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Product standardization or adaptation: the Japanese approach

Leonidas C. Leonidou
Introduction One of the most remarkable developments of the post-war period has been the emergence and growth of multinational corporations (MNCs), which at present account for more than one-third of total world trade (Grosse and Kujawa, 1992). Yet, as the world approaches the end of the twentieth century, a number of critical issues relating to the international marketing activities of these organizations still remain unresolved. Perhaps the most controversial concerns the fundamental question of whether to offer a marketing mix programme abroad identical to that supplied domestically or adapt it to the specific requirements of foreign markets (Douglas and Craig, 1992). Obviously, the answer to this question is not an easy one, since it can have serious implications on the firms financial performance, competitive advantage and even survival in global business (Jain, 1989; Kotabe and Okoroafo, 1990). Opinions on the subject vary widely, among both academics and practitioners (Kustin, 1993; Sorenson and Wiechmann, 1975). Proponents of the standardization (or globalization) approach argue that in the light of the accelerating internationalization of world economies and the parallel increase in competition on a global scale, due mainly to technological advancements, improved living standards, trade liberalization and economic integration, the key to success lies in the development of universal marketing mix strategies (Buzzell, 1968; Levitt, 1983; Rau and Peebles, 1987). Supporters of the adaptation (or localization) philosophy state that, due to the inherent complexities and dissimilarities involved in operating in the international marketplace, particularly as regards macroenvironmental forces, consumer behaviour, usage patterns and competitive situations, it is more viable to have a marketing programme tailored to the individual needs of each overseas market (Douglas and Wind, 1987; Hill and Still, 1984; Walters, 1986). Each approach claims a number of benefits for the multinational organization. On the one hand, the standardization philosophy offers attractive cost savings, owing to economies of scale in research and development, production and marketing (Sorenson and Wiechmann, 1975); it enforces tighter management control on overseas subsidiaries, particularly in the case of
The constructive support of Anthoulla C. Leonida, as well of that of the editor and two anonymous JMP:AMS reviewers on earlier drafts of the article, is gratefully acknowledged.

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Journal of Marketing Practice: Applied Marketing Science, Vol. 2 No. 4, 1996, pp. 53-71. MCB University Press, 1355-2538

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organizations with a centralized structure (Buzzel, 1968); and it enables a company to derive the maximum benefit from good ideas and know-how created within the total organization (Hovell and Walters, 1972). On the other hand, the adaptation philosophy offers more customer orientation since it systematically evaluates buyer behaviour and market characteristics in each foreign country (Douglas and Wind, 1987); it results in profit maximization, because revenues accrued from marketing mix modifications may rise by more than adaptation costs (Terpstra and Sarathy, 1994); it also energizes creative thinking and innovativeness within the firm, due to pressures in finding ways to adjust marketing to meet specific overseas customer requirements (Czinkota and Ronkainen, 1995). The strategic importance of the standardization/adaptation decision has attracted a great deal of interest from researchers and, since the early 1960s, numerous articles have been published on the subject. However, there is some evidence indicating that this stream of research is incomplete, unbalanced and immature: first, most studies have been more conceptual than empirical in nature, thus creating a gap between academic theorizing and corporate practice (Kustin, 1993); second, the bulk of the research has concentrated essentially on advertising, with the other elements of the marketing and promotion mix receiving less attention (Jain, 1989); third, the primary focus of researchers in the field was on the practices of Western multinational firms, while companies originating from other countries were virtually neglected (Shipchandler and Terpstra, 1989); and fourth, the analysis usually centred on operations in developed markets of the world, with limited attention paid to emerging economies (Walters, 1986). Consequently, there is a need for a more empirical and practical type of research that will facilitate theory-building on the subject (Ozsomer et al., 1991). Research should focus on other crucial elements of the marketing mix programme, particularly the product which provides the cornerstone of the strategic marketing effort (Walters and Toyne, 1989). The standardization/ adaptation issue should also be examined from the perspective of other serious international business actors, as in the case of Japanese multinationals which have had tremendous success in entering, penetrating and exploiting foreign markets (Kotler and Fahey, 1982). Finally, the investigation should be reoriented to other less-developed markets, such as the Middle East, since these are increasingly sensitive to multinational firms marketing policies, particularly as regards product appropriateness (Terpstra, 1981). To fill this void in the literature, the present article aims to assess empirically the product standardization/adaptation practices of Japanese multinational companies operating in the Middle East. Previous empirical research As mentioned earlier, empirical research on the product standardization versus adaptation debate has been relatively meagre, denoting that company practices preceded academic research (Jain, 1989; Kustin, 1993; Wind, 1986). Following a systematic literature search, ten studies providing an empirical investigation on

