Managing a companies’ own management style?

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Managing a companies’ own

management style?

A case study of Ikea and Wal-Mart in China and Japan

University of Groningen

International Business and Management Faculty of Economics and Business

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Master thesis IB&M

ABSTRACT

It is important for a company to have a successful business worldwide, if it has a set of internationally transferable firm specific advantages (FSA’s). This master thesis is focused on exploring the extent to which Ikea and Wal-Mart face difficulties, when transferring their FSA’s to their Chinese and Japanese subsidiaries. The research question that will be answered in this thesis is: To what extent is it necessary to adjust the management style when

expanding abroad? The outcome of this research is that both companies were able to use

their management style in their Chinese subsidiaries, whereas in Japan only Ikea was able to implement their management style. Wal-Mart had to adapt their management style. Both companies were most likely able to use their management style in China due to the fact that the Chinese management style is changing towards a more western style. There are probably two reasons why both companies had a different management style outcome in Japan. The first one is the fact that the Japanese management style is dependent upon the Japanese culture and the second one is the fact that Japanese do not adapt their management style. Basically Japanese are not open for changes. For a foreign company to fit within Japan, they will implement, sooner or later, aspects in their management style which belong to the management style/culture of Japan. This is also what Wal-Mart did. The fact that Ikea used aspects in their management style which are also common in the Japanese management style is most likely the reason why Ikea did not had to adapt their management style in Japan.

Keywords: FSA’s, Culture, Management style, Marketing strategy, Performance, Ikea,

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1. INTRODUCTION AND PROBLEM INDICATION

A lot of companies are expanding their business abroad. A company which expands abroad creates value and is able to operate in profitable new markets. Furthermore expanding abroad increases the competitiveness of a company and companies have access to manufacturing innovations and new technology (Verbeke, 2009; Hollensen, 2008). Especially Asia and more specifically China are becoming more attractive for foreign companies to start a business. The reason why so many companies are expanding their operations to China is due to the fact that China is the fastest growing economy in the world (Tse, 2010; Johnson and Tellis, 2008). Furthermore China has an open market place and therefore it is able to attract companies from abroad. This results in the fact that there is strong competition but also a lot of business opportunities. What Tse (2010) argues is, that the integration of China with the world economy is growing and the undergoing changes of China have resulted in an array of possibilities for companies from abroad. Besides Tse (2010), Hofstede (2007) also argued that Asian countries are often becoming the location for (new) companies. This is also what Johnson and Tellis (2008) argued.

However, companies also have to keep the cultural distance in mind. With cultural distance is meant: “measuring the extent to which different cultures are similar or different” (Shenkar, 2001:519). According to Verbeke (2009) cultural distance is divided into four categories:

Cultural distance: these are differences in language, norms and religion. But also differences in the way of communicating and the way decisions are made (Hollensen, 2008). Thus basically differences in cultures.

Administrative distance: this kind of distance is low if countries have political ties or a shared/common history.

Geographic distance (also called spatial distance): with this kind of distance is meant the physical distance between two countries. This distance is low when there is a common border. Differences in climate increase this distance.

Economic distance: with economic distance is meant the differences in resources and wealth of the consumer.

Shenkar (2001) argued that cultural distance can be bridged by the following aspects:

Increasing communication and interaction

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Master thesis IB&M

Having a lot of foreign experience

Expanding to attractive cultures

Looking at what kind of employees one hires in the subsidiary (whether they fit with the culture of the company).

In order for a company to deal with the liability of foreignness and being able to compete with local firms in the host country, it is necessary for a company to have firm specific advantages (Zaheer, 1995).1 It has been argued by Verbeke (2009) that it is especially important for a company to have a successful business worldwide, if it has a set of internationally transferable firm specific advantages (FSA’s). However, it is not always immediately clear which of the company’s FSA’s is internationally transferable and which is in fact bound to its home country or region (location-bound FSA). Only after expanding to another country or region, this can become clear. Therefore it is the subject of this thesis to investigate to what extent companies face difficulties in transferring their FSA’s to China and Japan. This will be done via a case study of Ikea’s and Wal-Mart’s expansion into these countries.

1.1 Case study

This master thesis, as mentioned, consists of a case study which is focused on Ikea and Wal-Mart. Both companies decided to expand their business to China and Japan. Ikea is a Swedish furniture company that successfully expanded to China in 1998 (http://cnbusinessnews.com/ikea-to-double-stores-in-china/, 2010). Ikea expanded twice to Japan, the first time was in 1974 this ended in a failure, but in 2006 Ikea decided to expand to Japan for the second time, this time it was successful

(http://www.icmrindia.org/casestudies/catalogue/Business%20strategy/IKEA-Re-entry%20Business%20Strategy%20Case%20Study.htm, 2008; Wijers-Hasegawa, 2006; Capell, 2006). Wal-Mart is an American hypermarket. They decided to expand to China in 1996, where they are operating successfully. Wal-Mart decided in 2002 to expand their business to Japan.2 In this country is Wal-Mart not so successful (Holstein, 2007; Rowley, 2005; http://www.wal-martchina.com/english/walmart/fastfact.htm, 2010).

1_{FSA’s are according to Verbeke (2009:14): “in order to overcome the additional costs of doing business} abroad, the MNE must have proprietary internal strengths. This set of MNE internal strengths, the availability of which both allows and constrains the scope of the firm’s expansion across borders, is called an FSA.”

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Master thesis IB&M Ikea and Wal-Mart both assumed that all its Firm Specific Advantages (FSA’s) were

transferable to China and Japan. But when they were operating in China and Japan it turned out that not all their FSA’s were transferable, due to local (host country) cultural issues. Therefore a couple of aspects of their FSA’s had to be adapted/changed.

The following chapters will discuss in more detail which kind of changes both companies had to make in China and Japan concerning their FSA’s.

I will first of all look at the national cultural aspects belonging to the two host countries (China and Japan). These aspects will be compared with the aspects belonging to the national cultures of Ikea’s and Wal-Mart’s home countries (Sweden and the United States). This way the differences and point of attention will be discussed.

The second chapter will discuss the corporate culture of Ikea and Wal-Mart. This corporate culture will be compared with Ikea’s and Wal-Mart’s corporate culture in their Chinese and Japanese subsidiaries. The main question is: Were both companies able to use the corporate culture of the parent company in their Chinese and Japanese subsidiaries, or did both companies have problems when implementing the parent country corporate culture in their Chinese and Japanese subsidiaries?

