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Essay Topic: Adaptation of Products and Services to Local Culture

Requirements: Critically examine the contention that organizations must adapt their products and services to Local culture if they are to succeed in foreign markets? This essay must contain relevant academic theories and models giving an analytical balanced argument for organizations (such as multinational corporations) to adopt and adapt to local culture if they are to be successful, this must also use cases of companies which have failed and are successful. The reference style to be used is Harvard reference style. Level: University Final, Course Title: Global Business Development.

Essay Body:

GLOBAL MARKETING: STANDARDIZATION VERSUS ADAPTATION

Today, with transportation and otherwise transaction costs confidently decreasing, spatial distances cease to impose an important constraint on international trade and communication, thus rendering the world increasingly more of an integrated place. While it is subject to meticulous case-by-case analysis determining whether direct exporting is preferable to direct foreign investment, the major players have increasingly chosen to seize opportunities in the latter domain. By exporting not just products and services, but also the very factors of production, as well as processes and managerial practices, they in fact perform a socially important function of facilitating the implicit convergence of initial global resource distribution, which really is the ultimate objective of integration. More importantly, though, is for these agents to realize their own, private benefits while at it. At any rate, one important fact facing decision makers today is that, the very notion of a national economy, or a national portfolio of opportunities for that matter, potentially reaches beyond the national hinterlands. Each company's competitive advantage is now a whole vector of advantages it may enjoy in regions it finds itself operating in.

These advantages, however, present a leverage of a new opportunity as well as a new challenge. Since these opportunities aren't homogeneous in terms of cultural or otherwise institutional constraints, the company's very ability to utilize these hinges crucially on its ability to meet the constraints. Its past record of successful operations in its domestic or neighboring environments need not imply that ability will travel very well cross-culturally. In fact, the greater the cultural or institutional differences (distances), the higher the uncertainty of its local competitive edges to be of use elsewhere. We will not provide a strict and exhaustive definition of 'opportunity' or 'competitive advantage' in this study. Suffice it to note that, new markets alone do qualify as new opportunities which a company finding itself in the modern volatility environment simply cannot afford overlooking. Therefore, insofar as culture is an important determinant or constituent of consumer behavior, cross-cultural flexibility should be viewed as an imperative must in any company's marketing management.

That was largely a positive or pragmatic justification urging for cross-cultural awareness on the part of today's managers. A normative implication would by definition sound more like a set of imperatives that are somewhat vaguely substantiated or have to do with ethical considerations. Sadly enough, the mainstream literature on intercultural management appears to have chiefly pulled the normative strings by pointing out either the general benefits of being culturally educated or providing some horrifying anecdotes (mostly involving Japanese and American negotiators). By far the single most popular and somewhat overused normative suggestion has to do with the need to avoid the self-reference criterion and ethnocentrism in intercultural setting. The former has been used to describe judgment by imposing (perhaps unconsciously) the constraints and values of one's original cultural milieu on choices originating from a different cultural environment. Ethnocentrism is regarded as the stronger form of SRC, in that the imposition is reinforced by the belief in own culture's superiority. The proposed solution has been that there's "no place for SRC in the twenty-first century marketing" and that all cultures should be treated as "no worse, no better--just different."

While it is not entirely clear whether the implication's tossup is dominated by political ('peace keeping' and tolerance) or pragmatic reasons (success in operations), the formula does not appear very persuasive. On the one hand, it would seem a bit difficult to reconcile all cultures as equal in quality, if only because some of them are more complex (not the same as 'sophisticated') than others. There are a number of other important dimensions, over and above the traditional (and the only one really well researched) individualism versus collectivism taxonomy. For instance, Triandis (1995) and Triandis (2001) elaborate on as many as nine distinct facets identifying a 'culture': complexity, tightness (tolerance toward deviations from norms), verticality (importance of hierarchy), active vs. passive style (with respect to whether people are being more influenced by the environment than shape it), etc. On the other, the fact that all these cultural equilibria have not been ruled out by replicator dynamics (evolutionary selection) is a lame reason: if at all, they were subjected to it each within its own (rather closed) domestic setting, rather than being continually tested so as to be adopted as the standard globally.

