25048869

Adaptation of International Marketing Strategy Components, Competitive Advantage, and Firm Performance: A Study of Hong Kong Exporters Author(s):
Gerald Albaum and David K. Tse Source: Journal of International Marketing, Vol. 9, No. 4 (2001), pp. 59-81 Published by: American Marketing Association Stable URL: http://www.jstor.org/stable/25048869 . Accessed: 13/03/2014 11:17
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of International Marketing Adaptation Strategy Competitive Components, and Firm Performance: Advantage, A Study of Hong Kong Exporters
The authors examine how firms adapt different components of their marketing strategies in foreign markets compared with
their domestic market The and how such adaptation decisions in
ABSTRACT
fluence
thefirms' competitive positions

authors component conceptualize is a purposeful
and performance
in for
eign markets. marketing-mix
a that adaptation of that is influ process to the firm's process helps
enced by a firm's past adaptation
strategy, and they investigate
the importance component marketing-mix ofthat success. The authors propose that the adaptation
define a firm's competitive advantage, which in turn affects its in the foreign market. The authors develop hy performance potheses and propositions and test them with a sample of 183 export firms inHong Kong.
Recent international studies marketing in the understanding in overseas and perform have made significant multinational Taken as a
breakthroughs firms behave
of how markets.
whole,
egy, and
they provide
for the first time the links between

its international On the basis marketing of a contingency strat ap
Gerald Albaum David K. Tse
and
firm's market
environment, its performance.
proach,
Szymanski, environment Researchers
frameworks
Bharadwaj, in deciding (Cavusgil, and
by Cavusgil
and Varadarajan its international Zou, confirmed Their and
and Zou
(1993)
(1994)
have
and
success
fully modeled
how a firm interacts with

Naidu
the foreign market

strategy. marketing Samiee and 1993;
Roth
have firm's
1992; Szymanski,
postulated performance.
Bharadwaj,
links
and Varadarajan
between a firm's
1993)
adap
tation strategy in its international marketing

findings can still
program and the
that in the era of suggest a In be globalization, strategy. powerful adaptation con the fundamental structure, short, among relationship has now been established. This duct, and performance repre a dramatic sents since and Craig's Douglas development
(1992) review of international marketing
studies.
to delineate how a This article extends these developments firm develops its adaptation strategy, how this adaptation
to the relates strategy seas market, and how in overseas formance involves ing mix changing to fit needs, in an over firm's competitive position this position the firm's per determines An markets. strategy adaptation or the elements of the market components real or perceived, in particular country
1999 Submitted March Revised August 2001 ? Journal of International Marketing Vol. 9, No. 4, 2001, pp. 59-61 ISSN 1069-03IX
59
markets
(Keegan
and Green
2000,
pp.
395-402).
In short,
spe
cific activities are performed differently across foreign mar to existing kets. This article contributes literature by and testing the propositions that (1) a firm's conceptualizing adaptation strategy is a purposeful process, (2) a firm's adap tation decision helps it develop its competitive position in its
overseas ates and (3) a firm's competitive market, position its adaptation and between strategy performance. medi
The study is designed with

we investigate a firm's
three distinctive
strategy
features. First,
after a it enters the
adaptation
market
Wind
as well
as at the point of market
entry (Douglas and

firm's internal (Walters interna orienta process resultant strategic
we examine how Second, 1987). its adaptation affect decision processes the effect of a firm's 1986). Third, we assess tional marketing strategy in a broadened
tion, as suggested by Douglas

In the following process. then
and Craig (1989).

adaptation as process strategy being as a
we describe section, we view this Specifically,
change
from what
propose adaptation
is being done
and strategy, We discuss discuss
in the home/domestic
the relationships advantage,
market. We
a firm's among and its perfor and man
its competitive
mance.
This discussion
is followed
future
by the study design and

directions
its results.
research
agerial implications
at the end of the article. argument (Dunning in its home market be
Strategy
Adaptation as a Process
to the internationalization According 1988; Rugman 1981), a firm survives

cause
over its it possesses advantages specific ownership to exploit in overseas its advantages It seeks competitors.
markets by exporting
its products
to, licensing
its production
As the the firm expansion stud ex
in foreign markets. in, or investing technology it chooses its international operations, pands
path and strategy that gives

internationalization ies (e.g., Johanson discussion on the firm's as scale
it optimal
risk and return. This

in prior
has been verified process and Vahlne 1977,1990). on versus it enters in production
Previous focused factors
globalization choice when economies
adaptation an overseas
has mar
ket. The literature has discussed

