B Basic theoretical concepts of globalization and international marketing
International marketing in a global era

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“If there is any true (and sincere) way of being global it is not by denying differences […].” (Usunier and Lee 2005: 549)

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”Globality describes the fact that from now on nothing which takes place on our planet will merely be a physically limited event, but rather every invention, victory and catastrophe which occurs will affect the whole world, so that we will have to reorient and reorganize our lives, dealings, organization and institutions along the ‚global-local’ axis ...” (translation by author, Beck 1997: 30)42

“Globalization does not of necessity mean automatic, one-sided, or one-dimensional globalization. Rather, it is under the governance of the ‘g-word’ as the emphasis of the local and the opposite of the above ...” (translation by author, Beck 1997: 86)43

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Summary Proponents of the globalization thesis emphasize different aspects of the global integration process, but generally this is seen to affect political, economic, and cultural relationships. This thesis focuses on the dynamic links and reciprocal exchanges between the latter two, that is the relationship between multinational companies (global players) and consumers (local players) in Southeast Asia, particularly Indonesia. Indonesia is undoubtedly in a phase of rapid economic, political and social transformation, which is partly connected to the dynamics of the globalization process. Modernization and globalization are partly responsible for the creation of new social groups, for the relativization of traditions and for the development of new social distinctions and phenomena. This transformation however is only partial and occurs on the “local-global“-axis. Seen within the framework of consumer research, it is utopian to expect the genesis of global consumers who think and act identically. The lead-in will commence with the debate of the globalization phenomenon which is not to be understood exclusively in the economic sense with its multiplicity of meanings and effects in a multipolar and kaleidoscopic world. Discussing this topic in depth is owing to the fact that in economics globalization is understood as an economic and not as a cultural process. Since the importance of culture is the starting point of this thesis it is however deemed necessary to bring the theories of cultural globalization closer to a wider audience outside social sciences.

B.1  Global dynamics and culture: Between globalization and localization

B.1.1  Introduction

The ever-increasing level of world trade, opening of markets, intensified competition and enhanced consumer purchasing power all provide evidence for the global integration of markets (Dicken 2003: 1-4; Deresky 2006: 3-4; Cateora and Graham 2004: 18). The extensiveness and character of current developments have encouraged wide acceptance of the view that a new global condition prevails (Proff 2004: 1-19; Czinkota and Ronkainen 2004: 6-7; Kotabe and Helsen 2004: 5-8). As the second millennium drew to a close and a new one began, the catchword was “globalization”. Although not by any means a new word, its use exploded dramatically in the 1990s as a host of books and academic papers with “global” or “globalization” in their title shows (Social Sciences Citation Index44). Globalization as a topic did not enter management literature until the early 1980s (Thomas 2003: 215), but it became a major theme in management discourse in the 1990s with the publication of “The Borderless World” (Ohmae 1990). Furthermore, Gurcharan Das (1993) with his “Local Memoirs of a Global Manager“, published in 1993 in the Harvard Business Review should be mentioned at this juncture.

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Globalization has been defined in a variety of ways, but a common thread in these definitions is its reference to a process or a series of processes whereby the world’s societies are becoming increasingly interlinked and interdependent (Thomas 2003: 215; Kotabe and Helsen 2004: 5-8; Jeannet and Hennessey 2001: 42-47). The aims of the following discussions are twofold, namely to present the multiple dimensions of globalization and to provide a definition relevant to this work.

B.1.2 Globalization and the world economy

Dicken (2003: 32-81) states that the most significant development in the world economy during the past few decades has been the increasing internationalization and arguably, the increasing globalization of economic activities. Until recently, he argues, the extension of economic activities beyond national boundaries largely took the form of trade in goods produced within a national unit (Dicken 2003: 32-33). These trading relationships involved relatively few commodities exchanges between a limited number of nationally based firms. Today, however, trading relationships have been extended to cover a vast range of goods and services (Johansson 2000: 4-8). More importantly, they have been supplemented by production relationships which require the functional integration of production processes across national borders (Artner, Bassa, Hernadi, Meszaros, Szekely-Doby 2003: 5-38). The older world pattern of core manufacturing countries trading with peripheral suppliers of food and raw materials (Ricardo 1817)45 has now been replaced by a new and more complex situation in which production is fragmented and geographically dispersed, transcending national boundaries.

These trends in the organization of manufacturing have their counterparts in business strategy and international marketing where brands, products and services surrounding marketing (such as advertising and brand consultancy) are now organized by giant, global companies operating on a worldwide scale (Johansson 2000: 498; Deresky 2006: 3-4; Czinkota and Ronkainen 2004: 398). This has been facilitated by new information and communication technologies (ICT) (McLuhan 1995: 119-129). As Thomas Friedman puts it, globalization is driven by “computerization, miniaturization, digitization, satellite communications, fibre optics and the Internet” (1999: 8). With these innovations, the potential for global economic integration is greater than it has ever been before. Moreover, corporations also tend to promote the homogenization of consumer tastes via their global marketing activities (Czinkota and Ronkainen 2004: 58).

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Globally dispersed information technology brings previously separated parts of the world together, dissolving previous boundaries and forming an unprecedented “global village” (McLuhan 1995). At the same time this technology, together with flexible manufacturing methods and the global reach of the multinational company, enables mass markets to be fragmented into niches, and individualized tastes to be catered for. Thomas (2003: 218) adds: “Differentiation and fragmentation occur simultaneously; paradoxically globalization also produces localization”, implying a fundamental destabilization of previous boundaries.

B.1.3 The globalization debate: the area of conflict between critics and supporters of globalization

Notwithstanding the fact that the globalization topic dominates the social sciences, its causes, agents and consequences are still contended inside as well as outside academia. The globalization phenomenon is capturing the popular imagination and is becoming widely used, but not always understood. Globalization, a term that reached economics in the late 1980s, denotes increased integration of world production through new technologies and the agency of international corporations (Artner 2003: 31) to take advantage of one of the many hundreds of definitions available. Before defining the term globalization it is necessary to deal with the popular criticism of globalization and its potential effects since this criticism dominates the public opinion.

Globalization has been blamed for everything from child labour and environmental degradation to cultural homogenization and a host of other ills affecting rich and poor nations alike. Not a day goes by without impassioned authors and activists, whether anti- or pro-globalization, putting their oars into these troubled waters. Populist books (see, for example: “No Logo”; “Global Dreams”; “One World Ready or Not”; “Turbo-Capitalism”; “When Corporations Ruled the World”; “A Future Perfect”) have greatly intensified people’s awareness of “global”. The authors are respectively: Klein (2000), Barnet and Cavanagh (1994), Greider (1997), Korten (1995), Luttwack (1999) and Micklethwait and Wooldridge (2000). Many activists think of globalization as having overwhelmingly negative social consequences and believe that its impetus derives from the greed of multinational corporations and that its benefits accrue almost exclusively to the already rich (Mandle 2003: 2). Anti-globalization critics assume that the international triumph of the market economy must of itself lead to an erosion of cultural diversity (Meier and Roehr 2004: 35; Martin and Schuhmann 1998). Such an image often gives rise to an exaggerated sense of panic at cultural invasion which will result in the demise of local culture (Chua 2003: 121). Others argue “…global market integration is a desirable process, one that helps to advance worldwide living standards” (Mandle 2003: 1).

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But are anti-globalization critics correct in claiming that economic globalization is imperilling both mainstream and indigenous cultures? This observation seems to be overly simplistic and pessimistic. In Bhagwati’s (2004: 109) opinion, economic globalization is a culturally enriching process. Bhagwati (ibid: 109) believes that people increasingly cope with globalization by creating hybrids. Time will tell, however, if this belief is verified or not. Before putting these settings up for dialogue in the context of international marketing, a definition of globalization is required. So, what does globalization stand for in the social sciences?

B.1.4 Defining “globalization”

Globalization is a subject of enormous contention. The predicament is that, despite the proliferation of globalization literature, it is often difficult to see clearly through the maelstrom of views and opinions. Moreover, the process of worldwide globalization seems now to be quite different from that which had been visualized: a steady extension of the “American way of life” throughout the world which would contribute to the global happiness of humankind (Usunier and Lee 2005: 548). Three distinct and extremely polarized viewpoints can be organized around those of sceptics, hyperglobalists, and transformationalists (see, for example: Friedman 1999; Giddens 1999; Ohmae 1995; Reich 1991; Held and McGrew 1999).

Hyperglobalists argue that one now lives in a borderless world in which the “national” is no longer relevant. Globalization is the new economic (as well as political and cultural) order. We live, it is asserted, in a world where nation-states are no longer significant players or meaningful economic units and in which consumer tastes and cultures are homogenized and satisfied through the provision of standardized global products created by global corporations with no allegiance to place or community. Globalization is thus seen as both a real and dominant force in the contemporary world and one which is radically diminishing the influence of states in favour of markets. Many management gurus subscribe to this view. The future points to the emergence of global convergence, a global culture, a global citizenry and, of course, to the rise of a global consumer.

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Although the notion of a globalized world has become widely accepted, there are some who adopt a more sceptical position, (see, for example: Hirst and Thompson 1992: 394; Ruigrok and van Tulder 1995: 119; Gly and Sutcliffe 1992: 91) arguing that the “newness” of the current situation has been grossly exaggerated. The world economy, it is claimed, was actually more open and integrated in the half century prior to World War I than it is today (Kozul-Wright 1995: 139). Moreover, to speak of a global economy is a misnomer since this mostly involves only what Ohmae (1990) calls the “Triad”46 countries. Some sceptics, such as Sklair (1995) in “The Sociology of the Global System”, also argue that globalization is not, as some of its apologists would claim, a mechanism for spreading wealth more evenly around the world. The gap between the “haves” and the “have-nots” is not disappearing but is being redrawn on a global scale with the emergence of a transnational capitalist class. The claim that the world is becoming borderless and that nation-states have become economically irrelevant, is also rejected.

So, on the one hand, it is claimed that we do, indeed, live in a new globalized world economy in which our lives are dominated by global forces. On the other hand, it is claimed that not all that much has changed - that we still inhabit an international, rather than a globalized world in which national forces remain highly significant.

Transformationalists take an arguably more balanced position than either sceptics or hyperglobalists. Recognizing continuities with the past, they also believe that a distinct transformation is under way: long-established processes of connectedness have accelerated and spread more widely in recent decades that they have hitherto. Thus Giddens (1991) accepts in “The Consequences of Modernity” that profound changes are taking place in the modern world, but he is reluctant to accept that these amount to a break into a different kind of society. Rather, he uses such terms as “late” or “high” modernity to describe the contemporary situation. Similarly Beck’s (1997) view is that globalization is a relatively recent process which has accelerated and has now produced a distinct condition.

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It seems that the truth lies in neither of the two polarized positions presented by sceptics and hyperglobalists. The sceptic’s understanding of globalization from the economic viewpoint as a process reduced to the seemingly stubborn logic of capital, is exactly the understanding to be avoided (Wischermann 2004: 2). On the contrary, it must be comprehended and decoded as a unified entity: “Globalization … is graspable in detail, in the concrete, in place, in one’s own life, in cultural symbols, all of which bear the signature of the ‘glocal’”, states Beck (1998: 91, translated by Wischermann 2004: 2). As a consequence, globalization deserves to be recognized as a key idea in the context of understanding social change in the human societies in contemporary times.

As already stated, the social and cultural sciences connect globalization to a whole spectrum of processes and effects, the latter of which are to be presented now. The various widespread theses are anchored somewhere between the poles of homogenization, polarization and hybridization. Whereas the first of these claims that global culture is increasingly modelling itself on western or American standards (Westernization, McDonaldization, Disneyization), the second claims that increasingly the local cultural alternatives and the opposition to the dominance of western ideas are gaining relevance. A third position claims that reference to and incorporation of seemingly contradictory elements is the predominating development in the respective cultures. In general, the discussion around these three developmental tendencies is strongly speculative.

However, it is clear that the thesis of homogenization underestimates the degree of cultural creativity arising out of the meeting and interaction of global and local forces and therefore does not reflect reality. “Cultural exchange is by no means a one-way street”, writes Wischermann (2004: 2). Frequently, proponents of the “homogenization” thesis ignore the existence of local cultural alternatives and the active role of local population: the penetrating cultural elements enter a dialogue with these local forms and meanings, these perspectives and experiences of local populations. “Local groups in the countries of the South are not only passive consumers and uncritical of the western culture”, summarizes Schuerkens (2003: 215). As production processes and so-called modern lifestyles seem to converge, new distinctions are born creating multiple identities that address various levels of belonging at the same time (Korff 1997: 1; van Dijk 2001: 181-198; Gerke 1995: 1-3; Willer 2006: 31-43). Countering the proponents of the worldwide cultural homogenization thesis, the globalization theorist Appadurai argues that “… the central problem of today’s global interactions is the tension between cultural homogenization and cultural heterogenization” (Appadurai 1995: 295). Heryanto (2002: 23) notes: “By accelerating our time and compressing our space, the new conditions have ruthlessly promoted fragmentation, superficiality, hybridity, dispersion, plurality and simulation.

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Now that theoretical pluralism has been presented, it is necessary to outline the way in which globalization is to be understood in the framework of this thesis. This work is embedded in sociological theories which serve as the necessary intellectual system of thought to make the complex, multi-causal logic of globalization accessible.

This thesis reflects the view that processes of globalization precipitate an increase, not a decrease in cultural diversity and lead to a new global cultural diversity. In this sense, the widespread imagining of a McDonaldization of the world (convergence of global culture) is contradicted. According to this, universalization in the sense of a unification of life styles, cultural symbols and transnational behavioural patterns, is not catching on. The world does not consist of a one-dimensional shopping paradise which represses variety and openness and which denies the roots of local cultures and identities replacing them by a world of product symbols. Globalization in this case is understood as a dialectic process of cultural globalization in which “opposing elements are possible and become real contemporaneously” (translation by author; Beck 1997: 85: „gleichzeitig Entgegengesetztes möglich und wirklich wird“). Beck emphasises that “cultural globalization does not imply that the world will become more culturally homogenous” (translation by author; Beck 1997: 63: „Kulturelle Globalisierung bedeutet nicht, dass die Welt kulturell homogener wird“). Beck goes on to say: “Globalization actually means ‘glocalization’, that is, an extremely contradictory process as far as its content and the diversity of its repercussions are concerned” (translation by author; Beck 1997: 63: „Globalisierung meint vielmehr ‘Glokalisierung’, also einen hochgradig widersprüchlichen Prozess, sowohl was seine Inhalte als auch die Vielfältigkeit seiner Konsequenzen angeht“). Globalization actually leads in the long run to an emphasis of local aspects (Beck 1997: 86).

The fact that globalization does not only mean de-localization but implies re-localization, arises from economic calculation. Nobody can produce the commodity “global”. Even globally producing companies that market their products internationally have to develop local bonds. It is no wonder, therefore, that this local-global-nexus plays a central role in large concerns’ calculations. Coca-Cola and Sony describe their strategy as “global localization” (Demos 2006: 48-49). Their heads and managers emphasize that globalization does not mean building plants worldwide but rather means becoming part of the respective cultures. They declare their belief in “localism” and that is the company strategy which becomes increasingly important when practicing globalization.

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As Robertson (1992: 173-174) explains, local and global are not mutually exclusive. On the contrary, local must be taken to mean one facet of global. Robertson suggests substituting the basic expression cultural globalization with “glocalization”, a portmanteau word connecting globalization and localization. Owing to its origin, this expression is especially appropriate as an abstract starting point for this thesis which concerns itself with consumer behaviour. Robertson (1992: 173) writes: “… glocalize [from dochakuka (問い合わせ), roughly meaning ‘global localization’] … a term which was developed with particular reference to marketing issues…” The expression “glocalization” did not originate in sociology, rather it is a term that was invented in order to emphasize that the globalization of a product is more likely to be a success when the product or service is adapted specifically to the locality or culture in which it is marketed. The term first appeared in the late 1980s in articles by a Japanese economist in the Harvard Business Review (Ohmae 1989, “Planting For A Global Harvest”; Ohmae 1989, “Managing in a Borderless World”; Ohmae 1989, “The Global Logic of Strategic Alliances”).47 According to the sociologist Roland Robertson (1992), who is credited with popularizing the term, glocalization describes the tempering effects of local conditions and global pressures. The expression glocalization therefore has its origins in marketing, the central idea of which is to win over consumers to buy products and services. In spite of its origin in marketing, the expression and its impact have only made inroads in a few companies. Examples such as McDonald’s are the exception. The increasing presence of McDonald’s restaurants worldwide is an example of globalization, whereas the restaurant chain’s menu changes in an attempt to appeal to local palates are an example of localization (Appendix 1, Figure 14).

In spite of the resounding success of glocal strategies, they continue to be in the minority and many companies persist in implementing standardized global strategies, the virtues of which are extolled in the majority of subject-specific literature (DM, interview December 2004; IW, interview November 2004). In this manner, they attempt to standardize expectations of how life is to be lived, and to industrialize wishes and tastes. However, these attempts have mostly been unsuccessful as, for example, is shown with reports on Chinese children who identify McDonald’s as a domestic brand (Demos 2006: 48-49).

When considering the metamorphosis in Southeast Asia following a phase of rapid economic, political and social transformation, it can be confirmed that individuals there continue to demonstrate a lifestyle specific to their cultural environment (Becker, Rüland, Werz 1999; Gerke 1995; Gerke 2000; Gerke und Evers 1999; Horstmann 1997; Robison 1995; Sen und Stivens 1998; Robison und Goodman 1996; Chua 2000, 2003; Loh 1998; Pinches 1999; Tanter und Young 1990; Willer 2006), even if this often continues to be ignored by foreign companies. Culture, religious beliefs, social habits and longstanding traditions are the last area of global convergence, and also the weakest. Societies are loath to renounce deeply rooted values and it would be extremely naïve to think that American popular culture, seductive as it is, will soon engulf the entire world. To sum up, globalization is not a linear, one-dimensional phenomenon, forcing westernization. Globalization is to be understood as glocalization and the points of view set out and discussed in this chapter should be considered as the framework conditions of this work.

B.2 The global economic map: Internationalization trends in business

B.2.1  The global environment

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At no time in economic history have countries been more economically interdependent, have greater opportunities for international trade, or, has the potential for increased demand existed than now (Cateora and Graham 2005: 29-34; Czinkota and Ronkainen 2004: 31-33; Dicken 2003: 7-14; Kotler, Ang, Leong and Tan 2004: 2-4). National economies have become increasingly deregulated and have opened up opportunities for international trade and competition (Czinkota and Ronkainen 2004: 41-42; Dicken 2003: 36-81). Indonesia’s market liberalization in the 1980s propelled foreign direct investment in a wide array of industries (on liberalising foreign direct investment policies in APEC [Asia Pacific Economic Cooperation]48, see for example Bishop 2001). It has become the norm for organizations to compete for market share not only with their national competitors but also with international ones (Kotabe and Helsen 2004: 3-8; Czinkota and Ronkainen 2004: 5-6). Globalization has implications for stakeholders, workers, suppliers, customers and local communities (Kotler, Ang, Leong and Tan 2004: 2-4). Marketers benefit from new markets opening and smaller markets growing large enough to become viable business opportunities (Johansson 2000: 4; Kotabe and Helsen 2004: 3; Czinkota and Ronkainen 2004: 53). Consumers benefit by being able to select from the widest range of goods produced anywhere in the world at the lowest prices (Cateora and Graham 2005: 28). Bound together by satellite communications and global companies, consumers in every corner of the world are demanding an ever-expanding variety of goods (Johansson 2000: 4; Czinkota and Ronkainen 2004: 607-608). International marketers, therefore, face a rapidly changing environment (Cateora and Graham 2005: 29; Kotler, Ang, Leong and Tan 2004: 2; Backhaus, Büschken and Voeth 2005: 3; Trompenaars and Woolliams 2004: 27; Cravens and Piercy 2004: 3) in which market integration poses new challenges since no market stands alone and the internationalization process is apparently irreversible (HS, lecture October 200449). Companies increasingly find themselves needing to internationalize in order to stay competitive (Backhaus, Büschken and Voeth 2005: 3-12; Czinkota and Ronkainen 2004: 114-115; Kotabe and Helsen 2004: 3-8).

