
To sum up, this chapter intended to answer the third research question, namely whether the
chosen strategies of Kvadrat are in line with the theoretical suggestions and furthermore, why
this certain approach is beneficial for the company. Furthermore, this chapter also contributed to
solving the problem statement by examining the communication strategies and the reasons
behind these choices. All in all, this thesis views Kvadrat as an exemplary case, since the
environmental conditions point to the direction that Kvadrat´s communication strategy should be
localized. Nevertheless, Kvadrat´s international marketing standardization involves standard
advertising materials translated into 9 languages by one agency called Design-Dialogue
operating in the UK. Furthermore, this also requires a centralized approach regarding the tactical
and operational levels of conducting business. The Blue Ocean Strategy has been used in order to
find out, why Kvadrat is still successful, even though the analytical results pointed out that the
standardized communication strategy does not fit the environmental characteristics. In general,
Kvadrat has a history of making use of the Blue Ocean Strategy by moving to B2C segment and
new markets when it has reached the maximum number of B2B contract on a certain market.
Consequently, even though the environment suggest the international marketing standardization
strategy, Kvadrat still succeeds in China, mainly due to moving away from the Red Oceans by
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value innovation and thereby maintaining a consistent business strategy and making use of
economies of scale.
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Discussion
The aim of the following part of the thesis is to answer the fourth research question, namely how
the analytical findings above interplay with the theories and what the future prospects for
development are. In order to answer this research question, first of all, the advertising
transferability will be discussed, followed by a debate on the Blue Ocean Strategy.
Advertising transferability
Even though Kvadrat is successful regarding its advertising strategies, it is still essential to
discuss the possibilities of advertising transferability.
According to Ipsos (2013), one in every three advertisements should not be launched in another
country, whereas another third should have been modified before aired. That leaves only a third
of the ads which can be used without modification.
Sheth (1978) argues that it is tempting to standardize the advertising materials due to easier
management and economies of scale. These are also highlighted by the proponents of the
international marketing standardization and criticized by the supporters of the international
marketing localization. Sheth (1978) claims that the determining aspects of multinational
advertising are: a) expectations of the customers, b) specifics of the message encoding-decoding
process, and 3) silent languages, such as culturally different meanings of time, friendships, etc.
On the basis of these factors, he proposed a framework, which helps the companies decide about
the degree of adaptation. These strategies include: a) complete extension, b) symbolic extension,
c) literal extension, d) symbolic and literal extension, e) simple adjustment, f) literal adjustment,
and g) complete adjustment.
Figure 23 – Strategies of Advertising Transferability in Multinational Marketing. Source: (Sheth J. N., 1978).
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Since the customer expectations between the Chinese and Danish market and similar, but the
encoding-decoding process and the silent language are different, Kvadrat might consider to use
the symbolic & literal extension strategy, indicating the use of the same medium, however,
symbolically adjusted messages.
Addtionally, according to Ipsos (2013), creative ads do not transfer easily not only due to
cultural and language differences, but it is also dependent upon the strategy itself. In case, it is
not new or relevant to the audience, it will fail to create interest. Furthermore, the executional
aspects are also crucial when it comes to advertising on a second market. Based on these reasons,
Ipsos (2013) recommended five strategies to think through before using standardized advertising
material in another market. First of all, consumers in all regions in the world look forward to
great the relevant storytelling. Secondly, the customer´s geography, culture, brand awareness and
advertising context should be taken into account as well. Thirdly, ´think global´, meaning that
big ideas developed for a global market are more likely to penetrate across markets. Fourthly, the
investment in the success is crucial as well, indicating that the company should start with strong
ads in order to create the important brand awareness, since strong ads are more likely to transfer
than weak ones. Fifthly, it is always a good idea to conduct focus group interviews and tests
before launching a big scale campaign (Ipsos, 2013). Additionally, (Ipsos, 2013) has also come
up with a checklist for transferring ads between markets.
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Figure 24 – A Checklist for Transferring Ads between Markets. Source: (Ipsos, 2013).
This framework measures how strong the strategy is on the originating market and takes into
account the cultural and executional variables. With regards to Kvadrat, this framework might
recommend some changes in its advertising practices, such as paying more attention to
storytelling and a more localized approach.