the subject were identified and analysed. (A number of other studies, such as those by Whitekock (1987), Seifert and Ford (1989) and Cavusgil et al. (1993), also examined the issue of product standardization/adaptation. However, these were excluded from the analysis because they focused on exporting firms with production facilities located in single nations, thus falling outside the scope of the present research which deals with multinational corporations.) These are presented in chronological order in Table I, which also provides a summary of their objectives, research methodologies and empirical findings. Though the subject has not been researched extensively, an examination of the extant writings leads to a number of conclusions relating to target population and markets, degree of product adaptation, product elements adapted, variations in adaptation strategy and factors affecting product alterations. Target population and markets The first attempts to investigate empirically the product standardization/ adaptation issue can be traced back to the early 1970s with works by Kacker (1972), Ward (1973) and Sorenson and Wiechmann (1975). Following a period of stagnation, interest in the topic was revived in the mid-1980s and has intensified in recent years. The bulk of research on the subject focused on multinational firms with their headquarters in the USA, probably reflecting the fact that the majority of researchers in the field were affiliated with research institutions or universities in this country. Surprisingly, only three studies incorporated European organizations in their sampling frames (Ozsomer et al ., 1991; Szymanski et al. , 1993; Ward, 1973), while Japanese multinationals were investigated by only one study (Shipchandler and Terpstra, 1989). To identify differences in standardization/adaptation decisions by product nature, most studies included in their samples both consumer and industrial goods manufacturers. Target markets for analysis were basically confined to the developed world (particularly Europe and the USA), while developing countries provided the focus of three studies (Hill and Still, 1974; Kacker, 1972; Ozsomer et al., 1991). Overall degree of product adaptation As opposed to theoreticians on the product standardization/adaptation debate, empirical researchers justifiably argue that instead of viewing product strategy as an either/or proposition, it would be more appropriate to examine the range of options, which vary from full standardization to complete adaptation (Baalbaki and Malhotra, 1993; Jain, 1989; Quelch and Hoff, 1986). The overall picture given by empirical studies in the field is that most multinational companies offer products to overseas markets that are fairly standardized, and that in those cases where adaptations were made, these were of an obligatory nature in the sense that the management was unable to avoid them, while discretionary adaptations, that is those that the company chooses to make itself, were generally minimal (Baalbaki and Malhotra, 1995; Hill and Still, 1984; Sorenson and Wiechmann, 1975). In fact, this pattern has remained more or less

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Study Personal interviews with parent and subsidiary executives of 26 US MNCs operating in India. Firms produced either consumer or industrial goods. Collection of supplementary information from parastatal Indian organizations. No statistical analysis was performed Mail questionnaires and personal interviews with top executives of 53 subsidiaries of British, French, German, Dutch, Belgian and Swiss MNCs operating in the US market. Industries included a broad range of industrial and consumer goods. Data analysis was based on percentage frequencies Product adaptations were minimal, aiming just to maintain an established market share. Most product changes were made to meet government requirements. Climatic and economic factors mainly influenced packaging. Product mix rarely incorporated items specially designed to meet the needs of the Indian market A substantial number of products required some form of adaptation. More consumer than industrial goods were subject to changes. In descending order of importance, product adaptations were applicable to: operating mechanism, labelling, quality, packaging and styling. Most adaptations were minor in terms of cost. Customer needs and preferences were the chief influences on adaptation. British subsidiaries reported significantly different practices from their Continental counterparts Extremely high degrees of standardization were observed in all product aspects examined, namely physical characteristics, packaging and brand names. High levels of standardization were ascribed to crossborder similarity of market conditions. In those cases where changes in products were made, these were of an obligatory nature (Continued)

Kacker (1972)

Ward (1973)

Sorenson and Extent to which MNCs actually Wiechmann (1975) standardize their products. Conditions under which product standardization takes place

Table I. Summary of empirical studies on product standardization/ adaptation Research methodology Empirical findings Personal interviews with 100 senior executives in 27 US and European MNCs with operations in Europe and the USA respectively. Firms belonged to the food, soft drink, household cleaning and cosmetics industries. Data analysis was based on percentage frequencies

Objectives

Nature and pattern of product adaptation. External environmental effects on product strategy

Extent of product adaptation and the cost involved. Product factors desirable to change. Variation in product adaptations among subsidiaries of different nations

