Global Standardization as a

Success Formula for Marketing

in Central Eastern Europe?
Arnold Schuh
lilemlure does nol presenl a dear picltire of inlcniatioiial niarkelltiii stainlarcUzalion in
Central Eastern Europe. Although a tnore customized approach seems phmsible and is often reeoin-
mended. empirical evidence shows the contrary. This paper e.xamincs the ari>unients for markeling
program shmdardizalioii on the basis of case studies conducted with Western companies operating in
Central Eastern Europe and finds ihat the globalization philosophy is leading to a new interpretation
of this issue.
C
ompanies entering the emerging
markets of Central Eastern Eu-
rope (CEE) have to decide on the entry
and marketing strategies they shall fol-
low in these markets. They face the
challenge of coping with the tensions
resulting from efficiency motives asso-
ciated with the extension of a standard-
ized global marketing strategy and the
need to adapt their marketing effort to
local market conditions. Ten years after
the fall of the Iron Curtain the reform-
ing countries of CEEhere defined as
the Czech Republic. Hungary. Poland.
Slovakia and Sloveniacontinue to
move closer to a Western style democ-
Arnold Schuh. Department of Marketing. Vienna
University of Economics tjnd Business Administra-
tion (WU-Wicnj, Augasse 2-6, A-W90 Vienna,
Austria. Tel.: +43-1-31336-4608; Fax: +43-1-
31336-732 <Arnold.Schuh^wu-wien.ac.at>.
racy and market economy. The prospect
of integration into the Eur6pean Union
helps to further stabilize the economies
of the region. However, at a microeco-
nomic level a considerable gap in pur-
chasing power and overall product mar-
ket development still exists. Compared
to the European Union average of 100
the GDP per head figures (OECD 1995)
for the CEE-countries range from 30
(Poland). 36 (Hungary). 41 (Slovakia),
52 (Czech Republic) to 58 (Slovenia).
After the principles of the traditional
international marketing concept (e.g.,
Cateora, 1975), a pronounced global
marketing program standardization
understood as using a common product,
price, distribution and promotion pro-
gram on a worldwide basisdoes not
seem adequate. Given these differences
in market conditions, a standardized
Gluhal Standardization as :i Success Fonnuia 133
strategy would not seem to be an ef-
fective strategy for CEE {Kraljic.
1990; Springer. 1993). By employing
a more responsive international differ-
entiation strategy, the different levels
of market development and the differ-
ences in household income, customer
expectations and usage patterns could
be better addressed. Existing literature
on business and marketing strategies
for CEEand emerging markets on
the wholedoes not present a clear
picture of this issue. The overall im-
pression is that in many conceptual
writings a differentiated approach is
suggested (Czinkota. Gaisbauer. &
Springer. 1997). whereas, in contrast,
a surprisingly high degree of market-
ing program standardization is ob-
served in the few existing empirical
studies (Schuh. Klausegger. & Schre-
iber. 1994: Dahm, 1995).
The key to a better understanding of
the standardization issue lies in a
broader perspective. An exclusive
market-oriented perspective in which
success in a foreign market is attrib-
uted to a high responsiveness to the
local business environment and mar-
ket situation does not suffice to ex-
plain strategic decisions of interna-
tional firms. The decision for program
standardization has to include finan-
cial performance and competitive and
implementation aspects, too (Buzzell.
1968; Jain. 1989). The concern for
supply-side aspects fits very well with
the prevailing global marketing con-
cept. This concept emphasizes cost
advantages due to scale economies
and product standardization, the de-
velopment of leverage through prod-
uct, program and system transfer and
a strongly technology-driven product
development in strategy formulation
(e.g., Levitt. 1983; Douglas & Wind.
1987; Douglas & Craig. 1989; Yip.
1989). Possibly, the global marketing
concept offers the better explanation
for this issue. If this is true, the pre-
mises for a differentiation strategy
like the heterogeneity of business en-
vironments and markets, the signifi-
cance of nations as an international
segmentation criterion and the accep-
tance of the invariability of behavioral
differences have to be reconsidered.
The objective of this paper is to find
answers to the following questions:
Why do Western companies mostly
follow a global standardization strat-
egy in CEB? What is the business
logic behind it?
How do they cope with the different
and often opposing requirements re-
sulting from internal strategic con-
siderations and from local market
responsiveness?
To capture the impact of the internal
and external context on the standardiza-
tion issue, the case study method is
used. It is an adequate method for ex-
ploring the interrelations and trade-offs
in strategy formulation. The decision
patterns forming the followed market-
ing strategy in CEE are the subject of
the analysis. Eight international compa-
nies operating in the CEE markets were
analyzed. The paper presents a brief
literature background, the guiding
framework for research, and the results
of the study.