To sum up, there are several different frameworks regarding advertising transferability, but they
have one thing in common: usually in the case of Kvadrat China they suggest some modification
of its advertising practices. This thesis views as beneficial to run standardized advertisement for
the foreign interior designers working in China, whereas a modified strategy might be beneficial
for the native Chinese target segment.
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As pointed out above, the advertising transferability is dependent upon the receiver´s sensitivity
to comprehend certain culturally embedded messages. However, the advocates of the
international marketing standardization claim that the consumer tastes are increasingly
universalized. Holt (1994) claims that the methods used to analyze the consumer tastes across
different markets are rather inadequate, since they put too much weight on cultural aspects.
However, consumption behvaiour is also largely affected by economic, political, demographic
and ecological factors, therefore cross-national consumption patterns should be viewed in this
spotlight. Furthermore, even though there are still discussions on whether the ´global consumer´
has emerged and to what extend it exists, data reports increasing importance dedicated to quality
and uniqueness. In the case of Kvadrat this is an important trend, since it provides the customers
with unique product offerings. Consequently, the culture might be a significantly lower role in
determining whether Kvadrat´s products are going be bought. Furthermore, through the
company´s product customization, it can also satisfy the buyers from various social and cultural
backgrounds. As the case study shows, this approach of high quality product and after-sales
service coupled with customization options can be marketed in a standardized way successfully
(Holt, 1994).
How to survive the future Red Ocean?
Regarding the Blue Ocean Strategy, the analysis showed that Kvadrat applies it professionally on
the strategic, tactical and operational levels. However, as Kim & Mauborgne (2005) point out,
blue oceans will eventually become red oceans. Therefore, it is important for Kvadrat to be
future-oriented and grasp new opportunities in order to further create uncontested market space.
One of the aspects to consider is to look for new customers. Currently, Kvadrat has been mostly
working with foreign design companies and foreign interior designers. Hence, it is could be a
beneficial idea to engage in more contracts with the Chinese building architects. Furthermore,
the usual Kvadrat strategy of moving to the retail market via wholesale could be another strategy.
According to the SWOT analysis by Bayer (2008), the company´s strength lies in product
development, sales, key employees, broad presence and low competition.
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Figure 25 – SWOT Analysis on Kvadrat. Source: (Bayer, 2008).
Production in China is listed both as a threat and an opportunity. In case, the Chinese market was
turning into a red ocean, Kvadrat could consider working together with Chinese suppliers. This
would make them be closer to the customers and working with Chinese designers would allow
them to understand the more culture-specific pattern of the public spaces. In order to reach a new
blue ocean several tactics can be employed. First of all, more online advertising could take place,
whereas the development of an e-business division could be beneficial as well. Furthermore, as
discussed under the Advertising Transferability section, it could be crucial to re-think the culture
specific symbols and the ad messages could be built on those (Bayer, 2008).
On the operational level, Kvadrat has reached excellent results. However, it is essential that it
maintains its academy on employee training and it keeps the employees up-to-date about the new
tactics employed. For this purpose, the frequent use of intranet is recommended.
With regards to communication, the analysis has showed that Kvadrat puts an emphasis on
communicating to the most important stakeholders. As pointed out above, in case the conditions
change, which result in strategic decisions, the stakeholders should be kept informed
(Cornelissen, 2011).
All in all, Kvadrat´s operational level show its ability to respond to quick changes, which is
crucial in managing change or a move away from the red ocean.
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Balancing the paradox of standardization and localization
This thesis aims to contribute to a crucial discussion with regard to international marketing
standardization. The arguments for both standardized and localized strategy have merit and this
section aims to present some ideas on how to balance the paradox of globalization and
localization.
As mentioned above, globalization drives growth and improved business opportunities, however,
it still continues to be a challenging playing field, where only a few players actually manage to
become truly global brands. In order to win in a global area, the companies need to have the
strategic know-how and possess the executive skill to manage the day-to-day business issues
(Bird, 2007). As the Figure below points out, this paradox of globalization holds both challenges
and opportunities for the retailers.
Figure 26 – The Paradox of Globalization. Source: (Bird, 2007).