Study Mail survey among 19 MNCs with executives in their US headquarters and subsidiaries in LDCs. Companies belonged to consumer goods industries, particularly food, drink, pharmaceuticals and cosmetics. Data analysis was based on percentage frequencies Most common adaptations were those of measurement units, product constituents, labelling and packaging. Marketing factors exhibited a greater effect in adapting products than environmental forces, with consumer preferences being the most influential. Changes in transferred goods made first were those of a mandatory nature, especially those affected by legal and economic requirements abroad Major obstacles to product standardization were national differences in tastes, habits, regulations and technical requirements. Overall, products were fairly standardized irrespective of group. There was an increasing tendency to product standardization compared to ten years earlier Relatively low levels of adaptation. Most adaptations took place in relation to product attributes. Technical differences were the major reason for product changes. Principal information source for product adaptation was informal customer feedback All aspects of the product were highly standardized, particularly those referring to product characteristics. Product (Continued)

Objectives

Research methodology

Empirical findings

Hill and Still (1984)

Product areas more susceptible to adaptations. Factors affecting product changes. Sequence of product modifications

Boddewyn et al. (1986)

Degree of standardization by product type (non-durable, durable and industrial)

Survey among US MNCs operating in the European Economic Community. Companies belonged to a variety of industrial sectors. Data analysis was based on percentage frequencies and mean values

Shipchandler and Degree of product adaptation. Terpstra (1989) Product aspects altered. Reasons for adaptations. Information on adaptations

Mailing survey among 76 European and 25 Japanese firms operating in the US market. Companies fell under SIC codes 20 to 39. Data analysis was based on percentage frequencies

Ozsomer et al. (1991)

Degree of product standardization. Personal interviews with 58 managers in 33 Factors determining level of European and US MNCs operating in Turkey. standardization The sample covered manufacturers of

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Table I.

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Study consumer goods (both non-durables and durables). Data analysis was based on mean values and ANOVA. standardization was higher among subsidiaries that were wholly owned, originated from Germany and the USA and produced pharmaceutical/chemical goods. Product standardization was higher when market conditions between the host and home countries are similar Product standardization was more applicable in the case of industries with a high rate of technological change, as well as those producing industrial goods. No significant variations in product standardization were observed as regards stage in product life cycle, various marketing policies and financial performance Strength and form of the relationships between the various marketing mix elements and competitive strategy, market structure and business performance factors were relatively similar across different markets Greater degree of standardization was possible for products that were perceived to be essential. Greater customization was required for products that are in different life-cycle stages in different markets. Higher level of strategy adaptation occurred when laws relating to product standards, features, performance, etc. varied across markets. Higher levels of adaptation existed in the case of international differences in support requirements across different countries

Samiee and Roth Relationship between global (1992) standardization and technological environment, product type, stage of product life cycle, marketing policies and financial performance

Szymanski et al. (1993)

Baalbaki and Malhotra (1995)

Table I. Research methodology Empirical findings Mail survey with executives in 147 business units (46% response rate) located in the USA. The survey covered both consumer (15%) and industrial (85%) goods sectors. Data analysis was based on mean low and high standards as well as chi-square Information obtained from PIMS database which includes Fortune 500 US companies and European companies of similar size. Use of correlation and regression analysis as well as path analysis Mail survey with 80 US international firms (11.7% response rate). The sample consisted of 46 industrial firms and 34 consumer firms. Bridging conjoint analysis was used as an analytical tool

Objectives

Degree of standardization of the strategic resource mix across national markets

Assess the relative importance and significance of a large number of marketing management variables in shaping standardization/customization product strategy

the same since the early 1970s, while some researchers claimed an increasing tendency for product standardization over time (Boddewyn et al., 1986). In those studies in which comparisons could be made among multinationals from different countries, with a few exceptions (e.g. Ward, 1973), no significant variations in product standardization/adaptation decisions were reported (see, for example, Shipchandler and Terpstra, 1989; Sorenson and Wiechmann, 1975). Product elements subject to alterations In investigating the level of standardization/adaptation, most studies did not treat the product in its generic form, but rather broke it down to its constituent parts. In fact, the analysis centred on the elements of the actual product, rather than the core or the augmented product (Kotler and Armstrong, 1996). Interestingly, the findings of these studies indicated that the degree of standardization/adaptation tends to vary in accordance with the specific product element. Specifically, the product area receiving most changes in overseas markets was that relating to product characteristics, namely design, quality, and features (Baalbaki and Malhotra, 1995; Hill and Still, 1984; Sorenson and Wiechmann, 1975; Ward, 1973). Packaging was the second area most frequently subject to alterations (Hill and Still, 1984; Sorenson and Wiechmann, 1975; Ward, 1973), followed by labelling (Hill and Still, 1984; Ward 1973). In relation to this, some studies concluded that multinational firms tend to adapt those product dimensions that involve minimal costs and are easier to make, aiming to maintain price competitiveness and market share overseas (Kacker, 1972; Ward, 1973). Variations in adaptation strategy Several researchers attempted to associate product standardization/adaptation practices with various industrial and organizational parameters pertaining to multinational firms. Two studies aimed to identify variations between producers of industrial and consumer goods, and reported that the former were more standardized than the latter (Samiee and Roth, 1993; Ward, 1973). Another study claimed that product standardization was more applicable to industries with a high rate of technological change, such as the microchip industry (Samiee and Roth, 1993). Two other studies tried to link the standardization/ adaptation decision with the product life-cycle concept, with one reporting variations in adaptation levels across different stages (Baalbaki and Malhotra, 1995). Finally, another study investigated the relationship between product standardization and financial performance and found no significant results (Samiee and Roth, 1992). Influences on product adaptations Almost all studies tried to identify and assess the importance of factors affecting the product standardization/adaptation decision, these relating essentially to the environmental conditions prevailing in foreign markets. The