Confronted with increasing global competition for expanding markets, multinational companies are changing their marketing strategies and altering their organizational structures (Kotler, Ang, Leong and Tan 2004: 714; Cateora and Graham 2005: 335-337; Backhaus, Büschken and Voeth 2005: 23-53; Kotabe and Helsen 2004: 3-8). Their goals are to enhance their competitiveness and to ensure proper positioning in order to capitalize on opportunities in the global marketplace (Deresky 2006: 2-5). Developing countries and emerging markets play a decisive role in this competition. Therefore, emerging markets, such as Indonesia, have become the objects of significant investment and major driving forces behind the global expansion of MNCs (Jeannet and Hennessey 2001: 316, 348-350). However, they are subjected to a multiplicity of marketing environments in these countries and realize the limits of the “economics of simplicity” (Levitt 1983), that is: growth by selling standardized products all over the world. Although products and services tend to become more similar over time (and there is no doubt that this is happening), customers seem to have different reasons for buying similar products (Ratneshwar et al. 2000: 1-8; HS, lecture October 2004). Indeed, the cultural factor is so dominant that some authors doubt there will ever be a converging taste across all customers around the world (global consumer) (Usunier and Lee 2005: 84-85; 123-126).

In spite of these obstacles, experiments with globally uniform products, brands and marketing activities (i.e. a lowest-common-denominator position that is supposed to be effective across all cultures) have not really diminished (Holt, Quelch and Taylor 2004: 1). This can be observed even though multinational companies have become lightening rods of anti-globalization protests, and customization to local tastes seems to be more profit-yielding. Furthermore, due to new technology, production, reduced transport costs and distribution techniques, it is economically viable. However, to take advantage of the opportunities in emerging markets, the marketer needs to get back to the local environment variables, then needs to decode, interpret and transfer them into the meaning and application of brands, products and services offered. Companies are progressively investing more in intangible assets, for example local brands, than in tangible assets, such as local factories (IW, interview November 2004; Bird 2004: 93-121; Güldenberg 2005), decisions which render an exact knowledge of the cultural environment even more crucial. Therefore, the time is right to investigate market expansions and associated international marketing matters (Cateora and Graham 2005: 34). This will be done in the following section.

B.2.2 The market contours

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As described in previous sections, it is difficult to ignore the fact that increased global competition has been on the rise over the last three decades (Dicken 2003: 32; Kotabe and Helsen 2004: 3-8). These kinds of competitive effects put pressure on companies to globalize their marketing activities (Johansson 2000: 14). This is why there has been much discussion as to whether markets will ever globalize.

In 1987 Michael Porter was very astute in observing dramatic change in international trade patterns.50 He concluded in his article “From Competitive Advantage to Corporate Strategy” that within business, multi-domestic home markets were themselves developing into global markets. In this respect, it is general knowledge today that this development is much more of a push from organizations trying to integrate their production processes on all levels of the value chain, than a pull from the consumer (IW, interview November 2004). This push was triggered by a series of factors which will be elaborated on hereafter.

B.2.2.1  Drivers of globalization processes influencing marketing strategies

In order to scrutinize the apparent trend toward the often criticized homogenization of markets, three aspects of globalization processes must be distinguished. The first aspect is the globalization of demand, that is the apparent convergence of consumer behaviour and marketing environments worldwide (market drivers). The second aspect is the globalization of supply and competition, with the progressive shift from domestic industries operating in national markets protected by non-tariff barriers, to global industries (competitive drivers).51 The third aspect deals with the globalization of products and marketing offerings. Companies react to globalization partly by shaping new strategies and partly by refining their organizational designs. They do this under cost constraints, given the potential for the experience effect of available technologies and the impact of transportation costs (cost drivers).52

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The validity of the assumption concerning cost and competitive drivers seems to be justified. However, the presence and effect of market drivers is doubtful in the event of non-existent global homogenization of consumers and of their needs and wishes. Furthermore it is important to recognize that it is not only economic forces which shape global business. Particularly in the past several years, many political events have affected the nature of global competition (political drivers) (Kotabe and Helsen 2004: 3-8). The demise of the Soviet Union, deregulation and privatization of state-owned industries, also in Indonesia (AFX 2005a; Prasetiantono 2004: 141-157) changed market environments around the world.

Obviously these trends have been dependent on several factors such as the continued lowering of trade thresholds for example General Agreement on Tariffs and Trade (GATT) and recently the European Union and ASEAN Free Trade Area (AFTA) (Johansson: 12-16; Meier and Roehr 2004: 6 -7; Backhaus, Büschken and Voeth 2005: 3-12). In a freely competing world market, many organizations are forced to enter the international competitive arena in order to create synergies and lower costs by economies of scale (Johansson 2000: 15). The figure below (B-1) depicts the four drivers of globalization.

Figure B-1 Globalization Drivers

B.2.2.2 Phases of internal business economic strategies

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The reasons (which can be differentiated chronologically) behind competition and cost drivers have typically been based on internal business economic strategies (Kotabe and Helsen 2004: 297-325). The first phase, in the 1960s and 70s, was initiated by multinationals which delegated much of their authority to their local generating companies in order to be as close to the market as possible. The country managers, being lords of local fiefdoms, exploited their authority by emphasizing that decentralization was the most relevant strategy in order to be able to react properly to their unique local market circumstances (Jeannet and Hennessey 2001: 686-688; Cateora and Graham 2005: 337; Backhaus, Büschken and Voeth 2005: 23-26). Also, MNCs which grew fast worldwide in the 1960s and 1970s did so by granting a large degree of decision-making autonomy to their subsidiaries in their home markets (Deresky 2006: 293-294). Subsidiaries were asked to replace the corporate values and organizational practices of the parent company and were also encouraged to adjust completely to the local market (Usunier and Lee 2005: 229). Later on, subsidiary managers used the message of the uniqueness of their market to defend specific, nationally designed marketing policies. Hence, they defended their autonomy even at the expense of sometimes rather fallacious arguments (MJ, informal discussion, February 2005).

Then in the 1980s, under the doctrines of McKinsey and the like, a big centralization move was initiated (von Simson 1992: 28).53 MNCs needed to shift their organizational design towards more centralization (Hout, Porter and Rudden 1982: 3).54 Parent companies wanted to have a more unified implementation scheme of new, more centrally designed international marketing strategies, responding to the globalization of competition (Backhaus, Büschken and Voeth 2005: 23- 26; Jeannet and Hennessey 2001: 686-688). It was claimed that multi-local approaches needed to be replaced by centralized processes in order to achieve any global economies of scale (Meier and Roehr 2004: 10-12).

The following figure juxtaposes time, organization and management strategies typical of that time. In the 1960s and 1970s the then-expanding large corporations espoused the view that local markets had to be conducted locally (decentralization). These strategies were removed owing to the factors already mentioned, in favour of views that posed centralization of decision-making at the centre of company organization (centralization). Notwithstanding, these strategies did not always lead to the expected results. In recent years, after a long period of standardization, companies have started to give slightly more weight to localization, especially with regard to advertising and branding (Usunier and Lee 2005: 230). It is precisely the most successful companies that, according to Fortune, (“The World’s Most Admired Companies”), are, today, those which have struck a balance between centralization and decentralization.55 Peter Brabeck-Lethmathe, the chairman and CEO of Nestlé justifies the decentralized approach of Nestlé with the fact that consumer tastes are decided locally (Demos 2006: 49) and adds: “There is no such thing as a global consumer, and the autonomy given to our individual operations makes a lot of sense” (Demos 2006: 49). The figure below (B-2) shows various corporate strategies whereas Nestlé’s strategy is similar to Unilever’s.

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Figure B-2 Strategies and timeline

B.2.3 Globalization and marketing

B.2.3.1  The dilemmas

Before the appearance of Buzzell’s (1968) classic article, “Can you standardize multinational marketing?”, natural entry barriers related to culture were seen as very high, requiring adaptation to national markets and offsetting the potential advantages of scale economies.56 Behind this debate there is a quite practical issue regarding firms’ operations, which is, the traditional dilemma between production flexibility and marketing’s tendency to customize products to diversified needs (DM, interview December 2004). Factory managers prefer to be inflexible, for low-cost purposes, whereas marketing managers favour as much tailoring to customers’ needs as possible. Developments in factory automation nowadays allow product customization without major cost implications. New strategies have been found to enforce economies of scale and experience effects. A modular conception of products permits shared economies of scale at the components level, whereas lagged differentiation maintains a high scale of production as long as possible in the production process and organizes cheap final customization.

In the context of the centralization and standardization strategy, the fundamental dilemma of globalizing is apparent. On the one hand, globalization is stimulated by production processes that are consistent throughout the organization to save costs; on the other hand, one finds the obvious responses from sales and marketing people to adapt their products and services to the needs of local consumers. This dilemma has not vanished, despite the fact that three remarkable global developments have occurred since the 1980s. Firstly, a further increase of global integration, especially in the late 1990s, occurred across cultural and company borders with the merger and acquisition wave (Kotabe and Helsen 2004: 285). Secondly, and also in the 1990s, there was a fundamental increase in the mobility of people. Thirdly, there has also been a fundamental breakthrough of both mass media (aimed at particular groups, like MTV and CNN) and the internet. Obviously, this has affected the internationalization of marketing. However, it remains reasonable to believe that these three developments will not lead to converging consumer tastes and in the long run to the emergence of a global consumer. This has not been the case to date and there are no signs of this kind of consumer even existing. While artificial entry barriers are disappearing, global markets remain more apparent than real when one looks at consumption patterns. Globalization is driven much more by increased global competition and simultaneous global restructuring processes (Kotabe and Helsen 2004: 3-8) than by consumers. Additionally, patterns of consumption are simply difficult to globalize without any adaptation (Kotabe and Helsen 2004: 131-174).

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There is no evidence to claim that the globalization of marketing goes hand in hand with corresponding processes of global consumer behaviour and consumption patterns of convergence, even homogenization. One must be reserved about drawing the conclusion that, in the course of time, a global consumer will emerge as a result of globalization processes. Global markets evolve more through globalization on the supply side than on the demand side (which is much less willing to stifle its own unique needs and wants). According to Clark (1987) the customer will never want to be a universal punter at the mercy of a global producer.

B.2.3.2 The standpoints

Ever since Levitt’s (1983) article on “The Globalization of Markets”, academics and practitioners have debated whether international markets are becoming homogenous, and if the international marketing paradigm ought to change from highlighting national differences to exploring international similarities.57 Proponents of global marketing contend that, because market needs are becoming homogenous, country differences are less relevant to international marketing planning (Bartlett and Ghosal 2000, 2003; Levitt 1983)58. Therefore it has been, and continues to be argued that global consumer segments are emerging. Consumers within such segments would be similar worldwide and would want to use the same products and services. A position such as the one in question, taken by companies, became abundantly apparent at the end of the 90s and was characterized by a growing number of marketing activities (market segmentation) where the geographic reference market was no longer a country or a continent, but global consumer groups such as teenagers or Muslim females. Sheth and Parvatiyar (2001: 21) argue that if a marketer targets its products or services to the teenagers of the world, it would be relatively easy to develop a worldwide strategy for that segment. The idea of a global youth segment seems bluntly naïve as huge differences exist between countries with a comparable economic level such as the Philippines and Indonesia or, on the other hand, Singapore and Hong Kong. To reason that the same level of purchasing power in two countries leads to identical market segments, (that is, for example, teenage consumers in two different markets sharing values, attitudes and consumer behaviour), remains unrealistic.

Conversely, in the market for industrial goods (business-to-business) competition is global for a whole series of activities, and products in this sector tend to be of a global nature, such as in high-technology (aerospace, aviation, and telecommunications), industrial goods (machinery) and raw materials (basic products). However, it is less so in the case of the consumer goods being focused on here, and even less so in the case of services (credit cards, advisory services, and so on).

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Yet others assert that the existence of global markets is “a myth”. They point to the many contradictory trends around the world suggesting stark differences in national markets, and hence the need for adaptation and customization of international marketing based on individual country differences (Quelch and Hoff 1986; Douglas and Wind 1987). Despite these arguments and counter-arguments, it is now widely known that consumers have not globalized and companies are adopting increasingly local approaches in order to reach their global strategy goals. Even in the luxury goods market, products usually thought to be truly global and acquired by a globally similar elite customer base (Kyojiro 2004: 32-48), Chang and Liao (2004) have shown for Louis Vuitton the enormous differences in brand image, buying and usage patterns of luxury goods in Taiwan, Hong Kong and Japan, three, at least geographically, close markets.

Marketing professionals are becoming increasingly aware of the need to take account of culture when working in diverse markets (Usunier and Lee 2005; Johansson 2000: 57). To their dismay, established theories break down and are insufficient when organizations are faced with new global markets with different cultural orientations. The following example will outline the theoretical debate explained, by means of highlighting the dilemma of global strategies of the Swedish furniture concern, IKEA.

IKEA, with operations in Southeast Asia in Singapore and Malaysia, is often cited as an example of a company with a successful marketing strategy given the globalization of world markets. However, IKEA had to learn that consumption patterns and way of life regarding household equipment, furniture and related items remain significantly different, according to the consumers’ cultural backgrounds. This can be witnessed by comparing IKEA customers in Germany with their counterparts in Singapore and Malaysia, where customers perceive IKEA as a prestigious European brand and prefer not to assemble the furniture themselves as wished for by IKEA (informal discussion with IKEA staff, Singapore 2004). IKEA, acknowledging its perception as a European status brand, offers all electric goods with European sockets in order to enhance its up-market image by appearing distinctly European (although these electric goods are manufactured outside Europe). This illustrates the paradox of globalization, based on the rather harmonious coexistence of global and local patterns. Thus, IKEA succeeds globally in local ways, while maintaining a strong Swedish brand image and branding its items of furniture with names that sound strongly Nordic. Finally it is apparent that IKEA’s standards and processes are universalized but there is room for local adaptation as desired by consumers. This strategy has been named “contingency strategy” in this thesis and will be fully elaborated on later. Contingency strategy here means when local adaptation is possible but not absolutely necessary. However, customization to local peculiarities promises more success (Demus 2006: 48-49).

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Finally it should be reiterated that the encounter between companies that are increasingly globally operating, and consumers who remain largely local in their attitudes and preferences is the central paradox of the globalization of markets and displays the general line of disagreement. In view of the reality of the situation it appears contradictory that companies still seem to maintain such a strong paradigm for action emphasis on globalization since consumption patterns are clearly not globalizing, and adjusting to global competition is reconcilable with tailoring products and marketing strategies to national markets. Several reasons are cited for this view discussed at company-level. First, many companies believe that standardization will result in higher performance (Zou and Cavusgil 2002). The standardization of promotions and product is perceived to affect both aspects of performance (Kotler, Ang, Leong and Tan 2003: 391). However, empirical findings show that a firm’s performance is indifferent to standardization versus adaptation, being dependent on the match between strategy and context (Fortune 2006: 33-46)59. Western companies rely heavily on standardization even when market conditions seem to favour localization. Secondly, often the globalization of consumption is presented as an unquestionable postulate, because it is much easier to sell the recentralization policy within the organization. The relationship between headquarters and subsidiaries in the defining of marketing strategy is complex. Too much autonomy results in purely local solutions with few economies of scale and an absence of worldwide coordination. It is the patterns of globalization of competition which impose changes in organizational design (recentralization), rather than the globalization of consumption patterns. As Kashani (1989: 92) emphasizes:

“… the way global decisions are conceptualized, refined, internally communicated, and, finally implemented in the company’s international network have a great deal to do with their performance.” (Kashani 1989: 92)

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Local managers naturally tend to emphasize local consumption patterns and marketing environments. Regardless of these motives, the following facts are to be observed. The headquarters of successful global companies are flexible rather than authoritarian in dealing with their subsidiaries’ assumed arguments (Demo 2006: 48-49). Artificial entry barriers related to duties and standards are now being progressively replaced by natural entry barriers related to scale and experience. For international marketing, culture-related experience is all the more important since the natural entry barriers relating to consumer behaviour and marketing environments will diminish gradually and only in the long term. Culture-related differences, for instance, will remain. Therefore, global marketing strategies must be implemented cautiously, especially in culture-bound industries: local knowledge has to be generated either by research, organizational learning and human resource management or by acquiring local companies. Globalization belongs to the realm of organizational discourse rather than to actual international marketing. Rather than a hard global marketing strategy, it is possible to adopt a semi-global i.e., an intercultural marketing strategy which has basically the same goals but is more respectful of local culture and attempts to serve purely local segments. Against this background, the question arises as to what is understood by the concept of international marketing.

The thesis follows the underlying philosophy that successful companies should standardize marketing programs wherever possible, and customize wherever necessary (strategy of differentiated standardization or contingency strategy). Conversely, global marketing strives to attain worldwide coordination, rationalization and integration of all marketing activities including target market selection, packaging, promotion and sales programmes (Douglas and Craig 1989). Although many companies, such as Procter & Gamble, are transforming themselves to become global companies by rationalizing their brand and product portfolio and developing integrated global marketing by altering their company structures, they still see the importance of local approaches and products. And this trend is apparently implemented increasingly in emerging markets, such as Indonesia. Thus, in the case of Indonesia, international marketing is seldom reincarnated into integrated global marketing since consumers are the focus and they are simply not global. As one can see, although international marketing is closely tied to the globalization of trade and markets, the existence of global marketing is questionable, as is the existence of a global consumer. Regional integration, the emergence of the triad power, technological advances and free-market policies have led to global sourcing and global competition for companies, but have not resulted in a global consumer as argued by Sheth (1992).

B.2.3.3 Globalization and consumption

No previous generation has had so many options for constructing lifestyles as today. In a world where the consumer has ever more opportunities for choosing and constructing lifestyles, the validity of the axiomatic economic models, whereby the purchaser makes what appears to be consistent and logical buying decisions (homo oeconomicus), is breaking down. Purchasing decisions are extremely culturally bound and no longer correlate to the traditional theory of consumer choice which encompasses four elements about the buyer and the market outlined by Anglo-Saxon economists. Why consumers purchase a certain product cannot solely be traced back to (1) the buyer’s marginal disposable income, (2) the price at which the goods or services can be purchased, (3) the tastes and preferences of the consumer and (4) the belief that consumers behave rationally and do the best for themselves. They have to be replaced by models which explain how and why a new generation of buyers, with different and frequently changing tastes and preferences (visible layers of the structuralist model of culture), think and act. The number of these lifestyle choices has increased dramatically. Furthermore, increasing wealth and prosperity allows the consumers to choose from this variety of lifestyles and respective goods. New production techniques provide the possibility of offering certain products for even the smallest niche markets (micro segments), while (due to worldwide interconnectedness) goods and wares are available worldwide, whose markets till now were extremely limited geographically. As a consequence, reality today is more complex as international trade becomes more and more part of daily life. Although for certain products, such as transportation vehicles (as outlined in the figure below [B-3]), demand can be linked to certain income levels, for most other products these general development stage trends have outlived their usefulness. For example, one would link the private use of mobile phones in the 1990s with the stage of a fully industrialized economy whereas today in Indonesia the majority of people are avid users of mobile phones irrespective of income (IS, interview October 2004; RD, interview December 2004).