(such
the impacts of a firm's cost

and market of factors global
ing), marketing
global image), across segments (public policies
strategy considerations
host market environments and other on nations), and regulations)
(benefits of uniform
(characteristics host country versus
adaptation
ization decisions. As Douglas and Craig (1989) note, few studies have attempted to explain what firms face after they
enter firm the their enters firm overseas markets. a foreign market, to adapt its strategies a that when argues Jain (1989) will local competition inspire to the local market. Executive
interviews
(Harris 1994) have confirmed 60 Gerald Albaum
that such pressure and David K. Tse
exists
when
executives
consider
their
advertising
strategies.
Indeed, increased knowledge of the local market motivates a firm to develop products that better fit the local needs the decisions 1993). Often, (Cavusgil, Zou, and Naidu to adapt and how much to adapt is a trade-off be whether tween the costs of a localized strategy and the benefits of bet
ter serving the local market. In their article, Douglas and
Craig (1989) conceptualize adaptation decisions as part of a firm's evolution in developing its global marketing strategy.
They suggest scale market, that at the economies. it faces time of entering a new market, a firm
seeks
achieve foreign
to leverage
its domestic
After different
position
a firm strategic
internationally
successfully options. As enters famil
to
a
iarity with the local market environment marketing and distribution infrastructure
will be able products to leverage and services more options to maximize across
increases develops,
a broad
and its the firm
its return.
range of Walters and
Toyne (1989) postulate that some firms anticipate such needs to adapt to local markets and establish a range of flexible
designs product ket. Szymanski, and options Bharadwaj, markets in the mar the changes and Varadarajan (1993) propose to meet
that multinational
strategies formance. suggesting adaptation In Figure in overseas
companies
will
on discussions
refine
are after
their marketing
of their past per in unequivocal a firm success
the basis
In short, previous that adaptation process 1 we remains a
is inevitable
fully enters
its foreign market.
Yet what
determines
this
unexplained. contingency-based view framework in
propose
which
ing sumes all firm
strategy adoption
performance. that no universal and
plays a sequential
The
role in determin
of strategy is optimal and Venkatra as for
Factors
Strategy
Affecting
Adaptation
the
organizations
contingency set of strategic choices circumstances (Ginsberg
Process
and Performance
man 1985) but that optimal strategy is subject to a certain set of organizational and environmental conditions (Harvey
1982). ences Researchers have attached a broader meaning to con
tingency by considering
factors that are responsible
for differ
as outcomes in strategy variables (Ekeldo contingency we and Sivakumar 1998, p. 277). Consequently, argue that our can be considered a model it in model because contingency cludes We egy factors that that can lead factors to variations in performance. to a firm's strategy strat
propose
two
are fundamental adaptation
(along
process: adaptation each marketing-mix
the firm's
at entry
component: (i.e., how
product, much
promotion,
pricing,
of success that cess) The each
and distribution)
ofthat component
and the perceived
instrumentality
a firm perceives to its suc
marketing-mix component in the overseas market. factor that affects a firm's
contributes
first
current
adaptation
strat
egy in a foreign market
is the strategy the firm uses when Strategy 61
it
Adaptation
Strategy
at Entry
Adaptation
of International
Marketing
Figure 1. Strategy Adaptation, Competitive Advantage, and Firm Performance
Perceived Instrumentality toSuccess
Current
of Degree Adaptation
Competitive Advantage
Firm
Performance
first
enters
that market. consideration
Literature of their environment
on
foreign
market
entry
suggests
conscious and
that firms formulate
their entry strategy through a

their objectives, to determine and resources,
country the entry alliance mode, Researchers have found
the entry the of the entry. strategy, timing that firm-specific factors (produc see Erramilli tion and other transaction and Rao 1993), costs; nature host variables of host choice, (location gov country see Pan Tse and and intercultural variables ernment; 1996), as in Tse, Pan, are salient distance and Au (cultural 1997) a firm designs its and entry financial strategy. Cavusgil and Zou
the host
when sufficient Such Slater
(1994) note
that firms carefully

is intended
plan
their entry, allocating

to the venture. that the market
managerial careful planning 1989).
resources to ensure
ing strategies ment
can be effectively
In addition,
implemented
of the host
(Aaby and
environ
considerations
are critical. Douglas and Craig (1989) stress that entry strategy reflects the firm's response to the legal and technical
that are often mandated.
regulations
Adaptation
ing viewed orientation
at entry may be influenced

of the firm, variable. and such Whether
by the decision-mak
orientation a firm has can be an eth
as an antecedent
nocentric, entation
or geocentric regiocentric, polycentric, in its international decision making
(EPRG) ori is relevant
(Perlmutter
Decision-making a firm's plans
1969; Wind,
orientation
Douglas,
refers
and Perlmutter
to how a decision within firm not the focuses of what make A
1973).
maker context its op is best deci
of "geographic" in a particular eration for headquarters. sions on the basis
in foreign markets strategy concern. An ethnocentric market on the basis
for that market area but of what
is best for the home market or

regiocen
In contrast, firms polycentric is best for each market. of what
tric firm will anchor its decisions on the basis of the region in which the firm is operating, and a geocentric firm will direct its operation to fulfilling its global goals. In their study of 456 Danish companies, Shoham, Rose, and Albaum (1995) report is positively orientation related to that decision-making
the standardization advertising, of marketing strategies, particularly Because and market research. distribution, for the
62 Gerald Albaum
and David K. Tse
theory that would between orientation

empirical research
underlie any possible relationship and adaptation at entry is limited and

almost nonexistent, we formulate the fol
lowing proposition
Pa: A firm's
(not hypothesis)
for examination:
a it first enters when strategy adaptation is to market ori the related foreign decision-making entation of the firm.
to cap its optimal entry strategy represents attempt its target risk and return. For many firms, entry strategies from an extensive result internal process decision-making firm's ture
(Anderson
change
and Gatignon
after
1986). Although
it enters the foreign
a firm will
market, we
likely
pos
its strategy
tulate that the initial strategy works

modification. new host A In other environment. firm's current words, Therefore, we
as the anchor for future

learn propose to adapt to the the following: strategy at
firms will
Ha:
adaptation components
strategy (product,
(i.e.,
a point in time after first entry), defined

marketing-mix
in terms of
positioning,
pricing, and distribution), adaptation strategy when
is positively related to its it first entered the market. argument specifies

signs among of convergence.
The central theme of the globalization

social trends international in many markets show
that Perceived to Success Strategy Instrumentality and Adaptation
With
and
anticipated
growth
travels,
in telecommunication
interaction
technology
would
markets
increase, making globalized strategies possible and profitable (Levitt 1983). Opponents to globalized strategies have pointed
out ments ditions, that socioeconomic though national may be converging, and consumer reactions trends in some market cultures, to globalized local market strategies and seg con may
be diverging
gested across is more case cific Recent 1994)
(Buzzell 1968; Sheth 1978). It has also been sug

regulations almost impos will be the
cases, that, in many public policies markets will make strategy globalization likely for overall components discussion has shifted to be an exception than a norm.
sible (Douglas and Wind
1987). In short, strategy globalization

