Retention

Introduction: This chapter aims to present the background of the subject of the thesis and introduce the reader to the topic of the research. Therefore it will present the reader with a basic discussion of standardization versus adaptation for companies operating in international markets. Also the research questions which are intended to answer are presented. Background: When companies expand their market internationally,they have to consider standardization and adaptation of their marketing program (Jobber,2001). Standardization is an international marketing strategy where the company uses the same marketing program for all their international target market. The author describes Adaptation is a strategy regarding change of the marketing program, in other words the company's product, price , place and distribution for each international target market. Well managed companies respond to expanding global markets with standardized products that are higher in quality, more reliable and lower priced than their competitor. Levitt (1983, cited in Loyka,2003) .Buzzel (1968, cited in Loyka,2003) identifies benefits and barriers to standardization in terms of product design, pricing , distribution and sales forces . Areas identified by Buzzel(1968) as having the potential to serve as barriers to standardization included physical environment, Stage of economic development, cultural characteristics, stage of product life cycle, competition, distribution systems, advertising media and legal restrictions. He also reported that customary ways of doing business including basing marketing philosophies on local marketing environments were employed during a time when national boundaries were more formidable. Buzzel (1968) argued that it would be a mistake to assume that products could be transferred from one market to another without careful consideration of the market differences and requirements. Levitt(1983, cited in Zou, et al (1997) provided the most compelling case for international marketing standardization. He argued that advanced technology in communication and transportation has homogenized markets around the globe. As a result, global consumers have emerged who demand high-quality products at low prices. These changes in the global marketplace have led to changes in the competitive dynamics between companies. One key source of competitive advantage has become the ability to produce high-quality products at a low cost. Since standardization of products and international marketing strategy facilitates the realization of economies of scale in production and marketing, Levitt argued that firms must pursue a standardized product and international marketing strategy to be successful in the global market. The aim of the research is to find whether Toyota, a multinational motor company has standardized or adapted it's marketing mix strategy while doing business in Bangladesh and the underlying factors that has enabled them to take the decision. Research Question: The purpose of this thesis is to investigate and get an understanding of the factors that influence standardization or adaptation of the marketing strategy of Toyota motors in Bangladesh We shall address the following research questions to satisfy the purpose of the research: Research Qs 1: How are standardization/ adaptation of products are influenced by various factors in Toyota Bangladesh' Research Qs 2: How are standardization/ adaptation of pricing are influenced by various factors in Toyota Bangladesh' Research Qs 3: How are standardization/ adaptation of promotions are influenced by various factors in Toyota Bangladesh' Research Qs 4: How are standardization/ adaptation of distribution channels are influenced by various factors in Toyota Bangladesh' Literature review: Introduction: The recurrent theme in international marketing in whether companies should aim for a standardized or country-tailored marketing approach is very much debated in the academic literature and is a concern for every multinational company and marketing practitioner. (Vrontis and Thrassou,2007). On one hand it has been argued that the global market has become homogenized that multinational companies can market their products and services the same all over the world by using identical strategies with resultant lower costs and higher margins. On the other hand, some observers emphasize the obvious dissimilarities between the markets of various countries, especially those for consumer goods and argue in favor of using international differentiated marketing programs. (Vrontis and Thrassou,2007) The theoretical framework will explain different theories regarding standardization and adaptation of a marketing strategy and also the fundamentals of 4 p's of marketing: Product,Price, Promotion and Place (distribution channels). The literature review will consist of four sections each of them containing theories of the four research questions. Marketing Mix Strategy :Standardization/Adaptation of Products: "Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organizations and ideas'' (Kotler et al,1999). In discussing the nature of the product Kotler (1998) suggests that three distinct elements need to be considered. • Product Attributes are associated with the core product and include such elements as features, styling, quality, brand name, packaging, and size and color variants. • Product Benefits are the elements that consumers perceive as meeting their needs – this