134 .loLirrui! ol" World Business / 35(2) / 200()
LITERATURE BACKGROUND
International Marketing Program
Standardization
The standardization issue of interna-
tional marketing strategy is not a new
topic. The subject has been broadly dis-
cussed since the niid-196()s (see over-
views of Walters. 1986: Jain, 1989). An
examination of these studies leads to the
following conclusions:
A differentiation has to be made be-
tween program and process standard-
ization (Sorenson & Wiechmann,
1975: Kreutzer, 1989). Process
standardization understood as the
standardization of decision-making,
data collection, planning and con-
trolling, reporting processes and of
organizational structurescan be
exercised even by multidomestic
firms that primarily pursue an adap-
tation strategy.
The standardization decision is not a
dichotomous one between complete
standardization and complete differ-
entiation. Program standardization
can be examined by at least four
dimensions, namely by business
functions, product nature (efficiency-
driven/culture-bound), marketing mix
elements and regional scope of the
decision (Quelch & Hoif, 1986).
Numerous relevant internal and ex-
ternal factors turn the decision into a
highly situation-specific issue. Among
these factors, product and industry
characteristics are paramount (Wind
& Douglas. 1986). Legal require-
ments, the conditions of product use
and consumer expectations iire key
environmental variables (Walters.
1986).
The consumer goods industry shows
a higher propensity to customize
than the industrial goods industry
(Hill & Still, 1984; Sorenson &
Wiechmann, 1975).
Rapid changes in technology and
greater emphasis on capacity utiliza-
tion favor global program standard-
ization (Samie & Roth. 1992).
MNCs benefit substantially from
standardization via cost reductions,
particularly in product design, pack-
aging and brand management (Buz-
zell. 1968).
International program standardiza-
tion is most feasible in settings
where marketing infrastructure is
well developed (Peebles. Ryans. &
Vernon. 1978).
Although policies of "total unifor-
mity" are relatively rare. MNCs tend
towards standardization of marketing
programs. The highest benefits are ex-
pected in product and brand policy.
Findings about advertising and other
promotional programs are mixed. Stan-
dardized pricing can be found in areas
where firms are faced with transnational
customers and where they are threat-
ened by parallel imports. Advantages of
program standardization are mainly
seen in cost savings (via variety reduc-
tion and standardization), in a coherent
brand image and in a more rapid diffu-
sion of products. The organizational
structure and the form of planning and
control over foreign marketing pro-
grams by headquarters are other medi-
ating variables. To implement globally
standardized programs a higher degree
Global Si;indardi/ation as a Success Formula 135
of coordination and centralization is
necessary (Brand & Hulbert. 1977;
Quelch & Hoff, 1986; Kreutzer &
Raffee, 1986).
Marketing Strategies for CEE
The existing environmental differ-
ences between CEE and Western mar-
kets, as well as the impact of the tran-
sition process from a command to a
market economy on marketing deci-
sions, constitute the agenda for research
in CEE (Schuh & Springer, 1997). Re-
search in this field is foremost charac-
terized by a macromarketing perspec-
tive. Marketing is seen in close relation
to the local business environment and
follows a more or less environmental
determinism. Therefore, for many re-
searchers the analysis of the economic
aspects of the transition process is the
starting point for behavioral and mana-
gerial studies (Shama, 1992; Hooley.
1993). As business and marketing strat-
egies provide a matching function be-
tween the organizational capabilities,
resources and goals and the relevant
business environment, strategy-related
studies are a popular research area
(Schuh & Springer, 1997).
Exclusive research on marketing pro-
gram standardization is rare. Typically,
the standardization issue is part of an
overall study on entry and penetration
strategies for CEE (Quelch. Joachimst-
haler. & Nueno, 1991). Market entry
strategies that encompass the compari-
son of different entry methods and the
choice of the adequate method are one
of the strongest areas in research. Be-
fore 1989 a direct presence of foreign
companies in CEE was impossible. The
opening of their economies, the aboli-
tion of the foreign trade monopolies and
the privatization of state-owned compa-
nies created a new situation and new
opportunities for foreign companies to
enter the market. Studies show that
commitment to CEE markets was in-
creased step by step ("incremental in-
ternationalization") depending on the
progress in the transition process (En-
gelhard & Eckert. 1993; World Bank,
1996; Czinkota, Gaisbauer, & Springer.
1997). Foreign companies pursue mar-
ket entry methods with capital engage-
ment preferably in those reforming
countries that have reached an advanced
level of transition. Low risk entry meth-
ods like exporting are being employed
in those markets that are still unstable
and more or less at the beginning of
transition (Hooley, Beracs, & Kolos.
1993; Schuh. Klausegger, & Schreiber.
1994; Shama. 199.^). The growing sta-
bility of the CEE economies and their
convergence towards West European
structures and standards will let us see
more direct entry patterns in the future.