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Figure B-3 Development stages of motorization

According to this model, world citizens who achieved a per capita income of US$1,000 PPP, used mass transport vehicles such as busses and bicycles in particular; from US$3,000 PPP upwards, people used more motorbikes and tricycles, such as the so-called “tuk-tuk” in Thailand or “bemo” in Indonesia. A US$5,000 PPP and upwards per capita income, means people increasingly use vehicles with an open loading surface such as pick-ups. The purchasing threshold for passenger cars was circa US$7,000 PPP. With knowledge of the correlation between development stages of motorization and per capita income, certain growth figures of GDP can be translated into future sales potential with the aid of various prognosis techniques. Higher income increments enable faster consumption of more valuable technologically developed goods. The prognoses are complicated by uncertainty since the probability of the appearance of future environmental conditions is unknown. In addition to this, the purchase of certain goods is culturally dependent as is the use of income in general. Thus the assumption is widespread that when a country’s per capita income is less than US$10,000 PPP, much of the income is spent on food and other necessity items, and very little disposable income remains. However, once per capita income reaches US$20,000 PPP, the disposable portion of income increases dramatically because the part of the income spent on necessities does not rise nearly as fast as income increases. As a result, people around the world with per capita income of US$20,000 PPP and above have considerable purchasing power. This assumption is easily comprehensible but, however, the following continuation of thought is not. It is assumed that with this level of purchasing power (US$20,000 PPP), people, regardless of their nationality, tend to enjoy similar educational levels, academic and cultural backgrounds, and access to information (see, for example: Kotabe and Helsen 2004: 9). This, however, does not lead to worldwide comparable consumer behaviour, or to the emergence of a global consumer. Even the assumption that the same income would lead to a unification of cultural backgrounds, which represents a mandatory prerequisite for the emergence of such a consumer is as absurd and detached from reality, as the following statement:

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“As these cultural and social dimensions begin to resemble each other in many countries, people’s desire for material possessions, ways of spending leisure time, and aspirations for the future become increasingly similar.” (Kotabe and Helsen 2004: 8).

Although the convergence of consumer needs at the macro level may be true, i.e. from a certain per capita income and upwards, more cars are purchased, it does not necessarily mean that individual consumers will adopt all the products from around the world which are associated with a certain income level. Furthermore, products and their importance are interpreted differently. What is more, the same goods may be purchased but for completely different reasons, as was demonstrated in the case of Indonesia. In fact, globalization would tend to emphasize this fact since the range of goods available in every field has dramatically increased. Globalization does not suffocate local cultures, but rather liberates them. In other words, thanks to market globalization, not only have people become more receptive to new things, but people also have a much wider, more divergent set of goods and services to choose from to shape their own individual preferences and lifestyles. In other words, the divergence of consumer needs is taking place at the same time and forms the basis of a glocal consumer culture.

B.3 Global players in Southeast Asia: The role of the MNC

With its combined consumer potential of 500 million inhabitants, Southeast Asia has been vigorously targeted by some of the world’s foremost consumer multinationals for years (TD, interview December 2004). The long history of colonization in the region, by Western powers in particular, has served to smooth the path for later economic expansion (Houben 2002: 35-36). Hall (1985: 26) notes in this context: “International maritime trade in Asia developed in stages”, i.e. the multitude of companies operating in Southeast Asia today, were active very early on in this region, partly on behalf of governments, which meant real advantages in terms of little competition from local, indigenously run companies. Western MNCs are the oldest-established “modern” enterprises in Southeast Asia, beginning with colonial-era multinational trading companies and export plantations (Purcell 1965: 18-69; Chaudhuri 1985: 160-202; Chaudhuri 1999: 111-139). Unlike in Japan or the so-called dragon economies of Korea, Hong Kong and Taiwan, where indigenous firms played the leading role, these foreign corporations have been instrumental in promoting the development of Southeast Asia. Even before the investment liberalization of the late 1980s and 90s, the western MNCs came to occupy a major, if not dominant, role in the modern sectors of Southeast Asian economies (Booth 1999: 564-579).

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During the early decades, Western investment in the region was most attracted by the region’s abundant natural physical resources and cheap labour, and the possibilities they provided for competitive exports to world markets (Van Goor 1999: 141-167). But since the 1970s the presence of Western MNCs has steadily increased as these economies have grown and developed new sectors, and barriers to foreign trade and investment have been progressively reduced (Booth 1999:578-580). This is typified by the series of studies indicating that at least half of the domestic economic growth in Thailand since the 1980s has been the result of FDI, with foreign multinationals responsible for over one-third of the country’s subsequent export flows (de Bettignies 1997: 77-90). This surge in FDI across the region has propelled Southeast Asia’s economies far beyond the point to which their indigenous technologies would have taken them. From the point of view of the corporations themselves, the most important activity is using Southeast Asia as a production base for the worldwide export of product, often through the sourcing of local components (IW, interview November 2004). However, this is changing since, through social transformation brought about by economic growth, a new middle class has sprung up, which creates profitable markets.

Although both domestic and foreign corporations seek profits and are often operationally interconnected, their management and marketing practices tend to be so dissimilar that Boeke’s concept of “dualism”, originally developed to describe the broad cleavage between a western, modern capitalist sector and an Eastern traditional non-capitalist sector (Boeke 1953), seems still to persist. The Indonesia Best Brand Award (IBBA) confirms the idea of the dominance of Western brands and products in all categories except “Rokok Kretek” (clove cigarettes), Rokok Mild (non-clove cigarettes) and “Bumbu Instan” (instant noodles) where local players dominate (Palupi 2004: 26-43).60 SWA recapitulates: “Local brands often evoke the perception of being cheap, not having global competence and having a low brand value” (translation by author, “Merek lokal sering dipersepsikan sebagai produk murah, tidak berkompetisi di pasar global dan brand value-nya rendah” (SWA 2004: 43).

In times of fierce competition, brands evolve as the only distinction between products (Meffert et al. 2003: 4-15) and consumers set this trend by building relationships (brand loyalty) with their preferred brands. The relationships between brands and customers are becoming more passionate and brands, particularly in Asia, tend to be seen as a form of self-expression (Leong, Ang and Tan 2001:115-124) which underlines the significance of marketing and branding. Indonesian companies, with some exceptions (such as Indofood or Sampoerna)61, seem not yet to have understood the importance of brand building and therefore have not successfully driven the consumers’ desire to own and use their products; a fact which leaves domestic sales of most Indonesian companies far behind their Western counterparts. Multinationals with headquarters in the West and Japan are generally far superior to their local counterparts in technological and organizational competencies, from which much of their industrial power is drawn (HS, opening address October 2004). Indonesian conglomerates have in the past competed largely through pricing and low wages, neglecting the huge effort necessary to move forward in terms of management practice and technology.

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In the framework of the recent economic crisis, the prevalence of foreign corporations remains undiminished and has by all accounts been enhanced (HS, interview October 2004). With their immense financial weight, some of the world’s top corporations, headed by U.S. and European giants of Procter & Gamble, Gillette, Nestlé62 and Unilever, have spearheaded the stampede to buy out or take increased stock in partly owned subsidiaries or competitors (DM, interview December 2004; TD, interview December 2004). Yet far from being mere cases of asset stripping, the vast majority of the acquisitions appear to be long-term strategic investments in the region. The growth of the increasingly large and affluent middle class has been a concurrent slant on MNC investment in the economies of the region.

Albeit temporarily dampened during the immediate aftermath of the crisis, this continuing trend has led to higher demand per capita for more complex, higher-priced consumer durables such as automobiles and electronic house wares. In this context an increasing number of MNCs are being drawn to the region by its consumers. As wage levels in the region continue to rise, some MNCs currently using ASEAN as a low-cost exporting platform may well reinvest elsewhere in time (Kleine-Brockhoff 2006), but others will be drawn in their place by the region’s growing spending power. Along with the arrival of firms such as Ford, Nestlé and BMW, this development will act as a catalyst to the transition from a labour- to a more knowledge-intensive manufacturing base in the coming years (DM, interview December 2004).

In the current Indonesian industrial environment, multinationals are prevalent across a wide spectrum of industries. A glance at the roadside billboards on the taxi ride from Jakarta’s international airport to the city centre reveals a typical cross-section of the industries represented, from automotive companies to electrical and communications firms and consumer giants. The comparative multinational dominance of western MNCs is not only characteristic of automobile, electronic and petrochemical sectors, but also of cosmetics and pharmaceuticals. L’Oreal, Estée Lauder, Avon, Procter Gamble and Unilever lead the field in cosmetics, the latter two companies also dominating the regional consumer goods industry alongside Colgate-Palmolive (DM, interview December 2004).

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In the course of market saturation in industrialized countries, more and more companies are pushing into developing and emerging markets so as to tap new target groups for their products and services. This leads to fierce competition pressure and long-term to cut-throat competition, since only those companies whose products and services appeal to the consumers of countries like Indonesia, will leave the ring reinforced and victorious. Therefore locally adapted marketing strategies are necessary. What exactly is meant by marketing will be explained in the next chapter.

B.4 International Marketing: Meaning and subject in a global environment

“One region of the world that has been overlooked from the marketing standpoint is Asia.” (Onkvisit and Shaw 1985: 5)

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“Globalization is not the very simple process it is often believed to be.” (Usunier and Lee 2005: 409)

Summary The following sections deal with the definition, content, factors and risks of international marketing (IM) as well as with the strategical orientation of internationally operating companies. The comments attempt to summarize several thousand pages of marketing literature which deals in depth with the aspects described here briefly. It is imperative to focus on the essentials in order to provide the necessary basics for those readers not familiar with marketing. Besides the English specific terms, their Indonesian equivalents will be named.

B.4.1  An introduction to marketing

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Products and services are intended to satisfy human needs [kebutuhan]. Someone buys soup in order to satisfy his hunger. The consumer reaps this so-called basic benefit from the functional, for example physical, chemical or technical properties of the goods. Furthermore, several products have an additional benefit because they fulfil a higher need (for example, the need for prestige or self-esteem). Someone who buys an abalone63 soup generally does so not merely to satisfy his appetite, but also to eat healthily and because it is considered an expensive delicacy. These additional benefits are rather incorporeal in nature and are mostly transmitted via advertising [promosi penjualan], for which marketing is responsible. A definition of marketing and its content will be outlined and explained in the following sections.

B.4.1.1  Definition

Marketing as a discipline of study and as a profession developed in the United States; most of the techniques utilized in marketing were originally created and employed there (Onkvisit and Shaw 1985: 5). The American Marketing Association defines marketing as “… the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals”.64 The concepts of satisfaction [kepuasan] and exchange are at the core of marketing. Potential customers [pelanggan] should be perceived as information seekers who evaluate marketers’ efforts in terms of their own drives and needs. If the offering [tawaran] is consistent with their needs, they tend to choose the product; if not, they choose other alternatives. In western thinking, marketing has become an all-embracing business discipline (Trompenaars and Woolliams 2004: 4; Bruhn 2001: 5). In a nutshell, it could be said that marketing is the management process that identifies, anticipates, and supplies customer requirements efficiently and profitably (Czinkota and Ronkainen 2004: 17).

What marketing has to achieve is the creation of wealth through the relationships between people and what they value (Carvens and Piercy 2004: 5). Marketing as a discipline had and still has less significance when goods are scarce and demand exceeds supply (Kotler, Ang, Leong and Tan 2003: 105-107) and developed as competitive markets shifted in the buyers’ favour. Peter Drucker (1973: 64-65) explains the aim of marketing is to make selling superfluous. He adds:

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“There will always, one can assume, be need for some selling. […] The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer base who is ready to buy. All that should be needed then is to make the product or service available.” (Drucker 1973: 64-65)

Consequences of this idea are that marketing must know and understand customers so well that the product or service suits them and sells itself. However, in many cases marketing strategies fail on home markets, not to mention on foreign and culturally diverse ones, where the propensity for failure has never been greater (Trompenaars and Woolliams 2004: 3). Onkvisit and Shaw (1985: 5) remark that it is rather surprising that firms which generally go to great lengths to study their American customers in order to find the best way to communicate with them, have generally not exhibited the same kind of diligence and attention when they venture abroad.

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The following figure summarizes a simplistic marketing system [sistem pemasaran]. The system comprises a collection of sellers (for example an industry) and a collection of buyers to the market. Sellers and buyers are connected by four flows whereby the sellers send goods, services and communications (ads, direct mail, etc.) to the market and in return receive money and information (attitudes, sales data). The inner loop shows an exchange of money for goods and services; the outer loop shows an exchange of information.

Figure B-4 A Simple Marketing System

B.4.1.2 The marketing process

A key task of the marketer is to recognize the ever-changing nature of needs and wants [keinginan] (for example, the requirements of Indonesian consumers [konsumen] altered during the financial crisis in such a way that due to financial constraints buying items in small quantities - for example, individual sachets of shampoo - was deemed necessary) (IS, interview October 2004; AS, interview November 2004). Increasingly, the goal of marketing has been expanded from sensing, serving, and satisfying individual customers to taking into consideration the long-term interests of society (corporate social responsibility - CSR). Kotler describes this as: “… to determine the needs, wants and interests of target markets … in a way that preserves and enhances the consumer’s and the society’s well-being (1997: 27). Some companies have already adopted this wider outlook in Indonesia, such as Unilever’s “Clean Brantas River project”.65

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The marketing manager’s task is to plan and execute programs that will ensure a long-term competitive advantage for the company. The task has two integral parts: determining of specific target markets [pasar-pasar sasaran], and secondly marketing management [manajemen pemasaran], which consists of manipulating marketing mix [kombinasi pemasaran]elements to best satisfy the needs of individual target markets. Characteristics of intended target markets are of critical importance to the marketer and can be summarized by the so-called eight Os: occupants, objects, occasions, objectives, outlets, organization, operations, and opposition (Kotler 1994: 174-175).

Characteristics of target markets

Occupants are targets of the marketing effort. The marketer must determine which customers to approach and also define them according to numerous dimensions, such as demographics (age, sex, nationality), geography (country, region, city), psychographics (attitudes, interests, and opinions), or product-related variables (usage rate and brand [merek] loyalty). Objects are the things being bought at present to satisfy a particular need, such as services, physical objects, ideas, organizations, places and persons. Objectives are the motivations behind the purchase or adoption of the marketed concept. Many customers look for hidden value in the product they purchase, which may be expressed. Occasions are the circumstances in which occupants can buy objects. Outlets are places where customers expect to be able to procure objects or to be exposed to messages about them. Organization describes how the buying or acceptance of an idea takes place. Organization expands the analysis beyond the individual consumer to the decision-making unit (DMU). The DMU varies in terms of size and its nature from relatively small and informal groups like a family, to large groups (more than ten people), to formal buying committees. DMUs in Indonesia, as in other Southeast Asian countries, seem to be larger in size as, for example, the extended family can be involved in buying decisions (Schütte and Ciarlante 1998: 50-51). Operations represent the behaviour of the organization buying products and services. Opposition refers to the competition to be faced in the marketplace. Analyzing the eight Os, and bearing in mind other uncontrollable factors in the environment, the marketer must select the markets at which efforts will be concentrated.

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The marketing mix

Analysis of the characteristics of the target market enables the specification of the marketing mix, or the four Ps [empat P]: product [produk], price [penetapan harga], place [penempatan], and promotion [promosi] (Perreault and McCarthy 2002; Cravens and Piercy 2004: 38-39). Kotler, Armstrong, Saunders and Wong (1996: 96) define the marketing mix as follows:

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“We define the marketing mix as the set of controllable tactical marketing tools that the firm blends to produce the response it wants in the target market. The marketing mix consists of everything the firm can do to influence the demand for its product. The main possibilities gather into four groups of variables known as the ‘four Ps’: product, price, place and promotion.” (Kotler, Armstrong, Saunders and Wong 1996: 96)

Each consists of a sub-mix of variables, and policy decisions must be made on each. Product policy is concerned with all the elements that make up a product or service. All possible tangible characteristics (such as the core product and packaging) and intangible characteristics (such as branding and warranties) are included. Many products are a combination of a concrete product and the accompanying service. Communication policy uses promotional tools to interact with customers, middlemen, and the public at large. The communications element consists of these tools: advertising, sales, promotion, personal selling, and publicity. Because the purpose of all communications is to persuade, this is the most visible and sensitive of the marketing mix elements. Pricing policy determines the cost of the product to the customer. Price is the only revenue-generating element of the marketing mix. Distribution policy covers the place variable of the marketing mix and has two components: channel and logistics management. Channel management is concerned with the entire process of setting up and operating the contractual organization, consisting of various types of middlemen (such as wholesalers, agents, retailers, and facilitators), while logistics management is focused on providing product availability at appropriate times and places in the marketing channel. Place is the most long term of all the marketing mix elements, and the most difficult to change in the short term. The following figure shows the particular marketing tools under each “P”.

Figure B-5 The four Ps: the marketing mix

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Marketing process stages

The actual process of marketing consists of four stages: analysis, planning, implementation, and control (Lambin 2000: 424-451). Analysis begins with collecting data on the eight Os and using various quantitative and qualitative techniques from marketing research. Data sources will vary from secondary to primary, internal to external (to the company), and informal to formal. The data is used to determine company opportunities by screening the environment checked against the company’s resources to judge their viability. Planning refers to the blueprint generated to react to and exploit the opportunities in the marketplace. The planning state involves both long-term strategies and short-term tactics. A marketing plan developed for a particular market includes a situation analysis, objectives and goals to be met, strategies and tactics, and cost and profit estimates. Additionally it includes the formation of an organizational structure or adjustments in the existing one congruent with the execution of the plan. Implementation is the actual carrying out of the planned activity. If the plans drawn reflect market conditions, and if they are based on realistic assessments of the company’s suitability to the market, then implementation will be a success. Concurrently, control mechanisms must be put into effect to monitor environmental forces, competitors, channel participants, and customer receptiveness.

Figure B-6 Marketing analysis, planning, implementation and control

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These marketing process basics (eight Os, four Ps and marketing process) do not vary, regardless of the type of market one is planning to enter or to continue operating within. They have been called the technical universals of marketing (Czinkota and Ronkainen 2004: 20). The different environments in which the marketing manager must operate will give varying emphases to the variables and will cause the values of the variables to change. The awareness of different environments brings us to the international perspective of marketing.

B.4.1.3 Defining international marketing

The business environment is changing and firms cannot afford to ignore international markets. The increasing dependency of nations around the world on each other’s goods and services has raised awareness among companies of the need for an international outlook in their approach to business and marketing. Compared to international trade and export marketing, international marketing is a more recent phenomenon (Johansson 2001: 4-8). It has grown since World War II and presumably was a consequence of the demise of colonialism and the recreation of numerous independent nations (Sheth and Parvatiyar 2001: 18). However, the phenomenon is not entirely new. Products have been traded across borders throughout recorded civilization, extending back beyond the Silk Road that once connected East with West from Xian to Rome on land and the recently excavated sea trade route between the Roman Empire and India which existed 2000 years ago (Ptak 1999: 112-140). What is relatively new about the phenomenon, apparent in large U.S. companies in the 1950s and 1960s and in European and Japanese companies in the 1970s and 1980s, is the large number of companies with interrelated production [produksi] and sales operations located around the world (Kotabe and Helsen 2004: 1). This geographical expansion of corporations takes us to the definition of international marketing. The classic understanding of the concept and content of international marketing is reflected in the definitions given in literature. The following classifications stem from American and European literature.

In general, definitions in international marketing literature are characterized by an emphasis on crossing national borders and run parallel to traditional definitions of marketing. This hazy distinction, a mere extrapolation of familiar concepts from the national to the international sphere, would mean that no in-depth treatment of international marketing is really indispensable. However, the difference between international and domestic marketing does not lie in the above-presented theoretical concepts of marketing but in the environment within which marketing strategies and plans must be implemented (Cateora and Graham 2005: 10).

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International marketing is that segment of business concerned with the planning, promotion, distribution, pricing of the goods and services desired by intermediate and ultimate consumers internationally (Albaum et al. 1998; Onkvisit and Shaw 1993; Mühlbacher et al. 1999).

The definition of international marketing is different from marketing only in the fact that goods and services are marketed across political borders. Kahler and Kramer (1977), too, and Bradley (1991) regard crossing national borders as the central characteristic of international marketing, without an immediate link to the market and consumers. According to Meffert and Bolz (1994: 23) international marketing is the analysis, planning, execution, coordination and control of market related activities of a company operating in more than one country.

Strategies in international marketing

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By and large, literature presents two distinct trends in marketing outside domestic home markets, i.e. international marketing, implemented as (1) multinational or multi-domestic marketing, and (2) global marketing (Jeannet and Hennessey 2001: 4-6, 10-11; Kotabe and Helsen 2004: 16-17; Johansson 2000: 8-12).

