Presentation Group 4A

The Topic

Using a context/contexts of your choice, take stance in favour or against a standardized approach to relationship management between an exporter and an overseas channel intermediary.

Key words

Standardization/AdaptationExporter Overseas channel intermediaryRelationship management

Definition of standardizationScholars advocating the standardization

approach to marketing think that the world is becoming more similar due to technological uniformity, similar consumer needs, tastes and preferences, the growth of international communication channels and the emerging global market segments (Akaah 1991; Grosse and Zinn 1990; Perry 1990; Theodosiou and Leonidou 2003; Theodosiou and Katsikeas 2001)

Institutional theory “organizations strive for efficiency,

effectiveness and legitimacy. It recognizes the idea that societies exert pressures for organizational conformity to legitimized managerial routines and standards which constrain resource allocation decisions and strategy selection”. (Meyer & Rowan 1977).

Advantages of standardizationEconomies of scalelead to increased legitimacy for headquarters

in its international marketslead to higher levels of motivation among

local managers to accept and use deployed knowledge

It can be used in uncertain environments when characteristics crucial for competitive advantage are unknown – Morosini et al 1998

Disadvantages of standardizationInaccurate positioning Friction between headquarters and local

representatives Limited decision; and change may not be

implemented even when necessary to save the firm

hinder international performance

Adaptation Definition: ‘Alter for new use and conditions’ – Collins dictionary

2003.Adaptation occurs when one party in a

relationship alters its processes or the item exchanged to accommodate the other party (Gadde & Hakansson, 1993). Ford (2002) discusses that adaptation behaviour would vary over the life of the relationship. In the early stages it will be a means to develop trust, and in the mature state it will expand and solidify the relationship.

Advantages of adaptationAccurate positioning;Adaptation could lead to increased legitimacy

of the foreign arm of the international firm in this firm’s headquarters

To enhance managers’ motivation to listen to their foreign counterparts.

Disadvantages of adaptationThe costs associated with adaptation can

also play a major role in determining whether or not a firm chooses to standardize their product;

Cultural Fit Theory “Most existing models of culture and work

behaviour assume cultural stability and emphasize the fit between a given culture and certain managerial and motivational practices”. (Leung et al. 2005:361)

Determinant characteristics of international performance The level of standardization/adaptation of

international coordination, support, autonomy, control of and communication with international representatives across borders is related to international performance.

Determinant characteristics of international performance Representatives’ coordination – “complementary

and similar market behaviours make dyadic partners open to agreed – on analysis of the market and the activities designed to serve it” (Anderson & Narus 1990)

Support to international representatives – technical guidance, promotion materials, training, visits by headquarters’ personnel.

Representative autonomy – “the closeness of the exporter’s supervision of the representatives and the extent to which responsibilities are delegated to them” (Joyce and Slocum 1984; Koys & DeCotiis 1991)

Determinant characteristics of international performance Control - standardizing control across markets

means that it could be too high or too low depending on the market, culture and so on. So it may reduce performance but if monitoring reps becomes too complex, adapted control level could mean firms suffer also.

Communication with representatives – in aspects such as quantity, quality, and contents of communication. Communication enhances harmonious relationships with foreign representatives characterized by clearer, open and systematic exchange of information.

Facets of international behavioural performance Esprit de corps - group cohesiveness, a sense of

belonging to a group, a ‘we’ feeling. (Greenberg & Baron

1997:259)The greater willingness of cohesive group members to work together and conform to group norms can contribute to the groups performance -(Shaw 1981)

Cooperation – “the degree to which the firm and its representatives jointly put forth effort and collaborate toward the achievement of their specific and joint goals. (Leonidou, Katsikeas, and Hadjimarcou 2002)

Commitment – “an active association between individuals and/or organisations which they are willing to contribute to others” (Dunham & Pierce 1989)Model of network relationships : business network connection –mutual commitment – mutual dependence – value creation (Holm, et al 1999:473)

Relationship marketing between exporter and an overseas channel

Distribution channels rely on a series of relationships among intermediaries. Most channel members are independent organizations with their own objectives and ways of conducting business, but each wants to control its own distribution activities and set standards for its business. (strategic marketing management p361)

Definition of relationship marketingRelationship marketing is marketing based

on interaction within networks of relationships (Gummesson, E. 2002)

Morgan and Hunt define relationshipmarketing as all marketing activities directedtowards establishing, developing, and

maintaining successful relational exchanges

The importance of good relationship to channelA good channel relationship is an important

factor contributing to success in both domestic and overseas markets (Rosson and Ford 1982; Rosson 1984; Young and Wilkinson 1989; Cavusgil and Zou 1994).

According to the International Distribution literature, developed relationships ensure continued commercial success through increased sales growth, market expansion, profit and brand equity (Bilkey 1982; Rosson and Ford 1982; Cavusgill and Zou 1994; Johanson and Vahlne 1990; Styles and Ambler 1994, 1996; Munro and Beamish 1987).