Research on international marketing
standardization is embedded in a gen-
eral strategic context. Although custom-
ized approaches are often regarded as
the only ones feasible, it seems that the
majority of foreign companies bet on
standardization. Classic country-related
differentiation can only be found in the
consumer goods industry and is often
connected to the acquisition of local
companies (Dahm, 1995). In addition to
the region-specific literature, research
on marketing in emerging or transi-
tional economies offers a further empir-
ical and conceptual background on mar-
keting strategy issues, as the criteria
136 Jourriiil of World Business / .^SC) / 2O(H1
defining an emerging economy also ap-
ply to the countries of CEE. Batra
(1997) as well as Arnold and Quelch
(1998) emphasize a multi-tier product
strategy to serve not only the high-end
segments but also the middle and lower
price segments of the markets. They
suggest that foreign companies should
pay more attention to the affordability
of (consumer) products given the low
average household income in these
countries. High levels of mass commu-
nication and an extensive presence in
the available distribution channels are
regarded as success factors. Table 1
gives a brief overview of the relevant
literature on this subject.
FRAMEWORK EOR DETERMINING
MARKKTIN*; PR(K;RAM
STANDARDIZATION
Based on the findings of the literature
review, a framework for explaining the
degree of marketing standardization in
CEE has been developed (see Eigure 1).
It is designed to serve as a guideline for
the exploratory study. The purpose of
the framework is to indicate relevant
factors that are supposed to affect mar-
keting program standardization.
The framework is built on the follow-
ing considerations:
The degree of marketing program
standardization is determined by two
main forces, namely by characteris-
tics of the national market and its
business environment and by firm-
related aspects (Jain. 1989). CEB
markets can be seen in light of
progress in transition process, of the
perceived risk for doing business in
a country, ease of market entry,
"quality" of target market (size, po-
tential, competitive situation, con-
sumption patterns) and state of mar-
keting infrastructure. Company
related aspects are corporate goals
and culture, nature of product, stra-
tegic orientation towards interna-
tionalization, organizational struc-
ture and configuration of value
activities and financial performance.
Companies use a wider spectrum of
management tools and mechanisms
than the marketing-mix to adjust to
local environments. Target market
selection, choice of entry method
and timing decisions are closely in-
terrelated with the marketing-mix
decision and predetermine the avail-
able strategy options and the effec-
tiveness of the marketing-mix strat-
egy. Therefore. the program
standardization decision has to be
analyzed together with these other
strategic marketing decisions.
RESEARCH DP.SI(;N
As the objective of the study is explor-
atory, the case study approach was cho-
sen. The use of case studies is advanta-
geous when the analyzed phenomenon
is highly context related and develop-
ments over time are to be captured (Yin.
1994). By using multiple sources of ev-
idence we tried to circumvent some of
the difficulties typical for strategy re-
search. Eight case studies with West
European and U.S.-based firms (3M In-
ternational, Agrana AG, BBAG, Eeiix
Austria, Henkel CEE. McDonald's,
Ogilvy & Mather, Philips Electronics)
Gkibul Standardization as a SIIUL'CSS h'ornuila 137
Table 1
Overview of Literature on Marketing Strategies for Transitional Economies and for
CEE
Strategy Dimension Findings Source
Motives Ibr market entry Tapping the growth potenlial: extending ihe presence in the
global market; defensive move lo block competitors;
markci oriented objectives are more important than the
exploitation ol cosl advantages.
Exporting as low-risk strategy is still the preferred entry
method; FDI becomes now more popular due lo
privaii/ation programs and progress in transilioii: trend to
increased local value-added lo stay eompelilivc; joint-
ventures arc often "transitional modes" of market entry as
foreign partners buy out local partners; low inveslment
levels indicate a cautious entry behavior.
Market entry method/
Mode of operation
Degree of standardization
of nuirkeiiniz-mi\
Segmentation and
positioning strategy
Tiniiny {)f entry
Priorities in marketing-
111 i\ strategy
Standardization of markeling-itiix is frequently observed
althoujih differences in market devclopnienl and consimier
expectations obviously support differeiitialion: degree of
standardization depends on product type and inleniational
scope of brand.
High-end segments arc typical target market for Western
emphasis is on brand image and product quality; packaged
goods manufacturers increase coverage by offering
international and (aequired) local brands.
Firsl-mover advantage is critical to success: restricted
access lo market, referenee status of first brand and higher
level of brand loyalty; however, followers enjoy a lower
risk exposure and "frce-ridcr" effect.s; erosion of first-
mover advantage in the medium term.
High disiribulion intensity necessary as availability moves
sales: need Ibr multiple marketing partners rather than
exelusive distributor; brand extensions of sueeesslul brands
("Umbrella branding"); multi-tier product strategy to cover
high- and middle-price segments of market; high pHce
sensitivity favors "value-for-inoney" and competitive
pricing; TV is the most effective media Ibr consumer
goods.
Engelhard & Eckcrl,
1993: Dahm. 1995
Queleh, Joaehimsthaler
& Nueno. 1992;
Engelhard & Eckert.