is some times referred to as the ''bundle of potential satisfaction'' that the product represents. Included within this bundle is the product's performance and its image. • The Marketing Support Services consists of all the elements that the organization provides in addition to the core product. These typically include delivery, installation, guarantees, after-sales service, and reputation. Standardization or Adaptation of product: Calantone,et al.,(2004) has said that two divergent international marketing strategies have been debated over past two decades which is standardization versus adaptation of product offering. They continue to explain that standardization means selling essentially the same products in the same markets. The advantage of this strategy is lower costs due to economies of scale and experience that accumulates from designing ,manufacturing and distributing identical products in multiple countries. The authors say that offering the same product can be undesirable in the legal environment, distribution channels, climate and topography, levels of markets and technological development and competitive and cultural factors. According to Calantone et al(2004) customers in different countries have different requirements and use conditions; they explain that a standardized product may not satisfy all. Product adaptation refers to the degree to which physical characteristics or attributes of a product and its packaging differs across national markets. Even though modifying the product for different markets increase costs, the authors say that the adapted product may fit the needs and desires of the consumers in different countries better, command higher margins and generate much greater revenues. Levitt (1983 cited in Vrontis and Thrassou,2007) argues that well-managed companies have moved from emphasis on customizing items to offering globally standardized products that are advanced, functional, reliable and low priced. He also argues that multinational companies that concentrated on idiosyncratic consumer preferences have become ''befuddled and unable to take in the forest because of the trees". Only global companies will achieve long-term success by concentrating on what everyone wants rather than worrying about the details of what everyone thinks they might like. Marketing Mix Strategy :Standardization/Adaptation of Pricing: What is pricing' "The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service." (Kotler et al,1999) Palmer and Huntley (1999) say that,Of all the elements of the marketing mix , only price brings revenue to a company- the others result in expenditure. If the selling price of a product is set too high, a company may not achieve its sales volume targets. If it is set too low, volume targets may be achieved, but no profit earned. Setting prices is a difficult part of the marketing mix. In theory , prices are determined by the interaction of market forces. According to them, there are three basic approaches to the practical task of setting prices for products (see fig1): 1.What it costs to produce 2.What the competition is charging 3. What customers are prepared to pay. Determines maximum price achievable Determines long term Restrain minimum acceptable pricing freedom price level fig1: The influence of marketing environment on pricing (Palmer, Hartley,1999) The most significant factors of pricing (Wilson and Gilligan,1998) are: • The organization's corporate objectives • The nature and the structure of competition • The product life cycle • Legal considerations • Consumers and their response pattern Lancioni (2005, cited in Sousa and Bradley 2009) says,developing an effective pricing strategy is difficult, and failure leads to missed opportunities and lower profits .According to Czinkota and Ronkainen, (1998, cited in Sousa and Bradley 2009) understanding the influences on export pricing decisions, particularly the degree of adaptation that may be required, is vital because of the effect on the firm’s revenue and profit levels . Export pricing methods can be classified under two broad categories (Myers et al.,2002): (1) cost-based export pricing; and (2) market-based export pricing. The cost-based pricing methods calculate price on the basis of firms’ costs. This method is frequently used by managers because it is easy to implement and makes intuitive sense. Price is determined on the basis of costs with little interest in market or competitive factors in the export market. The market-based pricing method, on the other hand, takes into account market and competition factors when setting price. When different geographic markets exist, firms using this policy are more likely to practice price discrimination to adapt to the local conditions.(Myers et al.,2002).According to Sousa and Bradley (2009 ),he degree of price adaptation is strongly influenced and conditioned by the degree of product, promotion, and distribution adaptation. Marketing Mix Strategy :Standardization/Adaptation of Promotion: What is promotion' "Activities that communicate the product or service and its merits to target customers and persuade them to buy." (Kotler et al,1999).Palmer and Huntley (1999) say that, Promotion is a means by which companies communicate the benefits of their products to their target markets. Promotional tools include advertising, personal selling, public relations, sales promotion, sponsorship and increasingly direct marketing methods. Just as product ranges need to be kept up to date to reflect changing customer needs, so too promotional methods need to be responsive to environmental change. A number of aspects of a firm's promotional activities identified by them are: 1. Developing a message: As customers' needs change , so the unique selling proposition of a product used in promotion needs to change. For example car adverts reflect this trend by increasingly emphasizing safety rather than speed. Also messages that work well in one culture may not work in others- cuddly dogs may produce positive association in the United Kingdom but revulsion in others. 