This not but may hold for spe
programs marketing of strategy, such as pricing.
on globalization (e.g., Cavusgil to a more the attention fundamental
and
Zou issue:
the underlying
strategy end?the petitive "When timate
motives
of the firm. Jain (1989) hints
that
to an com
is the means (versus adaptation globalization) assets establishment of a firm's economic and
are asking, in the marketplace. Researchers position a firm are its ul in an overseas what market, operates to to in broaden the discussion The need objectives?"
in this debate has also clude the firm's strategic perspective been articulated by several authors (Douglas and Craig 1989;
Szymanski, Bharadwaj, and Varadarajan 1993; Walters 1986).
Adaptation
of International
Marketing
Strategy
63
Let us turn to the discussion

within a firm. For more than
on the motivation
two decades, organizational
process
sci
entists have applied expectancy theory to elucidate the moti vation process within organizations (Pinder 1984). Drawing insights from Vroom's (1964) classic work on motivation,
postulate and mentality, they havior. toward tween outcome Valence the components?valence, and direct expectancy?motivate refers to the affective orientation that three key instru a firm's be hold
outcome, an act and the
people to the link be refers instrumentality an instrumental outcome (or between to a higher-level and refers to outcome), expectancy
the probability of attaining that outcome (Pinder 1984). Prior studies have verified the application of the expectancy the
ory to motivations in organizations. of a firm's find the executives strategy success adaptation of the firm evaluate the the ex process, a desirable out strength of the
In the context ecutives come. would The
would
relationship
between
the firm's success and their effort (that
and act accordingly. is, their marketing Therefore, strategy) we propose success to is a dri that perceived instrumentality a firm when evaluates whether and how ving motivation much to adapt. The more a firm marketing-mix the greater more serves adapt component the perceived ensure the firm will its customers, and that marketing-mix perceives is instrumental that a particular to its success (i.e., of the component), the the more to the component the firm will We
importance that the marketing-mix accordingly, component
local market.
hypothesize
H2:
the following:
of a marketing-mix instrumentality success to the firm's in the overseas after market com market
Perceived ponent
is positively
related to the degree of adaptation

component entry.
in
that marketing-mix
Until Adaptation Strategy Competitive Advantage and

alized
recently, studies have treated a firm's choice of its glob

or localized strategy plan. as the outcome Recent studies the result variable, this have expanded
of a firm's marketing
limited scope to study how globalized or localized strategies affect the overall position of the firm. Douglas and Wind (1987) and Jain (1989) point out that one key payoff of the de
cision on globalization and adaptation is the competitive ad
vantage of the firm. In discussing alternative product policy options for firms, Walters and Toyne (1989) emphasize the
need to evaluate such options in the context of the competi
tive strategy of the firm.

The nomic much preceding argument that assumption are agrees a firm's with goal the fundamental secure this eco its
is to survive,
assets, and grow (Bradley 1984). Whether

to adapt instrumental strategies
to adapt and how

servicing goal.
Whatever
the firm must
do to be successful,
itwill
do, glob
64 Gerald Albaum
and David K. Tse
alized
or not.
In their seek scale
three-phase
evolution their
framework,
Dou
glas and Craig (1989) postulate

seas market (including leverage expand to maximize economies and
that firms entering an over

locational expansion). advantages Simi
and market
larly, Dunning's
their into
(1988) eclectic
paradigm
locational
argues that firms
ownership overseas markets
in the marketplace. tage position that strategy (versus adaptation success to in the marketplace. attempt gain
as advantages they to gain a competitive advan In short, prior studies argue a firm's serves globalization)
that how Extending from these arguments, we conceptualize much a firm decides to globalize or adapt contributes to de its competitive (ormaintaining) advantage in its veloping
we a causal link be postulate of and the competitive degree adaptation of the firm along each of its marketing-mix compo advantage nents. in deciding whether That consideration is, the major overseas tween markets. Therefore, the current
to globalize
regards the same
or adapt locally rests on how effective

strategy overseas (i.e., what market. it does
the firm
in
the adaptation time) in the
at a point
time after entry) as leading to its competitive pothesize

H3:
advantage
we
(at
hy
Accordingly,
the following:
is a positive along relationship each between the current
There
level of adaptation
of a firm
nents.
and the competitive

of the marketing-mix
advantage
compo
Perceived tant the the firm's
instrumentality firm perceives success on
to success a
measures
marketing-mix in the overseas market.
impor to be to component construct af This
how
Perceived to Success Advantage
Instrumentality and Competitive
fects a firm's competitive

influence firm's When resource fine-tuning a firm
advantage
allocation
in two ways:
and its influence
through its
on the
of its strategy. a marketing-mix in the overseas and/or component it will market, human to be in
strumental
perceives to its success
support
that component.
ments, ecutives carefully technology
Such support may

investments,
include financial
capital.
commit
The ex
to sensitive feedback also may systems develop com each monitor how marketing-mix competitive
ponent
As
iswhen
compared with
firm executives
that of its competitors.

will pay more attention to mar
discussed,
keting-mix
components
that are instrumental
to building
its
to components that and less attention competitive advantage a firm pays more as attention The be viewed "benign." might a toward marketing-mix example, component?for particular
product
able mand. As
strategy?the
that the a result,
more
likely it is that the firm will

to match learn how the market to acquire
be
de
to fine-tune
component firm will
more
Adaptation
of International
Marketing
Strategy
65
competitive advantages in its product strategy. This learning process will provide the firm with a competitive advantage
needed to succeed to the in its market. rational economic firms involves resistance there argument, be considered that must are in
In addition ternal
processes
within
(Wal discus
ters 1986). Shoham and Albaum

adaptation sion and instrumental firm's between argument, decision often a faces
(1994) point out that a firm's

intensive from organization headquarters. By engag
ing in goal-oriented
competitive
discussion?that
advantage?firms and subsidiaries. not much
is, by considering
how
a
marketing-mix
component can
is to achieving resolve differences Consistent with this it, we
headquarters which has
theory
behind
propose
the following:
P2: The perceived instrumentality to success firm of a mar
keting-mix
competitive ing-mix The results
component
advantage
is positively
of the
related to the
in that market
component. studies is no and firm point consistent to an uncomfortable between example,
Competitive Advantages and Firm Performance
conclusion: strategy
of previous that there
adaptation
relationship For performance.
Samiee and Roth (1992) find no performance difference be tween firms that adapt their strategies and those that choose
not to. This adaptation raises finding or globalization a fundamental really matter? issue: Does strategy
The results of Cavusgil and Zou's (1994) study raise the same question. The authors find a positive relationship between
performance inverse unanticipated export and product relationship an but also adaptation between and performance
promotion
adaptation
adaptation.
works Taken
These
but
findings
not
suggest
that strategy
of a firm's make it dif
for some
strategy. marketing to draw a definitive ficult and We firm performance.
together, conclusion
all components these findings on strategy
adaptation
that by evaluating which component conceptualize a to to refine it, firm continues adapt adapt and how much
to its
marketing
its market. mines
strategy until
In turn, the
it attains competitive
firm's That competitive is, we propose
advantage
deter
in
its performance.
advantage that competitive
advantage is the link between This idea was performance.