1993: Nienians. 1993:
Wesnil/.er. 1993:
Shama. 1995;
C/inkota, Gaisbauer &
Springer. 1997
Austin. 1990: Springer.
1993: Schuh.
Klausegger &
Sehreiber. 1994;
Dahtii. 1995
Shama. 1992; Schuh.
Klausegger &
Schreiber. 1994: Batra.
1997
Queleh. Joachimslhaler
& Nueno. 1992;
Dahm, 1995; Becker
& Baker 1996; Arnold
& Queleh 1998
Heyder. Miisiol &
Peters. 1992; Shama.
1992: Stippel. 1992;
S/najder. 1993: Tiirks
& Tram. 1993;
Hooley, 1993;
Schweiger &
Friederes. 1994: Batra,
1997; Arnold &
Quelch. 1998
that have established significant opera-
tions in CEE markets were conducted
between 1996 through 1998. The re-
gional focus was on the Central Euro-
pean countriesHungary, Czech and
Slovak Republic, Poland, and
Sloveniathat are the most advanced
in terms of economic liberalization
(World Bank, 1996). Collectively, these
firms represent a cross-section of com-
panies that market products and ser-
vices to consumer markets and
business-to-business markets. The case
studies include a general company pro-
138 of World Business / 35(21 / 2(HW)
Figure 1
Framework for Determining International Marketing Program Standardization.
Internalfactors External factors
Corporate goals
and culture
Intemational
orientation
Strategic marketing decisions
Nature
of product
Financial
performance
Organizational
structure
Marketing
objectives
Target
market
Degree of
marketing program
standardization
Market
entry
method
file, a history of business in CEE and a
documentation of strategic marketing
decisions. Observations in each case
were generated through personal inter-
views with managers of corporate or
regional headquarters and, in a few
cases, with CEE subsidiary manage-
ment. Further insights were obtained
from annual reports, industry reports,
other published case studies and trade
literature. Table 2a and b give a brief
overview of the examined firms and
their CEE marketing strategy character-
istics.
FINDINGS
Marketing Strategy and Marketing
Program
Six of the eight cases show a high
degree of marketing program standard-
Timing
of market
Progress in
transition
process
Perceived
business risk
Ease of
market entry
,,Quality" of
target market
State of
marketing
infrastructure
ization. Only in two casesin the
FMCG-company Henkel and in the beer
company BBAGa "parallel strategy"
or "multi-tier product strategy," that is.
the parallel offering of international and
acquired local brands, is pursued. The
acquired local brands are used to cover
the medium- and low-price or in other
words the "value-for-money" segments
of the market. However, a highly stan-
dardized approach is also employed in
the international brand units of Henkel
and BBAG. In the case of the two ex-
amined service companies, McDonald's
and Ogiivy & Mather, due to the nature
of the product and its mandatory local
production standardization is strongly
related to processes that aid in program
development and implementation.
Although operating in different busi-
nesses, similar decision patterns leading
Global Standardi/iilion as a S Formula 139
DJ}
I
I
T3
I
a.
o
tl
O
a
c
G
B
=
L
1>
'>
t
* =
o
a
Ul
o
U
>
a
<
>
Q u: 2
Q E
UJ
u
c
I
S
I
.
>
LU
U
-
u -2
</5 gj 3
o o
T3
OJ
>
cd
u.
<
C
i
x:
^
i>
J=
2 ^
Cu P
c
m
3
; ^
TU
S
a
l
W O
.a- i '-
b -F o ^ ' s
1*
c -J O
^ S _ T3
CL C
:? UJ o
Di U O
3 "* U
2 E -E
G
l
.^ f= >
O UJ .= a.
i _,. 7^ "t^
"n :c E
X a ^
Q o
- [iJ
c U ^
E ^
u d. E
1
Q,
a
S ' J
o
a.
c .2 g
2 i f5
li I
I / ;
CJ
p
r
o
B
i
c
y
-
p
o
l
X
'E
CO
o
a
CJ
r
e
l
1
. 3
u 2
Is y:
C. ^
tij .E
UJ
UJ
u
c
o
ij
L.
a.
i i C
00 E J= .jJ 5 o =
5 g-^ -^
15 2 1 r^
" = = &
7^ -^ 2 5 >
UJ
00 C S
"2 00 d V
"3 - * -3 2f
^ ' o 1 ^
X H >
UJ
w
o
c
2
Cn
00
c
o
140 JoLirnal of World Business / .^5(2) / 20(K)
Of)
c
C
H
c
o
u
c
4>
X
c
U
N
Id
c V
o
a.
1
c
CJ >
'
2
a
r
i
UJ
UJ
u
c
u
E
<u
.c
' c.
^ t*
1
E
ra
o
O
io
3
e
n
t
ra
E
ra
E
i
o
n
ra
u
a
o
iv-
o
^ ^ - - t - - h ,w_^
^ < CD /
I-
o .