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most frequent and influential reason reported for adapting product strategy abroad was the existence of variations in customer needs and preferences across countries (Hill and Still, 1984; Ozsomer et al ., 1991; Sorenson and Wiechmann, 1975; Ward, 1973), as well as government rules and regulations and technical requirements relating to products (Baalbaki and Malhotra, 1995; Boddewyn et al., 1986; Kacker, 1972; Shipchandler and Terpstra, 1989). Notably, some researchers pointed to the fact that different environmental forces have a different effect on various product aspects. For instance, it was found that climatic and economic factors mainly had a greater impact on packaging (Kacker, 1972), while foreign laws primarily affected product standards, features and performance (Baalbaki and Malhotra, 1995). A number of research questions can be derived from the preceding analysis of the empirical research on the product standardization/adaptation debate which could be addressed within the context of Japanese multinational companies operating in the Middle East. These are the following: What is their overall degree of product adaptation? What specific product dimensions are subject to alterations? How do these adaptations vary by industry type and market experience? What effect do the regions environmental forces have on product adaptation decisions? Which product elements are likely to undergo further adaptations in future? To address these questions, the research methodology adopted for the present investigation is first detailed. The findings of the empirical study undertaken are subsequently presented and analysed with respect to each research question. Finally, conclusions are derived from the study findings, as well as guidelines for further research. Research methodology Japanese multinational companies constituted the unit of analysis in this research because they have been repeatedly described as high performers in international business in general (Kotler and Fahey, 1982) and in the Arab market in particular (Leonidou, 1991). In fact, Japan is currently the third major contributor to world trade (after the USA and Germany) (World Bank, 1995) and among the three top suppliers to the Middle East market (together with the USA and the UK) (IMF, 1995). The Japanese success has been ascribed to several factors: extensive government assistance, pioneering production systems, strong domestic competition, a supportive financial system, unique management styles and appropriate marketing strategies (Doyle et al., 1986; Kotabe and Okoroafo, 1990; Lazer et al., 1985). With regard to the last feature, it has been postulated that one of the secrets of Japanese marketing success lies in the special emphasis placed on engineering, design features and quality of the product offered in foreign markets (Keegan, 1983; Kotler and Fahey, 1982).

The fieldwork of the present study took place in the Middle East, with particular focus on the countries comprising the Gulf Co-operation Council (GCC), namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The selection of these countries was justified on three accounts: first, they have enormous purchasing power due mainly to vast oil reserves, hence constituting lucrative markets for international companies (Rossides, 1994); second, they are characterized by very idiosyncratic marketing environments, differing greatly from those of their major foreign trade suppliers (Kaynak, 1984); and third, their markets have recently changed from sellers to buyers conditions, thus forcing multinational firms to strive hard to protect their market shares in the light of more sophisticated customers and intensive competition (Leonidou, 1991). In the absence of official trade directories providing information on Japanese multinational companies operating in the Middle East, relevant databases maintained by regional marketing research agencies were employed. The target population comprised 94 companies, all of which were contacted by telephone to arrange an in-depth personal interview. Thirty-nine firms responded positively (i.e. 41 per cent response rate), yielding a usable sample comprising 35 units. Interviews were held with either the area manager or marketing officer in charge of the Middle East operation. A series of student t -tests were conducted to compare the demographic profiles between responding and nonresponding firms as regards sales volume, number of employees, and establishment year, but no significant differences were observed, thus eliminating the possibility of non-response bias. The majority of participants were multinational corporations operating in the Middle East via their own marketing or sales subsidiary, although a few had licensing agreements or joint ventures with indigenous partners. This reflects the conservative and cautious approach towards foreign direct investment by governments in the region. Respondents produced a variety of goods, ranging from textiles and electronic devices to machine tools and electrical cables. Specifically, 16 firms mainly manufactured consumer products while the remainder (i.e. 19 companies) were industrial goods producers. Most initiated activities in the Gulf region soon after the oil boom in the early 1970s, in response to the profitable market opportunities that began to emerge in the area from rising disposable incomes. For analytical purposes, respondents were divided into those with a long presence in the Middle East market (ten years or more) and those that were relatively new, representing 22 and 13 firms respectively. Research centred on product adaptation defined as any change, adjustment or compromise to the product offered in an overseas market (Kacker, 1972). This definition includes any type of product modification, both mandatory and voluntary, and was the one adopted in this study. Here, the term product was used in its wider context and concentrated on all aspects of the actual product, namely external characteristics, internal features, packaging, labelling and branding (Kotler and Armstrong, 1996). Each of these elements was further