Bharadwaj, strategic followed. and Varadarajan advantages. As a final Until link
strategy adaptation and firm first hinted by Szymanski,

(1993), who suggest that more
effort is needed
to link strategy standardization
and a firm's
not been we hy
their suggestion has now, in our contingency model,
pothesize
the following:
66 Gerald Albaum
and David K. Tse
H4: A firm's performance

firm's To test our competitive hypotheses Hong
is positively
related
to the
advantage and examine has
in marketing our been
strategy. we
propositions,
conducted
small among decade.
a survey of exporters
in Hong Kong. Despite
its
population, the world's
products land China, countries).
Kong consistently economies in the past top 15 trading a wide firms actively of Hong spectrum Kong export to all the world's Main markets (i.e., top regional North A America, of Hong survey Japan, Kong and Western exporters provides European a data
ranked
Research Methodology
Design
and
set with diversities in products and markets that is adequate to test the hypotheses and examine the propositions.
We contacted that asked the Trade facilitates Development Council, external to select an organization
set up by the Hong Kong Special Administrative

ernment and we Hong Kong's its research department involved
Region Gov
trade activities, ran 600 firms
domly from its database of all exporters

that are actively uct categories
(approximately
1500)
in Hong Kong's top six export prod and textile, watches and electronics, (clothing and clocks, materials). jewelleries, plastic products, printed The council's database contained the address, the full name of the firm's or senior executive the chief operating executive, (owner, contact and the number, telephone in the firm. Firms that were very small
general manager), of employees number
(fewer than five people in the firm) were deleted, which re sulted in an original sample of 400 firms. We believed that the small firms would be less likely to have the diversity of expe
rience small in adaptation firms account that issues that for a small larger firms have. share of exports. senior rate: or the survey, senior executive. and executives Also, the
Knowing
surveys a
targeting response firm
generally
yield
process 1. We
poor responses,
to ensure sent a letter them
we designed
the following
four-step
good to the
owner
It informed
of the upcoming
its purpose,
its length. The letter asked them to call or fax back if they did not want to participate in the survey. The letter also
informed them in the a week, that a member of the research team would
telephone
pation 2. Within
them within
survey.
a few days to confirm their partici
a research
team member also person
called ensured were
the
senior
executive
to solicit his or her verbal agreement
to help
that correct
in
the as
contact the survey. The telephone the name, and the contact address, in the database. provided 3. We subsequently tives who were sent willing a
six-page questionnaire to participate together
to execu with a sou
Adaptation
of International
Marketing
Strategy
67
venir identity 4. After
pen
from and
to reinforce the university the researchers' nature the academic of the project. we sent a second questionnaire to the
two weeks,
nonrespondents. This in 196 responses, resulted process represent four-step a 49% response were rate. 13 responses Of from ex these, ing
ecutives
respondents)
in the middle
and were
management
not This included
level
in our rate
(as rated by the

analyses, is high which
resulted
response
in an obtained
rate of 45.8%.
sample of 183 firms and an effective

response compared
with prior studies on similar populations (Samiee and Roth 1992; Shoham and Albaum 1994). Early and late responders'
scores cant were the key variables the two difference between that delay response on compared, groups was not and no detected, operative. signifi which
suggested To ensure Measurement
bias was
activities in a range that the survey covered company we used a of foreign markets, The re split-ballot approach. to to ask respondents search task would be too cumbersome more one area. We four data for market than developed provide
to a particu each corresponding of the questionnaire, lar regional market United States/Canada, China, (mainland Western Asia other than mainland countries, China). European one of the four ver to We the assigned randomly respondents versions ations If a company did not have any oper of the questionnaire. was to in the assigned market asked area, the company re a in which it had operations and choose market regional sions
spond to the questionnaire

Aside background and of establishment, respondent, adaptation, all specific were from
on the basis ofthat regional market.
such as the firm size, year information, on the so forth, and information personal on strategy the following and scales questions were and firm advantage, competitive performance to the regional market. used The regional markets markets for Hong Kong exporters. Although
all major
business is done in Latin America and Africa, it is relatively small compared with the areas included in the study.
We used ten marketing activities covering the four typical ar
eas inmarketing strategies (product, positioning, pricing, and distribution; as in Cavusgil and Zou [1994]) and additional
strategic components We such measured as service the degree activities and marketing of adaptation by asking the research
to measure
their markets. on each
how firms globalize

ten marketing
their marketing
activities
respon
in
at entry
of the
dents to rate how much change (compared with activities in the Hong Kong market) they made at the time when the firm
first entered assigned five-point were that the respondents that market (remember one regional to respond about market) using only that ranged from "very scales significant change,
that is, high degree
of adaptation"
to "no change at all, no and David K. Tse
68 Gerald Albaum
adaptation."
Similar
retrospective
measures
were
used
by
Cavusgil, Zou, and Naidu