C ra
^ ^
-a -^
a. Q
d
E
.^
c
c
e
x
p
.2
X
3

UJ
+
c
i ^ ra
N o
U W;
.E >
"a
i
o
n
-a
o
Q.

^n
'1
X
a.
ra
V.
VI
CJ
; j
X
3J
I
O
c
5
-y.
c
'5;
3
.C
^
O
5
GC
c
'ir.
UJ
u
E =
I I
S -^ X LLJ Q
N
UJ
UJ
O
o .:i
ra ,^
P ra
o
E
o
DC
: ^
)
OJ
>
o
y
i5
, ,
2
y.
ly.
_3
s i =
LLJ
UJ
U
UJ
UJ
O
.E
1 i
t '-'
CD
X
>
a.
c
a
o
' c
3
o
: ^
^ -
Li -
;>^
Wj
u
ra
ir.
E
3
CL
3
g
r
o
at
3
ra
c
'ra
c
Z
! UJ
.-- UJ
in:
m
e
_ - c ^
c- 5
C X:
. -q o
ra 3
E O
1/: _J
= - ra
S ^ ^
Global Standardi/ation Js a Success Komiula 141
to a standardization strategy can be
identified. All companies studied follow
(in their international brand units) a
value-oriented strategy and attempt to
stay away from price-based competi-
tion. They stress the superior quality
and performance of their products and
build on the brand image of being a
leading Western company or even a
world-class company. A strong global
brand identity allows and at the same
time requires a common marketing ap-
proach across markets. Therefore, the
core product and the brand elements
remain unchanged, slight adjustments
can be found among the more "periph-
eral" elements (e.g., packages, labeling
contents). The price position of the non-
service products is close to the levels in
West European markets. A common
European price policy (e.g.. in the form
of an "European price corridor" at 3M
and Philips) is supposed to protect the
companies against the threat of reim-
ports. But this leads to a difficult price
positioning in the price sensitive CEE
markets where local brands are often
sold at half the price or even less. As a
consequence, the products are mainly
targeted at the affluent middle and up-
per class or, in industrial goods markets,
at the biggest companies of a country.
Among the latter, the firms that are fully
or partly owned by Western companies
are of major interest. Especially service
companies like Ogiivy & Mather follow
their Western multinational clients into
the CEE markets or even "sell" them
the entry into these markets.
Moving product and brand position-
ing of international brands towards the
lower priced segments of the market is
regarded as a strategic mistake. The
perception of Western products by CEE
consumers, company image and values
and the cost structure draw them auto-
matically to the high-end segment.
Given this "natural" positioning in the
high-end and quality segment, the firms
try to skim the (small and overcrowded)
market. Other typical strategies include
the education of prospects and custom-
ers to appreciate better quality and per-
formance (and to be willing to pay for
it). In this strategic "strait jacket." the
praised pioneering strategy becomes an
important means for a company to dif-
ferentiate itself from the host of West-
ern competitors.
Adaptation to I.ocal Markets
Adjustments in the marketing-mix
occur mainly among the noncore ele-
ments and are often kept to a minimum.
The following areas and mechanisms
were found:
Labeling content, package design
and names of consumer products are
changed to meet legal requirements.
Product instructions are translated
into the local language.
The product-mix offered in the na-
tional market is adapted to the local
market by "creative selection."
Working together, local and regional
management select, from the whole
range offered, those products that
have the highest purchase probabil-
ity in a national market. In the case
of 3M even the business-mix is cho-
sen by the local management (e.g.,
3M Poland currently carries about
9,00() items in its portfolio out of the
total 60,000 3M products).
142 Journal or World Business / 35(2) / 2()(K)
This principle of "creative selection,"
also called "opting in/opting out ap-
proach," is used in the communications
area too. In this case, a group consisting
of local and regional managers and ad-
vertising agency representatives selects
those TV commercials or promotional
materials from a centrally produced
portfolio that tit the specific country's
market best. Another approach in com-
munications is "pattem advertising" in
which the creative idea and core mes-
sage remain the same, only how it is
carried out is adjusted to different de-
grees of brand awiireness. consumer at-
titudes, usage pattems and cultural and
legal restrictions.
Regional management centers {Phil-
ips Electronics, McDonald's, Hen-
kel CEE, Ogilvy & Mather) are an
attractive organizational device to
transform a global strategy to re-
gional characteristics. They allow
the pooling of the resources {e.g.,
production, logistics and delivery
systems), a better exploitation of
market similarities and provide sup-
port and expertise to the local of-
fices. Because CEE mainly consists
of small states with small markets,
geographic concentration of busi-
ness activities helps to reap econo-
mies of scale and scope. The estab-
lishment of regional management
centers also seems to mark a transi-
tion point, namely from a rather op-
portunistic to a strategic behavior in
the marketing to CEE countries.