Shortly, we will introduce another seminal taxonomy (Hofstede, 1980) that conveyed the most momentum to the research in the area since the 1980s.[1]. For now, however, we might want to recognize one other caveat to the egalitarianist statements: indeed, to reject the SRC outright might properly involve accepting the ethical part of the story. In other words, a fully culturally sensitive manager would then be required to tolerate (adapt to) the local ethical standards, or even to practice (adopt) them locally. He will clearly have his home jurisdiction imposed on his choices, but no home jurisdiction will be possible to impose on the local agents' choices. Problems begin to arise when delicate ethical issues are involved, such as bribery. On the one hand, home constraints (formal institutions as opposed to culture that's more of informal constraints) such as the Foreign Corrupt Practices Act might be intended to control national agents' morality. However, unless these constraints are uniform and homogeneous and are consistently enforceable on all international players, they would act to undermine the national players' competitiveness-a huge cost in the modern times of volatile market powers, shaky brand loyalty and uncertain confidence. On the other hand, local standards of, say, corruption and cronyism can be regarded as institutions affecting the composition of marketing channels locally, which could be a critical entry barrier to outsiders.

Finally, another important ethics-related issue pertains to the standards of advertising. One proverbial case is that of Nestle introducing its famous and controversial baby formula onto African markets in the early 1990s. Advertising and price fulfill their role if and only if they convey full information enabling the consumer to evaluate and rank alternatives. However, if that information is incomplete in that it is contingent on some other knowledge the customer might not possess, market mechanism fails. Certainly, not all of the information must be spelled out literally, and cultures vary in their standards (ceilings) of ad puffery. However, unless the local customers have been reasonably instructed as to how to perceive ad content and discount it by some expected 'deflationary factor,' the responsibility must not rest with them, but ought to be redistributed to foreign advertisers (manufacturers). If certification is costly, protectionism might hamper trade or at least restrict certain advertising practices.

When it comes to more pragmatic considerations involving the choice of whether to adapt to local culture, the debate involves product (and marketing) standardization thesis. One can start off with recognition that branding is a prerogative of large players most probably qualifying as multinational companies. There is, however, one important distinction between a global brand versus an international brand. For the former, the differentiation basically assumes the form of...zero differentiation, in that a global brand is positioned by the same name, largely the same design, and same creative strategy (perhaps even in terms of channels of distribution or media mix) on most major global markets. There are two primary schools of thought that stress alternative visions of what makes cross-cultural management effective and efficient: the globalization (standardization) approach vs. the localization (adaptation) premise. The former is championed primarily by Theodore Levitt of Harvard Business School who argues that multinational businesses should act as if there already was a single global market with no major cultural barriers. His point can be interpreted as suggesting that, largely due to the progress of modern information technologies, cultural and institutional matrices tend to converge. Moreover, consumers of all nations share essentially the same needs and incentives and should therefore be addressed in a similar manner and with similar means.

Philip Cotler of Northwestern University, a leading espouser of the adaptation approach, turns around in stressing that, what bridges the success of the normative adherence to long-run tendencies is the positive (and short-run) realization that failure to meet local constraints will result in consistent underperformance and rising cost of using foreign markets. Indeed, while local competitive edges might have some overlap due to similarities, it would be myopic to build entirely on general factors underlying the advantage and overlook specificity, thus failing to capture important sources of opportunity. Competition won't fail to seize it, especially now that such opportunities (markets) are increasingly growing scarce.

On careful examination, though, one could note that these two approaches are as polar as they are complementary, and each multinational business chooses some toss up to fit the needs of a specific project or a campaign. On the one hand, institutional and cultural frameworks do exhibit a tendency to converge. However, that convergence does not always go both ways or indeed toward a 'common denominator.' For example, there remain the so-called high-context cultures in Asia, where a message will signal a context-contingent meaning over and above the otherwise independent (proper) signal it would convey in a low-context society like Germany or the US. However, it happens some of the more context-laden cultures like Japan have shown to be remarkably comfortable importing Western value system as well as preferences in diet, apparel, and leisure. Still, their idiosyncrasies remain a tough problem for foreigners to solve.

Then, although the basic needs could be assumed more or less alike, that unlikely holds for preferences as specific realizations or indeed combinations of needs as well as of means to meet them. For my part, I would argue that the more efficient (from the standpoint of cost as well as end result) and controllable marketing in an international context could be secured through bypassing specificity rather than adapting to (focusing on) it. Of course, there are gaps that simply cannot be ignored at the operational stage. Likewise, though, a typical ad or a TV commercial that addressed every bit of a given culture, and stressed those differences, wouldn't likely be a success. There are some 'unavoidables' like effective use of local idioms and living up to practices-related expectations (also a form of non-verbal idiomacy). But after all, by bypassing local barriers we really mean producing messages that are neutral with respect to cultural context insomuch as it's feasible and profitable.

Keillor and Hult (1999) suggest that the study of cross-cultural differences should be focused on the relevant core, and that further theoretical research is needed to not only conceptualize 'culture' (in essence, the subject) in more unambiguous and promising terms, but also to identify interlinkage between its maintained constituents ...

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