We measured the current
(1993) and Schwenk

degree of adaptation
(1985).
on each of the
same ten activities by asking the respondents to rate the dif ference in each item currently (at the time of data collection) between the foreign market and the domestic Hong Kong
market cant using difference, scales that ranged from "very signifi five-point no to "no difference, that is, high adaptation" same scales were The and Al used by Shoham
adaptation."
baum (1994).
Perceived each how pany's of the instrumentality ten activities. each to success was measured asked of the along to rate com
important operations scales that
Respondents is in the activity specific from "not regional
were success market
in the
point to "very
range to success." significant success measures to importance
important Examples are shown
at all
five using to success"
of adaptation and in the Appendix.
The competitive
was measured
advantage
in terms
of the firm in the specific market

of the four conventional mar
of each
and components keting-mix (product, positioning, pricing, with service and research, distribution) together marketing two firm characteristics: to respond to market plus quickness
changes and flexibility in responding to market changes (see refers to speed of Fiegenbaum and Karnani 1991). Quickness
response, so forth flexibility The of response. performed ranged from and and creativeness, diversity, were to rate how asked respondents in each of these activities compared covers
the company
with
scales their There porting 1987), the both tors) "much market
the competitors
that competitors. has been some
in the regional market using

"much worse" to "much
five-point
than
better"
debate
in the should firm
literature be measured.
on how
an ex
firm's we
performance
Benefiting along two di
from previous mensions:

two
discussion
(Aaby and Slater 1989; Madesen

performance firm
operationalized
(1)market
dimensions,
share and (2) operating profit. In each of

we measured performance with compared (i.e., compared than." asked using competi with a
the comparative (i.e., approach and the expectation approach
firm's expectation)
worse share the than"
using
five-point
better
scales that ranged from

For example, the to the respondents worse" share ("much
to "much
rate how to "much We
comparative approach in market firm performed than competitors). decision-making they made
better"
measured concern
a firm's when
orientation a decision about
by
asking
the respondents
primary
to identify what particular region would regional market about which
be of they
business
activities
in the specific
Adaptation
of International
Marketing
Strategy
69
were
was The respondent asked responding. the following: (i.e., ethnocentric), Hong Kong a group of foreign ket involved (polycentric),
to choose
one
of
the specific mar markets (i.e., re
giocentric),
Perlmutter's determined In addition,
and all markets

(1969) what category EPRG
involved
(geocentric).
each
This
self
is
schema.
Thus, characterized contained
respondent decision making. some firm-specific
the questionnaire
its size, the questions on the year the firm was established, to of markets the different firm, existing regional importance
activities liance minutes in overseas formation. to finish. of the in presented in size: 23% have more than 1000 em are The markets, questionnaire and some took statements approximately on al 25
Characteristics
Obtained Sample Characteristics
Table less
1. The than
companies 10 employees,
responding companies show a wide range and 8.3% have
Table 1. Characteristics of Responding Companies
Company Characteristic Number of Employees

Less 10-49 50-99 100-249 250-999 than 56 18 30 20 10 42
Number Companies
of
Percent
Distribution
23.0 30.6 9.8 16.4 10.9
1000 and above

Percentage
17
in Foreign Markets
9.3
of Employment
None 86 l%-20% 12 21%-50% 14 51%-75% 12 76%-100% 59 Age of Company

Less 5-9 10-14 15-24 25 years than years years years and 5 years 68 31 33 above 30 21
47.0 6.6 7.6 6.6 32.2
11.5 37.1 17.0 18.0 16.4
Ownership
of Company
Hong Kong 144 78.7 7.7 8.7 2.7 2.2
Independent-owned
Subsidiary of Hong Kong 14 Subsidiary of foreign 16 Joint venture of Hong Kong and foreign 5 Others 4
Decision-Making Orientation
Hong Kong 58
Foreign Group Market market of foreign involved markets 43 14
34.7 25.7 8.4 31.2 For 28.4 19.9 20.5 31.2
All markets
Area
52
Responded
China 50 Asia other than China 35 United States/Canada 36

Western Europe 55
70 Gerald Albaum
and David
K. Tse
ployees. Despite
Council, cluded some
the request made

less
to the Trade Development
were in five employees having were in the sample, and their responses for retained no Almost one-half the have companies analysis. employees than one-half in foreign whereas 41% have more markets, 5 years their employees thus employed. Their ages range from firms than to more than 100 years, Kong and the mean and is 12.7 years. More are than sub
80% of them are Hong Kong based; 78.7% of them are inde
pendent Hong companies, 7.7% of them
sidiaries of Hong Kong firms. For the firms' geographic orientation in their decisions, approximately two-thirds of the responding firms (65.3%) focus on the benefits to markets other than Hong Kong when they make decisions. The vast majority (65%) of respondents reported that at least one-half
their exports represented is consistent re-exports, with the nature and most come origi ori
nally from China (these data are not included

orientation
in Table 1). This
of an externally
ented city like Hong Kong and reflects its role as an entrep?t. We
more are
grouped
the marketing
activities
activities two
as follows
to test the These
into four
four hy
general marketing-mix the and examine potheses shown measure in Table of alpha ite measures
2, which internal for the three consistency .92. .66 to Because service from ranged
propositions. that also shows
groups the Cronbach's compos strategy
correlated highly with distribution strategy, itwas items to form a distribution/service the distribution
sion had for subsequent low correlations analysis, The marketing research analysis. with other marketing activities, to this with findings marketing regard
added to dimen
activity and in activ
further
ity offered no additional

subsequent discussion.
insights,
so it was
dropped
from
Initial Entry
Product Strategy .86 .92
_Coefficient Alpha_ Current Practice

.82
Table
Importance to Success
2. Marketing Activities
Grouped
Product Product
strategy design
Product quality Product function

Positioning .67 .76 .66
Advertising/promotion
Brand name
Distribution/Service Distribution Personal