Internal and External Context
Compared with the framework in
Eigure 1, which we used as a guideline
for our research, the factors "progress in
transition process", '"perceived business
risk", and "ease of entry" were not re-
ally decisive in our sample. The transi-
tion process to a Western style democ-
racy and market economy is seen as
irreversible. The countries in our sam-
ple are the most liberalized among the
transition economies and a major polit-
ical crisis in this region is not expected.
The other factors vary in relevance. Fig-
ure 2 highlights the critical internal and
external context factors as well as the
strategic marketing elements that affect
the marketing program standardization
decision. Among the internal factors,
the existence of a globalization or re-
gionalization strategy and strong corpo-
rate values favor a higher degree of
marketing standardization. In the strate-
gic plans of all studied firms, the emerg-
ing markets play a major role in corpo-
rate growth and long-term viability.
Their goal is to develop their business
in the local markets and to achieve at
least similar levels of market share and
brand awareness in CEE as in their
home markets. Superior product and
process technology combined with fi-
nancial strength and marketing
excellenceespecially in the case of
the global firms 3M. McDonald's, Phil-
ips Electronics and Henkelgive them
a competitive advantage vis-a-vis local
competitors. The activities and further
increasing market penetration of West-
ern companies in CEE (which also in-
cludes the retail, transportation and me-
dia scene) will, in the long run, lead to
the emergence of similar market struc-
tures and marketing infrastructures as in
Western Europe.
Global Standardization as a Success Formula 143
Figure 2
Critical Context Factors and Marketing Strategy Elements That Lead to a High
Program Standardization in CEE.
Critical internalfactors
Existence of a
globalization
strategy
Strong corporate
values
Balancing of
profitability and
risk considerations
Typical elements of a
standardization strategy for
CEE markets
Value-based positioning
{quality, performance, image)
Product and brand elements
and price positioning
are highly standardized
Pioneering strategy helps to
differentiate from competition
High-end segments are
"natural" target markets
Exporting as entry method
Areas and mechanisms
of adaptation
Adaptations of non-core elements
(packaging, sales promotion)
..Creative selection"
(product-mix, advertising campaigns)
,,Waiting for the market"
Regional management center
Critical external factors
Existence of
similar and trans-
national customers
Appreciation of
Western products
and life-style
Interdependence
with West
European markets
Currently small
market (and sales)
volumes
Prospect of
integration into
European Union
Strong corporate cultures and man-
agement practices with regard to qual-
ity, innovation and product perfor-
mance (e.g.. the "quality, service,
cleanliness and value" principle of Mc-
Donald's) are a further determinant of
marketing standardization. Deviations
from these core values are not tolerated
even when local conditions would de-
mand them (e.g.. sacrifice quality for a
lower price). A good example of the
impact of the strategic orientation on
marketing standardization is 3M, which
follows the practice of exporting Amer-
ican products that have global uses
rather than developing products for the
global marketplace. Although profit-
ability and risk considerations were not
shared with us, it is evident that the
balancing of investments and returns as
well as the management of risks in-
volved is a major concern. The follow-
ing are indicators of a risk averse and
cautious attitude and often a tense fi-
nancial situation: the defensive and of-
ten opportunistic approach in the first
stage of market penetration, the incre-
mental internationalization pattern, the
144 Juurniil 1)1 World Business / 3?(2) / 2{X)0
tendency to cooperate with local and
international partners and the reluctance
to invest heavily up-front in the mar-
kets. Marketing program standardiza-
tion fits excellently into this picture as it
keeps investments, additional costs and
risks low (when combined with export-
ing).
Perhaps surprisingly, several charac-
teristics of the CEE markets favor pro-
gram standardization too. The existence
of similar customer groupsbe it the
affluent local middle and upper class or.
in business-to-business markets, the
subsidiaries of Western companies
facilitate a strategy transfer, sometimes
eveti demand it. However, these seg-
ments account today for only a small
percentage of the total market (esti-
mates range from 10 to 15% of popula-
tion), so that market volumes anddue
to the fierce competition in most prod-
uct marketsalso sales volumes are
currently very low. When sales volumes
are low, profitability is also depressed
(considering the small profit margins of
an export strategy and the costs for run-
ning the local sales offices) and this
leaves no room for expensive product
adjustments. Geographic proximity to
Western Europe and a growing interde-
pendence of the markets (via increasing
tourism, existence of media overflow,
and retail chains operating in both re-
gions) force international marketers to
stick to Western price levels to avoid
cross-border shopping and parallel im-
ports. The favorable progress in the
transition process and the prospect of
integration into the European Union by
2005 have caused Western companies
to assume that the CBE markets will
constantly become more similar to
Western markets as far as market
structure and buying behavior (e.g.,
consumption/usage rates, quality con-
sciousness, brand loyalty) are con-
cerned. Based on this assumption they
seem to be "waiting for the market."
That means they are waiting until the
income situation and standard of living
improves and broader segments of the
population can afford their products.