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broken down, resulting in a list of 20 different product attributes. Factors that could influence the product adaptation decision were determined after a review of the pertinent literature. Approximately 26 different factors emerged from this exercise, which were subsequently narrowed down to 20. These were classified into five groups: physical, demographic, socio-cultural, economic and politicallegal. Interviews were based on a fully structured questionnaire consisting of three parts: the first dealt with differences between products sold by the Japanese multinationals domestically vis--vis the Middle East market; the second part examined the influence of environmental forces on Japanese product adaptations in the region; and the third focused on future trends in Japanese product policy. The measurement of these questions was based on five-point rating scales. The research instrument was written in English and, prior to the full-scale study, was pre-tested for clarity, length and ease of response. All collected data were subsequently edited and analysed using mean values and cross tabulations. Research findings This section presents, analyses and discusses the findings of the study in relation to the research questions raised in a previous section within the context of Japanese firms operating in the Middle East. These refer to the overall degree of adaptation, the product areas subject to alterations, variations in adaptation strategy, influences on product adaptations and future alterations in products. Overall degree of product adaptation Table II illustrates the degree of similarity/difference between products marketed in the Middle East by Japanese multinationals compared to those sold in their domestic market. Overall, Japanese products received little to moderate adaptations in the Gulf market (overall mean score 2.7 out of 5.0), implying the adoption of a relatively conservative adaptation policy. Although, prima facie, this contradicts to some extent previous assertions that Japanese multinationals tend to develop and modify products with particular foreign markets in mind (Kotler and Fahey, 1982), compared to earlier empirical findings relating to multinational corporations originating from the USA and Europe (e.g. Boddewyn et al., 1986; Hill and Still, 1984; Kacker, 1972), Japanese firms offer slightly more product adaptations. With regard to specific product aspects, the study revealed that labelling attracted the greatest degree of modification, followed by packaging, internal features, external characteristics and branding. These findings are slightly inconsistent with earlier research among US and European multinationals, which showed that the product dimension receiving most changes was that relating to external product characteristics, followed by packaging and labelling (Baalbaki and Malhotra, 1995; Hill and Still, 1984; Sorenson and Wiechmann, 1975; Ward, 1973).

Product area Whole product External characteristics Design Style Quality Dimensions Internal features Ingredients/parts Construction method Technical specifications Operating system Packaging Appearance Size Colour Type Labelling Language Symbols Text Instructions Branding Name Language Trademark Positioning

Total (n = 35) 2.7 2.5 2.4 2.4 2.4 2.8 2.6 2.2 2.7 3.0 2.5 2.6 2.5 2.6 2.6 2.7 3.3 3.3 3.5 3.4 3.1 2.4 2.3 2.8 2.3 2.3

Product type Consumer Industrial (n = 16) (n = 19) 3.0 2.8 2.8 2.8 2.4 3.0 2.5 2.2 2.6 2.7 2.3 3.0 2.8 3.2 2.9 3.1 3.8 3.6 3.9 4.0 3.6 2.8 2.7 3.1 2.5 2.8 2.4 2.3 2.1 2.1 2.4 2.6 2.8 2.2 2.8 3.3 2.7 2.2 2.2 2.1 2.3 2.4 2.9 3.0 3.2 2.9 2.7 2.1 2.0 2.5 2.1 1.9

Market experience Extensive Limited (n = 22) (n = 13) 2.9 2.6 2.6 2.5 2.4 2.9 2.8 2.4 3.0 3.0 2.7 2.8 2.7 2.8 2.7 3.0 3.5 3.5 3.5 3.7 3.3 2.6 2.5 2.9 2.3 2.7 2.4 2.3 2.1 2.2 2.4 2.6 2.3 1.9 2.2 3.0 2.2 2.3 2.2 2.3 2.4 2.2 3.0 3.0 3.5 2.9 2.8 2.1 2.0 2.6 2.3 1.6