What are the factors for building good relationship?TRUST & BENEFITA good relationship can be categorized as

having core components of mutual trust and benefit, necessary conditions (attitudes and behaviors) for trust and mutual benefits to develop, and is subject to influences on the development of trust and mutual benefit.

The elements of good relationship

TrustMost perspectives on trust recognize that risk is

required for trust to influence choice and behavior (Lewis & Weigert, 1985; Schlenker, Helm, & Tedeschi, 1973)

“Trust is an essential element in productive and effective intraorganizational communication and organization” (Wells, C V & Kipnis, D., 2001 )

“Since each culture’s collective programming results in different norms and values, the processes trustors use to decide whether and whom to trust may be heavily dependent upon a society’s culture” （ Doney, P. M., Cannon, J. P. & Mullen, M. R. 1998 ）

The importance of trustTo internationalisation:

“....the establishment of trust-based cooperation relationships with foreign partners positively affects the success of the participating companies” (Fink & Kraus)

Relational Process – psychic distance decreases as the relationship develops

Fink, M & Kraus S., (2007), “Mutual trust as a key to internationalization”, Management Research News; Vol. 30 No. 9, pp. 674-688

3. Psychic Distance: Medium

RM Variables Importance

Empathy Medium

Experience High

Satisfaction High

Commitment/Trust Medium

4. Psychic Distance: Low

RM Variables Importance

Empathy Low

Experience Medium

Satisfaction Medium

Commitment/Trust High

2. Psychic Distance: High

RM Variables Importance

Empathy High

Experience Medium

Satisfaction High

Commitment/Trust Low

1. Psychic Distance: Medium

RM Variables Importance

Empathy High

Experience N/A

Satisfaction N/A

Commitment/Trust N/A

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Conway, T. & Swift, J. S. (2000), "International relationship marketing. the importance of psychic distance." European Journal of Marketing, Vol. 34, No.11/12: pp. 1391-1413.

The trust building processCalculative processPredictionIntentionalityCapabilityTransference

Trust building process, Base disciplines and underlying behavioral assumption

Trust-Building Process

Primary Base Discipline

Underlying Behavioral Assumption

Calculative: Trustors calculates the costs and rewards of target acting in untrustworthy way.

Economics (Dasgupta ， 1988 ；Williamson,1985)

Individuals are opportunistic and seek to maximize self-interest.

Prediction: Trustor develops confidence that a target's behavior can be predicted.

Social psychology (Destusch,1960; Lewichi & Bunker,1995)

Individuals behavior is consistent and predictable.

Intentionality: Trustor evaluates a target's motivations

Social psychology (Rempel & Holmes, 1986)

Individuals are geared toward others, as opposed to themselves (e.g. motivated to seek joint gain).

Capability: Trustor assesses a target's ability to fulfill his or her promises.

Sociology (Barber,1983; Butler & Cantrell, 1984)

Individuals differ in their competence, ability, and/or expertise and, thus, the ability to deliver on their promises.

Transference: Trustor draws on proof sources from which trust is transferred to target.

Sociology (Granovetter, 1985; strub & Priest, 1976)

Individuals and institutions can be trusted; connections in a network are strong and reliable.

CultureDefinition of Culture-“Culture is the collective

programming of the mind which distinguishes the members of one human group from another.....Culture, in this sense, includes systems of values; and values are among the building blocks of culture” (Hollensen,S 2007)

Cultural diversity is not a new phenomenon, yet in our increasingly mobile and global world it has taken on greater, even urgent, importance.

Various cultures in the world

• Understanding cultural diversity can come from many directions, including gaining direct knowledge through working and living overseas, or from exposure to domestic diversity.Source from :http://www.pacific.edu/sis/mair/cultural-diversity.htm

Culture effects on trust

Hofstede’s cultural dimensions

Individualism/collectivismMasculinity/feminityHigh power distance/low power distanceHigh uncertainty avoidance/low uncertainty

avoidance

Understanding Culture“High context refers to societies or groups where people have close

connections over a long period of time. Many aspects of cultural behaviour are not made explicit because most members know what to do and what to think from years of interaction with each other”. (http://www.culture-at-work.com/highlow.html)

“Low context refers to societies where people tend to have many connections but of shorter duration or for some specific reason. In these societies, cultural behaviour and beliefs may need to be spelled out explicitly so that those coming into the cultural environment know how to behave”.(http://www.culture-at-work.com/highlow.html)

High Context – Collectivist: Indirect, Symbolism, Flexible, Group Conformity, Hierarchical,

Time = Relationships=Trust

Low Context – Individualistic: Direct assertive communication, Linear, Self-orientated, Work has value,

Time = Money=Trust

Conceptual Domains, Cultural Taxonomies, and the influence of social norms and values on the formation of trustConceptual Domains and Related Cultural Taxonomies (Clark, 1990:73)