CONCLUSIONS
The analysis of the case studies offers
an explanation for the reasons why for-
eign companies favor marketing stan-
dardization and how the various mar-
keting decisions are interrelated. It
provides a better understanding of why
Western companies reiy so heavily on
international marketing program stan-
dardization although market conditions
seem to favor localization. It is hard to
say if marketing program standardiza-
tion is a success formula in terms of
(short-term) profitability. But the study
shows that it is popular among Western
companies entering CEE and that the
underlying business logic is plausible.
One lesson is: Don't look only at the
market side. To understand the stan-
dardization decision, internal aspects
have to be linked to market characteris-
tics. The preference for a standardized
marketing strategy is rooted in the con-
ception that
Most CEE countries are small mar-
kets (except Poland) where customi-
zation does not pay off
These markets will converge to
West European market structures
Global StandardizLition as a SUI:L-OS.S I-onuula 145
and rules within the next decadeso
why invest in a "transitional" strat-
egy?
A differentiated marketing strategy
is inefflcient because it does not uti-
lize synergies and cost saving poten-
tials and would involve a lot of risks
(e.g., parallel imports, brand image
dilution)
Market structures and consumer be-
havior can be changed over time.
Western retailers, media groups,
banks, forwarding agents and other
marketing service providers operat-
ing in CEE are important change
agents. The massive market entry of
Western firms, thousands of product
launches and heavily funded promo-
tion campaigns have steadily "west-
ernized" the product, distribution
and media scene in these countries.
The case studies show that marketing
strategies for CEE are part of the glob-
alization strategies of the MNCs. Under
a global philosophy cost arguments and
competitive aspects gain in importance
at the expense of market related aspects.
International differentiation occurs
along other dimensions: the cross-
national orientation at customer groups,
applications and regions, the so-called
"intermarket segmentation" (Jain,
1990). outweighs the traditional think-
ing in country market dimensions. Na-
tional differences can, to a certain ex-
tent, be satisfied by a huge centrally
developed assortment covering differ-
ent price, application and lifestyle seg-
ments. In some product categories like
food, beverages or detergents the cov-
erage of mass-markets by a local assort-
ment seems to make sense. The exam-
ples of Henkel CEE and BBAG show
that a multi-tier product strategy is an
attractive strategy among Western con-
sumer goods marketers as it enables
them to cover also lower price segments
of the markets and to participate in var-
ious market developments. On the other
hand, assuming a continued conver-
gence of CEE markets to Western mar-
ket standards and structures, the "paral-
lel strategy" runs the risk of becoming
strategically obsolete. Even these firms
try to "regionalize" their local brands to
overcome disadvantages in scale and
scope. Their example shows us how
hard it is to escape the prevalent "global
business logic." In any case, the context
of the transitional economies of CEE
provides an excellent opportunity to ad-
dress the assumptions and propositions
of the international marketing program
standardization again.
RKFKRENCES
Arnold. D. J. & Qiielch. J. A. (1998). New
strategies in emerging markets. Sloan
Mamigeineni Review. 39i?i): 7-20,
Austin, J. E. (1990). Managing in developing
counlries. New York: The Free Press.
Batra, R. (1997). Marketing issues and chal-
lenges in transitional economies. Journal
of Inlernaiional Marketing. 5(4): 95-114.
Brandt, W. K. & Hulbert. J. M. (1977). Head-
quarlers guidance in marketing strategy in
the multinational subsidiary. Columbia
Journal of World Business. 12(4): 7-14.
Cateora, P. (1975). International marketing.
Homewood, IL: Irwin.
Czinkota. M. R.. Gaisbauer, H.. & Springer, R.
(1997). A perspective on marketing in
central and eastern Europe. The Interna-
tional Executive, 39{(y): 831-848.
Dahm, M. (1995). Strategische Marktbearbei-
tungsentscheidungen internationaler
146 Journal of World Business / 35(21 / 2()00
Markenarlikelunternehmen am Beispiel
Ungarns. Der Markt. 340): 122-132.
Douglas, S. & Wind. Y. (1987). The myth of
globalization. Columbia Journal of World
Business. 22(4): 19-29.
Douglas, S. & Craig. S. C. (1989). Evolution of
global marketing strategy: Scale, scope.
and synergy. Columbia Journal of World
Business. 24(3): 47-59.
Engelhard. J. & Eekert. S. (1993). Marktein-
trittsverhalten deutscher Unternehmen in
Osteuropa. Der Markt. 32{4): 172-188.
Heyder, H.. Musiol, K. C. & Peters, K. (1992).
Advertising in Europe -attitudes towards
advertising in certain key east and west
European countries. Marketing and Re-
search Today. 20(1): 58-67.
Hill, J. S. & Still. R. R. (1984). Effects of
urbanization on multinational product
planning: Markets in lesser-developed
countries. Columbia Journal of World
Business, /9(2): 62-67.
Hooley. G. (1993). Raising the Iron Curtain:
Marketing in a period of transition. Euro-
pean Journal of Marketing. 27( 11/12):6-
20,
Hooley. G. J., Beracs. J.. & Kolos, K. (1993).