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Note: Mean scores based on a five-point scale, ranging from very similar = 1 to very different = 5

Table II. Differences between products sold in the Japanese and Middle East markets

Product dimensions subject to alterations A closer examination of each product area revealed several interesting findings. With respect to labelling, label symbols exhibited the highest differentiation, not only among other labelling parameters, but also among all other aspects of the product; second in rank were alterations made to the label text, such as information on ingredients, production/expiry dates and manufacturing origin, followed by changes in the language written and instructions for use. All aspects related to packaging exhibited approximately the same degree of adaptation in the Middle East market. Overall, the packaging of Japanese goods sold in the region was slightly adapted, with the type of construction being the most adjusted aspect (mean score 2.7). As regards internal features, technical specifications were adapted most extensively, although the degree of modification was moderate (mean score 3.0); the way the product was constructed and its system of operation were only slightly differentiated in the

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Arab market, while the least adjusted area referred to product ingredients/ parts. External characteristics of the product, that is design, style and quality, were minimally adapted (mean score 2.4). Only size dimensions received slightly more adjustments, usually in the form of larger/economy sizes, this being attributable to the fact that the size of an average household in the region is larger compared to its Japanese counterpart (Vassiliou, 1980). Finally, among the brand dimensions examined, the language in which the brand was expressed attracted most adaptations, although this was relatively moderate (mean score 2.8). The brand name of the product was to a large extent unaltered, as were the symbols incorporated in the trademark. As far as brand positioning is concerned, this remained unchanged in the Middle East market. Variations in adaptation strategy Responses on product adaptation levels were subsequently analysed in accordance with product type and market experience of the participant companies. With regard to product type, the present study confirmed conclusions of earlier research (e.g. Samiee and Roth, 1992; Ward, 1973) that consumer products are subject to more adaptations compared to industrial goods. The only exception was internal product features, particularly technical standards and operating system, where the reverse pattern was observed, signifying the critical role of engineering parameters in selling industrial goods to overseas markets. As far as experience in the Middle East is concerned, the study consistently showed that firms with a long market presence tend to proceed with more extensive adaptations in almost all product aspects compared to recent market entrants. This is an indication of growing commitment and interest in this lucrative market which, however, is characterized by increasingly sophisticated, mature and demanding buyers (Rossides, 1994). Influences on product adaptations An analysis of the factors influencing product adaptation decisions in the Gulf market revealed a moderate impact overall, consistent with the previously observed conservative pattern of Japanese product strategy (see Table III). In descending order of impact, these were factors relating to the demographic, political-legal, physical, socio-cultural and economic environments. These findings partially concur with earlier research among US multinationals, which reported customer profile variations (e.g. Hill and Still, 1984; Ozsomer et al., 1991; Sorenson and Wiechmann, 1975) and government laws (Baalbaki and Malhotra, 1995; Boddewyn et al ., 1986; Kacker, 1972; Shipchandler and Terpstra, 1989) as being the most influential reasons for product alterations in foreign markets. Analytically, the effect of each environmental force on specific elements of the Japanese product strategy in the Middle East was the following: among demographic parameters, population size/growth exhibited a greater overall effect on product adaptation decisions. While population size and structure resulted in modifications to the external/internal product

Influencing factors Physical factors Natural conditions Climate Territorial size Demographic factors Population size/growth Household size Population structure Socio-cultural factors Language Tastes and habits Education Aesthetics Values and attitudes Religion Economic factors Disposable income Infrastructure facilities Economic situation Political-legal factors Technical standards Measurement units Legal restrictions Government controls Taxation policies

Product area Whole External Internal product characteristics features Packaging Labelling Branding 2.5 2.5 2.5 2.4 2.6 3.1 2.1 2.5 2.3 2.8 2.7 2.3 2.1 2.0 1.9 2.2 2.2 2.1 2.2 2.6 3.1 2.8 2.8 2.2 2.2 2.6 2.5 2.7 2.6 2.9 3.5 2.3 2.8 2.4 2.2 3.5 2.3 2.4 2.1 1.7 2.5 2.5 2.5 2.4 2.9 3.1 3.0 2.9 2.7 2.6 3.6 3.7 3.5 3.6 2.7 3.1 2.3 2.5 2.2 2.4 2.5 2.3 2.0 1.9 2.0 2.5 2.5 2.4 2.5 3.0 3.8 3.3 3.1 2.5 2.5 3.2 3.3 3.0 3.1 2.7 2.8 2.5 2.6 2.1 2.5 2.6 1.9 2.1 1.8 1.9 2.3 2.3 2.4 2.2 2.5 3.0 2.9 2.7 2.1 1.9 1.6 1.6 1.6 1.5 2.6 3.1 2.0 2.5 2.5 3.7 2.2 3.1 2.0 2.1 2.1 2.0 2.0 1.9 2.0 2.5 3.2 1.9 3.1 2.1 2.3 1.5 1.5 1.5 1.4 2.2 2.8 1.6 2.1 2.3 3.1 2.6 2.1 2.1 1.9 1.7 1.7 1.8 1.5 1.7 1.9 2.3 1.6 2.2 1.5 1.7