First of all, the paradox can be divided into 6 dimensions, covering the a) Product, b) Brand, c)
Innovation, d) Supply chain, e) Organization, and f) Values. It is difficult to meet economies of
scale and the local customer needs, involving the question of local sourcing, whereas it is also
essential to decide whether a global brand is needed. Regarding the supply chain, the companies
have to develop a well-functioning supply chain management, where there is place for
innovation and sharing of new knowledge in order to create competitive advantage. In order to
achieve these, the organization itself needs to be open to changes and flexible with the balance
between the global and local decision making, and stil not excluding the local values and trends
(Bird, 2007).
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Figure 27 – Products: Global scale versus local customization needs. Source: (Bird, 2007).
As Bird (2007) points out, there is a way to balance the paradox of globalization of products.
According to him, the degree of complexity increases with the differentiation from competitors
and customer preferences, whereas the degree of complexity decreases by lowering the cost base
of manufacturing, storing, distributing and controlling the products, meaning by the increase of
profitability.
A profitable tool Kvadrat could integrate into its business operations is a similar tool to Nike´s
NikeID. With this tool, the customers can globally customize the products at a global customer
interface, which leads to reduced costs, higher profits and full market exploitation through
increased scalability and flexibity. In the case of Kvadrat, a customization tool could help in
engaging in local retailing without the time-consuming efforts of negotiations with the customers.
Figure 28 – Innovation: need to build truly global networks instead of R&D islands. Source: (Bird, 2007)
Concerning the dimension of innovation, Bird (2007) suggests that instead of locating the R&D
centers separately worldwide, there needs to be built truly global networks, which connect these
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locations. This will also lead to increased information exchange resulting in growth of the
emerging markets. With regards to the supply chain, the companies face the challenges of
increased delays, security compliance, and shorter product life cycles.
Nevertheless, there are still several theorists, who claim that the balance between standardization
and localization should not be balanced by choosing one strategy, but by integrating them,
resulting in global products tailored for local preferences, namely, there should be a “glocal”
approach (V., 2011). Furthermore, V (2011) claims that the way this approach can be integrated
is the so called ´reverse innovation´. This concept can be defined as letting every market
innovate and those results should be spread across other markets. The advocates of reversed
innovation claim that the market-sourced innovation could be an effective strategy by fostering
organic growth resulting from innovating products and services for the different national markets.
Furthermore, dealing with globalization is a natural step for today´s businesses, whereas
localization only increases growth up to a certain point, where reversed innovation could help to
overcome the difficulties. Additionally, through the concept of reversed innovation, innovation
itself could be enjoyed locally (V., 2011).
Another option to balance the paradox of globalization and localization is the strategy of “think
globally, act locally”. Few scholars or marketing practitioners would question this strategy;
however, the interpretation of what it actually means is rather debatable. Parnell (2006) suggests
that the firms should strive to achieve a synthesis between the standardization and localization
strategy instead of choosing one over the other exclusively. This entails a “glocal” approach,
where there are worldwide appeals which are mixed with local application. Furthermore, Parnell
(2006) claims that the company´s most important lesson is to understand how the global and
local strategies can be applied simultaneously. In order to add to this debate, he (2006) maintains
that the academia should take a different path from the current one, indicating that instead of
trying to determine which global, regional or local tactics are relevant, they should measure the
organizational, industrial and environmental factors influencing the creation of a synthesis
between the globalized and localized approaches. Svensson (2001) states that this glocal
approach can be divided into local, international, multinational and global strategy approaches. It
varies from the global approach, since it recognized the importance of local adaptation, further it
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is typically comprised of both international and multinational matters. The global strategy
approach means the harmonization of the business activities across all markets; the multinational
approach is applied when a number of foreign markets are targeted, whereas international
strategy refers to the strategies which can be applied outside the home market. To sum up, the
glocal strategy provides a harmony between standardization and localization, entailing developed
correctness of the present utilization of the global strategy. Consequently, Daft (2000) states that
“… we must remember we do not do business in markets; we do business in societies… In our
future, we`ll succeed because we will also understand and appeal to local differences. The 21st
century demands nothing less…” (in: Svensson (2001)).
With regards to Kvadrat, the case study shows that certain aspects, such as the marketing
materials and online presence are standardized, whereas the distribution channels and price are
localized. There are several advantages of this mixture; however, Kvadrat could develop its
business operations by not separating the globalized and localized matters, but by combining
them. For instance, it could run similar advertisements in the countries with a little local touch.