Service
.81.86
.76
selling
n.a. Pricing n.a.n.a.
Pricing
Notes: n.a. = not applicable.
Adaptation
of International
Marketing
Strategy
71
Findings
and Discussion
In reporting findings, we report in the order inwhich a propo sition or hypothesis has been discussed within the context of the conceptual framework rather than discuss all hypotheses together and all propositions together. Whether a relationship has been presented as a hypothesis or a proposition is depen dent primarily on the extent of underlying theory and re to evidence the ported empirical support relationship.
P-L asserts orientation. that a firm's In short, adaptation orientation strategy is viewed when it first enters to
a foreign market will be related to the firm's decision-making

as antecedent
adaptation at time of entry. Using the EPRG schema, initial market entry difference varied significantly by decision
making hoc fore, To test, orientation only for distribution/service; differed the statisti There
cal significance was p < .08.When we used the Scheff? post

no pair of orientations not is Pa supported. and H2, we regressed for each relative regression equations, significantly.
Current
Level
of Adaptation
test Ha
the
current
level
of adapta
tion against the degree of adaptation

instrumentality We to success also the components. firm and size, age, to the firms markets results. included in the firm
at entry and perceived

four marketing-mix characteristics such of regional as control as
of the
importance equations all the firm
variables. Table 3 reports the ordinary least squares (OLS) re

gression In all four characteris
tics are insignificant, which suggests that firms' current level of adaptation in their marketing strategies is not affected by the institutional factors. This implies that prior bivariate studies that have found significant correlation between firm
characteristics and standardization strategies need to be re
assessed,
We next
as Cavusgil
examined As shown
and Zou (1994) also point out.

how strategic variables affect the firms' with and
choice of their current level of adaptation

strategies. respect in Table to the degree 3, all regression at entry of adaptation
in their marketing
coefficients are positive
the current suggests that firms developed significant. level of adaptation on the basis of their chosen level of adapta tion when they first entered the overseas market (Ha). The This
more was at the point of en the strategic component adapted more was current the the compo try, marketing-mix adapted nent. That all four marketing-mix components report the same
results provides
For perceived and positive,
a solid empirical support for the hypothesis.
are to success, all coefficients instrumentality are significant at the p < three of four coefficients
.05 level. The only exception is product strategy, forwhich the is positive but not significant. This finding sup coefficient
ports H2, which component states that the more instrumental of the firm the market in that market, ing-mix is to the success
the higher
is the adaptation
for that marketing-mix and David
compo K. Tse
72 Gerald Albaum
Independent Degree of Dependent Variable of Adaptation

. 74
Variables Perceived Instrumentality to Success
Adaptation at Entry
Table 3. OLS Regression Current Degree
Results for of Adaptation
Current Degree
Product strategy
**
.04 .18* .16* .16**
.55 .57 .62 .38
strategy Positioning Service and distribution

Pricing strategy .51*
.63** strategy .67**
*p<.05. **p< .01. Notes: The table reports
the beta coefficients.
nent.
This
suggests
that when
a firm
keting-mix emphasize tailor the firms ceive
as salient component as a result, that component; the firm will further to meet Pressure the local market demand. strategy
mar a regards particular to its success, the firm will
from competitors
to localize
in the overseas market may also help push

when strategies to their success. the firms per
their marketing as salient that component examined the of the
Next,
we
strategy adaptation and a firm's competitive a firm's or strategy
between relationship four marketing-mix Our basic but an end
the
level
of
advantage. is not adaptation firm's aim market.
components is that premise a means to a
Firms'
Competitive
Advantage
higher goal. We propose

adaptation, the advantage in an overseas
that whether
Some find
through globalization
its competitive firms may find glob
is to establish
alization
positions, establishing competitive components
strategies
whereas their
crucial
others competitive the
to establishing
may
their competitive
necessary in
adaptation We advantage. each
advantages against
along current
the regressed of the four marketing-mix level of standardization and In addition, variables. we in
perceived instrumentality cluded firm characteristics
to success. as control
The OLS regression

the firm characteristics More equations. gree of adaptation
results are reported in Table 4. Again,
all
are in all (e.g., size, age) insignificant current the relations between de important, are and competitive either weak advantage
(as in pricing and positioning) and service and distribution).

globalization or localization
or nonexistent This confirms

is not
(as in product our belief that
a panacea for all firms. or strate either following globalization Blindly adaptation a not in an does firm's guarantee gies competitive advantage overseas not is market. Therefore, H3 supported. In contrast, perceived consistent and instrumentality significant impact to success on a firm's shows competi a
more more
tive advantage.
important
These
the
findings
regards
support P2. Simply

the marketing-mix
put, the
compo
firm
Adaptation
of International
Marketing
Strategy
73
Table 4. OLS Regression Results for in Competitive Advantage Marketing Components
Independent Degree of Dependent Competitive

Product Positioning
Variables Perceived Instrumentality to Success
Variable Advantage
strategy strategy .02
Adaptation at Entry
.31*** -.17* .32*** .16* .06
.09 .07 .02 .03
Service
Pricing
and distribution
strategy .17**
strategy
.01
*p<.10. **p< .05. .01. ***p< Notes: The table reports
nent
to be on
for the
firm's sure
success, it has a
the more competitive component.
the
firm will over
con
centrate competitors Firms
making in that marketing-mix
its edge The insignifi to purpose
cant coefficient
marketing
for pricing
name-brand
strategy is not totally unexpected.

products These are known firms'
fully adopt a premium pricing strategy as away

high-class therefore name-brand not competitive image. but instrumental
to establish a
strategy success. is
pricing to their
Prior studies have failed to find a definitive Firm Performance

and
relation between
We firm performance. the rela first examined adaptation firm in four between (measured ways: performance tionship share com with market market share compared competitors',
pared with expectation, profit compared with competitors', and profit compared with expectation) and current level of
strategy adaptation.
In accordance
forth, the four
with
the hypotheses
variables
and propositions
were regressed competitive components,
put
against advan (3) the
performance
(1) the current level of strategy adaptation

marketing-mix tages in each components, of the four marketing-mix (2) the firm's
in each of the four
orientation of the firm, and (4) the firm's decision-making variables strategic (quickness to respond and flexibility to
meet market demand). Firm characteristics were also in
cluded
Table tics firm each
in the equations.
5 reports the firm characteris results. the OLS Again, are which that suggests insignificant, age) (e.g., size, Most not firm does determine impor type performance.
tant of all, all four current level of adaptation