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Note: Mean scores based on a five-point scale, ranging from not influential at all = 1 to highly influential = 5

Table III. Factors influencing Japanese product adaptations in the Middle East

characteristics and labelling, household size affected packaging decisions more. An example of demographic effects is the Arab preference for Japanese vehicles with four doors and multiple seats due to large family size. With respect to political-legal factors, technical standards were the most influential, particularly affecting decisions on adapting internal product aspects. Indeed, the Gulf Standards Organization has, since its inception, issued standards for hundreds of products along US and British lines. Measurement units and legal restrictions were two other important parameters in this category. Least influential were government controls and local taxation policies, which, however, had a greater effect on external/internal product features. Physical parameters, namely the regions natural conditions, climate and territorial size, exhibited a relatively strong influence on both the internal characteristics and packaging aspects of the product. An illustrative case is that of a Japanese

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manufacturer who reported the use of a special tyre construction to conform to the tough driving conditions on Middle East roads. Another example is the tropicalization of the engine system of most Japanese cars sold in the area, owing to the prevailing high temperatures. Of the socio-cultural forces, language differences were among the most influential, particularly affecting such language-sensitive product areas as labelling and branding. Consumer tastes and habits exerted a similar effect, especially on external product characteristics. Education, aesthetics, values and beliefs, and religion had much less impact on almost all product aspects, the only exception being differences in education which, as expected, affected labelling adjustments more. For instance, labelling instructions were simpler and usually contained pictorial illustrations. Economic factors, comprising disposable income, economic situation, and infrastructural facilities, had the least effect on adaptation decisions across all product aspects. This can be explained in part by the economic prosperity in the region, which makes the economic environment similar to that of developed countries, such as Japan. Future product adaptations When respondents were asked to specify their future product strategy in the Middle East, the majority replied that they would proceed more or less as at present. The only exception regarded the external product characteristics, which were expected to undergo further adaptations, particularly with respect to design aspects. This is consistent with the earlier finding of the present study, revealing that this product area has so far been one of the least adapted by Japanese multinationals. As far as the remaining aspects of the product are concerned, minor modifications to internal features were planned, especially product construction method, technical specifications and operating system, while ingredients/parts would be adjusted less. A similar pattern was observed in the case of packaging and branding issues. Some minor adaptations to colour and type of packaging, as well as to the name, language and trademark of the brands sold in the Middle East, were proposed. However, these alterations were not expected to be extensive enough to be considered important. Labelling was the product area that would be the least adapted, as this product dimension had already received sufficient adaptations. Notably, some firms claimed that they would proceed with slightly more standardization of symbols and instructions on the product label. Summary and conclusions The purpose of this article was to shed light on the crucial issue of product standardization versus adaptation, with particular emphasis on the experience of Japanese multinational companies in the Middle East. The study revealed that Japanese products marketed in the region, on the whole, differ little or moderately from those sold in their home market. This approach could be justified on three major grounds: first, the fact that the Japanese usually design their products with the world market in mind, so that they require no serious