Marketing strategy typologies in Hun-
gary. European Journal of Marketing.
27(II/12):8()-IO1.
Jain, S. C.(1989), Standardization of interna-
tional marketing strategy: Some research
hypotheses. Journal of Marketing. 53{\):
70-79.
Kraljic. P. (1990). The economic gap separating
east and west. Columbia Journal of World
Business, 25(4): 14-19.
Kreutzer. R. (1989). Global Marketings
Konzeption eines liinderiibergreifenden
Marketing. Wiesbaden: DUV.
Kreutzer, R. & Ratfee, H. (1986). Organisato-
rische Verankerung als Ertolgsbedingung
eines Global Marketing. Thexis. ,?(2): 10-
21.
Levitt. Th. (1983). The globalization of mar-
kets. Hanard Business Review. 61(3):
92-102.
Niemans. J. (1993). Market entry approaches
for central Europe. Journal of Business
Strategy. 14(2): 26-32.
Peebles. D., Ryan.s, J.. & Vernon, I. (1978).
Coordinating international advertising.
Journal of Marketing. 42{,\): 28-34.
Quelch, J. A. & Hoff, E. J. (1986). Customizing
global marketing. Harvard Business Re-
view. 64(?>): 59-68.
Quelch. J. A.. Joaehimsthaler, E., & Nueno,
J. L. (1991). After the wall: Marketing
guidelines for eastern Europe. Sloan Man-
agement Review. 3!(A): 82-93.
Samiee. S. & Roth, K. (1992). The influence of
global marketing Standardization on per-
formance. Journal of Marketing. 56(4):
1-17.
Schuh, A.. Klausegger. C, & Schreiber. M.
(1994). Aktuelle Problemfelder und Strat-
egien osterreichiseher Unternehmen bei
der Marktbearbeitung in Mittel-
Os,\QmoxiH. Der Markt. 33{4): 178-190.
Schuh, A. & Springer, R. (1997). Marketing in
central and eastern Europe: An assess-
ment of past and future research. In P.
Chadraba, & R. Springer (Eds.), Proceed-
ings of the 5th annual conference on mar-
keting strategies for central & eastern
Europe (pp. 4-19). Vienna: WU-Wien.
Schweiger. G. & Friederes. G. (1994).
Markenaufhau in Osteuropa. Markenar-
tikel. I994{\\): 512-515.
Shama. A. (1995). Entry strategies for U.S.
firms to the former Soviet bloc and east-
ern Europe. California Management Re-
view. ,f7(3): 90-109.
Shama, A. (1992). Transforming the consumer
in Russia and eastern Europe, Interna-
tional Marketing Review. 9(5): 43-59.
Sorenson, R. Z. & Wiechmann, U. E. (1975).
How mullinationals view marketing stan-
dardization. Harvard Business Review.
53(?>): 38-47.
Springer. R. (1993). Markteintrittsentscheidun-
gen fiir Osteuropa. MarketingZeitschrift
fiir Theorie und Praxis, 15(4): 259-270.
Springer. R. (1995). Market entry and market-
ing strategics for eastern Europe. Journal
of East-West Business. /(3): 67-104.
Stippel. P. (1992). Wer hat den Kopf frei fur
Osteuropa? Markenartikler als Pioniere,
Absatzwirtschaft. 35(2): 34-47.
Sznajder, A. (1993). Marketingaktivitaten der
Global Standardization as a Success Formula 147
Konsumgiiterhersteller auf dem polnis-
chen Markt. in B. Tietz, & J. Zentes
(Eds.). Ost-Marketing: Erfolgspoten-
tiale Osteuropdischer Konsumgiiter-
mcirkie (pp. 159-192). Diisseldorf:
Econ Verlag.
Turks, M. & Trani, M. (1993). Konsumgulerdistri-
bution in OstcuropaErlblgversprechende
Vertriebsoptioncn fiir wcstliche Kon-
sumgulerhersteller. In: B. Tietz. & J. Zentes
(Eds.). Ost-Marketing: Eifolg.spotentiale os-
leiirojxnscher KonsumgUlennarkte (pp. 247-
274). Diisseldorf: Econ Verlag.
Wallers, P. G. (1986). International marketing
policy: A discussion of the standardiza-
tion construct and its relevance for corpo-
rate policy. Journal of International Busi-
ness Studies, 17(2): 55-69.
Wesnitzer, M. (1993). Markteintrittsstrategien
fur OsteuropaKonzepte fur die Kon-
sumgiiterindustrie. Wiesbaden: Gabler
Verlag.
World Bank, (1996). From plan to market.
World developnienl report. 1996: Wash-
ington, DC: Oxford University Press.
Yip, G. S. (1989). Global strategy: In a world of
nations? Sloan Management Review, Eall,
1989: 29-41.
148 Journal of World Business / 35(2) / 2(H)()