The third chapter discusses the general management style of Ikea and Wal-Mart. This management style will be compared with the management style that both companies used in their Chinese and Japanese subsidiaries. The main question is in this chapter: Were both companies able to use the management style aspects of the parent company in their Chinese and Japanese subsidiaries or did they have to adapt towards the local management style?

The fourth chapter is about the marketing strategy of Ikea and Wal-Mart. This strategy will be compared with the marketing strategy that both companies use in their Chinese and Japanese subsidiaries. The question that will raise in this chapter is: Did both companies have to adapt towards the needs and preferences of the Chinese/Japanese’s customer or were they able to standardize certain aspects of their marketing strategy in China and Japan?

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Master thesis IB&M The following sub questions will be used in this research:

1. What does the existing literature tell us about the national culture of China and Japan?

2. What does the existing literature tell us about corporate cultures?

3. What does the existing literature tell us about adjusting management styles?

4. How are Ikea’s and Wal-Mart’s marketing strategy in China and Japan?

5. Cultural distance and Ikea’s and Wal-Mart’s performance in China and Japan

With the help of the sub questions the following research question will be answered:

To what extent is it necessary to adjust the management style when expanding abroad?

1.2 Why is the main research question interesting in relation to management theory? The main issue that will be studied during this research, is related to management styles and

whether it is necessary to adjust the management style to another culture when expanding abroad. Concerning this issue Hofstede (1994, 2007) for instance, argued that management styles are cultural specific and a management style that is successful in one country will not always be successful in another country. The same argument was also made in the article of Adsit, London, Crom and Jones (1997). The indicated problem presented above becomes very interesting when looking at this issue in practice, because it turned out that Ikea and Wal-Mart did not adjust their management style when expanding to China and Japan (Davies, 2007; Björklund, Mattsson and Stoffers, 2010; Matusitz and Forrester, 2009; The economist, 1994; Jonsson, 2007) despite the fact that the cultural differences of China, Japan, Sweden (Ikea) and the United States (Wal-Mart) are huge when looking at Hofstede’s, Hall’s and Trompenaar’s cultural dimensions (see also appendix A).

1.3 Research objective

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1.4 Research methodology

1.4.1 Research strategy and data sources

This research is a qualitative study. The data collection for this research consists of secondary

data namely: academic literature, journals, academic books, information provided on the website of Ikea and Wal-Mart (for company information, press releases, financial figures), annual reports of Wal-Mart, Ikea does not have annual reports, but does have sustainability reports and finally newspapers will be used (for example Bloomberg Businessweek).

1.4.2 Limitations of the data sources

Thomas (2004) argued that the main problem of a case study is that it has to deal with the internal and external validity. The meaning of internal validity is that case studies are severely criticized. With external validity is meant that most of the time it is impossible to generalize from a case study and it can only be used for explanations. Although it has been argued by Yin (1994) that the results of case studies cannot be generalized to populations it is possible to generalize them towards theoretical propositions.

Limitations of the data sources could furthermore be that certain documents are only accessible for a relatively short period of time. It is possible that the information presented in documents is not consistent all the time. Moreover it is possible that mistakes or misrepresentations could occur, either on purpose or accidently (Thomas, 2004). Many company documents (reports, websites) seem to be objective and truthful but many are written with a certain goal in mind and they are also meant for a certain audience (Blumberg, Cooper and Schindler, 2008).

1.4.3 How will the data be analyzed?

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Master thesis IB&M the section headings. After this a closer look will be given to the empirical evidence. Finally

the references will be checked (Blumberg et al., 2008).

1.5 Conceptual framework

FIGURE 1: Conceptual framework

Author’s construction

Research question:

To what extent is it necessary to adjust the management style when expanding abroad? Culture Sweden

and the United States

Corporate culture Ikea and

Wal-Mart

General management style and marketing strategy

Ikea and Wal-Mart

Culture China Culture Japan

Management style and marketing strategy Ikea and Wal-Mart in China and Japan

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Master thesis IB&M With the help of the conceptual framework the following research question will be answered:

To what extent is it necessary to adjust the management style when expanding abroad? This

research question will be answered with the help of a case study of Ikea and Wal-Mart in China and Japan.

The (national) cultures of China and Japan will be researched and compared with the cultures of the Ikea and Wal-Mart home countries (which are Sweden and the United States). This way the main differences/point of attention within the cultures will be indicated. After this, the corporate culture of Ikea and Wal-Mart will be compared with the corporate culture that Ikea and Wal-Mart use in China and Japan. Moreover the general management style and the marketing strategy of both companies will be discussed and compared with the management style and marketing strategy that both companies use in China and Japan. If and to what extent the cultures of China and Japan influence the management style and marketing strategy of Ikea and Wal-Mart in China and Japan will be researched in this part. Finally both companies’ performance in China and Japan will be discussed.

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Master thesis IB&M

2. WHAT DOES THE EXISTING LITERATURE TELL US ABOUT

THE NATIONAL CULTURE OF CHINA AND JAPAN?

This chapter starts with presenting theory about national culture and discusses the aspects which belong to the national culture of China and Japan. These aspects will, at the end of this chapter, be compared with the national culture aspects of Sweden and the United States. Finally the differences and point of attention will be discussed.

2.1 Theory about national culture

A clear definition of culture is: “culture, in general, is the homogeneity of characteristics that separates one human group from another” (Tihanyi, Griffith and Russell, 2005: 271). Hollensen (2008) argued that there are different layers of culture namely: the national culture, the business culture and the corporate culture. All these layers are related with each other, due to the fact, that the national culture decides the values which influences the business culture. The business culture determines the culture of a single organization. Hollensen (2008) also argued that the national culture only provides a general framework of cultural issues and legislation. Moreover it is argued by Adsit et al., (1997) that nationality has an effect on the behavior of individual people because they interact with each other.

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Master thesis IB&M dimensions namely: universalism versus particularism, communitarism versus individualism,

neutral versus emotional, specific versus diffuse and achievement versus ascription, see appendix A for an explanation of these dimensions (Trompenaars, 1993, 1997). Finally the high- and low context cultures defined by Hall (1960) will also be used, see appendix A for the explanation of these two cultural dimensions.

Table 1 shows the cultural dimensions of Hofstede, Trompenaars and Hall for Sweden, the United States, China and Japan. As can be seen in this table, Sweden and the United States have a lot of cultural dimensions in common as well as China and Japan (see also appendix A).