A multinational approach is characteristic of polycentric firms, that is, companies with an intensive consideration of country-specific conditions. Contrary to that strategy, the global marketing companies treat the world, including their home market, as one market (Cateora and Graham 2005: 20). Market segmentation [segmentasi] decisions are no longer focused on national borders, as is the case in international marketing. Instead, market segments are defined by income levels, usage patterns, or other factors that often span countries and regions or even the entire globe (Johansson 2000: 10). Effective use of segmentation, that is, the recognition that groups within markets differ sufficiently to warrant individual marketing mixes, allows global marketers to take advantage of the benefits of standardization while addressing the unique needs and expectations of a specific target group (Czinkota and Ronkainen 2004: 409-410). The objective is to arrive at a grouping or groupings that are substantial enough to merit the segmentation effort. One of the segments pursued by global marketers is the middle-class family. However, as stated already earlier in the discussion about a global teen market, the homogeneity of such segments is questionable globally as well as locally in times of the so-called hybrid consumer. Often this global marketing is catalyzed by a company’s crossing the threshold of more than half its sales revenues coming from abroad. The entire organization (organizational structure, sources of finance, production, marketing, and so forth) begins to take on a global perspective (Cateora and Graham 2005: 20; Johansson 2000: 10; Kotabe and Helsen 2004: 16-17). A company guided by the idea that markets are global and therefore one which standardizes marketing across national boundaries, is referred to as a global company or a company with a global marketing outlook. The global marketing concept views an entire set of country markets as a unity, identifying groups of prospective buyers with similar needs as a global market segment and developing a marketing plan that strives for standardization (Caterora and Graham 2005: 23).

Conversely, multinational marketing of a company starts, as shown, when activities of a company cross borders, and it recognizes the importance of differences in overseas markets. A company guided by this concept has a strong sense that country markets are vastly different and require almost independent marketing programmes [program pemasaran]. Multinational marketing is often used as just another word for international marketing. Similarity between country markets and the home market plays only a minor role, in comparison to the situation with ethnocentric firms. While for ethnocentric firms, the transfer of familiar and successful concepts from the home market to new country markets plays a central role (global marketing), polycentric firms see adaptation to national preferences as being key to success (multinational marketing) (Backhaus, Büschken and Voeth 2004: 108). Based on the idea that the concept of a global consumer and his attributes is a myth that thwarts the reality of globalization (i.e. that globalization processes do not lead to cultural homogenization), this study now concentrates on multi-domestic marketing and not on global marketing whereas multinational or multi-domestic marketing is treated as international marketing and therefore is understood in opposition to global marketing.

B.4.1.4 Elements or factors of international marketing

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The following elements or factors are particularly important for the concept of international marketing (see, for example: Czinkota and Ronkainen 2004: 2-29). The uniqueness of international marketing comes from the range of unfamiliar problems which increase uncertainty and which are described in literature as the uncontrollable and controllable factors, elements (Jeannet and Hennessey 2001: 40-164) or just as the environmental data (Johansson 2000: 97-102) of marketing decisions. Neglecting these factors can lead to results detrimental to the company and its operations. The elements of the marketing environment of international markets tend to be divided into “controllable elements” and “uncontrollable elements” in American literature (Cateora 1993: 10). Each foreign country in which a company operates, adds a unique own set of uncontrollable factors (Cateora 1993: 9). Environments mould the wants, needs and emotional world of foreign customers and must therefore be regarded as the determining factors in setting strategies, goals and marketing instruments (Kulhavy 1989: 74). Generally speaking, the marketer cannot control or influence uncontrollable factors, but instead must adjust or adapt to them. Johansson (2000: 96) notes: “… researching country markets’ potential and the risks involved in entry is more critical than ever”. The uncontrollable factors of a foreign market are political and legal forces, the economic environment, infrastructure and technology, geography, distribution and cultural forces (Johansson 2000: 97-108; Cateora and Graham 2005: 10; Rugimbaba and Nwankwo 2003: 183-208; Quack 1995: 35-63; Griffin and Pustay 2003: 56-119; Proff 2004: 37-41) as seen in the following figure (B-7).

Figure B-7 Elements or Factors of International Marketing

The above figure illustrates the total environment of international marketing at a definite time, i.e. environmental factors, whether controllable, semi-controllable or uncontrollable, can change in due course as presented in most books, and which is, however, merely a myth. The inner shaded area depicts the controllable factors that constitute the marketer’s decision area, the second circle shows semi-controllable factors where uncontrollable cultural factors of a foreign market come into play, and the outer area represents the factors of the foreign environment for each foreign market in which the company does business and can, and usually does, present separate problems involving these factors. Thus the more foreign markets a company operates in, the greater the possible variety of foreign environmental factors with which to contend. Frequently, a solution to a problem in country market A is not applicable to a problem in country market B. Finally, a marketing programme has to be designed for optimal adjustment to the uncertainty of the uncontrollable factors, whereas the inner shaded part represents the area under the control of the marketing manager.

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Controllable factors

Controllable factors can be altered according to market conditions, corporate objectives and consumer demands [permintaan], needs and tastes. The outer area surrounding the marketing decision factors represents the levels of uncertainty created by the foreign environment. The marketing mix needs to be adapted according to these environmental factors. Controllable factors of marketing decisions lie within the company and are the four factors of the marketing mix: product, price, promotion and place (Bruhn 2001: 31-32). Even though these marketing principles and concepts are universally applicable, the environment within which a strategy is implemented varies from country to country.

It is widely accepted that the first element of the marketing mix, product, is the most critical of the 4Ps, as it defines the business in which a company is involved and therefore dictates the nature of pricing, promotion and distribution strategies to be applied in selling it in the relevant, here international, marketing environment. A product can be defined as a set of attributes that provides the purchaser with actual benefits (Kotler, Armstrong, Saunders and Wong 1997: 69-102). There are three layers of product attributes that lend themselves to a greater or lesser extent to standardization: (1) physical attributes, (2) service attributes and (3) symbolic attributes. Around a core product offering that is standardized worldwide, most global companies such as Coca-Cola or McDonald’s customize when needed. Theodosiou and Leonidou (2003) found that quality, design and features were the most standardized product-related elements, while product lines, branding and packaging were at least partially adapted for foreign markets. The marketplace dictates the extent of modification, whether physical or psychological, and therefore by the same tokens the issues of adaptation and standardization (Elliot and Acharya 2003: 108).

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According to Usunier and Lee (2005: 165, 248-255), the real issue is not a dichotomous choice, i.e. whether to adapt or to standardize completely. Usunier and Lee (2005: 249) argue that the performance of products has been found to be a combination of both adaptation and standardization strategies which one could describe as “glocal” to use the terminology of the earlier chapter on globalization. Product customization may also result in market differentiation, thus creating a competitive advantage vis-à-vis actual competitors, raising entry barriers for potential competitors (Usunier and Lee 2005: 248). Theodosiou and Leonidou (2003: 167) report that: “… international marketing strategy (whether standardized or adapted) will lead to superior performance only to the extent that it properly matches the unique set of circumstances that the firm is confronted by within a particular overseas market”.

Pricing can be one of the more powerful weapons in a firm’s competitive arsenal, since it is directly linked to corporate sales and profits. Pricing serves three interrelated objectives: (1) profits, (2) sales, and (3) market interactions. Price is a tactical tool in local markets and a strategic tool in the face of global competition (Usunier and Lee 2005: 324). Developing an appropriate international pricing strategy is therefore a vital but highly complex managerial discussion (Callow and Lerman 2003: 117). Indeed, managers judge international pricing to be among the most crucial decisions in their business practice (Backhaus, Büschken and Voeth 2005: 297; 301-302). Academic research in international pricing has focused on four main areas: (1) microeconomic issues (for example, price elasticity of demand), (2) export pricing issues (for example, price escalation), (3) internal pricing issues (for example, transfer pricing) and (4) consumer-oriented issues (for example, consumer preference prices) (Callow and Lerman 2003: 117). Problems which are seen in relation to international pricing are, particularly, those described in the next practical example as grey market phenomenon.66

Grey markets, or parallel importation, refer to authentic and legitimately manufactured trademark items that are produced and purchased abroad but imported or diverted to a country by bypassing designated channels (Ronkainen and van der Gucht 1987: 13). Grey marketed products vary from inexpensive consumer goods to expensive capital goods (Economist 1996: 65; Economist 1997: 61; Economist 1999: 72). The phenomenon in Indonesia is not restricted to imports but also takes place in export. That means, products which have a lower price in Indonesia are exported to other parts of the world and sold there for market prices. Indonesia has witnessed grey markets because of the low value of the Rupiah. Hong Kong and Singaporean wholesalers often found it cheaper to go to Indonesia to buy products and then resell them in their respective countries.

Stabilo BOSS is a good example of a typical grey market product in that it carries a well-known trademark. Unauthorized importers buy Stabilo BOSS products in Indonesia at advantageous prices and then sell them to consumers in other parts of Asia. More and more companies are fighting back, for example, by advertising warnings to consumers against buying grey market products on the grounds that these products may be obsolete or worn-out models and that consumers might have problems with their warranties. Various conditions allow unauthorized resellers to exist. The most important are price segmentation and exchange rate fluctuations. Competitive conditions may require the international marketer to sell essentially the same product at different prices in different markets or to different customers (Cespedes et. al 1988: 75-82). The existence of the grey market is an example of the economic practice called arbitrage. In economics, arbitrage is the practice of taking advantage of a state of imbalance between two (or possibly more) markets: a combination of matching deals is struck that exploit the imbalance, the profit being the difference between the market prices. A person who engages in arbitrage is called an arbitrageur. Some products face significant parallel importation due to significant price differentials. In some cases these were reasons for the termination of a channel relationship when agreements were not honored by one party or because of lack of performance. These must be spelled out carefully because local courts are often favourably disposed toward local businesses. In some countries, termination may not even be possible (Czinkota and Ronkainen 2004: 362).

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Of the various internal and external elements that shape a company’s pricing strategy, culture has received perhaps the least attention. Usunier and Lee (2005: 316) conclude: “At first sight, price appears to be anything but cultural.” And so price is often assumed to be an intrinsically objective element of exchange and an issue reserved for rational economic factors. There is a tendency to assume that pricing is primarily an economic issue that, in conjunction with quality, helps create value, and therefore culture is not a major determinant of pricing strategies (HS, lecture October 2004). Price is a more subjective element and it is a signal that conveys meaning. As such, it is perceived in quite different ways across cultures and among individuals.

Although the 4P component of place is a controllable element in the international marketing environment, it is closely related to infrastructure, distribution and technology, all of which are uncontrollable factors in international marketing. Promotion is the element of the marketing mix which helps to push the product through to the customer: (1) the distribution channels, (2) sales promotion, and (3) the sales force (Usunier and Lee 2005: 341-363). Place, that is distribution, is the element of the marketing mix which is most deeply rooted in culture, because it is closely related to everyday life and human relationships (Usunier and Lee 2005: 348). De Mooij and Hofstede (2002) suggest in that respect that cultural dimensions point to groups of countries likely to differ in their propensity to certain retail function. For instance, they suggest that one of the consequences of long-term orientation is being sparing with resources. This leads to a preference for picking merchandise up and may lead to lower acceptability of e-commerce. However, although the connection between long-term orientation and resourcefulness tends to be rational, the conclusion seems less so, as e-commerce and e-shopping behaviours are linked to internet access and secure payment methods.

For Indonesia, and Southeast Asia in general, the following observation tends to be more noteworthy. It seems that ties to culture and self-identification are so strong that this creates a barrier to newer distribution methods. Local consumers seem to remain faithful to their traditional distribution outlets for specific segments of consumption, precisely because of their traditional character (TD, interview December 2004). In Indonesia and Singapore it was observed that perishable goods such as fish, fresh fruit and vegetables and meat are still purchased through traditional stores. This led new market entrants, such as Carrefour, to modify their strategy and alter their product presentation in such a way that it represents the image of freshness sought after by consumers (own observation, October 2004).

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This is reflected by the case study (Fionna 2003) on Airpork67, chilled Australian pork that is air-freighted to Singapore, after it banned pig farming and pig imports from neighbouring countries due to the spread of viruses.68 However, consumers continue to show a strong preference for pigs slaughtered on wet markets in Singapore in spite of the government’s health requirements (1-3) according to which wet markets had been planned to be closed down (ibid 2003: 4). Dubbed “a story born out of disaster”, the Airpork brand proved to be a huge success. Consumers were convinced, with the help of the Singaporean Health Promotion Board, that chilled and freshly-slaughtered air-freighted pork, named “Xian Bao” which means “Fresh Treasure”, was superior to fresh pork (Fionna 2003: 5). However, and this has not aroused the interest of the case author, Singaporeans buy their Airpork on wet markets and show how deeply distribution is entrenched with culture.

The basic tenets of the marketing communication process are the same regardless of the cultural context. However, marketing communication in different cultures requires an understanding of the differences in the cultures and how such differences might impact on the marketing communications process. Usunier and Lee (2005: 409) argue that: “Advertising, which is based on language and communication, is the most culture-bound element of the marketing mix.” Since advertising is largely based on language and images, it is influenced by culture. Cross-national differences continue to exist, for the simple reason that different languages have not yet ceased to exist. Moreover, language, whether verbal or pictorial, is the strongest link between advertisers and their potential audiences in marketing communications. Language is the key dimension of culture and it is through communication, especially spoken or written language and non-verbal language, that cultural contact occurs. Tacit issues such as colour association, sense of appropriate distance, symbols, time and status cues, gestures and body language make up the unspoken or non-verbal part of language. These cues impact on the marketing communication process, and they must be factored into marketing communications decisions (Daniels et al. 2002: 94-96). Advertising, which is a large part of marketing communications, is a field that is constantly changing. On the one hand it is closely dependent on the cultural and linguistic attitudes of the local target population. On the other hand, in so far as social representations are not fixed, advertising is a privileged method of cultural borrowing. It mirrors changing social behaviour (Usunier and Lee 2005: 411). However, regardless of culture, the basic tenets of the communication process remain the same. The marketer’s message must be encoded, conveyed via the appropriate channel and decoded by the customer (Darley and Luethge 2003: 147).

Indeed, although major mistakes often occur in the marketing mix because the firm and its managers do not have an adequate understanding of the business environment, this fact seems not to have led to an automatic increase in international marketing research (described as a semi-controllable element of international marketing in Figure: Elements or factors of international marketing). The American Marketing Association (AMA) defines marketing research as:

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“…the function that links the consumer, customer, and the public to the marketer through information – information used to identify and define marketing opportunities and problems; to generate, refine, and evaluate marketing actions; to monitor marketing performance; and to improve understanding of marketing as a process.” (http://MarketingPower.com, 19 May 2005)

This very broad statement highlights the fact that research is the link between marketer and market, without which marketing cannot function. This fact is also reflected in the orientation of articles published in key research journals (Czinkota and Ronkainen 2004: 186; Malhorta et al. 1999: 160-183). The tools and techniques of international marketing research are said by some to be exactly the same as those of domestic market research, and only the environment differs (Cravens and Piercy 2004: 144-151; Kotler et. al 1996: 244-246).

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This is why marketing textbooks usually present research as a controllable element. However, the environment is precisely what determines how well the tools, techniques, and concepts apply to international markets (Kotler et. al 1996: 244; Jain 1990: 334-339) and this is why it is presented contrary to established theory as a semi-controllable element. Although the objectives of marketing research may be the same, the execution of international research may differ substantially from the process of domestic research. Kotler (1996: 244) notes: “Consumers in different countries also vary in their attitudes toward marketing research.” In Indonesia people may feel too embarrassed to talk with researchers about their choice of certain products or Indonesians in rural areas are not able to respond because of high functional illiteracy rates. Furthermore middle-class people in developing countries often make false claims in order to appear well-off (Kotler et. al 1996: 244; IW, interview November 2004; SL, interview October 2004; HS, lecture October 2004). Thus, major challenges in international marketing research are the complexity of research design due to environmental factors, the lack and inaccuracy of secondary data, time and cost requirements to collect primary data and the difficulty in establishing comparability across multi-country studies (Kotabe and Helsen 2004: 176-177). As a result, entirely new tools and techniques may need to be developed (Czinkota and Ronkainen 2004: 188).

Political and legal forces, economic climate, competition and of course cultural forces, as well as infrastructure and technology, are the environment in which the company markets its products and/or services and the factors which have a direct effect on the success of a foreign venture. In addition to uncontrollable factors such as legal and political as well as economic factors, a significant source of uncertainty is the uncontrollable element of culture. Obviously, some uncontrollable factors, such as political and legal forces do not only apply in foreign environments but also in domestic market environments, for example when a home market government restricts the export of certain goods or imposes exports to certain countries in general (Czinkota and Ronkainen 2004: 236). However, in most cases uncontrollable factors must be dealt with intensively outside home markets as companies undoubtedly feel more comfortable in forecasting the business climate and adjusting business decisions to legal and political forces in their home country (Cateora and Graham 2005: 178-208).

Political factors

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Dynamic upheavals, as one has seen in Indonesia since 1998, illustrate problems of dramatic change in political, legal, social and economic climate (Lee 1999: 12-40; Ricklefs 2001:387-421; Wie 2002: 194-243; Manning and van Diermen 2000: 1-11; Simanjuntak 58-76; Booth 2000: 145-162; Strauss et al. 2004: 1-5). In this transitional phase, confusion prevails as to what rules are applicable, still in force and by whom they are interpreted (IW, interview November 2004; SL, interview October 2004; DT interview December 2004). This is why for many firms the standard first question about a country concerns political risks, the danger that political upheaval will change the nation’s economic rules and regulations overnight (Johansson 2000: 97). Companies fear unpredictable change even as they seek profit from the opportunities change creates, such as newly privatized industries in Indonesia. If the risk is deemed unacceptable, as was the case in Indonesia in the eyes of many investors, the investment project is discontinued in favour of FDI elsewhere. Kobrin presents four levels of political risk factors which range from general instability (revolution, external aggression) to expropriation (nationalization, contract revocation) (Kobrin 1979: 67-80). However uncomplicated this classification may appear, political risk assessment (PRA) is a broad and diffuse concept that sits at the intersection of politics, economics, sociology, and finance (Harvard Business School 1997: 1). Two distinct modes of analysis, quantitative and qualitative, have been developed to assess this risk.

Quantitative analysis is primarily the terrain of think tanks and academic groups, whereas qualitative analysis remains the purview of country experts. Quantitative analyses of political risk assume essentially that political events manifest themselves in a discernable pattern. The increase in local strategies, that is a higher involvement in foreign markets, again makes PRA an indispensable foundation of successful MNCs, as for local strategies the dimensions of political risk (government, society, security, economy) need to be minimized. This is particularly true for emerging markets, such as Indonesia, which generate greater shares of global supply and demand today (Bremmer 2004: 2). There are three principal reasons for this.

First, international markets are more interconnected than ever before (Dicken 2003: 32-81). For example, in 1997 capital flight from Southeast Asia roiled markets around the world (Draguhn 1999; Berger 2000; Resinek 2000; Hozumi and Wohlmuth 2003; Hunter 1999; Goldstein 1998; Henderson 1998). Second, the off shoring trend is growing. Businesses shift operations to countries where labour is cheap, but the labour is cheap for a reason. In countries such as Indonesia, living conditions for the working class can be harsh, and there is greater threat of unrest than in developed countries with their large, relatively prosperous middle class. Third, the world is increasingly dependent on energy from states troubled by considerable political risk. The dimensions of PRA explain that governments affect almost every aspect of business life in a country (Kotabe and Helsen 2004: 133). The major problem is the lack of political stability and continuity, and this portends a high level of uncertainty in the business climate. The number of political parties also influences the level of political stability. Indonesia, with its multiple-party system without any clear majority, offers an extreme situation, as the consistency of government policies may be compromised as a result. Besides the national political system, foreign businesses have to pay attention to the local government structure, too. Some governments are very weak and hardly have any control at the local level (Brodjonegoro 2004:125-140). For example, Indonesia, whose government used to be very centralized, has steadily been releasing power to local communities (see for example: Bach 2003; Bünte 2003). This means that foreign businesses now have to deal with local government and political systems in each of its 32 provinces (Jakarta Post 2002a).