2. Developing the medium: Promotion is only effective if it reaches its target audience and has some effect on it. A company seek to minimize the cost of getting its message through to a specified target market and this target market must be matched with the audience of the available media. Audience habits have been changing and the range of media available to promote products has been growing. In some instances , the choice of advertising medium may be influenced by legislation or voluntary codes of conduct. For example- In the United Kingdom the Independent Television Commission's Code of Advertising Practice does not allow cigarette adverting on television. 3. Eliminating 'noise' : Promotion involves sending out a coded message to customers who then decode it. The original intention of the communicator could become distorted in the minds of the receiver by a misleading message, a poor medium or interference from other sources. An example of this interference is provided by editorial comments in newspapers that might contradict the claims of a company's advertising. 4. Developing a campaign A campaign brings together the various elements of a company's promotional effort. The proliferation of media brought about by developments in satellite and cable television, direct mail and telemarketing is leading promotion planners to plan a campaign carefully so that they hit their target audience and do not waste money communicating with people who are not likely sales prospects. Marketing communications represent the voice of a brand and the means by which companies can establish a dialogue with consumers concerning their product offerings. Marketing communications allow marketers to inform, persuade, incite, and remind consumers. Marketing communications can provide detailed product information or ignore the product all together to address other issues. (Keller, 2001) Proponents of the standardization approach argue that a single advertising message with only minor modifications, or even advertisements with proper translations, can be used in all countries to reach consumers. (Papavassiliou and Stathakopoulos,1997). According to Harvey (1993, cited in Papavassiliou and Stathakopoulos,1997) The nature of the product is considered to be the most significant factor influencing the degree of international advertising strategy .He continues to say that the product aspects that affect the standardization decision are product type,product involvement, product life cycle and culture-bound appeal. Ringlstetter and Skrobarczyk, (1994, cited in Papavassiliou and Stathakopoulos,1997) states that, the chances of improving advertising effectiveness depend on similarities among different national markets. These similarities are to be found mainly in the basic institutional and cultural conditions. Taking into account these similarities and the effects of the experience curves leads to economies of scale in the context of both the development of either a standardized or an adapted international advertising strategy and the simplification of planning complexity. Fig :.Different approaches to international advertising strategies over time for academics and practitioners (Agrawal,1995 ,cited in Melewar & Vemmervik, 2004) According to Domzal and Kernan( 1993,cited in Melewar & Vemmervik, 2004 ). global advertisements are not necessarily completely standardized; in most cases, for instance, there is a need to adapt to the local language. Furthermore, the authors see no reason to impose a worldwide criterion on what qualifies an advertisement as global since most products are not even marketed globally. They conclude that a standardized advertisement is one that is directed simultaneously in several countries. Onkvisit and Shaw(1990, cited in Melewar & Vemmervik, 2004 ) says that there are three basic schools of thought regarding advertising standardization They are as follows. (1) Standardization – proponents of the standardization school assumes that due to faster communication there is a convergence of markets and that consumers are becoming increasingly similar. (2) Individualization (or adaptation) – proponents of the adaptation school points to cultural differences and conclude that advertising must be adapted. (3) Compromise – proponents of this school recognize local differences but also that some degree of advertising standardization is possible. Harvey (1993, cited in Melewar & Vemmervik, 2004 )identified six variables that affect the degree of standardization or adaptation of advertising . These variables are: (1) product variables – the degree of universality of the product; (2) competitive variables – the structure of the competitive environment; (3) organizational experience and control variables – the level of organizational experience in the corporation; (4) infrastructure variables – the degree of similarity of