TABLE 1: Cultural dimensions of Hofstede, Trompenaars and Hall of Sweden, the United States, China and Japan

Author’s construction. Sources:http://www.geerthofstede.nl/research--vsm; Trompenaars, 1993, 1997; Hall, 1960

Aspects of the national culture of China and Japan

First a closer look will be given to a couple of aspects belonging to the national cultures of China and Japan.

China and Japan are masculine cultures, just as the United States (http://www.geerthofstede.nl/research--vsm). Despite the fact that all three countries are

Sweden United States China Japan

Hofstede

Individualistic/collectivistic Individualistic individualistic collectivistic collectivistic

Feminine/masculine feminine masculine masculine masculine

Long term/ short term oriented short term oriented short term oriented long term oriented long term oriented

Power distance low low high somewhat high

Uncertainty avoidance low low low high

Trompenaars

Universalism/particularism universalism universalism particularism particularism

Communitarism/individualism individualism individualism communitarism communitarism

Neutral/emotional neutral somewhat emotional neutral neutral

Specific/diffuse specific specific diffuse diffuse

Achievement/ascription achievement achievement ascription ascription

Hall

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Master thesis IB&M masculine, only the Chinese and Japanese females always had, and still have, a lower

position in the Chinese and Japanese cultures than Chinese and Japanese males (http://www.un.org.cn/cms/p/news/27/1346/content.html, 2010; Ford and Honeycutt jr, 1992). Equality between males and females is therefore not common in the national culture of China and Japan. Females receive in China often a lower wage than males, and males are also earlier hired than females (China country review, 2011). In Japan women are also not accepted in business. Females in management positions are also a phenomenon which is not common in Japan.

China and Japan are collectivistic countries, meaning that the group is very important. Chinese and Japanese therefore like to work in groups instead of working individually. At the same time Chinese and Japanese are modest people (http://www.geerthofstede.nl/research--vsm; Guffey, 2007; Gooderham and Nordhaug, 2003; Ford and Honeycutt jr, 1992; Graham and Lam, 2003). It is impolite in the Chinese culture to brag and to accept compliments individually. A Chinese will, in that case, give a self-depreciating response to a compliment (Fox, 2008). Praising of Chinese people, by good performance, was also not common in China, but this aspect is nowadays changing, since Chinese want to be praised when they perform well (Dragon news, 2007). It is also not common in Japan to praise employees, mainly due to the fact that Japanese are modest people (Guffey, 2007).

In China and Japan ranking/hierarchy and status are very important (Fox, 2008; Graham and Lam, 2003; Ford and Honeycutt jr, 1992). In Japan, the status of an individual depends on: age, gender and the social role of a person (http://countrystudies.us/japan/58.htm, 2012).

Showing respect is in China and Japan very important, this is mainly due to the fact that Chinese and Japanese were raised with the fact that they should show respect to other people (Goodman, 2000; http://uk.askmen.com/money/successful_100/134_success.html, 2011; Nguyen, 2012; Graham and Lam, 2003; Ford and Honeycutt jr, 1992).

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Master thesis IB&M to the company (Graham and Lam, 2003; Goodman, 2000; Hollensen, 2008;

http://uk.askmen.com/money/successful_100/134_success.html, 2011; Ford and Honeycutt jr, 1992; http://www.geerthofstede.nl/research--vsm; Gooderham and Nordhaug, 2003; Nguyen, 2012). The above mentioned aspect is also the reason why promotion is in China mainly based on seniority, instead of performance, but this aspect is nowadays changing since in large Chinese firms, performance is becoming a more important factor in promotion (Wah, 2001). In Japan promotion only depends on seniority, this means that Japanese do not reach a senior management position before the age of 55 and chief executive before 60 (Ford and Honeycutt jr, 1992; Nichols, 1984).

Finally, Japanese as well as Chinese people are long term oriented (http://www.geerthofstede.nl/research--vsm).Having a long term relationship (and getting to know each other) is very important for Chinese and Japanese people (Goodman, 2000; Tung, 1984; Graham and Lam, 2003).

The following aspects belong specifically to the national culture of China:

Chinese have a high work ethic. With work ethic is meant that Chinese people work hard. This mainly has to do with the fact that Chinese have always been very eager to learn (Graham and Lam, 2003).

Chinese people can also be described as people who like to receive gifts. Chinese bosses also like to give gifts to their employees. The gift giving aspect belongs to their way of doing business (Davies, 2007).

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The following aspects belong specifically to the national culture of Japan:

An aspect belonging to the national culture of Japan is that Japanese people do not explain themselves and they refuse to spell things out. In other words they do not use a lot of words (Johnston, 1980).

Saying ‘no’ is also something the Japanese do not like to say, so when they refuse to do something they will mention this indirectly without hurting someone’s feelings, since they also like to avoid confrontation/conflicts (Johnston, 1980; Tung, 1984).

Japanese consider the bloodline (family) the most important. That is also one of the reasons, why foreigners are not really welcome in Japan. Japan is namely proud of their uniqueness and they do not want outsiders in their culture because they can diminish this uniqueness (Ford and Honeycutt jr, 1992).

Japanese people have a relative high uncertainty avoidance (Gooderham and Nordhaug, 2003; Fan and Zigang, 2004;http://www.geerthofstede.nl/research--vsm).

Japanese are furthermore very quality oriented and they find service towards the customer very important (Caroli and de Woot, 1994; Capell, 2006; Jonsson, 2008).

2.2 Analysis of the national cultures of Sweden, the United States, China and Japan In the previous section were the main aspects belonging to the national cultures of China and Japan discussed. In this section, we will go one step further by presenting the cultures of the Ikea and Wal-Mart home countries (which are Sweden and the United States). The cultures of these two home countries will be compared, with the Chinese and Japanese culture in order to indicate the main differences/point of attention.