This way it would be able to sustain economies of scale, but still avoid the trap of distancing
itself from the customers.
To sum up, the purpose of the Discussion section was to answer the fourth research question by
putting the analytical findings into another spotlight and examine their interplay with the
theoretical recommendations. The basic notion of this section was that the thesis stems from a
social constructivist perpectives, thereby assuming the dynamic nature of business. Consequently,
Kvadrat´s current communication strategy might not continue to be successful in case it remains
static and is not adjusted to the changing market conditions. Therefore, the transferability of
advertising has been debated on followed by an introduction on how to face with increasing
competition. All in all, it has been discussed that Kvadrat should continue with its professional
way of dealing with the communication efforts by making sure that the most important
stakeholders are up-to-date with the business strategies.
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Conclusion
The purpose of this thesis was to contribute to the debate on international marketing
standardization or localization from a communicative perspective in order to tackle the
challenges the businesses need to face when operating across various national markets.
The process of globalization has not only affected the current political, social and economic
structures, but it has also challenged the development and implementation of successful business
strategies across various national markets. The two prominent strategies on how to address these
challenges are the international marketing standardization or localization. This thesis has given
an account of and the reasons for the widespread use of the international marketing
standardization approach, whereas it has also investigated whether these two strategies are
exclusive or they could be used simultaneously and harmoniously. Another topic, this thesis has
covered is a new management perspective, namely, the businesses should forget about fighting
the competition and they should better look for way in order to add value to their products or
services, through which they create uncontested marketspace (Kim & Mauborgne, 2005).
Kvadrat is a Danish company specialized in interior textiles and since its business operations are
successful with growing turnover in both Denmark and China, it has been chosen as a case study
in order to contribute to the discussion on the international marketing standardization or
localization. This study set to determine why it could be more beneficial for an international
company entering new markets to use the international marketing standardization strategy, even
though the host market characteristics suggest that it should better use the localization approach.
In order to find an answer to this problem statement, several research questions have been asked
as well. These include the definition of globalization, the debate on international marketing
standardization vs. localization vs. the strategy-fit approach, the Blue Ocean Strategy, and
business management on strategic, tactical and operational levels. Due to the fact that Kvadrat
operates in the B2B market, the difference between the B2B and B2C fields has been researched
on as well.
One of the main findings of this thesis is that the Danish and Chinese market characteristics are
profoundly different, consequently, the both the framework by Katsikeas, Samiee & Theodosiou
(2006) and by Ramarapu, Timmerman & Ramarapu (1999) recommend that a localized approach
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is more suitable. However, Kvadrat uses a standardized communication strategy, thereby
translating its website, newsletters and brochures to Chinese language. This is in contradiction
with the theoretical recommendations; however, the growing turnover of the company indicates
success. Therefore, the thesis also looked into the reasons behind this and with the use of the
Blue Ocean Strategy by Kim & Mauborgne (2005) and it entails the creation of an uncontested
marketspace. It has generally been found out that the fast service and after-sale care, moreover,
the high quality and unique design has added a high value, which is coupled with the economies
of scale achieved through the standardized communication strategy, which is the key to
Kvadrat´s success. However, as the research paradigm of social constructivism suggests, this
current status is not static, therefore it has also been discussed how Kvadrat can further move to
uncontested marketspace. These ideas involve moving to the B2C market and the sale of the
ready-made products. Other suggestions could be moving production sites to China in order to be
closer to customers.
All in all, it can be concluded that the present study makes noteworthy contributions to both the
debate on international marketing standardization and creation of uncontested marketspace. It
has also gone some way towards enhancing our understanding on the challenges and
opportunities when companies enter a new national market in the spotlight of globalization. The
empirical findings of this study give a new understanding of how the standardization and
localization can be mutually inclusive approaches, and therefore, it could serve as basis of future
studies on this matter. Furthermore, the methods used by Kvadrat may be applied to other
markets in the world, which shows the company´s professionalism and great understanding of
the current situation in today´s globalized world.
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Appendix
Figure 30 – Kvadrat´s website. Source: www.kvadrat.dk
Figure 29 – Kvadrat´s Weibo presence as of 01.05.2014. Source: http://weibo.com/kvadratchina
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