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Political risk analysts, too, study the percentage of children who regularly attend school, how police and military salaries compare with criminal opportunities, and how much access to medical care is available in towns of 10,000 to 50,000 people (Bremmer 2004: 6). They look at such statistics as the unemployment rate for people between the ages of 18 and 39 and determine how many of them are in prison. And, of course, they add economic variables to the mix: per capita income, balance of payments, and national debt. Taken together with the legal system (the next environmental factor to be discussed) this information reveals much about a country’s underlying sources of strength and vulnerability. The topic area of PRA also includes another environmental factor, namely the legal system. PRA literature argues that instead of trying to measure the independence of a nation’s judiciary, for example, analysts can determine whether judges in a particular country are paid a living wage, whether funded programs exist to inform them about new legislation, and whether and how often they are targeted for assassination.

Legal factors

Legal systems and the laws they create differ dramatically in countries around the world and business faces a myriad of legal issues every day. Questions relating to such issues as pricing policies and production practices must be clearly answered in order to avoid litigation and punishment. In countries with banks which follow Islamic law, it is illegal to charge interest. In Indonesia, for example, credit card companies such as Visa and MasterCard receive collateral assets - such as jewellery which they can sell - from card users instead of charging interest (IS, interview October 2004). The protection of intellectual property rights is a special problem of the legal forces in international marketing. Failure to protect intellectual property rights adequately in the world marketplace can lead to the loss of legal rights in potentially profitable markets (Cateora and Graham 2005: 191). Many companies have found their assets appropriated and profitably exploited in Indonesia without licence or reimbursement (SL, interview October 2004). Of course, legal issues face a business whether it operates at home or in a foreign country. However, the issues abroad are often amplified by the “alien status” of the company, which increases the difficulty of properly assessing and forecasting the dynamic international business climate. The alien status of a business means that, when viewed as an outsider, it can be seen as an exploiter and receive prejudiced or unfair treatment at the hands of politicians or legal authorities, or both. This often seems to be the case in Indonesia (FAZ 2005d: 7). Political activists can rally support by advocating the expulsion of foreign companies, often with explicit or tacit approval of authorities.

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Furthermore, in a domestic situation, political details and the ramifications of political and legal events are often more transparent than in some foreign countries. This is true for Indonesia, where market forces continue to be monopolistic and local tycoons interfere by lobbying (Chua 2006: 5-15). Legal systems in Indonesia are still evolving and corruption may prevail, foreigners may receive unfair treatment, or laws are misinterpreted. The point is that a foreign company is foreign and thus always subject to the political whims of the local government to a greater degree than a domestic firm.

Economic factors

The economic level of a country is the single most important uncontrollable environmental element to which the foreign marketer must adjust the marketing task (Cateora and Graham 2005: 244-275; Czinkota and Ronkainen 2004: 88-129; Johansson 2000: 96-123). The stage of economic growth within a country affects the attitudes toward foreign business activity, the demand for goods, the distribution systems found within a country and the entire marketing process. In static economies, consumption patterns become rigid, and marketing is typically nothing more than a supply effort (Cateora and Graham 2005: 244). In a dynamic economy, however, consumption patterns change rapidly. Marketing is constantly faced with the challenge of detecting and providing for new levels of consumption, and marketing efforts must be matched with ever-changing market needs and wants.

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The current level of economic development dictates the kind and degree of market potential that exists, while knowledge of the dynamism of the economy allows the marketer to prepare for economic shifts and emerging markets. Economic development is generally understood to mean an increase in national production which results in an increase in the average per capita gross domestic product (GDP). Besides an increase in average per capita GDP, most interpretations of the concept also imply a widespread distribution of increased income. Economic development, as commonly defined today, tends to mean rapid economic growth and increases in consumer demand improvements achieved in decades rather than centuries.

Proff (2003: 36-40), for example, sees a correlation between GDP per capita and private cars per capita and sees a GDP per capita of US$10,000 as critical to be able to purchase a private automobile in Brazil, Taiwan and Mexico. Karmokolias (1990: 3) shows similar figures. Discussions in Indonesia and Malaysia have shown the same figure, however, the limit of US$ 10,000 seems to be getting lower due to the increasing availability of consumer credit in Indonesia (own observation, Jakarta, September 2004; DM, interview 2004).

Infrastructure

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One indicator of economic development is the extent of social overhead capital, or infrastructure, within the economy. Infrastructure represents those types of capital goods that serve the activities of many industries (Czinkota and Ronkainen 2004: 22-29, 106-108). Paved roads, railroads, seaports, communications networks and energy supplies, (all of which are necessary to support production and marketing) are included in a country’s infrastructure. The quality of infrastructure directly affects a country’s economic growth potential and the ability of an enterprise to engage effectively in business (Cateora and Graham 2005: 251). Infrastructure is a crucial component for the uncontrollable factors facing marketers (Czinkota and Ronkainen 2004: 106). Without adequate transportation facilities, for example, distribution costs can increase substantially, and the ability to reach certain segments of the market is impaired (RD, interview December 2004). Infrastructure includes the presence or absence of financial and commercial services, such as agencies, warehousing storage facilities, credit and banking services, market research agencies and quality-level specialized middlemen (Cateora and Graham 2005: 253). Generally, the less developed a country is, the less adequate the infrastructure is for conducting business. Companies, as one can see in the case of Indonesia, do market in less-developed countries but it is often necessary to modify offerings and augment existing levels of infrastructure (RD, interview December 2004).

Although some publications such as (Czinkota and Ronkainen 2004: 21-29) pay significant attention to the study of geography in the context of international marketing, the discussion of geography related to characteristics of a place and its natural attributes such as terrain, hydrology and climate will not be included in this study as its focus is on cultural forces. Additionally, the competitive arena, that is, competitive forces in Indonesia, as an uncontrollable environmental factor, will be discussed briefly with the mode of entry (i.e. the ways in which a company can enter a given country’s markets) (Johansson 2001: 41-45). As reviewed, the uncertainty of different foreign business environments creates the need for a close study of the uncontrollable elements in international marketing. To adjust and adapt a marketing strategy and its implementation in a foreign market, marketers must be able to interpret effectively the influence and impact of each of the semi- and uncontrollable elements in the marketing programme.

B.4.2 Ethnocentrism and other problems facing international marketers

Individuals are subject to interpretation of new situations in processes such as communication, decision-making, and subconsciously tend to use their own thought patterns which are moulded by their own culture. Problems occur if this automatic reflex is used in new situations in foreign cultural environments and if experiences are carried forward which cannot be applied to this environment (Jeannet and Hennessey 1995: 95). In a domestic market, the actions and reactions in the cultural environment are automatic as the marketer is part of this culture and acts responsively to the domestic cultural setting (Johansson 2001: 60-62). The socialisation of the marketer serves as the basis for behaviour. In a foreign market, the task of cultural adjustment is more challenging and problematic as marketers are usually neither attuned to cultures different from their own, nor deal in unfamiliar settings and frames of reference. Judgements are derived from experience which is the result of acculturation in the home country. Differences must be learnt to avoid misunderstandings which can lead to marketing failures (Haig 2003: 3-4). Therefore, cultural conditioning will only be successful when marketers guard themselves against measuring and assessing markets against values and assumptions in their own cultures. In this context one needs briefly to discuss two obstacles to successful cultural conditioning.

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The self-reference criterion (SRC) and an associated ethnocentrism are primary obstacles to cultural conditioning. SRC is an unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions (Deresky 2006: 87). Lee (1966: 107) defines the SRC as an “unconscious reference to one’s own cultural values”. Closely connected is ethnocentrism, that is, the notion that one’s own culture or company knows best how to do things (Cateora and Graham 2005: 15; Deresky 2006: 87). Ethnocentrism and SRC are two separate phenomena. Ethnocentrism is more extreme than the SRC (Dahringer and Mühlbacher 1991: 171). It is an exaggerated tendency to think that the characteristics of one’s own group or race are superior to those of other groups or races (Drever 1952: 86). This leads to an intensive identification with its own culture and the tendency to devalue everything alien and unknown (Cateora 1993: 116). Ethnocentrism does not only affect concepts of research but also the data collection, data analysis and presentation of research results (Hofstede 1980b: 33). In order to avoid an ethnocentric attitude, “intercultural” procedures are to be used (Hofstede 1980b: 32). Cateora (1993: 101) claims:

“A marketer must always be aware and be ready to resist the presence of his or her ethnocentrism in the study of others. The more exotic the situation, the more sensitive, tolerant, and flexible one needs to be.” (Cateora 1993: 101)

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The same, of course, is true for the SRC (Dahringer and Mühlbacher 1991: 171). Both the SRC and ethnocentrism impede the ability to assess a foreign market impartially and in its true light. To illustrate the impact of SRC, one can consider misunderstandings that can occur about personal space between people of different cultures. In Germany, unrelated individuals keep a certain physical distance between themselves and others. In some cultures, such as Indonesia, the acceptable distance between individuals is substantially less than that which is comfortable for the average German. Germans assume Indonesians might be pushy due to the short physical distance, while Indonesians assume Germans are unfriendly. Both react according to the values of their own SRCs. Understanding and dealing with the SRC are two important facets of international marketing, as both ethnocentrism and SRC can influence an evaluation of the appropriateness of a domestically designed marketing mix for a foreign market. Relying on one’s SRC can produce an inadequately adapted marketing programme that ends in failure.

Unilever, appreciating the uniqueness of its markets, repackaged and reformulated its detergent for Indonesia. One reason was the lack of washing machines among most of its Indonesian customer base that made a simpler soap formula necessary. Also, since people in rural areas wash their clothes in rivers, the powder was packaged in plastic rather than paper so it would not get soggy. Finally, because Indonesians are price conscious and buy in small quantities, the soap was distributed in small, low-priced packaging.69

Even McDonald’s modifies its traditional hamburgers in Indonesia. In Indonesia McDonald’s is “halal”: it has the halal-sign on its food, on its publicity and on the certificate from the leaders of Islam to pronounce that the meat was bled properly.70 Then there is McDonald’s chilli sauce, an essential part of Indonesian cuisine, and the “McRice” and “AyamGoreng McD” meals. An addition to the area in the centre of the restaurant, where the tables and chairs make room for six-inch high tables and floor mats, enables visitors to consume “Big Macs” in their favourite manner. McDonald’s has certainly learned to adapt to the public mood. If employees at one McDonald's in Indonesia see protesters headed their way, they unfurl a green banner that says, “This store is owned by a Muslim, Bambang Rachmadi”. Rachmadi is the owner of the national franchise for McDonald’s, and his managers are instructed to present a picture of him and his wife in full Muslim dress.

In each of these examples, had the marketers’ own self-reference criteria been the basis for decisions, none of the changes would have been readily apparent, based on home-market experience. Although it is almost impossible for someone to learn every culture in depth and to be aware of every important difference, an awareness of the need to be sensitive to differences and to ask questions when doing business in another culture can help to avoid many of the mistakes possible in international marketing. To avoid errors in business decisions, it is necessary to conduct an inter-cultural analysis. Cultural differences lead to country- or region-specific applications of goods. From this perspective, cultural competence in international business plays a central role and “must be recognized as a key management skill” (Czinkota and Ronkainen 1998: 64). The often substantial cultural differences between various country markets form the basis of this practice. Such cultural differences stem from regionally diverging value systems, such as language, symbols, and customs which impact on the behaviour of customers. The local strategy approach emphasizes the significance of national or regional market characteristics, and consequentially the need for a regional adaptation of marketing activities: “Overseas success is very much a function of cultural adaptability: patience, flexibility, and tolerance for others’ beliefs” (Czinkota and Ronkainen 2005: 63). Standardisers, on the other hand, stress the opportunities provided by a unified approach to products and processes, to maximize scale advantages. The subsequent chapters on how local culture influences consumer behaviour [perilaku konsumen] in Indonesia, make comprehensible why an increasing number of multinationals adopt local approaches when entering emerging markets. Before this, however, the risks which international involvement brings with it, should be described.

B.5 Developing global marketing strategies: Risks and organizational matters

B.5.1  Determining the risks

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In crossing national borders, a firm encounters parameters not found in domestic marketing and may expose itself to an unfamiliar cultural environment. Examples include duties, foreign currencies and changes in their value, different modes of transportation, international documentation, etc. A company that has only done business domestically will have had little or no prior experience of these requirements and conditions (Johansson 2000: 72-73). But these parameters do not pose the biggest threat. In short, due to geographical expansion, companies are faced with issues such as higher information demand, higher risk, higher significance of operations research and higher coordination demand (Wißmeier 1992: 47), so assumptions formulated over the years in the domestic market must be re-evaluated.

Given the less (or completely un-) familiar market conditions and general business framework, the development of new country markets requires a high level of additional information. In some cases, this information is extremely difficult to obtain. The cultural specifics of the country markets, and an adequate consideration of their practical implications, constitute yet another need for information in the context of internationalization. For corporate decision-making purposes, in many instances only personal experience and knowledge are really useful (Kobrin: 1984); this requires the immediate presence of management on location (Meffert and Althans 1982: 24; Berekhoven 1985: 20; Kulhavy 1989: 5; Meffert and Bolz 1994: 23; Quack 1995: 10).

Market research provides information for the identification, evaluation, and comparison of potential foreign market opportunities and market selection (Czinkota and Ronkainen 2004: 190-192; Cateora and Graham 2005: 210-241; Johansson 2000: 99-102). To make a justifiable case for allocating resources to international market research, management must understand what the value of research will be. A decision may be determined by applying the following equation: V(dr) – V(d) > C(r); V(dr): value of decision with benefit of research; V(d): value of decision without benefit of research and C(r): cost of research. (Czinkota and Ronkainen: 2004: 190). An increased level of business risk is closely associated with the problem of cross-border informational needs. If little information is available, uncertainty rises as to the outcome of business activity (Kuhlhay 1989: 5).

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Companies that are active in several independent country markets simultaneously need to co-ordinate their national activities in a reciprocal process. This includes the problem of allocating scarce resources optimally, with respect to the various relevant countries, financial and management capacity, for example. Management capacity that is allocated to one country is no longer available for another, thus, resource allocation automatically creates reciprocal interdependence in country-specific markets (Meffert and Althans 1982: 24; Berekhoven 1985; 21; Wißmeier 1992: 47; Meffert and Bolz 1994: 23; Quack 1995: 11; Terpstra and Sarathy 1991: 6). As a result of the specific characteristics of cross-border marketing, entry into new markets increases the complexity and degree of differentiation of managerial and marketing tasks. In this context, the emphasis is placed on the particular significance of decision-making and preparatory process, as well as on the unique challenges devolving on managers, and their capabilities (Berekhoven 1985: 21; Kulhavy 1989: 5; Wißmeier 1992: 47).

B.5.2 International strategies

Participation in the international marketplace is increasingly within the grasp of many firms both large and small (Czinkota and Ronkainen 2004: 225). Research has found that firms which export, grow faster, are more productive, and equally importantly, have employees who tend to earn more (Demos 2006: 48-49). On the way to market expansion, there are several strategies for the internationalization activities.

Most firms start their international involvement with exporting and gradually internationalize, for example by licensing agreement, franchising, or FDI ventures (Kotabe and Helsen 2004: 14-17). Major concerns and preoccupations are linked to these different strategies. Basic stimuli are in most cases economic factors, such as scale effects, synergies and of course higher revenues, but can also be competition pressures or tax benefits (relief) which originate in countries providing exporting firms with certain tax mechanisms.

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Export strategies

Companies which export generally use one or more of the following distributions systems, i.e. stages of international activities. The firm can sell directly to customers through its own sales force or through electronic commerce or, as in most cases in Indonesia, the company operates through independent intermediaries, usually at the national, regional or local level (DT, interview December 2004). However, the use of intermediaries will automatically lead to loss of some control over the marketing of the firm’s products (Czinkota and Ronkainen 2004: 342) and the more difficult it becomes to control pricing, promotion and place. In the initial stages of internationalization or specific market entry, an intermediary’s specialized knowledge and working relationships are needed, but as exporters’ experience base and sales in the market increase, many opt to establish their own sales offices or own production facilities (Kotabe and Helsen 2004: 507-508). The issue of control correlates heavily with the type of product or service being marketed, as seen in interviews conducted by the author. The exercise of control causes more incidents of conflict than any other activity in the relationship (Czinkota and Ronkainen 2004: 343-344). Particularly in emerging markets with diverse cultural settings, the screening of potential intermediaries’ candidates has proven difficult (DM, interview December 2004; IW, interview November 2004). Firms that have successful international distribution intermediaries attest to the importance of finding top representatives (World Trade 1999: 86-87). As literature shows, the screening of candidates’ reputations is a difficult task. The financial standing, cash flow and the ability to support its operations without outside help are some of the most important criteria. However, financial reports are not always complete or reliable, or they may lend themselves to misinterpretation (RA, interview August 2004). Many Indonesian intermediaries lack adequate capital - a situation that can lead to more time spent managing credit than managing marketing strategy. Sales are another excellent indicator, as well as the distributor’s existing product lines which need to be analyzed along four dimensions: (1) competitiveness, (2) compatibility, (3) complementary nature and (4) quality. Some distributors in Indonesia are interested in enhancing their own standing in carrying as many products and product lines as possible, but they have the time and willingness to sell actively only those that bring the best profit (RA, interview August 2004). The distributor’s market coverage must be determined, too, particularly in a country like Indonesia where more than half the population lives outside the main island of Java. In today’s marketing environment, being close to customers, whether the final consumer or distributor, and solving their problems, is vital to bringing about success (DM, interview December 2004; IW, interview December 2004).

In addition to exporting, licensing and franchising are alternatives open to and used by all types of firms, large and small (see on franchising models and franchisees in Indonesia, Appendix 1, Figure 299-305). They offer flexibility in the international approach, reflecting the needs of the firm and the circumstances in the market (HaS, interview December 2004). “We export our high-end lifestyle products, such as the sport shoes to our Indonesian retail partner MAP, but at the same time, give him a license to produce lower-end T-shirts. However, we monitor this licensing agreement strictly as our brand shall not be diluted” (IW, interview December 2004). The key issues in negotiating licensing agreements include the scope of the rights conveyed, compensation, licensee compliance, dispute resolution, and the term and termination of the agreement.

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Licensing strategies

Under a licensing agreement, one firm, the licensor, permits another to use its intellectual property in exchange for compensation designated as a royalty. The recipient firm is the licensee. In the case of the Puma licence, the local partner is allowed to produce T-Shirts with the Puma brand under strict control of the licensor. Licensing has intuitive appeal to many potential international marketers. As an entry strategy, it may require neither capital investment nor knowledge and marketing strength in foreign markets (Kotabe and Helsen 2004: 273-275). Licensing reduces risk of exposure to government intervention in that the licensee is typically a local company that can provide leverage against government action (IW, interview December 2004). However, licensing agreements are often not unproblematic (IW, interview December 2004; SL, interview December 2004). This is especially true for countries like Indonesia, where for example, in the case of branded products, goods and services, no legal status for trademarks has been secured. In instances of high levels of piracy, a licensing agreement with a strong foreign partner may also add value because now the partner becomes a local force with a distinct interest in rooting out unlicensed activities. The rights conveyed are product and or patent rights. Licensing as well as franchising can both be used in lieu of or in addition to the export strategy. Licensing is particularly interesting for small firms and offers them expansion without much capital investment (Czinkota and Ronkainen 2004: 237). A multi-national corporation may use the same strategy to enter foreign markets rapidly in order to take advantage of new conditions and foreclose market opportunities to its competition. Another set of options consists of franchising and FDI, as well as the latter’s sub-category, such as Joint ventures (JV) and management contracts.