marketing-mix component) are insignificant.
variables
This
(in
re
sult agrees with previous findings that there is no significant relationship between the current level of adaptation along
of the marketing-mix measures. performance any components and any of the four
74 Gerald Albaum
and David
K. Tse
_Competitive
Advantages_
Dependent Variable
Market share with
Product Strategy
Positioning Strategy
Service and Distribution
Pricing Strategy
Firm Strategy r2
Table 5. OLS Regression Results Firm Performance
for
compared
competitors' Market share compared with
.22***
.29***
.15*
-.04
.11
.23
expectation Profit compared with competitors' Profit with compared expectation
.21*** .05 .23***
.01.16* .04
.01 .01
.17 .16* .12 .13
.11
.08 .02
.06
.19**
.04
*p< .10. **p< .05. .01. ***p< Notes: The table reports
However, marketing-mix
H4, which
specifies
that affect
the the
firm's firm's
advantages performance,
in
components components measures
finds support. As would

marketing-mix share performance
be expected,
is stronger (which
the influence
in the relate
of the
two market to market
directly
ing activities)
four on strategic both market registers
than in the two profit measures.

components, share competitive measures. effect Service on market advantages and
Among
the
in prod
uct strategy and positioning

strategy a marginal effect on
strategy exert significant

share
effects
distribution compared
with
any
competitors
significant
only, and pricing
strategy does not register

measures.
the performance
Profit measures,
functions within
which
firms,
are known
such as
to be affected
costs,
by other
found
production
were
to be less affected by the firm's advantages

components. strategy pared Last, Only a competitive registered positive, with competitors'. firm strategy variable
in marketing-mix
in positioning on com profit
advantages effect significant
the
(composed
of quickness
to re
spond and flexibility in responding tomarket changes) regis tered significant effects on both expected measures but not
the comparative measures. marketing-mix specific research tages components, reiterates variables the need for marketing strategic to broaden to include its scope advan firm-specific in further research. our Although the significance on focuses study of these firm
This study is based on two tenets: (1) Firms adapt their mar
in overseas markets strategies through and firms' needs (2) processes, strategy adaptation keting purposeful to be stud
Implications
and
Conclusion
ied in the context of their strategic positions

market. builds Several The on article from warrant ideas
in the overseas
a model and that proposes supports recent studies. international marketing further discussion.
points
Adaptation
of International
Marketing
Strategy
75
The proposed model proves useful in elucidating how firms and adapt their marketing strategies. The key hypotheses are re derived from the model the propositions supported by
sults ries of a survey that market that covers seems strategy. firms of different sizes and histo a diverse to major world range of products to apply to all four components of A summary is shown in Table 6. to success adaptation it serves.
markets. a firm's
The model marketing
In the proposed model, a to be critical proves strategy to its competitive
perceived instrumentality factor that links a firm's advantage in the market
Perceived
instrumentality
the motivation
can be thought of as a proxy that
of an organization its goal. In toward captures value has theories, expectancy perceived instrumentality to been used the directional for long conceptualize guidance an organization or individual in achieving its goal. Thus, by its nature, this variable internal captures part of a firm's as it or customized its globalized process strategies. develops
Applying
tality firm's We
Jain's (1989) framework

versus
that distinguishes
market
instrumen of a
ing process is a variable international
program, marketing perceived that targets the process component marketing a by strategy. relationship between that
to establish attempt and firm performance first leads to competitive sound
adaptation adaptation
link is conceptually is in As and this study. in prior research, supported a firm's the study finds no direct between relationship adap tation and its performance, but it confirms the links strategy adaptation advantage relationship and competitive advantage and firm performance. adaptation and between these Through and performance
conceptualizing The advantage.
between competitive the links,
between
is better defined
and therefore is validated.
Table Summary of Hypotheses and Propositions
6.
Hypotheses/Propositions H2 A firm's current adaptation strategy is positively related to its adaptation strategy at entry. H2 Perceived instrumentality of amarketing-mix component to the firm's success is positively H3 There related to adaptation after market entry. is a positive relationship between level of adaptation
along each
Result
Supported
Supported the current

Not
and competitive
component.
advantage
supported
marketing-mix
H4 A firm's performance competitive
is positively related to its in advantage marketing strategy.
Supported
strategy at time of initial market entry is Adaptation orientation of the firm. related to the decision-making
The perceived instrumentality to success of a
Not supported
marketing-mix
competitive
component
advantage
is positively
component.
related to Supported
in that
76 Gerald Albaum
and David K. Tse
The study reported
two unexpected
(e.g., size, strategies competitively
findings. First, firm de

age) proved insignifi and performance. This
characteristics mographic cant in determining firms' guarantee of success, and
may reflect that as markets become
competitive,
there is little
posi
advantageous
tions can be earned by firms of all types?big or small, young or old. At the same time, the finding implies that further re
search graphics on firm and performance investigate needs strategic to go beyond within elements firm demo a firm.
Second,
ship
the study found that there is no significant

decision-making orientation and
relation
between
adaptation
strategy at entry. A priori, polycentric firms would be expected to be more inclined to adapt than nonpolycentric firms. Itmay
be that other motivations, financial resources, taining that mance the such as tax reduction be or ease which of ob may suggests operative, on firm orientation of decision-making perfor impact to be broadened to include environ needs the business
ments
a
inwhich
the firm operates. Recent studies have adopted

approach to model how environmental factors set good
contingency
affect firm behavior and performance

Szymanski, examples The study reinforces and Varadarajan Bharadwaj, to follow. for further research
(Cavusgil and Zou 1994;