alterations when sold in specific regional markets; second, by keeping product adaptation costs to an optimal level, Japanese firms are able to gain a competitive edge and build an enviable market share; and third, it is possible that Japanese multinationals conceive other marketing strategy elements as being more important than the product, hence absorbing most of the adaptation efforts. The study also pointed to the fact that the degree of product adaptation is not uniform, but tends to vary not only among the various product areas but also among elements within each area itself. The finding that labelling attracted the greatest degree of modification, followed by packaging and internal features, implies that Japanese firms adapt those product aspects more that are less expensive to change, aiming to keep prices as competitive as possible. Moreover, it shows that they focus on adaptations that are easier and less time consuming to handle, thus permitting greater flexibility and a faster response to the market. Furthermore, it seems that Japanese firms tend to give priority to adaptations required by host government legislation, such as those referring to labelling and packaging requirements. Finally, these modifications were deemed necessary in generating sales, due to their immediate impact on customer awareness and understanding. Japanese product adaptation strategy was also found to vary in accordance with product type and foreign market experience. Specifically, the evidence given that consumer products are subject to greater adjustments compared to industrial goods denotes that the success of the former in overseas markets is more sensitive to international environmental forces than the latter. Also, of significance to product planners is the fact that manufacturers of consumer goods tend to adapt the outer aspects of the product more, while industrial goods producers place greater emphasis on inner aspects. As regards market experience, the finding that firms with a longer presence in the Middle East tend to adapt their products more, as opposed to newcomers, gives credibility to the postulation that the firms international business involvement is marked by increasing resource commitment (Johanson and Vahlne, 1977; Johanson and Wiedersheim-Paul, 1975). Factors influencing product standardization/adaptation decisions also exhibited a fairly moderate impact, which is consistent with the generally conservative pattern of Japanese product strategy. Notably, the effect of the regions environmental forces on product adaptation decisions has been diverse, having a different impact on each specific product aspect. The fact that demographic and political-legal factors exhibited the greatest influence overall implies that most of the adaptations undertaken by Japanese firms were to a great extent unavoidable and obligatory. Surprisingly, although one would expect socio-cultural factors to influence product adaptations strongly, because of the great disparity between the Arab and Japanese cultures, this was not validated in the study, thus contradicting findings of earlier research in the region which stressed the crucial role of these factors in adapting the marketing mix (Elbashier and Nicholls, 1983).

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Future Japanese product modification was expected to remain more or less at present levels, although it was anticipated that some further alterations would take place in areas currently being standardized, such as external product characteristics. This implies that Japanese firms will continue to pursue a conservative product adaptation policy in the Middle East, at least for the near future, despite the increasing sophistication, difficulty and protectiveness of this market (Leonidou, 1991). After all, such a strategy has proved successful for many years, thus giving Japanese firms no incentive to experiment with new product strategies. Future research guidelines Future research should explore further the product standardization versus adaptation issue within an international context, particularly in the light of its strategic role in corporate performance, competitiveness and even survival in foreign markets. As a first step, it would be advisable to incorporate in the unit of analysis not only Japanese firms, but also multinational companies originating from Europe and the USA. This would permit their product adaptation strategies to be compared and contrasted and their effect on international business performance to be monitored. Comparisons could also be drawn between multinationals from newly industrialized and developed countries, since it has been postulated that there are variations in their product adaptation strategies (Wortzel and Wortzel, 1988). An attempt should also be made to extend the analysis to other regional markets, such as the Pacific Rim, Eastern Europe and South America, in order to identify market-specific influences on product adaptation decisions. Of particular importance would be the undertaking of a comparative study among developed and developing countries, to examine differences in environmental effects on product alterations. Research should also broaden the scope of analysis in several directions: first, an attempt should be made to incorporate other product aspects, particularly those constituting the augmented product, such as after-sales service, installation and warranties, which provide a major competitive tool for contemporary business (Kotler and Armstrong, 1996). It would also be interesting to see how and why the companys product mix alters across different countries in terms of width, length, depth and consistency; second, the hitherto neglected elements of the marketing mix, namely pricing, distribution, and non-advertising promotools, should also be included into the investigation since they too have an important role to play in overall marketing impact (Douglas and Craig, 1992); and third, the standardization/adaptation issue could also be applied to other critical international marketing parameters, such as marketing research, market positioning and marketing organization. Another line of enquiry would be the investigation of variations in marketing standardization/adaptation strategy owing to factors specifically related to: industry, such as technological intensity, industry concentration and product life-cycle stage; organization, such as corporate culture, organizational

structure, and company life cycle; and management, such as leadership style, entrepreneurial skills and executive perceptions. It would also be interesting to see whether there are differences in product adaptation practices as regards various international business parameters; for instance, the mode of entering foreign markets (whether a marketing subsidiary, licensing, joint venture or wholly owned production), as well as the type of overseas market expansion strategy (whether concentration or spreading) can have a serious impact on marketing strategy alterations. Finally, it would be appropriate to widen the list of influencing factors in order to grasp their full effect on marketing standardization/adaptation decisions. One way of doing this is by adding more macroenvironmental parameters to the list used in this study; for instance, the host countrys production and consumer technology, as well as its marketing infrastructure, could have a major impact on marketing mix adaptations. An additional list of factors should also be incorporated, particularly those pertaining to the microenvironment of marketing prevailing in foreign countries, such as suppliers, competitors and the public. Finally, several dimensions of foreign buying behaviour, such as buying roles, shopping patterns and innovation adoption, should also be taken into account when examining product adaptation effects. Undoubtedly, the implementation of the above research guidelines would permit a more holistic, integrative and systematic approach in investigating the crucial issue of marketing standardization/adaptation in international markets.
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