Cultural Influences on the Development of Marketing StrategyforMultinational Retailers
Abstract
This paper examines the affects of culture on the marketing strategies ofmultinational retailers. The paper develops a model of nineteen international retailmarketing strategy factors and relates them to the five cultural factors of the HofstedeModel. The paper relates three of these factors (breadth of product assortment, retailformat, and speed of retailer expansion) to Hofstede’s cultural factors and variouseconomic factors. The findings of the paper are: the cultural factors of power distanceand individualism, and the economic factor of population are related to the breadth ofproduct assortment; the cultural factors of power distance and masculinity, and theeconomic factors of GDP and population are related to retail formats; and the culturalfactors of power distance and masculinity, and the economic factor population growth are related to the speed of retail expansion. The significant findings of the paper are: the inverse relationship between the cultural factor of individualism and increases in product assortment; and the positive relationship between the cultural factor of power distance and the increased speed of retail expansion.
Key Words culture, marketing strategies, multinational Retailers, power distance
Purpose of the Study
The purpose of this study is to determine what effect national cultural has on themarketing strategies of business. Since marketing strategy is different for each type ofbusiness the only way to successfully study marketing strategy to national culture is tolimit the study to one specific type of business. In this paper, the author looks to relatethe marketing strategy of retailers to the culture factors of foreign markets in order todevelop a model that represents how specific national cultures influences the marketingstrategy of international retailers.
The study of international marketing strategies for retailers was chosen for severalreasons. Retailers face several limitations in their available marketing strategies. Theprimary one is that they typically do not develop a unique product. Their products comefrom suppliers that sell to other retailers and sometimes directly to the public. For thisreason, product uniqueness is eliminated from the study variables. Also, price of theproduct may become less important. Since retailers buy from similar suppliers, theoverall product pricing difference to the consumer may not be significant betweenretailers. Although this is a debated topic, Wind (1986) theorizes that long-termadvantage cannot come from a low price strategy in retailing. Since retailers are limitedin their available marketing strategies, they are ideal candidates to determine if and whatnational cultural factors influence a retailers marketing strategy.
Significance of Study
The question of how national culture relates to marketing strategy is important toscholars and practitioners at several levels. For the practitioner, marketing strategy is oneof the key points to profitability for a retailer. Understanding how marketing strategy isdriven by cultural will allow marketers to better market their products in the globalmarket and therefore increase performance of the firm. For the scholar, this opens up anentirely new area of research. Past research in this area has been done either on the verymicro level (Nakata amp;Sivakumar, 1996; Hill amp; Still, 1984; Imai amp; Takeuchi, 1985; Boonghee, 1997; Fawcett, 1999; Tse, 1997) or at the macro level. (Deadrick, 1997;Deshpande, Farley amp; Webster, 1993; Olsen 2001; McDermott, 1997) This work willopen up the area in between. By relating marketing strategy to national culture factors,future academic work can begin to sum the pieces of the micromarketing studies into acomprehensive emic view of national cultures cumulative effects on businessperformance. This study is specific enough to examine the key components, yet is broadenough to encompass the entire field that is relevant to national cultures effects onmultinational enterprise’s (MNE) retail market strategy.
Thisproposed research comes at a time of flux between two opposing theories ofstandardization and customization. This research is an important piece that will betterexplain the factors of multinational retailers marketing strategies.
Definitions and abbreviations
Culture: “Culture is considered to be the whole system of usual and prevailing implicitpractices (values, representations, norms, attitudes, perceptive, cognitive and effectiveprocesses) and explicit practices (language, behaviors, know-how, applications of thisknow-how, intuitions), that are learned, shared and dynamic and define the frame ofreference and the way of doing things of the people involved in the retailing channel.”(Dupuis amp; Prime, 1996)
Hofstede Model: “Cultural model that describes the factors or culture by five factors:individualism, uncertainty avoidance, power distance, masculinity and long-termorientation.” (Nakata, 1997)
Marketing Orientation: “the organizational wide information generation anddissemination and appropriate response related to current and future customer needs andpreferences.” (Kohli and Jaworski, 1990)
MNE: Multinational Enterprises
Retailing: “includes all the activities required to sell directly to consumers for theirpersonal nonbusiness use.” (Kotler, Hibbard amp; Grayson, 2004)
Standardization of marketing strategy: “Offering a common marketing programand/or process on a national, regional, or worldwide level.” (Chung, 2003)
Standardization vs. Customization of International Business Strategy
Examining the two tracks of marketing research that came from the MarketingScience Institute’s challenge one can see two distinct ends of the continuum. One end hasculture as a key factor to market orientation. (Jain, 1989;
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