TABLE 2: Comparison of the national cultures of Sweden, the United States, China and Japan

Sweden United States China Japan

Individualistic Individualistic Collectivistic, this is Collectivistic. Group/

nowadays changing. family (bloodline) is

Group/family is important important

Equal opportunities for Persons of different No equality between No equality between males/females races, males/females males/females males/ females

have more or less

the same opportunities

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in wages wage than males wage than males

They find it somewhat Accepting compliments Accepting compliments Accepting compliments awkward to take a and praising is common and praising is impolite, and praising is impolite

compliment, but in the but this aspect is

meanwhile are happy nowadays changing

to hear you say it

They are modest They are not modest They are modest They are modest Hierarchy/ranking not Hierarchy is important Hierarchy/ranking Hierarchy/ranking

important important important

Status not important Status depends on the Status important Status important

function a person has

Promotion not based Promotion not based Promotion based on Promotion based on on seniority on seniority but on seniority but this is seniority

performance nowadays changing

Like to take risks Like to take risks Do not like to take risks Do not like to take risks Avoid conflicts Conflicts/confrontations Avoid conflicts Avoid confrontations/

are common conflicts

Author’s construction. Sources: Ford and Honeycutt jr, 1992; China country review, 2011; Björklund et al., 2010; Dragon news, 2007; Noah, 2010; http://www.un.org.cn/cms/p/news/27/1346/content.html, 2010; Gustavsson, 1995; Guffey, 2007; Fox, 2008; Graham and Lam, 2003; Caroli and de Woot, 1994;

Wah, 2001; Nichols, 1984; Gooderham and Nordhaug, 2003; Fan and Zigang, 2004; Johnston, 1980; Tung, 1984; Cardon, 2009;

http://www.umu.se/english/education/student-handbook/umea_-sweden-and-the-swedes/characteristics-of-the-swedes, 2011; Goodman, 2000; Hollensen, 2008

First of all, by only looking at the cultural dimensions of Hofstede, Trompenaars and Hall, see table 1 which is presented earlier in this chapter, one can conclude that Sweden and the United States are two completely different countries with a different culture than China and Japan. The same conclusion can also be drawn when looking more specifically at the cultural aspects which are presented in table 2. Thus there are overall a lot of aspects which are common in Sweden and/or the United States which are not common in the Chinese and Japanese culture.

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Master thesis IB&M

3. WHAT DOES THE EXISTING LITERATURE TELL US ABOUT

CORPORATE CULTURES?

This chapter will first discuss theory about corporate cultures. After this Ikea’s and Wal-Mart’s corporate culture will be discussed. Finally another discussion will take place about the corporate culture which is used in the Chinese and Japanese subsidiaries. The main question that will be answered in this chapter is: Were both companies able to use the corporate culture of the parent company in their Chinese and Japanese subsidiaries?

3.1 Theory about corporate cultures

A definition of a corporate culture is: “a corporate culture is expressed through the shared values, beliefs, meanings and behaviors of the members within an organization” (Hollensen, 2008: 143). The same author also argued that when companies decide to expand their business abroad the behavioral norms accepted by the members of a company become very important. In the book of Kotter and Heskett (1992) it is discussed that all companies have a corporate culture, only some cultures are ‘stronger’ than others. With a ‘stronger’ culture the following is meant: “almost all managers share a set of relatively consistent values and methods of doing business” (Kotter and Heskett, 1992: 15).

Besides similar corporate cultures it is also possible to have differences in corporate cultures. Hofstede (1994) argued that there are six dimensions which can be used to explain differences in organizational practices:

1. Process-oriented versus Results-oriented cultures

The process-oriented culture is subject to bureaucratic and technical routines. Results-oriented cultures are dominated by having a common concern for results.

2. Job-oriented versus Employee-oriented cultures

In a job-oriented culture is one only responsible for the job performance of the employee whereas in the employee-oriented culture one is responsible for the well being of the employee.

3. Professional versus Parochial cultures

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4. Open system versus Closed system cultures

With this dimension is meant the amount of internal and external communication and the degree to which outsiders are accepted.

5. Tightly versus Loosely controlled cultures

With this dimension is meant the level of punctuality and formality within a company.

6. Pragmatic versus Normative cultures

With this dimension is meant how a company deals with customers (flexible or rigid).

Bates, Amundson, Schroeder and Morris (1995) argued in their research that there is a relation between a company’s corporate culture and a company’s manufacturing strategy. The research of Pagell, Katz and Sheu (2005) discovered that national culture is able to explain the behavior of international operations management. By referring to these two studies, Naor, Linderman and Schroeder (2010) argued that both national and corporate cultures have an effect on operations/companies. These authors argued that when emerging countries grow, they will implement work-related behavior which is common in developed countries. In that respect, companies will look more like each other. Moreover they will implement universal practices related to work and corporate culture. On the other hand it has also been argued that national culture drives values, instead of the developed practices. Furthermore it has also been argued that the work force’ value system will not change, even when an emerging country will become a developed country. The main discussion of this article is thus whether national culture drives values or whether corporate culture drives values. If corporate culture drives values, the values which belong to the national culture of a country become less important (companies use a similar corporate culture in all their foreign subsidiaries). If national culture drives values, the values which belong to a company’s corporate culture become less important (companies decide to adjust their corporate culture towards the national culture of the country where they are expanding to). Which decision Ikea and Wal-Mart made in China and Japan will be discussed in the following section.

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Costs due to spatial distance, this means the costs of transportation, travel and coordination.

Firm specific costs due to the fact that the company is unfamiliar with the new local environment. Moreover there is a lack of roots.

The host country environment costs, this for example means that there is a lack of legitimacy of foreign companies.

The home country environment costs, for example a company has restrictions on sales of high-technology products towards certain foreign countries (Zaheer, 1995).

To what extent a company has to deal with these costs is different per company, per industry, per home and host country (Zaheer, 1995).

In order to overcome the liability of foreignness and being able to compete with local companies in the host country, it is necessary for a company to provide their subsidiaries with a firm specific advantage (FSA). Porter’s diamond model can be used for this (see appendix B, figure B1). The interactions between the aspects which are presented in Porter’s diamond model determine how competitive an industry internationally is (Verbeke, 2009). The firm specific advantage is most of the time characterized in organizational or managerial capabilities, for example saving costs due to economies of scale. With organizational capabilities is it also possible to create a competitive advantage, for example transferring organizational practices and managerial expertise towards the subsidiary. Thus basically a company’s overseas subsidiary imports capabilities which are embodied in the organizational practices of the parent company. This often occurs when the subsidiary is competing in a homogeneous market (Zaheer, 1995).

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Master thesis IB&M requirements it might be that the liability of foreignness will reduce or disappear (Zaheer,

2002). In this way, host country Firm Specific Advantages (FSA’s) are developed.

