Research Insights 7.2 Strategy Fit and Performance Consequences

International Market Development

Source: Katsikeas, C.S., Samiee, S., and Theodosiu, M. (2006). Strategy fit and performance consequences of international marketing standardization. Strategic Management Journal, 27(9), 867–90.

Abstract: This study addresses a long-standing debate in the literature regarding the appropriateness and performance consequences of marketing strategy standardization vs. adaptation. Much of the relevant literature represents the headquarters' viewpoint and broadly assesses antecedents of standardization or adaptation across widely varying markets. Using strategic fit as the theoretical platform for analysis, the study investigates international marketing strategy for a specific product or line within subsidiaries of U.S., Japanese, and German multinational corporations (MNCs) operating in the U.K. The results indicate that degree of strategy standardization is significantly related to similarity between markets with respect to regulatory environments, technological intensity and velocity, customs and traditions, customer characteristics, a product's stage in its life cycle, and competitive intensity. On the critical question of performance consequences, the findings suggest that superior performance results from strategy standardization only to the extent that there is fit or coalignment between the MNC's environmental context and its international marketing strategy choice. Copyright © 2006 John Wiley & Sons, Ltd.

Insight:

This article examines under what conditions companies are more likely to opt for a standardized international strategy and explores the performance implications of standardization. The analysis is based on the study of the UK subsidiaries of German, US, and Japanese multinationals. The authors show that companies are more likely to standardize when their home market is similar to the foreign market both in relation to macroeconomic factors (for example regulatory environment, technological intensity, traditions), as well as microeconomic factors (for example customer characteristics and competitive intensity). Standardization yields superior performance under conditions of high fit between the environmental context and the choice of strategy. The article has important implications because it suggests to practitioners under what conditions strategic standardization is more likely to be successful.

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