Franchising strategies

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In franchising, a parent company, the franchisor, grants another independent entity, the franchisee, the right to do business in a specified manner (Kotabe and Helsen 2004: 275-277). This right can take the form of selling the franchisor’s products or using its name, production, preparation and marketing techniques, or its business approach. The major forms of franchising are manufacturer-retailer systems (for Indonesia, see Appendix 1, Figure 299-305) (HaS, interview December 2004), manufacturer-wholesaler systems (Coca-Cola) and service firm-retailer systems (McDonald’s, KFC, Breadtalk71) (for Breadtalk franchise system, see Appendix 1, Figure 20-21, 299-305). The typical reasons for the international expansion of franchise systems are market potential, financial gain, and saturated domestic markets. From a franchisee’s perspective, the franchise is beneficial because it reduces risk by implementing a proven concept. This is especially true for Asian markets where indigenous brands have not yet developed (HS, lecture October 2004). Franchising agreements are usually beneficial from a government perspective, which is one reason for their success in overly regulated markets. From a recipient-country view, franchising requires little outflow of foreign exchange, and the bulk of the profit generated remains within the country. Despite all its benefits, franchising also encounters problems. The great degree of standardization involved in franchising due to the transferred know-how can prove to be a risk factor and localization is needed. McDonald’s in Indonesia demonstrates that standardization of franchising does not mean 100 percent uniformity. Adjustments are made in order to take local market conditions into account. Key to success is therefore the development of a franchising programme that maintains a high degree of reconcilability and efficiency benefits while being responsive to local cultural preferences. Another key issue is the protection of the total business system that a franchise offers. Once a business concept catches on, local competition may emerge quickly with an imitation of the product, the general style of operation and even with a similar name (Breadtalk and Breadstory in Indonesia) (own observation, Jakarta 2004).

Linking the various components and strategies discussed so far, facilitates an understanding of the process that a firm undergoes in its internationalization efforts. It has been made clear that firms do not become experienced globalists overnight but rather progress gradually through an international development process.

B.5.3 Organizational theories of MNCs

The issue of global strategy is closely associated with organizational theory in management literature (Kotler, Ang, Leong, Tan 2003: 400-401). The configuration of international activities forms a structure of various organizational sub-units and their geographic location (ibid: 26-27, 56-57). Corporate activities, the degree of concentration in certain areas, and the extent of centralization of decision-making structures can be spread over various markets. The importance of the level of centralization has led to the development of distinct forms of international organization (Cateora and Graham 2005: 337).

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Multinational enterprises form strongly decentralized and largely independent national units. The objective of this configuration is to improve on the ability to recognize and exploit different regional or national market opportunities through adaptation to the specific needs of national markets. This approach is usually accompanied by a strong differentiation of regional or national marketing policies. In this sense, multinational enterprises are characterized by pursuing the marketing advantages of differentiation. Global enterprises pursue a world-market orientation and the greatest possible degree of decision-making and operational centralization. Marketing operations are largely standardized, so that national units have the character of executive organs in the sense of carrying out strategies developed at headquarters for global importance. The objective of this configuration is the maximum exploitation of economies of scale throughout the organization. Thus, truly global enterprises strive relentlessly towards efficiency based on standardization. International enterprises constitute mixed forms of the above two extreme types. Certain responsibilities and decisional structures are delegated to national units. Enterprises of this kind strive towards an appropriate balance between economic marketing efficiency and a broader effectiveness.

These organizational types (multinational, global and international) differ according to the degree of centralization and emphasis on either efficiency or effectiveness. However, Bartlett and Ghoshal (1990) found that striving towards effectiveness and efficiency are not mutually exclusive. They suggest an additional organizational type, the transnational enterprise, which combines the advantages of the market proximity (differentiation) and size (standardization). However, the idea of a transnational enterprise presents many weaknesses (Dähn 1998: 123; Kreikebaum 1996: 115) and has limited success (RA, interview August 2004).

A company’s global strategy is deeply embedded in its outlook on and attitude towards the world. This global view- a vision for its markets- is linked with a firm’s international marketing approach. Once a company has achieved a certain level of development in foreign markets, one can differentiate certain views. They are dependent on four different perspectives: ethnocentrism, polycentrism, regio-centrism and geocentrism (Perlmutter 1969). Two of these (ethno- and geocentrism) are somewhat irreconcilable. In terms of set theory, the domestic market is perceived as disjointed from foreign markets.

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Ethnocentric companies view international operations as secondary to their domestic operations. A company that considers its national base as its top priority will impose its own language on its foreign subsidiaries. It will supply the domestic market first when production capacity is overstretched. It will never invite a non-national on to the board of directors unless this person shares the company’s native language and culture.

Conversely, a geocentric company, which considers its domestic market as belonging to the world market in the same way as any other domestic market, will make the opposite choices. Sheth and Parvatiyar (2001: 21) argue in this respect that the determinants of international marketing cycles i.e. political stability, government policy, ideology-driven economy, and fear of colonialism, marketing transfer issues, lack of infrastructure, North-South dichotomy, East-West dichotomy and product life, are gradually declining. A geocentric perspective is dependent on a truly borderless world. Regio-centrism and polycentrism are more moderate perspectives. A regio-centric company is more open to global marketing than an ethnocentric one. But this perspective also recognizes that regional marketing strategies may be necessary to better meet customer needs. Malhorta et al. (1998) argue that cultural factors will strongly inhibit the development of a homogenous market. Finally, a polycentric company recognizes differences which may need to be accommodated for by localized marketing policies and programmes. When companies distance themselves from an ethnocentric attitude and adopt one of the other perspectives, by virtue of their management style and corporate culture, they develop genuinely offensive and defensive marketing strategies in foreign markets. The following table (B-1), which completes the theoretical introduction to marketing, juxtaposes world view, marketing orientation, advantages and disadvantages.

Table B-1 Orientation and organizational structure

Orientation/ World View and Organizational Structure

Marketing Orientation

Locus of Decision

Key Advantages

Key Disadvantages

Corporate Example

Ethnocentric world view

(Companies with export department). Major market-entry method. If the firm moves into joint ventures or direct investment, the export department will no longer be adequate to manage international operations.

Domestic market orientation

Standardized and centralized marketing based on domestic market

High degree of control

No responsiveness to foreign consumer needs.

Boeing

Polycentric world view (multinational companies)

Host country orientation. Local standards and barriers, strong local preferences.

Non-standardized,

decentralized local marketing. This strategy is warranted when the forces favouring national responsiveness are strong, and the forces favouring global integration are weak.

Country managers (specialists) with full operational responsibility. Day-to-day market contact. Flexibility.

Sub-optimal use of synergies due to local responsiveness

Unilever is a better performer than Kao because Unilever grants more decision-making autonomy to its local branches.

Regio-centric world view

(Companies involved in several markets create international divisions to handle all international activities. Operating units can be organized in geographical organizations, international subsidiaries or world product groups)

Country group orientation

Standardized regional marketing

Regional managers with regional operational responsibility.

Regions, such as Asia are very diverse. Sub-optimal responsiveness to consumer demands.

BMW

Geocentric world view

(global companies) Corporate management and staff plan worldwide manufacturing facilities, marketing policies, financial flows, logistical systems.

Global orientation

Capital-intensive production, homogenous demand

Standardized and centralized global marketing. This strategy treats the world as a single market.

Experts at company HQ. High degree of centralization. Economies of scale.

Sub-optimal strategies due to global integration of markets. Organizationally very complex.

Only a very few companies are truly global in their decisions. This approach is common for industrial goods and luxury goods companies, such as Louis Vuitton.

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B.6 The idea of the global consumer: An old debate and a new view

“Globalizing influences have bored intercultural tunnels around the world, but core meaning systems such as those wrapped up in the idea of the family, continue to differ significantly.” (Applbaum and Jordt 1996: 207)

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Summary In an endeavour to complete the description of the effects of globalization processes on companies and their strategies (discussed in the previous sections of this chapter), this section puts the consumer at the centre. For one, various segmentation variables are presented, (i.e. how companies act when they are faced with segmenting a market). In this context a psychographic segmentation analysis will be discussed for Indonesia, on the basis of which the pitfalls of studies largely based on western parameters are highlighted. From a discussion of the role of global brands in a seemingly global consumer culture, a transition will be made to vivid examples (shown in the next chapter), which will serve to clarify how and why companies are thwarted if they make globally unified thinking and culturally convergent consumers the target of their concerted efforts.

B.6.1  Theoretical starting points

It is necessary to recapitulate that in the 1970s the argument in international marketing was coined as “standardization versus adaptation” whereas in the 1980s it was “globalization versus localization”, and in the 1990s it was “global integration versus local responsiveness” (Cateora and Graham 2004: 315; Holt, Quelch and Taylor 2004: 1). As advocated by Levitt (1983), and then continually repeated, rephrased and promoted by many other authors in the area of international marketing, one would see the emergence of a global market for standardized consumer products on a previously unimagined scale, described by many as “economics of simplicity”. In Levitt’s (1983: 97) words it would not be a matter of opinion but of necessity. Traditional differences in national tastes would disappear, while local consumer preferences and national product standards would become vestiges of the past as modernization would stifle and repress religious and cultural influences and would finally give rise to the rational consumer worldwide. In the interim, the idea of the existence of a rational global consumer is widely disputed. The reasons cited in literature for consumers becoming similar, take shape in three hypotheses which will briefly be discussed in the following paragraph.

The first reason is the “strong ideology of standard” (Usunier and Lee 2005: 120). Supply and competition are now largely globalized, with the progressive shift from domestic industries operating in national markets protected by non-tariff barriers, to global industries. For some, this alone is enough to explain a large part of the globalization of consumption. What dominates the global consumption debate in this respect is the utilitarian and materialistic factor: people strive for a large quantity of fair-quality, low-cost products (Levitt 1983: 3). Thus the global products philosophy is characterized by a lack of consideration for meanings invested by consumers at the local level (Arnould, Price and Zinkhan 2004: 73-118). This is because price is believed to be a universal concern (second reason) and low-cost arguments make sense. The implication is that consumers worldwide experience benefit maximization exclusively via price reductions. This economic view does not, however, reflect the complex reality, in which the consumer includes a multitude of factors in the purchasing-decision. There are non-utilitarian reasons for consumer behaviour, and cultural diversity at the international level are a reality. Bermingham (1997: 13) adds:

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“In fact it has been the failure to [exclude culture] which has resulted in the purely economist accounts of consumption …”(Bermingham 1997: 13)

Lee (1993: xiii) summarizes: “… consumption is the social activity which, above all others, unites economy and culture”. The simplistic, purely economic viewpoint of Levitt (1983: 3), that globalization processes lead to cultural homogenization, (and therefore worldwide to identical wishes, attitudes and preferences [third reason]) is contradicted by Belk (1982), Bronner (1983), Felson (1976), Furby (1978), Graumann (1974), Hirschman (1980), Holman (1980), Leiss (1983), Levy (1978), McCracken (1985), Prown (1982), Quimby (1978), Rodman and Philbert (1985), Schlereth (1982) and Solomon (1983). The following figure will conclude the discussion. The three trapezes present the respective hypotheses, according to which in the 1980s and 1990s, it was assumed that economic globalization would bring cultural globalization with it, which would lead to cultural homogenization, which would give rise to the global, uniform consumer.

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Figure B-8 The global consumer hypothesis

This assumption (visually summarized in the figure above) does not, however, reflect reality, as will be shown in the following paragraph.

B.6.2 Practical reality

Market segmentation

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Rather than discussing macro-level globalization (which is what Levitt [1983] and others have done), is rewarding from an international marketing perspective to try to understand the nature of this phenomenon (i.e. to look at consumers and the actual reasons behind their decisions in the consumption process). Many companies recognize the fact that a strategy of global, standardized marketing and the idea of a globally uniform consumer are often unpromising. Contrastingly, for companies that reject the idea of global standardized marketing, cultural diversity presents an opportunity to create differentiation and gain a competitive advantage (Demos 2006: 48-49). The growing body of empirical research illustrating the risks and difficulties of global standardization (Solbert 2002: 1-21; Alasban et al. 2002: 22; Cateora and Graham 2005: 315) is increasingly finding its way into the corporate world. Douglas Daft of Coca-Cola remarks in this respect:

“We became one of the best marketers in the world because we understood that no one drinks globally. Local people get thirsty […] Understanding the local culture and acting on that understanding is paramount to success.” (Daft 2000: 12).

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The fundamental question is whether the global homogenization of consumer tastes is really taking place and whether it allows global standardization of the marketing mix. Douglas Daft of Coca-Cola retorts:

“Coke has had to come to terms with a conflicting reality. In many parts of the world, consumers have become pickier … a little more nationalistic, and they are spending more on local drinks.” (Daft 2000: 12)

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Daft describes the new Coca-Cola strategy as “think local, act local” and explains that it is caused by new efficiencies made possible by increasingly flexible manufacturing processes (Daft 2000: 12). With decreasing barriers to international trade over the last century, and especially in the last 50 years, more variety has been brought to consumers in most countries of the world. In this sense, globalization is increasing, not decreasing, diversity in everyone’s experience. De Mooij (2000: 105) elaborates further, though economic systems may converge, there is evidence that with converging income, people’s habits diverge. More discretionary income will give people more freedom to express themselves and they will do that according to their own specific value patterns (Arnould, Price and Zinkhan 2004: 44-47). This is why in the twenty-first century, standardization versus adaptation is simply not the right question to ask (Ghemawat 2003: 138). Rather, the crucial question facing international marketers, is, what the most efficient ways to segment markets are. Country has been the most obvious segmentation variable, particularly for Americans. But as global markets continue to homogenize and diversify simultaneously, the best companies will avoid the trap of focusing on country as the primary segmentation variable (Sheth and Parvatiyar 2001: 16) Other segmentation variables are often more constructive, for example, language group, income, religion, and ethnic group. The following figure provides an overview of the main segmentation bases, as they are found in literature (for example, Arnould, Price, Zinkham 2004: 183-209). Essentially, four large segmentation bases can be differentiated which divide markets into smaller groups: (1) geographic bases, (2) demographic bases, (3) behavioural bases and (4) psychographic bases.

Figure B-9 Major segmentation bases

The first two bases are self-explanatory. The last two will be briefly outlined. With behavioural segmentation, buyers are divided into groups on the bases of differences in their knowledge of, attitude to, use of, or response to a product. Psychographic segmentation divides buyers into groups on the basis of differences in consumer lifestyle. One can think of lifestyle broadly as how people live. Psychographics is believed to be more comprehensive than demographic, behavioural, and socioeconomic measures (Arnould, Price and Zinkhan 2004: 443).

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AC Nielsen provides the following psychographic segments for Indonesia. These are summarized in the following figure. AC Nielsen states that there are nine discrete psychographic groups, which can firstly be categorized along the pessimist-optimist axis, and secondly on the traditional-western axis (HK, ACNielsen Media, email December 2004). The following figure and table contain a summary of the most important statements on the respective segments, and make apparent why the use of parameters developed in the west, are problematic in Indonesia. In the case of Indonesia, this leads to psychographic research being rendered invalid and contradictory, and leads to companies’ processing of the Indonesian market being rendered useless (IG, interview December 2004).

Figure B-10 Psychographic segments in Indonesia

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Table B-2 The nine lifestyle segments for Indonesia (AC Nielsen Indonesia 2004)

Sceptical

Restless

Apathetic

Material comfort

Optimist

Traditionalist

Settled

Young loyalist

Western minded

9%

7%

13%

13%

11%

11%

15%

11%

9%

Worries

Critical on life

Cynical on money

Information seekers on labels

Not career minded

Restless (tend to dislike a regular pattern of life)

Unconfident

Non opinionated (goes with the flow)

Career is important

Believe in equal gender opportunities

Making good money and financially secure

Not price conscious

Appearance conscious

Trusting

Do not fear failure

Outspoken

Health

conscious

Hold traditional values

Dreaming of wealth

Non-brand minded

Less health conscious

Not an ad-believer

”Nested”

Practical (prefer buying rather than fixing)

TV is a form of entertainment

Enjoying ads

Enjoying

shopping

Value friendship

Self-sacrificing

for greater results

Less environmentally conscious

Brand minded

Career oriented

Enjoying life

Lonely and need challenges

On the whole, missing definition of the individual segments and data collection which is often kept secret from consumers by market research companies are general problems named in conjunction with lifestyle analyses such as these. During the analysis of the psychographic segments available for Indonesia the most important criticisms were the following: on the one hand these lifestyle segments depend heavily on trends, i.e. they are relatively unstable over time and on the other hand, they are not very good at capturing the fluidity of lifestyle segment membership. Especially in a fast developing economy with frequent social shifts these psychographic analyses do not really help. One may find out how certain segments develop but not why.

Furthermore, and it should especially be emphasized that most of these segmentation bases are derived from empirical studies which investigate cross-national similarity in consumption patterns at a precise point of time, but not in the course of time. Moreover, actual consumption statistics are examined, rather than consumer motives and involvement in purchase (Usunier and Lee 2005: 122). To investigate consumer behavior thoroughly, it must be implemented much earlier, i.e. with an investigation of the consumer’s surrounding culture, which has been neglected in models to date, and thus which prevents thorough understanding of consumers in a foreign culture. To date a general study of Indonesian consumers is entirely lacking, which leads to many companies unaware of who their consumers are and how the cultural environment influences and is involved in the purchasing-decision. Studies which reveal the effects of culture on consumer preferences in certain product categories are becoming increasingly common and this is reason to hope that cultural influences on consumer behaviour will receive more attention in future.

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Micro-level research on cultural influences

At the micro-level, researchers have found that culture influences consumption patterns (Eshghi and Sheth 1985), but that this influence differs according to product type, product and service category, situational factors, and reasons for purchase. First, for product type Huszagh et al. (1986) found that durable, household and functional products varied more by culture than non-durable, sensory and personal products. Second, for situational factors Nicholls et al. (1999) found that frequency, time of day, where consumers shopped, the length of time and the reason, varied according to culture, for food, but not for clothing. Third, for product and service categories, Zaichkowshy and Sood (1988) found that restaurants, air travel and hair shampoo are more influenced by culture than beer, jeans, going to the cinema, soft drinks and stereo. However, the latter’s opinion on soft drinks made in 1988 tends not to reflect Coca-Cola’s strategy of local as the way to go. Furthermore, stereo systems, particularly their design, tend to reflect local tastes, for example stereos in Muslim countries have huge loudspeakers to represent strength, quality and energy (HaS, interview December 2004; CNBC Europe 2002: The Arab Consumer). These practical examples contradict the statements made by Usunier and Lee (2005: 127) who argue that consumer electronics are a typically culture-free product category because they are technology-based, and low in cultural context, however design preferences are certainly influenced by culture. Similarly, LG Electronics’ mobile phone range, which looks similar all over the world, proves that the content and functions cater to specific markets segmented not by country or income, but by religious adherence. This too contradicts Usunier and Lee’s statements. LG mobiles offer features called “Qiblah” showing the direction for praying, an alarm clock reminding users of praying times and Muslim phrase input hint (see Appendix 1, Figure 330)

Global brands: Glocal Brands?

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The apparent rise of a global consumption culture with global brands does not mean that consumers share the same tastes or values, as (Holt, Quelch and Taylor 2004: 2) note. Rather, people in different nations, often with conflicting viewpoints, participate in a shared conversation and draw upon shared symbols. Holt, Quelch and Taylor (2004: 2) emphasize: “One of the key symbols in that conversation is the global brand”. They continue by outlining that, like entertainment stars, sports celebrities, and politicians, global brands have become a lingua franca for consumers all over the world (ibid: 2). People may love or hate transnational companies, but they cannot ignore them. Many consumers are awed by the political power of companies that have sales greater than the GDPs of small nations and that have a powerful impact on people’s lives as well as the welfare of communities, nations, and the planet itself. Not surprisingly, consumers ascribe certain characteristics to global brands and use those attributes as criteria when making purchasing decisions. But exactly these purchasing decisions are made in the local life world, i.e. local factors, such as cultural and religious traditions and their interpretative force vis-à-vis symbols, colors, etc., and of course, economic factors, such as income and purchasing power all influence purchasing decisions.

Global brands in this sense are portfolios of local marketing assets, federated under a common, lexically identical name. This explanation of the attraction of global brands shows why Gerk’s and Belk’s (1996) idea of a Third World consumer culture which emphasizes the hedonistic attraction of conspicuous consumption, even when basic utilitarian needs have not been met, is too one-dimensional. The global brand is not desired for hedonistic status reasons alone, but because it seems to give access to a global life world, interpreted in the local setting. False global consumers buy false global products, which they reinvest with their own culture-bound motivations and purposes (Usunier and Lee 2005: 132).