It is not easy to change a corporate culture due to the fact that they developed common habits (Hofstede, 1994). One of the most important questions asked by a parent company is to what extent should a subsidiary behave like a local company versus the extent to which the practices are similar with the practices of the parent company (Rosenzweig and Nohria, 1994). Thus basically what is more important being internal consistent, this is according to Rosenzweig and Singh, (1991) also called the mirror effect or being similar to local companies? On the one hand it has been argued that being internal consistent is more important due to the fact that employees could move among subsidiaries. Even if this is not the case, companies still find internal consistency more important than being similar to local companies (Rosenzweig and Nohria, 1994). Moreover being internally consistent happens because doing business abroad is associated with uncertainty and ambiguity (Rosenzweig and Singh, 1991). On the other hand being similar to local companies is sometimes necessary due to the fact that some practices have to be in line with the regulations and/or law of a certain country. This is also called coercive isomorphism. Another reason to become more similar to local companies is to survive and to compete more effectively in the market or to fit within this market by implementing and thus imitating the local practices. This is also called normative and mimetic isomorphism (Zaheer, 1995; DiMaggio and Powell. 1983; Rosenzweig and Singh, 1991; Rosenzweig and Nohria, 1994). If a subsidiary is exposed to (one of these) pressures it is likely that the subsidiary will adapt to the local practices instead of the practices in the parent company (Rosenzweig and Nohria, 1994).

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Master thesis IB&M A company’s subsidiary is active within a different national environment. In order to have

success, the subsidiary has to be responsive to the local government, customers and institutions. This is called ‘local responsiveness’. Companies can on the other hand also decide to use a ‘global integration’ perspective. With ‘global integration’ is meant that companies do not adjust to the host country. In other words companies use one strategy (and offer the same product assortment) which they implement in all their subsidiaries worldwide. By using the ‘global integration’ perspective companies have the advantage of economies of scale (Nohria and Ghoshal, 1997). For more information about ‘local responsiveness’ and ‘global integration’, see appendix C, table C1.

Bartlett and Ghoshal (1986) conducted research towards what kind of strategies companies use for their subsidiaries. They found out that companies adopted two approaches. The authors called the first approach the ‘United Nations model’ this means that companies treat their subsidiaries in a similar way. The subsidiaries all have the same responsibilities and the same roles. This approach also means that more important markets are treated in the same way as the less important markets. The authors called the second approach the ‘headquarters hierarchy syndrome.’ The organization consists of two levels one is subordinate and the other one is dominant. The headquarter is the dominant one who makes decisions and who controls the resources of the company. This way a global strategy will be implemented. All the subsidiaries are subordinate. They have to make sure that the global strategy is implemented in the country where they are located. These two strategies cause for tension between the headquarter and the subsidiary. This is due to the fact that the headquarter is controlling the subsidiary, while the subsidiary wants to be more independent. Bartlett and Ghoshal (1986: 153) also argued that a number of companies are now moving towards “an organizational model of differentiated rather than homogenous subsidiary roles and of dispersed rather than concentrated responsibilities.”

The above mentioned information means for Ikea’s and Wal-Mart’s Chinese and Japanese subsidiaries that these subsidiaries either have implemented the corporate culture which is also used in the parent company or they adjusted towards the local culture. Which of these two aspects were used in Ikea’s and Wal-Mart’s Chinese and Japanese subsidiaries will be discussed in the following section.

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Master thesis IB&M Based on the information presented above the following hypothesis has been formulated:

H0: when the distance between corporate culture and host country culture is big, companies will have difficulty in expanding into that country

3.2 Case study

The corporate culture of Ikea

Ikea’s main vision is: “To create a better everyday life for many people” (Ikea Sustainability report, 2008: 8). Ikea’s main aim is to make furniture at affordable prices. Its main focus is on producing and distributing at low cost. Ikea’s employees who are not enthusiastic about this low cost approach will not feel happy working for Ikea (Mårtenson, 2002).

The corporate culture of Ikea can be described in the following words:

Informal, responsible, meaning that everyone who works for Ikea is responsible for their own actions and status does not play a role. Ikea’s co-workers are enthusiastic people.

Ikea works in a team in order to get things done. Respect is also considered important within Ikea.

Coaching, this means Ikea teaches by asking questions for finding the best solution. Moreover Ikea always wants to make their products better, they want to learn from each other and they are open for new ideas.

The two final aspects to describe Ikea’s corporate culture are: Ikea is cost-conscious; they offer products for a low price. A final aspect is competitiveness for example the sales growth of Ikea shops is being tracked (Kling and Goteman, 2003; Mårtenson, 2002; Lee, 2000; Ikea Sustainability report, 2008; Korsgaard, Rask and Lauring 2008; http://www.ikea.com/ms/en_CN/jobs/simply_ikea/coaching.html, 2011; Capell, 2005; http://www.ikea.com/ms/en_US/jobs/join_us/ikea_values/index.html, 2011).

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Master thesis IB&M Moreover showing and having respect is important in the Swedish culture. Sweden is a

feminine country, where one person is not more important than the rest (Gustavsson, 1995). Within Ikea is everyone responsible for their own actions. Looking at the Swedish culture it is also argued by Gustavsson (1995) that Swedish people make their own decisions and are responsible for their own actions. Finally in the Swedish culture, just as within Ikea, is it common to work in teams. This means that employees should help to reach the goals of companies as quick as possible and thus to come to results as quick as possible. Moreover it has always been in their nature to find solutions together (Gustavsson, 1995).

Korsgaard et al., (2008) and Gustavsson (1995) also argued that although the Swedish culture is implemented in the corporate culture of Ikea, at the same time Ikea does not have a purely Swedish culture anymore, mainly due to the fact that Ikea is also active in other countries with a different culture. Lief (2008) on the other hand argued that Ikea was able to enter countries with total different national cultures successfully, while keeping the core values of Ikea. The main reason for this success was that expatriates familiar with the Ikea values were sent to these countries before a new Ikea store was opened.

Finally, another aspect of Ikea’s corporate culture is their recruitment process, which is based on accepting Ikea’s values (Mårtenson, 2002; King and Goteman, 2003; Ikea Sustainability report, 2008). The managers of Ikea are recruited internally (Ikea Sustainability report, 2008). In every country where Ikea is active there is one store which trains and educates co-workers before a new store opens her doors. Moreover new co-workers also have a one week introduction where among others, the corporate culture and the values of Ikea are discussed (Jonsson, 2007). The reason why Ikea invests a lot in their managers/co-workers is that they want to make sure that the managers/co-workers understand the corporate culture of Ikea and that they are able to represent the Ikea values(Mårtenson, 2002).