the media infrastructure, for instance, media, advertising agencies and production facilities; (5) governmental variables – the restrictions on mass-communication; and (6) cultural and societal variables – the cultural differences between the home and export markets Marketing Mix Strategy :Standardization/Adaptation of Distribution channels: "All the company activities that make the product or service available to target customers'' (Kotler et al,1999) In both the international and domestic marketplace, companies can engage in the export activity in different ways, but there is a difference between consumer markets and B2B markets. The differnce is that the channels are shorter in B2B markets;they are often more direct (Tanner & Dwyer, 2002) According to Czinkota and Ronkainen (2004), companies have to study distribution channels in every country they wish to establish in and also study the types of linkages between channel members for their specific type of product. They continue to say that companies has to adjust to existing structures to gain distribution. Seifert and Ford (1989) argues that companies choosing their distribution channel when going abroad have little information and therefore have to ask themselves two questions: ''what types of channel intermediaries are actually being used by firms in their export activities' And how satisfied are firms with their chosen channel members' '' The authors also point out that it can be a very costly mistake for a firm that enters an export distribution arrangement the quickest possible way, both in time and money. The research of export channels appears to follow three major thurst according to Seifert and Ford (1989). The first one looks at the sophistication of the distribution channel and the level of economic development in the country. The second one focuses on the nature of channel dependence and conflict that may be presented. The Third has its focus on the appropriateness of dealing with direct, foreign based channel member as opposed to an indirect, domestic based channel member. Vishwanathan and Dickson (2007) says that, the three-factor standardization model identifies three factors as critical to standardizing marketing strategy: homogeneity of customer response to the marketing mix, transferability of competitive advantage, and similarity in the degree of economic freedom. They continue to say that ,to understand the degree of standardization possible in a given context, the level of the three factors need to be examined. When the ability of a company to transfer competitive advantage across markets is high, the homogeneity of customer response to the marketing mix in different markets is high, and there is a high similarity in economic freedom across different markets, a high level of marketing strategy standardization will also be possible An observation has been made that firms are often required to amend their marketing strategy for a host country because of different regulations concerning product standards, patents, tariffs and resale price maintenance by the host country government (Chung,2007) Previous studies have also identified that the disparity of government regulations between the home and host countries is a barrier to the choice of standardization strategies (Kotabe et al., 2005 cited in Chung.2007)). An observation has been made that firms are often required to amend their marketing strategy for a host country because of different regulations concerning product standards, patents, tariffs and resale price maintenance by the host country government (Cavusgil et al., 1993 and De Bu´rca et al., 2004, cited in Chung,2007) . A number of previous studies have stated that the variation in stages of economic development between the home and host countries is likely to have an impact on the selection of marketing strategies (Jain, 1989; Theodosiou and Leonidou, 2003).Furthermore, a large number of studies have pointed out that the disparity of competitive environments between the home and host markets is a barrier to the employment of a standardisation strategy (Boddewyn and Grosse, 1995; Theodosiou and Leonidou, 2003).The observation has also been made that international marketing decisions are influenced by the marketing infrastructure of a host country, which includes media availability and distribution infrastructure (Akaah, 1991; Papavassiliou and Stathakopoulos, 1997). A standardisation strategy is more likely to succeed when the basic marketing infrastructure is similar in the home and host countries (Jain, 1989).Culturally related items have also been widely noted to be a factor in the choice of a marketing standardisation strategy (Whitelock and Pimblett, 1997; Kotabe et al., 2005).Socio-cultural related items; such as consumer literacy, educational level, socio-cultural customs and taboos, and language; often force firms to modify product offerings for the host markets (Boddewyn and Hansen, 1977; Papavassiliou and Stathakopoulos, 1997).Lastly, several studies have found that firms are more likely to employ a standardisation strategy if the characteristics and behaviour of customers/consumers in the home and host countries are similar (Theodosiou and Leonidou, 2003).This research aims to identify the factors that leads to standardization or adaptation of Toyota Motor Company's marketing mix strategy in Bangladesh. ----------------------- Strength of demand Competitors' prices Production costs Marketing Management