1993). They
attempts gies. As
it research several future directions. First, opens a broad to assume in orientation the need strategic strate to understand firms' international marketing out in previous studies (Cavusgil, Zou, and
pointed
Naidu
1993; Douglas and Craig 1989), international market ing strategy is part of a firm's strategic plan and should be
accordingly. to understand In this how regard, this study attempts to
studied needed firms'
start building
other
this crucial
functional
link. Future
marketing such
research
efforts are
strategies complement as strategies, global production resources in human and financial strategies, policies, plans, overseas in their market, competitive positions developing are to understand if what determines researchers especially firm performance, such as firm profitability. Recent discus
sion on the theories of firm competition (Deligonul and literature may offer the 1997) in the marketing Cavusgil needed paradigms in this direction.
Second, tional process. changes this study to investigate attempts firms' that underlie is needed to delineate (2) how established In this internal strategic further organiza formation the com
processes More effort in overseas in subsidiaries overall global
plex internal processes, petition

sions firms'
including
(1) how firms incorporate

firms respond to com with inter
markets, are plans. to generate
in their local markets,
and (3) how

regard, the
strategic deci
in-depth
in coordination
view approach adopted by Cavusgil

propriate method
and Zou (1994) is an ap

insights.
the needed
Adaptation
of International
Marketing
Strategy
77
This
study provides several implications paramount importance is the recognition

customized strategies aie means rather than
for managers. Of that globalized or

ends of interna
tional marketing strategy. Executives need to appreciate fully the eminence of their marketing strategies in contributing to
a firm's for competitive success. Whether strategy or adaptation is no simple There panacea advantage. a firm follows a or customized global on its environment. is contingent No mat
marketing ization
ter how powerful
the arguments
are,
of the proponents
to achieve
of global
a higher
the necessity
level goal (competitive
position)
is amore meaningful
goal.
a firm's competitive In building this study empha advantage, to at sizes the need for marketing managers pay particular to marketing-mix tention that have the greatest components on the firm's success in the overseas market. impact assess to to need how different foreign markets respond In the of their the future, ponents strategies. marketing They com man
ager's
establishes cess will
job will
become
more
advantage
demanding.
over
When
a firm
suc
competitive follow.
its competitors,
The study is designed

perform carefully tion and after they executives
to understand
overseas their
how firms operate and

No matter at the time their and how of entry, firms' tech
enter plan are As
markets.
strategies
the findings
competitive
in this study suggest that subsequent modifica

inevitable global to maintain social, economic, advantage.
adaptation
nological
the ability ous This
forces offer strong influence

to acquire may
to the global markets,

continu through and success.
adaptation question
advantage competitive a firm's survival decide the extent to which
concerns
your
company
Appendix of Examples Items used to in Changes Measure

N_a__keting Variables
changes marketing
markets a. indicated
strategies when
above. indicate the
you sell in the foreign
In Column
I, please
extent
to which
you
changed each listed marketing variable when selling ini tially in the specified foreign market, compared with the domestic market (Hong Kong), by circling a number from
lto5. b. In Column market area II, indicate the extent with to which the
you
perform market
each listed marketing

today,
variable differently
compared
in the specified
domestic
(Hong Kong) by circling a number from 1 to 5. c. In Column III, indicate how important each activity is in in the specified foreign the success of your operations market by circling a number from 1 to 5.
78 Gerald Albaum
and David
K. Tse
I Extent of Change
II Extent of Difference
III
Importance to
Your Success
??
-M
I I
fr ? S ? S
> Product Pricing strategy strategy 12 3 4 5 12 3 4 5 12 3 4 5 w w S 2 fr ? > W 12 12 12 g CO 3 3 3 4 4 4 ? o > 5 5 5
op g
w cfl 2 3 3 3 4 4 4 Z 5 5 5
12 12 12
strategy Advertising/promotion Personal selling practices and strategy Marketing 12 3 4 5 12 3 4 5 research
12 12
3 3
4 4
5 5
12 12
3 3
4 4
5 5
on Ex Influences Aaby, N.E. and S.F. Slater (1989), "Management A Review Literature Performance: of the port Empirical 6 (4), 7-26. International 1978-88," Review, Marketing Anderson, Erin M. and Hubert Gatignon (1986), "Modes A Cost Transaction and Entry: Analysis Propositions," 17 (3), 1-26. Business International Studies, of Foreign Journal of
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of International
Marketing
Strategy
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The Authors
Gerald Albaum
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is a visiting scholar, University of

Professor and Senior Emeritus
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81

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Adaptation of International Marketing Strategy Components, Competitive Advantage, and Firm Performance: A Study of Hong Kong Exporters Author(s):

thefirms' competitive positions

eign markets. marketing-mix

a that adaptation of that is influ process to the firm's process helps

enced by a firm's past adaptation

strategy, and they investigate

breakthroughs firms behave

for the first time the links between

Gerald Albaum David K. Tse

environment, its performance.

how a firm interacts with

the foreign market

tation strategy in its international marketing

program and the

(1992) review of international marketing

The study is designed with

as at the point of market

entry (Douglas and

tion, as suggested by Douglas

and Craig (1989).

we describe section, we view this Specifically,

by the study design and

at the end of the article. argument (Dunning in its home market be

to the internationalization According 1988; Rugman 1981), a firm survives

path and strategy that gives

risk and return. This

Previous focused factors

globalization choice when economies

ket. The literature has discussed

the impacts of a firm's cost

(Harris 1994) have confirmed 60 Gerald Albaum

that such pressure and David K. Tse

and its the firm

range of Walters and

In short, previous that adaptation process 1 we remains a

its foreign market.

unexplained. contingency-based view framework in

contingency set of strategic choices circumstances (Ginsberg

factors that are responsible

are fundamental adaptation

process: adaptation each marketing-mix

component: (i.e., how

and the perceived

marketing-mix component in the overseas market. factor that affects a firm's

egy in a foreign market

is the strategy the firm uses when Strategy 61

Figure 1. Strategy Adaptation, Competitive Advantage, and Firm Performance

Perceived Instrumentality toSuccess

that market. consideration

Literature of their environment

that firms formulate

their entry strategy through a

country the entry alliance mode, Researchers have found

when sufficient Such Slater

that firms carefully

their entry, allocating

managerial careful planning 1989).

ing strategies ment

at entry may be influenced

or geocentric regiocentric, polycentric, in its international decision making

(EPRG) ori is relevant

of "geographic" in a particular eration for headquarters. sions on the basis

in foreign markets strategy concern. An ethnocentric market on the basis

for that market area but of what