Ikea’s management style and local culture

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Master thesis IB&M http://uk.askmen.com/money/successful_100/134_success.html, 2011; Graham and Lam,

2003; Ford and Honeycutt jr, 1992; Fox, 2008). Although it is not in line with the typical Chinese culture, being responsible is nowadays becoming a more common aspect in China. This is due to the fact that Chinese nowadays tend to make decisions more individually. In Japan is, on the other hand, the responsibility aspect not common. This is due to the fact that decisions are made in groups therefore one person cannot be held responsible for a certain action/activity. A final aspect of Ikea’s corporate culture is working in teams. This aspect is common in both countries. The reason why teamwork is still common in China although they become more individualistic is due to the fact that the individualistic aspect is tempered by cultural relationships and centralized controls (Ralston, Gustafson, Terpstra and Holt, 1995; Hollensen, 2008; Caroli and de Woot, 1994). Overall, Ikea’s corporate culture shows a couple of similarities with the Chinese culture, whereas there is little similarity with the Japanese culture.

Furthermore, as mentioned, expatriates (familiar with the Ikea values) were sent to countries before a new store was opened. This was done in order to teach the local Ikea co-workers the values of Ikea (Lief, 2008). Wei and Zou (2007) also argue that Ikea’s corporate culture in China is based on the values which Ikea also uses. Ross (2008) argues the same for Ikea in Japan. Moreover on the walls of Japanese Ikea stores is information presented concerning the values of Ikea, to make sure that the Japanese co-workers are familiar with them (Jonsson, 2007). Finally, both in China and Japan, Ikea’s co-workers get training/education about the values of Ikea (http://www.ikea.com/ms/en_US/jobs/true_stories/angela/index.html, 2011; Jonsson, 2007; Ross, 2008). Thus overall the aspects of Ikea’s corporate culture stayed the same when expanding to China and Japan.

The corporate culture of Wal-Mart

The core mission of all the Wal-Mart’s around the world are: “save people money, so they can live better” (Wal-Mart Annual report, 2010:12).

Sam Walton, the founder of Wal-Mart in 1962, created a couple of principles that are still carried out at Wal-Mart’s all over the world and these principles make Wal-Mart so successful today. These principles are:

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Master thesis IB&M

Providing service towards customers, Wal-Mart considers their customers as their bosses;

Wal-Mart’s final belief is striving for excellence.

Moreover Wal-Mart has the ten feet rule this means that employees greet every customer they see within ten feet. Wal-Mart also has the ten rules of doing business these consist of the following:

Commit to your business

Share your profits with all your associates, and treat them as partners

Motivate your partners

Communicate everything you possibly can to your partners

Appreciate everything your associates do for the business

Celebrate your success

Listen to everyone in your company

Exceed your customer’s expectations

Control your expenses better than your competition

Swim upstream (Davies, 2007;http://walmartstores.com/AboutUs/321.aspx, 2011).

The employees of Wal-Mart start their working day with the Wal-Mart cheer. Sales figures of the previous day are also discussed as well as their goals for the day. Furthermore Wal-Mart has the sundown rule, meaning that questions have to be answered before the end of the same day (Wal-Mart China factsheet, 2011; http://walmartstores.com/AboutUs/295.aspx, 2011; Davies, 2007; http://walmartstores.com/AboutUs/320.aspx, 2011). Moreover Govindarajan and Gupta (1999) argued that Wal-Mart inserted the aspects of its domestic corporate culture also in other countries where they are active.

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Master thesis IB&M This is mainly due to the fact that the American culture is one of the most individualistic

countries in the world and self-achievement is common (Caroli and de Woot, 1994).

Another aspect that Wal-Mart finds really important is, as mentioned, listening to their customers. By listening to them, Wal-Mart knows what the customers expect of them (Wal-Mart Annual report, 2010). Moreover Sam Walton had a good relationship with his employees and listened to them, because in his opinion the employees have the best contact with the customer. Mr. Walton often held the so-called ‘Grass Roots’ meetings with his employees where employees were asked about possible improvements. Nowadays the ‘Grass Roots’ has been changed in annual surveys at all Wal-Mart stores worldwide (Berggoetz and Laue, 2002).

Furthermore, Wal-Mart offers training programs to their employees. A lot of countries where Wal-Mart is active have ‘stores of learning’ this is a training program where employees have classroom lectures and in-store training (Wal-Mart Annual report, 2007).

The aspects which were just discussed about the corporate culture of Wal-Mart are in strong contrast with the fact that Wal-Mart is often accused of the fact that their employees have to work long hours without being paid for overtime. Sometimes the employees even have no lunch breaks during a workday. Moreover Wal-Mart is also accused of discrimination of females and disabled (Finkelstein, 2005). Finally, Wal-Mart is, in general, well known for the fact that they give extremely low wages to their employees (Schermerhorn, Osborn, Uhl-Bien, and Hunt, 2011; Finkelstein, 2005). Thus basically one can say that Wal-Mart maintains a ‘smoke-screen’ concerning their corporate culture. With ‘smoke-screen’ is meant that Wal-Mart only brings the positive aspects of their company and corporate culture out into the public, but as discussed above, this is not in line with what really happens in the Wal-Mart stores.

Wal-Mart’s management style and local culture

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Master thesis IB&M customer they see within ten feet. Chinese and Japanese people are, as mentioned, very

modest and thus approaching customers is not something they like to do.

Japanese are furthermore very quality oriented. They find service towards the customer very important and they adapt to the customers’ needs (Guffey, 2007; Caroli and de Woot, 1994; Capell, 2006; Jonsson, 2008). Customers are therefore, just as for Wal-Mart, very important for the Japanese.

As mentioned, Wal-Mart finds performance very important. Looking at the Chinese culture it can be concluded that they nowadays find a good performance also more important. Moreover they are willing to take risks in order to improve profit (Ralston, Egri, Stewart, Terpstra and Kaicheng, 1999). On the other hand, in the Japanese culture is building relationships and growth more important than performance (Caroli and de Woot, 1994).

Finally, having respect for individualism is nowadays present in the Chinese culture, whereas this aspect is not common in the Japanese culture (Ralston et al., 1995; Ralston et al., 1999;

http://www.geerthofstede.nl/research--vsm; Caroli and de Woot, 1994) Overall, Wal-Mart’s corporate culture shows a couple of similarities with the modern Chinese culture but little similarity with the Japanese culture.

As mentioned, Govindarajan and Gupta (1999) argued that Wal-Mart used their corporate culture, in their foreign subsidiaries. Looking at the Wal-Mart China factsheet (2011) one can also see that the three principles of Wal-Mart are followed by Wal-Mart in China and Japan. Davies (2007) argued that in Chinese Wal-Mart’s, posters are attached on walls that explain the corporate culture of Wal-Mart. Introducing the ten feet rule, as mentioned, caused a problem in Japan.In order to be able to solve this problem this aspect got a lot of attention in company training. Moreover training (the so called ‘store of learning’) was also used to introduce Wal-Mart’s corporate culture and their principles to the managers in Japan (Meyer-Ohle, 2007; Guffey, 2007).