Hofstede’s (1980) Cultural Dimensions and Associated Societal Norms and Values

Influence on Trust-Building Process

Relation to self: reflects concerns with self-concept and personalityIndividualism/collectivism (Hofstede, 1980)Masculinity/femininity (Hofstede, 1980)Conception of self (Inkeles & Levinson, 1969)Tightness/ looseness (Peabody, 1969)Perception of human nature (Kluckhohn & stodtbeck, 1961)

Individualism“I” consciousness (self-orientation) Value individual accomplishmentTolerate individual behavior and opinion low loyalty to other people and institutionsInteract on an individual, competitive basisLoose interpersonal ties

Collectivism“we” consciousness (Group orientation) Value joint efforts and group rewardsNorms for behavioral conformityHigh loyalty to other people and institutionsInteract in an interdependent, cooperative modeStrong interpersonal tiesMasculinityValue individual achievementNorm for cooperationNorms for independent thought and actionFemininityNorms for solidarity and serviceNorm for cooperationSocial norms honoring moral obligations

IndividualismCalculative (+)Capability (+)

Collectivism Prediction (+) Intentionally (+) Transference (+)

Masculinity Calculative (+) Capability (+)

Femininity Prediction (+) Intentionality (+)Transference (+)

Conceptual Domains and Related Cultural Taxonomies (Clark, 1990:73)

Hofstede’s (1980) Cultural Dimensions and Associated Societal Norms and Values

Influence on Trust-Building Process

Relation to authority: reflects the emphasis given to hierarchical relations in family, social class, and reference groupsPower distance (Hofstede, 1980)Relation to authority (Inkeles & Levinson, 1969)Assertiveness ( Peabody, 1969)Orientation toward human relationships (Kluckhohn and Strodtbeck, 1961)

High power distance Norms for differential prestige, power, wealthNorm for conflictAuthoritarian normLow power distance Egalitarian relationships prevail Norms for interdependence, solidarity affiliation

High power distance Calculative (+) prediction (+) Capability (+)

Low power distance Intentionality (+)Transference (+)

Relation to risk: reflects research into the perception, evaluation, and experience of risk in the buying/consumption processUncertainty avoidance (Hofstede, 1980) Primary dilemmas or conflicts (Inkeles & Levinson, 1969)

High uncertainty avoidanceNeed for structure (formal rules and regulations)Human behavior is purposiveNorm for compromiseStrong faith in institutionsBelief in experts and their knowledgeLow uncertainty avoidanceHuman behavior is unpredictableNorm for conflictWeak faith in people and institutions

High uncertainty avoidance Prediction (+) Intentionality (+) capability (+) Transference (+)

Low uncertainty avoidance Calculative (+)

Should be standardization or adaptation on relationship

channel management?

Advocator of standardizationProponents of the standardization approach

view the globalization trends in the world as the driving force behind greater market similarity, more technological uniformity, and higher convergence of consumer needs, tastes, and preferences (Levitt,T. 1983 and Ohmae,K. 1985).

Standardization on Channel ManagementStandardization could lead to increased

legitimacy for headquarters in its international markets (Jensen 2004), which likely would lead to higher levels of motivation among local managers to accept and use deployed knowledge (Kostova 1999; Kostova and Zaheer 1999)

Examples with explanations for standardizationMcDonald The firm maintains standardized

specifications for its equipment technology, product offerings, customer service, value, and operational systems.

Its core distribution strategies is consistent on a global basis.

Advocator of adaptationAdvocates of the adaptation approach argue

that, despite increasing globalization tendencies, variations between countries in such dimensions as consumer needs, use conditions, purchasing power, commercial infrastructure, culture and traditions, laws and regulations, and technological development are still too great, thus necessitating the adjustment of the firm’s marketing strategy to the idiosyncratic circumstances of each foreign market (Terpstra & Sarathy, 2000).

Adaptation on channel managementAdaptation could lead to increased legitimacy

of the foreign arm of the international firm in this firm’s headquarters, which would likely enhance managers’ motivation to listen to their foreign counterparts.

Examples with explanations for adaptationDell Dell direct sale model is very successful in

America and Europe market. low price , low inventory , partnership B to B The same strategy failed in China market

CONCLUSIONThe final decision on whether

standardization or adaptation in different situations.

Before choosing, these factors should be taken into considering in the following:

-Cultural diversity issues-Different attitude to relationship -Local markets-Building trust

CONCLUSIONThe key point of choosing adaptation or

standardization will not be completed and absolute, but the degree of standardization and adaptation.

However, culture does effect on relationship management and the culture diversity does exist in the world. The importance and advantage of adaptation tends to be more eximious.

Suggestions“High fit to a given culture requires high

levels of adaptation of management process which in turn should lead to organizational effectiveness” –Leung et al. 2005

Standardization of processes should be used when interacting firms come from the same cultural type i.e. cultures with similar levels of individualism, power distance and uncertainty avoidance

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