The increased adoption of global brands and products cross-nationally therefore cannot be interpreted as a sign of full global convergence and as a testimony to the progressive disappearance of local cultures. Significant elements of local cultures, such as language, writing systems, religions and relational patterns are still intact and quite visible in the local life worlds of consumers. Local cultures do not really disappear; rather, a new layer of common culture is superimposed on them. This illustrates the underlying hypotheses that consumption is not culture-free but has cultural meaning as McCracken (1986) argues. In this context Applbaum and Jordt (1996) suggest the need to centre on objects, and how they are used in context. They argue that by doing so, more insights are gained into the complex patterns of local consumer behaviour. Culture plays not only a major role in how we consume (consumption situation) but also which products we choose. All this adds weight to the conclusion that consumption is still largely a local reality. Consumers attribute meaning to products and services in the local context, especially what it means to desire, to search, to evaluate, to purchase, to consume, to share, to give, to spend, and to dispose of (Usunier and Lee 2005: 129). It is doubtful whether people in all countries have the same kind of buying motives, product use and product image. Far from being uniquely culture related, local reality also reflects climate and customs, and reflects the mere fact that much of our lives is still experienced, shared, perceived and interpreted with those nearby who share the same kind of local knowledge (Geertz 1983).

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The indulgence in global brand products, either authentic or imitated, leads young Indonesians to the idea of being able to display self-confidence among their peers (IG, interview December 2004). This is similar to huge segments of Western youth, but their cultural identification is different since they use the global brand as a passport to global culture, especially it seems, during times of change with all the uncertainty and difficulties that they bring. “Global brands make us feel like citizens of the world, and they somehow give us an identity” (Holt, Quelch and Taylor 2004: 3). How and why this is the case will be explained in the following paragraph.

B.6.3 Glocalization of consumers

In a globalized world, identity-seeking consumers can pick up products from two different shelves: one that favours the locality and the in-group orientation and another that displays desirable values, meanings and signs offered by foreign, out-group cultures (Usunier and Lee 2005: 137). How consumers combine local and global meanings is complex. There is much ambivalence in the search for identity in a radically modern world where local diversity based on linguistics and religious differences will persist. The globalization of consumption patterns is not a one-way street and therefore the emergence of a global consumption culture is confused with the acceptance of global technology through which the certain elements of foreign cultures may be adapted (localized) by local cultures. Kaleidoscopic borrowing and the assemblage of local and global times is only possible if marketers are flexible enough to introduce some adaptations to their offerings, ignoring criticism of adjustment to local ways.

Finding convincing proof for “glocalization” (Robertson 1992: 173) in Indonesia is, however, problematic. Many young Indonesians seem to be looking for a modern lifestyle which merges aspects of the West with distinct flavour from their own country, while at the same time respecting the essence of their own culture and traditions (IG, interview December 2004). Giddens (1991 :32) describes this in an appropriate manner: “Transformations in self-identity and globalization, […] are the two poles of the dialectic of the local and the global in conditions of high modernity.” The symbols of modern life are satellite TV, internet, cell phones and higher education and precisely these symbols connect them to global trends which then again are localized by them, through local adaptation, i.e. local interpretation, local usage or local neglect. Despite unabashed consumerism, “a passion for technology” (Siemens Mobile Lifestyle Survey Asia Pacific 2001; Siemens Mobile Lifestyle Survey 2003), a need to have fun, hope and trust, self-confidence and sense of identity and an awareness and respect for global, regional and local icons, make the Indonesian youth part of global youth culture. However, young Indonesian consumers have not lost sight of their roots (IG, interview December 2004; SL, interview October 2004; IW, interview November 2004). They have their feet firmly on the ground, with a reassuring sense of reality and cultural identification. Observation and interviews generated the idea of modernism without “Westoxification” and it seems that this is particularly true of young Muslim Indonesian females (IG, interview December 2004) (see Part D of this thesis).

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Process such as these, when, for example, globally available products are selectively adapted and interpreted can be described as creolization or glocalization. Creolization takes place when foreign goods are assigned new meanings and issues by the buyer’s culture, even if they are transferred to it without change. What emerges from the confrontation of global and local consumption is a complex pattern where the variety of consumption experiences reaches unprecedented levels. “Global consumptions patterns are reflected in local kaleidoscopes where myriad pieces of coloured glass are constantly rearranged in innumerable pictures”, argue Usunier and Lee (2005: 135). In this sense, one can contrast the creolization paradigm, where attention focuses on the reception and domestication process of global goods in local contexts, to the Coca-colonization paradigm, where emphasis is on uniformity (Howes 1996).

This picture of creolization is, according to Firat (1995: 111) consolidated by the idea of the post-modern consumer who pursues “the construction of his or her self-image”. Because the post-modern consumer experience is not one of committing to a single way of being, or a single form of existence, the same consumers are willing to sample the different, fragmented artefacts. The consumer is ready to have Italian for lunch and Chinese for dinner, to wear Levi’s 501 jeans and try the Gucci suit – changing not only diets and clothes but also personas and selves that are to be (re)presented at each function (ibid: 115). Whether people in general, or Indonesians in this context in particular, really change their self-image so quickly, is debatable. However, most consumers assemble diverse consumption items in a very opportunistic, fragmented and idiosyncratic way, not hesitating to mix local products and ways with global. There is a high pragmatism in post-modern consumption, in particular because budgetary constraints are still highly meaningful. Foreign mass consumption items have their place in this patchwork, as do haptic high-tech products; and luxury brands play a complementary role, being the shiniest and most colourful of post-modern consumption.

As demonstrated, while some products may be global, there are strong arguments against the existence of a global consumer and global consumer culture per se. Consumers always construct the identity of brands and products, even for global products, and they do so on the basis of their local culture and identity. Consumers search for and create meaning because they need constantly to re-build their self-image. For this reason, their search for identity through consumption must be a key concern to marketers (outlined in Part D of this thesis). Closely connected with these ideas is the discussion of consumer culture.

B.6.4 Consumer culture

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The expression “consumer culture” refers to an organized social and economic arrangement in which markets govern the relationship between meaningful ways of life and the symbolic and material resources on which they depend (Arnould, Price and Zinkhan 2004: 102). Consumer culture may be characterized first by the global marketing of virtually every good, service, image, idea, and experience. In other words, in consumer culture everything is evaluated in terms of market value. A second defining characteristic is the increasing importance of materialism among consumers. A third element is the parallel change in personal identity. A number of authors argue that in advanced consumer cultures, personal roles and identities (lifestyles) assume an apparently elective quality, and are subject to frequent and significant changes (Bourdieu 1987).72 The elective quality of personal identity means consumers may declare or claim the cultural categories or lifestyles they inhabit (Treibel 1994: 210-213). Given the fluidity of personal identity, individuals satisfy the freedom and responsibility of self-definition through the significance of the consumer goods they acquire and consume.73 A fourth element that spreads consumer culture is the rapid movement of economic migrants, religious pilgrims, and guest workers between even remote villages in the developing world and cosmopolitan centres in the Triad nations. Not only do these migrants purchase airline tickets, but also they return from their travels with suitcases stuffed with novel consumer goods and often with a positive change in attitudes toward those goods. A final defining characteristic of consumer culture is the exceptional influence of the fashion industry and the rapid pace of turnover in fashions of every kind (Finkelstein 2000: 225-240; see for example also: Tosonboon 2003: 78-93; Savage 2003: 94-113; Dawson 2003: 189-209). One significant trend in consumer culture is the global spread of brands and consumption practices. However, while there are global brands, there are not really global people. The success of Apple’s Ipod74, for example, is based on distinct templates for action in the Eastern and Western worlds. Western consumers purchase Ipods to enjoy music without being disturbed by others. Consistent with Indonesian values, however, Ipods are used as a way of listening to music without disturbing others.

A second trend in global consumer culture is the “creolization” of consumption patterns. Creolization or hybridization refers to consumption patterns that combine elements of local and foreign consumption traditions (Yamashita and Eades 2002: 4-8). Creolization concerns consumers in all nations who are basically to be seen as glocal consumers. The third trend in global consumer culture represents a nostalgic defence of so-called traditional consumption values. This can lead to boycotts of foreign consumer products. Finally, there is a trend, especially in the Triad countries, toward the consumption of presumably authentic cultural products and experiences from transitional and Third World countries. The following figure summarizes statements on consumer culture pictorially and compares characteristics and trends.

Figure B-11 Characteristics and trends of “consumer culture”

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Acting in conformity with cultural blueprints, members of a community or market segment constantly reinforce the distinctions between cultural categories through their purchase choices and consumption decisions, which they make locally. Through consumer behaviour, people define and redefine the meanings of self, community, and products and services themselves. Consumers’ expressions of likes and dislikes (cultural principles) distinguish both goods and consumers from one another. The diversity that may exist in a particular culture is fostered by many factors, including ethnic and class differences, as well as individuals’ lifestyle choices, family and household traditions. Cultural variability often leads to the development of differences in consumer lifestyles within and across borders.

In concluding this section, it may be wondered why companies should try to ignore local diversity. Rather than being a liability, it can also act as a superb opportunity for building competitive advantages based on differentiation, which are easier to defend against competition than low-cost advantages. The following interim chapter provides some practical examples of what can transpire when locally anchored consumers are addressed in a globally unified way.

B.7 Culture, a multidimensional construct: possible repercussions on advertising

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“In culture there is no shortcut to the business world.” (Hofstede and Hofstede 2005: 20)

Summary The aim of this interim chapter is to discuss consequences of standardized, global marketing. Hofstede and Hofstede (2005: 20) explain the relation between culture and business as multi-layered and reciprocal. Given that it is entirely feasible that successful market entries or product launches could be seriously marred by inadvertently failing to recognize the potential complications arising from the cultural environment, all precautions should be taken to reduce this likelihood. However, solving the enigmas associated with culture necessitates some current practical examples in order to highlight the significance of culture. This transitional chapter therefore manifests that descriptive-anecdotal approaches to the culture phenomenon in a globalized era (which is here understood as being glocal) is inadequate to conduct marketing successfully.

B.7.1  Culture and international marketing

B.7.1.1  Introduction

The international marketing literature, as shown elsewhere, provides a vacillating view of marketing thought. On the one hand is the observation that the world is becoming increasingly interdependent. International markets and international exchanges, such as trade and finance, are becoming accessible, and tend to imply that the “global village” (McLuhan, 1983) is a reality. This idea of virtual financial streams accessing and affecting every corner of the world is complemented by the observation that some products and brands are following these financial flows and are becoming obtainable everywhere. Nowadays, the French mineral water “Evian” can be found anywhere in the world, even in remote Indonesian villages. On the other hand, literature, for example by Usunier and Lee (2005), Hofstede and Hofstede (2005), along with Trompenaars and Woolliams (2004) suggest that, due to the enduring nature of the cultural variable and cultural diversity, it is far more realistic to imagine the existence of numerous dissimilar global villages instead of just one. In an increasingly interdependent world where barriers to trade and international exchanges are diminishing, cultural differences remain the single most enduring feature that has to be taken into account for international marketing strategies.

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The latter view assigning greater significance to the culture variable is increasingly making headway in the corporate world. The following explanations should exemplify the meaning of cultural influences and will be illustrated in the following four practical examples.

BMW in China

Western companies sense an enormous potential market in China. However, so-called marketing experts commit serious blunders when praising their products. Someone who depicts the figures in his commercials fighting a dragon should not be surprised if his advertising campaign fails. The car manufacturer BMW always endeavours to have a unified image when presenting its brand. On every continent, the Bavarians extol the virtues of their muscle cars with their slogan “Sheer Driving Pleasure”. The universal look is also valid when BMW launches a new model on global markets. Every car should be advertised with just one campaign.

When the new BMW 3 Series was launched, the manufacturers strayed from the usual pattern, at least in China, even though the advertising concept had paid off in Europe. With the slogan “The Driving Force” in the European TV commercial for example, one could see a group of runners who formed the silhouette of the new BMW. This was supposed to stand for sportiness, a typical BMW trade mark. Originally the same advertising spot was designed to tempt well-heeled Chinese consumers into the car showrooms. However, those in charge at BMW in the People’s Republic of China put on the brakes. The reason may seem banal but it could have led the introduction of the BMW 3 Series model to a debacle. The protagonists of the “driving force” were sweating, which in China is not at all associated with being fit and sporty. In fact it is considered to be unpleasant and disagreeable. Cars destined for the upper classes simply cannot be advertised in this way. “Local experts explained to us that physical exertion does not match the target group of supreme decision-makers”, explains Martin Huber from the advertising agency Interone, which advises BMW in China. “Being sporty means something different in China. Sport has to express something more elegant than it does in Europe”, also says Andreas Kunz, spokesman for the BMW group in China.

As a result, the Chinese population never got to cast their eyes on the “runners” campaign. Instead, Interone and BMW came up with their own campaign specifically for China. The result is a commercial with overtones of serene elegance. The BMW 3 Series model is not in the foreground: the cool, at ease decision-maker is. “This commercial strays substantially from the usual sporty positioning of the BMW 3 Series”, according to Interone manager Huber. Notwithstanding, the campaign was successful. “The sales figures speak for themselves and show us that we are on the right road”, emphasizes the BMW spokesman, Kunz. No sweat, no rush – good for BMW that these cultural idiosyncrasies have found their way into the 3 Series campaign. In many other cases the experts miss the bull’s-eye. “Chinese culture is very specific. Most western marketing experts are unable to think themselves into it”, explains Hans Joachim Fuchs, head of branding advisory committee, Chinabrand.

Size and brand awareness do not really protect concerns from mistakes. “There are enough companies among them - even the larger concerns which approach the topic ‘advertising in China’ too ingenuously”, says Tim Faber, lawyer for the business area China for the company Rödl & Partner. Actually, the large companies and branded goods’ producers predominantly account for advertising mistakes in the People’s Republic of China presented in almost every seminar on advertising faux pas in China.

Some other prime examples of advertising mistakes follow. Take, for example, the Japanese car manufacturer Toyota which achieved notoriety by using stone lions saluting the 4 wheel drive model “Prado” in an advertising campaign. Yet in China, predatory cats are a symbol of authority. The lions showing deference to a Japanese product, angered the Chinese audience. In another commercial, a Toyota-Jeep pulled a Chinese military truck out of the dirt. That was the final straw. The Chinese took offence and the car manufacturer stopped the unfortunate campaign.

McDonald’s had to beg for forgiveness recently too. The burger griller advertised its special offers by showing a customer on his hands and knees begging for a discount. A gesture of such humiliation displeased the audience. They complained to the state media, which consequently banned the commercial from its program. More recent examples of misunderstandings are connected to the Chinese language. This is how advertisers reported Coca-Cola’s attempt to translate its brand name phonetically. The result, among others was "Ke-kou-ke-la" which means “bite the wax-tadpole” Arch rival Pepsi did not do much better. With their slogan “Come alive with the Pepsi generation”, those in charge translated it as “Pepsi brings your forefathers back from the grave”.

Apart from damaging the brand and company reputation, this kind of misunderstanding can also have legal implications. ”Advertising is a sensitive subject in China. Advertising is considered part of the media, which, in spite of the opening of China for the market economy, is still somewhat restrictive”, reports China expert Faber. “Each advertising agency is required to employ a state controlled advertising supervisor. For advertising agencies financed by overseas investment it is actually a pre-requisite”, according to the lawyer.

China’s laws governing advertising have many traps. Anyone showing the People’s Republic of China’s flags, coats of arms or national anthem, is guilty of hostility to the state. The area of “Offending national pride” is even more explosive. What could be interpreted as fun or irony for Europeans or Americans could come across as offensive with the Chinese (take the examples of Toyota, Nike and Co).

A further detailed example should serve to reinforce the thesis’ supposition that tunnel vision treatment of the culture variable still exists. This example reveals why China banned a Nike television commercial (part of an international marketing campaign for Nike Basketball that uses symbolism from traditional Chinese culture including dragons, stone lions, goddesses, Yin Yang, and Buddhas) for not upholding national dignity and interest, and respecting the motherland's culture. The commercial features NBA player LeBron James battling against villains representing "Hype," "Temptation," "Haters," "Complacency," and "Self-doubt." Both U.S. and foreign audiences watch the commercial narrated in Mandarin Chinese with subtitles as it is part of a so-called global campaign.The subject of this controversy will be highlighted below.

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The Dragon battles back to beat Nike

Easily dismissible as a classic piece of government over-reaction, Beijing's banning of US sportswear manufacturer Nike's latest television advertisement - featuring a US basketball hero trouncing dragons, a martial-arts teacher and flying spirits - says a lot about China's lingering sense of victim status. Titled “Chamber of Fear”, the advertisement featured National Basketball Association star LeBron James simultaneously dribbling a ball while fighting off several adversaries, clearly Asian and very possibly Chinese. In the ad, produced using a computer-game format, James' goal was to encourage children to learn from his own upbringing and experience to confront life's hurdles and not shy away from them. Part of a global advertising campaign, the ad was aired nationally for more than a month before a statement on the ban was issued on December 6 by China's State Administration for Radio, Film and Television (SARFT). Since the government said the ad “violates regulations that mandate that all advertisements in China should uphold national dignity and interest and respect the motherland's culture”, Nike (named after the winged Greek goddess of victory) had no choice but to admit defeat and apologize. Nike subsequently relaunched the ad in a heavily edited format. With no further government explanation offered, viewers of national and local channels were left to make up their own minds about why Nike's “Chamber of Fear” should have caused such offence.

The answer comes in two parts. The first is the fact that the computerized adversaries that were soundly defeated included an ancient-looking martial arts teacher complete with long, wispy beard, several female spirits “feitian” (literally “flying heaven” similar to Buddhist bodhisattvas), and - perhaps most crucially - two dragons, the traditional symbol of the Chinese nation. All the defeated adversaries are icons closely associated with Chinese culture. The second is that James is a black American. Whether it would have mattered if James were white or Asian remains a matter of conjecture. What is certain is that in some people's eyes Nike was being cavalier in its use of Chinese cultural icons, and depending upon how far you take the imagery, conveying an impression of Western cultural domination. All the Chinese in the advertisement were defeated, including the dragon.

The incident is unlikely to cause long-term damage for Nike, which runs a powerful nationwide marketing campaign to promote its “cool” image. The company can perhaps take comfort in the notion that there is supposed to be no such thing as bad publicity. “This commercial was always likely to provoke dispute in China,” said Yao Ming in an after-game interview on December 9. “So it didn't surprise me when I heard it had been banned and widely criticized by Chinese people, especially youngsters.” “It is a cultural conflict. In China, the dragon is the symbol of China and Chinese culture and the feitian - the flying woman - is regarded as sacred and holy. They are not respectfully treated in the Nike commercial," said Yao. He clearly understands how cultural conflict can have a great impact. The NBA All-Star centre himself had the experience of adjusting to American culture when he arrived in the US to play in the NBA. “My modesty is often regarded as cowardice. But Chinese tradition has taught me not to be aggressive. Yet aggression is valued on the basketball court of the NBA,” said Yao. “Conflict will occur when you are ignorant about another culture and things will be even worse if you take too much for granted,” said Professor Gu Donghui, a sociology expert at Fudan University.75

Advertising criticism such as this is by no means limited to China. In Southeast Asia there have been clear attempts by governments to stem the tide of Westernisation where, it has been felt, this may be at variance with, or damaging to, indigenous cultural values (McDonald and Roberts 2000: 12). Indonesia is a case in point where the ban upon TV advertisements during the early 1990s was, in part, interpreted as a deliberate endeavour to check any further dilution of the Indonesian way of life. Cultural sensitivity to the encroachment of Westernisation, as depicted by something as seemingly innocuous as a foreign brand or product, should not be overlooked (SL, interview October 2004; IG, interview December 2004; IS, interview September 2004). On the other hand, MNCs are blamed for importing raw materials from developing nations without transferring needed production technologies to these countries (Peach 1987: 1507). This is often the reason why multinational companies are blamed for cultural imperialism that endangers local cultures through the proclamation of the “American way of life” (Angehrn 1986a: 63). Neocolonisation of markets by virtue of a foreign brand or product is perhaps carrying the argument to extremes, but it is quite evident that cultural affinity, shown in localized marketing approaches, may provide a benefit of considerable value.

When participating in the seminar “Marketing of Consumer Goods in Asia“ at the INSEAD-MBA school, Singapore, in October 2004, the author presented the following case as one problem area similar to those in the above-mentioned examples. The topic of discussion was the repositioning of luxury watch brand, TAG Heuer in China, whose 1998 global campaign “Inner Strength“ was unsuccessful.