Finally, it was mentioned that the wages of Wal-Mart employees are low. This is also the case when looking at the wages of Wal-Mart’s employees in China (Davies, 2007).

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Master thesis IB&M The following conclusion can be made, in order to accept or reject the hypothesis which was

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Master thesis IB&M

4. WHAT DOES THE EXISTING LITERATURE TELL US ABOUT

ADJUSTING MANAGEMENT STYLES?

This chapter starts with presenting theory about adjusting management styles. After this the management style of Ikea and Wal-Mart will be discussed. Finally a discussion will take place about the management style which is used in the Chinese and Japanese subsidiaries. The main question that will be answered in this chapter is: Were both companies able to use the management style aspects of the parent company?

4.1 Theory about adjusting management styles

This chapter discusses management styles. With a management style is meant managing people. Are management styles in different countries becoming more similar? In other words are they converging? Or are management styles becoming more dissimilar in different countries, thus are they diverging? (Adler, Doktor and Redding, 1986).

Authors like Hofstede (1994, 2007) and Adsit et al., (1997) argued that a management style that is successful in one country, will not always be successful in another country, they are culturally specific, and copying the management style in a totally different country can be counterproductive (Gustavsson, 1995).

On the other hand, Speece (2001) argued that the basic management aspects of Asian and western management styles are not really different. Moreover, the management practices used in Asia can be explained by the management theory that was developed in the western world. Thus, according to him, there are no strong differences in management theory or management style but adjustments have to be made in the details to fit the cultural context. The same is mentioned in Dragon news (2007): despite differences between China and Sweden in culture and values, it turned out that the Swedish way of managing works rather well in China. The reason why Chinese like the Swedish management style, is due to the fact, that Chinese people want to be treated more equally, want to be praised when they did a good job and they want to have a more open communication style with their boss. Moreover Fan and Zigang (2004) argued that Chinese employees nowadays are becoming more and more involved in the decision making process. The decision making process is no longer centralized. These aspects are on the other hand not in line with the typical Chinese culture.

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Master thesis IB&M differences in generations in China are also due to the fact that the new generation of

managers in China are raised in the social reform period (there is more freedom and openness and Chinese are more exposed to influences of the west). Managers who are currently operating in China grew up during the Great Cultural revolution and the older generations were raised during the Communist Consolidation. Thus, the reason for these differences in generations and differences in values has to do with the history of China (Ralston et al., 1999).

The new generation of Chinese managers tends to be more individualistic, but being individualistic is tempered by cultural relationships and controls which are centralized. Chinese managers want to be more independent, accept ambiguity, want to make decisions individually and take more risk in order to improve profit. More responsibility and self-determination is also becoming a more common aspect within the management style of China and both aspects are also used by the decision making process. Formal authority is also changing towards informal influence. Chinese seem to be more open for new processes and new methods. These changing aspects in China might bring the Chinese manager closer to management practices of the west. Despite these changes the new Chinese managers are not neglecting their Confucian values: these will always be within China as well as the moral traditions. Thus, it seems that young Chinese managers are implementing aspects which belong to the western way of thinking but also uses influences of the east (Ralston, Gustafson, Cheung and Terpstra, 1993; Ralston et al., 1995; Ralston, Kai-Cheng, Wang, Terpstra and Wei, 1996; Ralston et al., 1999).

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Master thesis IB&M In a later study, these dimensions and at the same time four dimensions of the western culture

were researched. This study also shows that there are significant differences between the managers from China, USA and Hong Kong, when looking at the four western values and when looking at three of the four eastern values. The only value when differences were nonsignificant was, as mentioned, moral discipline. This study also concludes that Hong Kong managers are using a more ‘crossvergence’ perspective. Ralston et al., (1993: 251) argues that with ‘crossvergence’ is meant: “when two cultures meet, a blending may result in some new cross-bred form of values.” This conclusion is based on the fact that the western managers’ self-directed view is partly adopted by the Hong Kong managers. Moreover Hong Kong managers are able to deal with the ambiguities of the free-market society. The Confucian aspect, which is very important in China, seems not so important in Hong Kong. Hong Kong managers have a more employee-oriented view and they are more caring than Chinese managers. Thus one can conclude from this research that managers from Hong Kong may have developed a new style in order to cope with employees from both China and the west. The overall conclusion of this study is therefore that culture and the business environment often interact to develop a set of managerial values in a country which is unique (Ralston et al., 1993).

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Master thesis IB&M Foreign companies who are active in Japan might converge towards a Japanese model. A

couple of companies from the west adjusted towards a Japanese model by changing/ implementing personnel practices and manufacturing aspects which are common in Japan (Dunhpy, 1987).

The above mentioned information means for Ikea’s and Wal-Mart’s Chinese and Japanese subsidiaries that the Chinese subsidiaries probably have not adapted their management style, whereas the Japanese subsidiaries probably have adapted their management style. In order to find out if the above mentioned expectation is correct, the following section will discuss the management style that Ikea and Wal-Mart use in their Chinese and Japanese subsidiaries.

Based on the information presented above, the following hypotheses have been formulated: H1: Companies expanding to China do not have to adapt their management style

H2: Companies expanding to Japan have to adapt their management style

4.2 Case study

The management style of Ikea

Annika Björnberg, who is a human resource manager at Ikea, argued that Ikea’s management style is implemented in all their stores worldwide. In order to teach the local employees this management style, Swedish managers were sent to the countries where Ikea is active (Björklund et al., 2010).

Moreover Annika Björnberg argued that Ikea has a couple of criteria that potential Ikea managers worldwide must possess in order to become an Ikea manager, these are:

Having good communication skills;

Managers must be able to motivate employees;

Ikea managers must be open for changes/ new ideas and/or improvements in the way of managing and performing;

Managers must strive to reach the goals of Ikea (Björklund et al., 2010).

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Master thesis IB&M the management structure of Ikea is rather flat (Björklund et al., 2010; Lief, 2008; Mårtenson,

2002). Furthermore for Ikea is each individual’s opinion considered important in the decision

making process (Lee, 2000;

(http://www.ikea.com/ms/en_GB/jobs/true_stories/edoardo/index.html, 2011).