TAG Heuer in China

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Prestige, performance, avant-garde technology and absolute reliability: these four “watch-words” have characterized TAG Heuer’s philosophy since its founding in 1860, when Edouard Heuer set up the company’s first workshop in Switzerland. Over the years, TAG Heuer, with its passion for sports, mastered the challenge of timekeeping and has become the official timekeeper of many international championships. TAG Heuer has always shared certain values with the competitive spirit of sports figures, such as pushing one’s limits and the quest for perfection and absolute precision. It is therefore only natural that since its founding, the company has joined forces with some of the world’s most celebrated sports figures. The following print advertisements reflect this.77

Before 1991

Campaign “Six Features” with Ayrton Senna “Champagne Resistant à 200 mètres”

1991-1994

“Don't crack under pressure”, with Ayrton Senna and Michael Schumacher

1995-1997

“Success. It's a mind game”

1998

“Inner Strength” with Marion Jones, Mika Hakkinen and Boris Becker.

2000

“Beyond Measure”

2002

“What are you made of?” with David Coulthard, Inès Sastre and Steve McQueen

2003

“What are you made of?” with Tiger Woods

2005

“What are you made of?” with Brad Pitt, Uma Thurman and Juan-Pablo Montoya join Tiger Woods, Maria Sharapova, Kimi Raikkonen, Steve McQueen and Yao Ming

“Don’t crack under pressure” (1991-1994) was one of the major successes of the TAG Heuer brand. This campaign illustrated the pressure of sport and the intense concentration athletes exercise, while insisting on the notion that the approach to sport is far more mental than physical. The ad is a tribute to the brand’s determination and to that of its ambassadors, such as Formula 1 racing-driver Ayrton Senna (Image right, courtesy of Tag Heuer).

The “Success. It’s a mind game” campaign (1995-1997) had revealed a prestigious and evocative vision of sport as it had never previously been represented, definitively establishing the brand within the luxury world. It depicts the mental pressures to which athletes subject themselves in order to win: a hurdler sees himself jumping over a giant razor blade; a horse-rider imagines herself jumping from one skyscraper to another; a swimmer refers to a competition with sharks chasing after him in the other lanes of the pool. This campaign, created by famous photographers Russel and Connie Guzman, Nadav Kander and Russell Porcas, earned numerous awards including the Lion d’argent at the Cannes international advertising festival (Images, courtesy of Tag Heuer).

The “Inner Strength“ campaign featured famous athletes such as Boris Becker and Mikka Hakkinan and highlights the spiritual strength of sport achievers. The campaign was targeted at consumers who wanted to be perceived as spiritually strong.

In direct line with these successes, in 2002 TAG Heuer launched the print advertising campaign “What are you made of?”, which once again overturned advertising clichés and codes. “What are you made of?” opens up a new era of communication for TAG Heuer by adopting direct and emotional language. TAG Heuer asks its own ambassadors the leading question What are you made of? and places them opposite their favourite watch. What is a success? A campaign created according to the "Chinese portrait" principle, with successful objects mirrored by talented individuals. David Coulthard and Ayrton Senna, associated with the Kirium Formula 1 and Link chronographs are shown in the ads. Steve McQueen is seen with his legendary Monaco and Inès Sastre next to their Link Diamonds watch.

Launched in May 2003 worldwide, the new film “What are you made of?” represents a major advertising event, by diverting the historic TAG Heuer concepts and making golf its new source of sporting inspiration. This evolution in the links tying TAG Heuer to top-level sports, is embodied in the greatest golfer of all time, Tiger Woods. Pursuing its historical commitment to Formula 1, thanks to the arrival of golf, TAG Heuer has an opportunity to rise to a new film-making challenge: how can one spark rivalry between two apparently irreconcilable sports in an extreme timekeeping race? A spectacular film that breaks with existing codes. Who can beat Tiger Woods? An F1 driver takes on the golfer on the legendary Monaco circuit. Golf ball versus car, swing versus V10, the story of a duel involving absolute precision. Dizzying bursts of speed and mental slow-motion sequences follow on from each other on the screen, with the omnipresent superimposition of obsessive timekeeping... Ultra-fast digital visuals express action, tension and sporting commitment, while the slow-motion parts are a reminder of the extreme concentration involved. The technological power of the Formula 1 vies with the mental strength and perfect gestures of Tiger Woods. Following his ball with his gaze, he guides it through what he calls the "zone", overcoming the unusual obstacles of the city of Monaco and its circuit, in order to reach its goal. 

TAG Heuer is making news in 2005, as Brad Pitt, Uma Thurman and Juan-Pablo Montoya join Tiger Woods, Maria Sharapova, Kimi Raikkonen, Steve McQueen and Yao Ming on its Dream Team of TAG Heuer ambassadors. All three celebrities are part of the new "What are you made of ?" campaign produced by Patrick Demarchelier, the famed fashion photographer. The result: a stylish campaign that perfectly embodies the blend of sports and glamour for which TAG Heuer is renowned (Images, courtesy of Tag Heuer).

Thanks to campaigns of this kind, companies try to distance themselves from other brands and to target a specific target group. Rolex differentiates itself by putting up and maintaining its brand messages – reliability and performance.78 Patek Philippe stresses its authenticity and the fact that its heritage that matters. Its message is that people are buying for the next generation and many of their timepieces are collectors’ items. TAG Heuer, conversely emphasizes the sportiness of its watches. While overtones of status, associated with the brand Rolex for example, are easily transferred to Asia (the brand stands for status and prestige worldwide and achieves e.g. in Indonesia, an almost 100% brand awareness), it is difficult for TAG Heuer with its associated attributes of sportiness and performance to appear relevant to the buyer and to motivate consumers to purchase. TAG Heuer initiated its China business with the “Inner Strength “ campaign, launched in 1998. The campaign, although a real success in Europe, was “a total failure in China” (author, presentation October 2004).

The reasons behind the failure are the following. In Europe the value of sports is both physical and mental, whereas in China it is purely physical. Consumers in Europe wear sport watches to exemplify their physical fitness or spiritual strength. Sports watches, such as those by TAG Heuer, are appropriate for business, and thus a premium price is reasonable. In China however, sports watches are primarily functional and are perceived as a casual watch, inappropriate for business, and therefore not worth paying a premium price for. Answers given by Chinese consumers after the campaign failed were, for example: “Wearing sports watches to work is like wearing slippers to attend operas”, or “I can’t justify paying RMB 7,000 (US$ 840) for a sports watch that is worn only when I exercise”. After the failure of TAG Heuer’s brand campaign in China, the watch maker was forced to re-think how to provide a relevant brand value for a sports watch to appeal to Chinese consumers who are not avid sports enthusiasts (sports-insensitive). The following image represents the campaign before the re-positioning. This campaign failed.

Figure B-12 Boris Becker for Tag Heuer (image, courtesy of Tag Heuer)

TAG Heuer’s new campaign changed drastically. TAG Heuer re-positioned its brand as a formal business watch with sporty overtones. Chinese appreciate spiritual values such as determination, but athletes in international campaigns lead consumers to associate the watch with physical values and not with the spiritual values which are highly respected in Chinese culture. To solve these issues, a local advertising campaign “The Attitude of the Achiever” was developed for China. “The Attitude of the Achiever” campaign featured business achievers, which was the most appealing image to the Chinese in TAG Heuer’s target group. The campaign featured Chinese idioms about determination and highlighted this quality as the attitude that brought about business success. The new campaign closed the so to speak culture gap. It replaced athletes by business achievers, which repositioned TAG Heuer as a formal business watch and increased the perceived retail price. Sales increased by 40 percent in the first half of 1999. The following two images are examples of this campaign.

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Figure B-13 Tag Heuer in China (1)

Figure B-14 Tag Heuer in China (2)

Although TAG Heuer now advertises in China with one of the most popular athletes, Chinese basketball player Yao Ming (under contract in the US), and although the heavy local coloured but still very successful campaign “The Attitude of the Achiever” has been stopped, great differences are evident when viewing the pictures of sports stars used in those campaigns (image right, courtesy of Tag Heuer). Yao Ming, for instance, is not recognizable as a basketball player; he is portrayed wearing a suit. The celebrities in the endorsements used outside China such as Maria Sharapova, are, on the contrary, recognizable as sports stars because of their typical sports gear. In the campaigns they are displayed to an extent playing their sports. In the campaign intended for China, Yao Ming’s portrayal is a so-called glocal compromise. On the one hand, TAG Heuer’s global standards are adhered to, i.e. taking sports stars under contract in order to reinforce the manufacturer’s positioning as a producer of sports watches. On the other hand, local adaptation is considered, i.e. Yao Ming is depicted as a successful and respected Chinese citizen abroad wearing appropriate clothing and not as a sweat drenched basketball player.

However, it is doubtful to what extent campaigns which show individualistic heroes can be successful in a cultural sphere in which adaptation or subordination to groups is presenting a common cultural behaviour form.

The above-mentioned examples clearly reveal that the relationship between culture and marketing can be described as reciprocal (Angehrn 1986: 203; Dahringer and Mühlbacher 1991: 170). Furthermore, Dahringer and Mühlbacher go as far as to postulate (1991: 170): “Not only does culture influence marketing; marketing also influences culture”. Thus, culture imparts the social context in which international marketing operates and that it is a, if not the, central determinant of international marketing (Usunier and Lee 2005: 2-3; Schütte and Ciarlante 1998: 1-16; Trompenaars and Woolliams 2004: 3-24; Lasserre and Probert 2001: 27-54). This central positioning of culture in international marketing was conveyed practically in the above examples. In the context of these examples, it should be indicated that the described companies’ faux pas were not mistakes that would have required the deepest knowledge of Chinese culture. That renders the mistakes even more infuriating since they could easily have been avoided. Mistakes of this nature occur because it is believed that attracting customers in the target markets could work globally since their customers worldwide would have adapted to one another in the course of globalization and modernization. This, however, is a misapprehension.

Although Seidel (1995: 158) sees some evidence for the increasing adoption of local approaches (termed multi-cultural strategy), it seems that MNCs refrain from adopting the “glocal” mindset and allocate extensive resources to researching cultural environments which could give them clues on how to adapt products and marketing strategies to suit local consumers. The case study (Part D) which was researched and elaborated on, shows, with the help of the Indonesian example, how successful marketing will look when it integrates the culture of the target country. The interdependence between customers and their environment illustrates the relationship between culture and international marketing, as the above-mentioned practically-oriented examples illustrate. The relationship between culture and international marketing is, as the previously-mentioned examples exhibit, in many cases, far from being able to be described as balanced. Statistical analysis, forecasting techniques and operational studies as taught in business schools around the world are not completely incorrect and are important technical skills. But companies frequently underestimate that it is inappropriate to assume that technical rationality characterizes the environment in which these techniques are applied and that “cultures resemble the laws of physics and engineering” (Trompenaars and Hampden-Turner 1997: 4).

Companies frequently overlook the fact that when transferring a product or marketing plan from one culture to another, the underlying assumptions of the culture in which it is placed will give it new meaning (Trompenaars and Woolliams 2004: 16). What all the examples mentioned so far have in common, is that they attribute culture significant influences to marketing. This is particularly true as marketing is much broader than selling (with which it is often narrowly associated). It encompasses the entire company’s market orientation toward customer satisfaction in a competitive environment (Kotler, Ang, Leong and Tan 2003: 16-29).

Therefore, fundamentally, the intention of the international marketer must be to create marketing mix approaches that communicate identity and create an affinity with the target market. In other words, marketing strategies require close attention to both customers and competitors (Kotabe and Helsen 2004: 12).

↓122

These practical examples serve to sensitize the reader to the relevance of cultural influences on the marketing mix and to the main section to follow.


Fußnoten und Endnoten

42  “Globalität bezeichnet die Tatsache, dass von nun an nichts, was sich auf unserem Planeten abspielt, nur ein örtlich begrenzter Vorgang ist, sondern dass alle Erfindungen, Siege und Katastrophen die ganze Welt betreffen und wir unser Leben und Handeln, unsere Organisationen und Institutionen entlang der Achse ‘global-lokal’ reorientieren und reorganisieren müssen” (Beck 1997: 30).

43  “Globalisierung heißt gerade nicht automatisch und einseitig, eindimensional Globalisierung…Vielmehr kommt es unter der Regierung des ‘g-words’ im Gegenteil zu einer neuen Betonung des Lokalen” (Beck 1997: 86).

44  http://www.lib.umich.edu/govdocs/ssci.html (26 September 2005)

45  For further information on David Ricardo, the following web pages can be consulted: http://www.vwler.de/joomla/content/view/14/26/; http://www.zeit.de/archiv/1999/23/199923.biblio-serie_4_.xml; http://cepa.newschool.edu/het/profiles/ricardo.htm (21 May 2005).

46  Economics and economic geography, take “Triad countries” to mean the description of the economic link between the EU, the USA and Japan. In this core area, the majority of world trade is concentrated.

47  http://harvardbusinessonline.hbsp.harvard.edu/hbrsa/en/hbrsaLogin.jhtml;jsessionid=3S3LEHM44UEX2AKRGWDSELQ;$urlparam$kNRXE2ULYRiR52NiwJYH5SF?ID=89410&path=arc&pubDate=July%201989&_requestid=6958 (12 August 2005); http://harvardbusinessonline.hbsp.harvard.edu/hbrsa/en/hbrsaLogin.jhtml;jsessionid=3S3LEHM44UEX2AKRGWDSELQ;$urlparam$kNRXE2ULYRiR52NiwJYH5SF?ID=89312&path=arc&pubDate=May%201989&_requestid=6987 (12 August 2005); http://harvardbusinessonline.hbsp.harvard.edu/hbrsa/en/hbrsaLogin.jhtml;jsessionid=3S3LEHM44UEX2AKRGWDSELQ;$urlparam$kNRXE2ULYRiR52NiwJYH5SF?ID=89215&path=arc&pubDate=March%201989&_requestid=6997 (12 August 2005)

48  http://www.apec.org/ (12 September 2005)

49  Lecture (welcome address) by Hellmut Schütte: Marketing of Consumer Goods in Asia (MOCA), Executive Education, INSEAD Singapore, October 2004.

50  http://harvardbusinessonline.hbsp.harvard.edu/hbrsa/en/hbrsaLogin.jhtml;$urlparam$kNRXE2ULYRiR52NiwJYH5SF?ID=87307&path=arc&pubDate=May%201987&_requestid=8336 (14 August 2005)

51  http://media.wiley.com/product_data/excerpt/24/07879653/0787965324.pdf (23 April 2005)

52  www2.widener.edu/SBA/econdept/Globalization%20Hill%20Ch%208.ppt (23 April 2005)

53  http://harvardbusinessonline.hbsp.harvard.edu/hbrsa/en/hbrsaLogin.jhtml;jsessionid=DGAB2C15YK5SCAKRGWCB5VQBKE0YIIPS;$urlparam$kNRXE2ULYRiR52NiwJYH5SF?ID=90412&path=arc&pubDate=July%201990&_requestid=74321 (21 August 2005)

54  http://harvardbusinessonline.hbsp.harvard.edu/hbrsa/en/hbrsaLogin.jhtml;jsessionid=DGAB2C15YK5SCAKRGWCB5VQBKE0YIIPS;$urlparam$kNRXE2ULYRiR52NiwJYH5SF?ID=82504&path=arc&pubDate=September%201982&_requestid=74136 (17 August 2005).

55  Fortune Europe Edition, 13 March 2006

56  http://harvardbusinessonline.hbsp.harvard.edu/hbrsa/en/hbrsaLogin.jhtml;$urlparam$kNRXE2ULYRiR52NiwJYH5SF?ID=83308&path=arc&pubDate=May%201983&_requestid=75511 (23 August 2005)

57  http://harvardbusinessonline.hbsp.harvard.edu/hbrsa/en/hbrsaLogin.jhtml;$urlparam$kNRXE2ULYRiR52NiwJYH5SF?ID=83308&path=arc&pubDate=May%201983&_requestid=78308 (13 August 2005);

58  http://harvardbusinessonline.hbsp.harvard.edu/hbrsa/en/hbrsaLogin.jhtml;$urlparam$kNRXE2ULYRiR52NiwJYH5SF?ID=R0308F&path=arc&pubDate=August%202003&_requestid=78178 (1 September 2005); http://harvardbusinessonline.hbsp.harvard.edu/hbrsa/en/hbrsaLogin.jhtml;$urlparam$kNRXE2ULYRiR52NiwJYH5SF?ID=R00201&path=arc&pubDate=March%202000&_requestid=78143 (1 September 2005)

59  Fortune, Europe Edition, 13 March 2006

60  http://www.tempointeraktif.com/hg/ekbis/2005/07/22/brk,20050722-64265,id.html (20 December 2005); http://www.swa.co.id/swamajalah/sajian/details.php?cid=1&id=3049 (21 May 2005); http://www.thejakartapost.com/yesterdaydetail.asp?fileid=20050725.L02 (25 May 2005)

61  http://www.indofood.co.id/content/index.asp?fuseaction=list_artikel&venue_id=080501&topic_id=1&enter_date=8/5/2004%209:09:50%20AM (25 May 2005)

62  Nestlé has been the first multinational in the food industry to word a global strategy in which Indonesia is stated explicitly: “Our objective is to build strong market positions in the three most populous countries, namely China, India and Indonesia.” (Nestlé Goldman Sachs Conference PBL, May 2001)

63  Abalone is the American English variant of the Spanish name Abulón used for various species of shellfish (mollusks) from the Haliotidae family (genus Haliotis).

64  (http://www.marketingpower.com/mg-dictionary-view1862.php? (12 May 2005)

65  http://www.unilever.com/Images/2003%20Cleaning%20up%20the%20Brantas%20River%20in%213 5526.pdf (14 April 2005)

66  http://www.antigreymarket.com (18 April 2005); http://willmann.bwl.uni-kiel.de/~gerald/awsem/wang.pdf (12 August 2005)

67  http://www.airpork.com.sg/welcome-to-airpork.htm (2 January 2006)

68  The case study was presented by Jill Klein during INSEAD’s executive education programme “marketing of consumer goods in Asia“, Singapore, October 2004. It can be accessed via: http://www.insead.edu/inspire/issue_19/page2.htm (2 January 2006)

69  http://www.trendwatching.com/trends/sachet_marketing.htm (21 September 2005) http://www.springwise.com/newbusinessideas/2003/12/sachet_marketing.html (12 August 2005) http://www.pcij.org/i-report/1/mini-size.html (12 August 2005)

70  http://www.halalmui.or.id/?module=static&act=view&id=16 (12 August 2005)

71  http://www.breadtalk.com/franchise.htm (21 January 2006)

72  For a discussion on lifestyles as markers of social inequality and differentiation, see for example: Müller 1989.

73  For contemporary perspectives on consumer motives, goals, and desires, see for example: Ratneshwar, Mick and Huffman (2000); Miles, Anderson and Meethan (2002) and the excellent work of Fines (2002) “The World of Consumption. The material and cultural revisited”. For an Asian perspective on consumption and the construction of lifestyles, see for example: Pinches (ed.) (1999); Robison and Goodman (eds.) (1996); Chua (ed.) (2000), (2003).

74  http://www.apple.com/ipod/ipod.html (27 December 2005)

75  This report was based on information gleaned from the following internet sources: http://www.china.org.cn/english/2004/Dec/114219.htm; http://news.bbc.co.uk/2/hi/asia-pacific/4083265.stm; http://www.usatoday.com/sports/basketball/nba/cavaliers/2004-12-06-james-china_x.htm; http://news.xinhuanet.com/english/2004-12/22/content_2367984.htm; http://chineseculture.about.com/b/a/131186.htm; http://www.chinadaily.com.cn/english/doc/2004-12/09/content_398845.htm (27 July 2005);

77  http://www.worldtempus.com/wt/1/3855/, http://www.thambassadors.com/ambassadors/maria_sharapova.cfm (21 January 2006)

78  http://www.rolex.ch/en/ (13 December 2005); http://www.patekphilippe.com/ (13 December 2005)



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