Having an open communication style with co-workers is common in Ikea stores (Björklund et al., 2010). Finally, Ikea managers must provide open feedback to their co-workers and Ikea’s co-workers are encouraged to tell their boss if they do not agree with something (Ikea Sustainability report, 2008; Lee, 2000).

The management style of Ikea in China and Japan

One of the responsibilities of Chinese Ikea managers is to manage their co-workers, they do this by listening to the needs and the frustrations of Chinese employees, but at the same time they must also see the co-workers’ potential, their desires and their strengths (http://www.ikea.com/ms/en_US/jobs/true_stories/angela/index.html, 2011).

Ikea China has also a decentralized way of managing, meaning that Chinese co-workers are involved in the decision making process and they are free to give their opinion (The economist, 1994). It is in the Chinese management style on the other hand common, to have a centralized structure where decisions are made at the top and employees are not involved in the decision making process (Dragon news, 2007; Wah, 2001) although, as mentioned, this aspect is changing nowadays (Fan and Zigang, 2004).

Moreover Ikea stores in China have an open communication style. There is not only open communication between the manager and the co-worker but also between co-workers in China (http://www.ikea.com/ms/en_US/jobs/true_stories/angela/index.html, 2011; Wei and Zou, 2007). In general it is in China not common, to have an open communication style since Chinese have a more indirect way of communicating (Fox, 2008), though it must be mentioned that this aspect is nowadays also changing (Dragon news, 2007).

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Master thesis IB&M other, due to the fact that Ikea Japan has an open communication structure (Jonsson, 2007).

Japan in general has on the contrary a more indirect communication style (Johnson, 1988).

Jonsson (2007) also argued that Japanese Ikea managers are for 80% on the shop floor and if a problem occurs, open discussion at the shop floor with the Japanese co-workers is considered normal. Looking at the Japanese management style on the other hand it is not common to openly discuss issues (Guffey, 2007).

Finally, Swedish and Japanese Ikea managers also practice job rotation and on the job learning. It is also common in the Japanese management style to practice job rotation and on the job learning (Jonsson, 2007; Nichols, 1984; Ikea Sustainability report, 2008; Caroli and de Woot, 1994).

The management style of Wal-Mart

Wal-Mart has a hierarchical style of managing (Davies, 2007). Moreover Wal-Mart has a centralized decision-making process, which is located in Bentonville, Arkansas (Matusitz and Forrester, 2009).

Wal-Mart’s managers also find it important to listen to their employees/partners and they do not lead by only sitting behind a desk, therefore a manager of Wal-Mart walks around the work floor and encourages entrepreneurial thinking. This requires that the manager is:

Open-minded

Has an open communication style

Has good communication capabilities

Moreover praising employees and confronting employees with poor performance are aspects which also belong to the tasks of the Wal-Mart manager (Berggoetz and Laue, 2002).

The management style of Wal-Mart in China and Japan

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Master thesis IB&M Chinese Wal-Mart stores have every morning a meeting on the work floor. During these

meetings employees are publicly praised, confronted with poor performance and motivated to come with improvements (Davies, 2007). As discussed earlier, it is not common in China that co-workers are praised when they performed well, although this aspect is changing (Dragon news, 2007). Furthermore direct and open conflicts are also avoided by the Chinese. So basically it is also not common in China that employees are publicly confronted with a poor performance (Cardon, 2009). But, due to the fact that Chinese nowadays want to have a more open communication style, it is likely that it will becommon in China to be openly confronted in case of poor performance (Dragon news, 2007).

A final aspect of Wal-Mart’s management style in China is that responsibilities of employees are clearly explained and work is clearly structured and ordered (Davies, 2007). Giving Chinese employees a clear job description is, on the other hand, not common in the Chinese management style (Wah, 2001).

As mentioned, Wal-Mart uses a centralized decision making process. But due to the fact that decisions were not executed as it should be in the Japanese Wal-Mart stores, Wal-Mart decided to change the decision making process in Japan. Nowadays the local store managers are responsible for managing the stores of Wal-Mart in Japan, instead that decisions are made in the head-office (Meyer-Ohle, 2007). This aspect is similar with the Japanese management style since Japan also has a decentralized style of making decisions. So Wal-Mart decided to adapt this aspect towards the Japanese management style (Caroli and de Woot, 1994).

Another aspect of Wal-Mart’s management style in Japan is publicly praising of its Japanese employees. This, despite the fact, that praising is not common in Japan due to the fact that Japanese are modest people. Wal-Mart therefore decided later to change this aspect towards the Japanese management style. The reason for this decision was that the Japanese managers from Wal-Mart refused to praise their employees (Guffey, 2007).

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Master thesis IB&M The following conclusion can be made, in order to accept or reject the hypotheses which were

formulated in the beginning of this chapter. Ikea and Wal-Mart both did not make adaptations in their management style when they decided to expand their business to China. Looking at Ikea’s and Wal-Mart’s Japanese subsidiaries it can be concluded that Ikea did not make adaptations in their management style when they decided to expand to Japan. Wal-Mart on the other hand had to make adaptations in their management style when they decided to expand to Japan. Based on this information, H1 is accepted but these two cases do not give clear evidence to accept or reject H2.

A possible reason for the fact that both Ikea and Wal-Mart did not had to adjust their management style in China could be, as mentioned above, that the Chinese management style is changing/developing.

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Master thesis IB&M

5. HOW ARE IKEA’S AND WAL-MART’S MARKETING

STRATEGY IN CHINA AND JAPAN?

This chapter starts with presenting theory about marketing strategies. After this the marketing strategy of Ikea and Wal-Mart will be discussed. Finally a discussion will take place about the marketing strategy used in the Chinese and Japanese subsidiaries. The main question that will be answered in this chapter is: Did both companies have to adapt towards the needs and preferences of the Chinese and Japanese customers?

5.1 Theory about marketing strategy

With marketing strategy is meant how a company positions itself in a foreign market. Are they adapting their marketing strategy (thus the product, price, promotion and distribution) in their foreign subsidiaries or are they using a standardized marketing strategy in their foreign subsidiaries?

Standardization of the marketing strategy

Standardization means: “the domestic marketing strategy is applied to a foreign market” (Zou, Andrus and Norvell, 1997: 108). Standardization of a marketing strategy is according to Jain (1989) divided into two aspects:

1. The marketing program. With program is meant: “various aspects of the marketing mix” (Jain, 1989: 71). The marketing mix consists of the design of products, the positioning of products, the price of the products and sales promotion.

2. The marketing process. With process is meant: “tools that aid in program development and implementation” (Jain 1989: 71).

Managing a companies’ own management style?