Factors influencing the degree of international pricing strategy standardization of multinational corporations Marios Theodosiou, Constantine S Katsikeas.

Journal of International Marketing. Chicago: 2001. Vol. 9, Iss. 3; pg. 1, 18 pgs Abstract (Summary) In response to certain important gaps identified in the global marketing literature, a study investigates the pricing strategies followed by manufacturing subsidiaries of multinational corporations. Specifically, it attempts to identify the factors that play an important role in determining the degree of international pricing strategy standardization. The findings suggest that the extent to which multinationals standardize their international pricing strategies depends on the level of similarity between home and host countries in terms of customer characteristics, legal environment, economic conditions, and stage of the product life cycle. The study highlights implications of the findings for business practitioners and discuss future research directions along with the limitations. Jump to indexing (document details) Full Text (6445 words) Copyright American Marketing Association 2001

[Headnote] ABSTRACT [Headnote] In response to certain important gaps identified in the global marketing literature, the focus of this inquiry is an investigation of the pricing strategies followed by manufacturing subsidiaries of multinational corporations. Specifically, the authors attempt to identify the factors that play an important role in determining the degree of international pricing strategy standardization. The findings suggest that the extent to which multinationals standardize their international pricing strategies depends on the level of similarity between home and host countries in terms of customer characteristics, legal environment, economic conditions, and stage of the product life cycle. The authors highlight implications of the findings for business practitioners and discuss future research directions along with the limitations of the study. Increasing liberalization, interdependence, and competition in world economies have accelerated the need for multinational corporations (MNCs) to develop effective global strategies in their endeavor to achieve sustainable competitive advantage in international markets (Samiee and Roth 1992). Marketing has played a significant role in the advancement of the field of international business; marketing strategy constitutes a critical component of a firm's global strategy (Zou and Cavusgil 1996). The development of optimal programs for global markets is of vital interest to business managers who view international operations as a means of boosting corporate growth, improving competitive

and ensuring company survival and longterm viability in a highly globalized marketplace.g.. we consider international pricing strategy along the standardization-adaptation continuum (Cavusgil and Zou 1994). along with directions for further research. (2) it affects its long-term direction with respect to international operations. Rosenbloom. the primary interests of this investigation focus on the pricing strategies MNCs follow. Notwithstanding the long-standing interest in and many articles published on the topic.. because standardization can affect firms' revenue and profitability levels and determine a product's foreign market positioning (Czinkota and Ronkainen 1998). The vast majority of studies have focused on promotion (e. This is followed by an examination of the factors that are potentially associated with pricing standardization and the development of specific research hypotheses. strengthening financial performance. understanding the elements that influence the extent of standardization of international pricing strategy is vital. Nevertheless. product (e. Because the key consideration in international business operations is whether the marketing strategy should be standardized or adapted. and preferences has received focal research attention at both the conceptual and the empirical level. the extent to which elements of the marketing program should be standardized across markets or adapted in order to accommodate different foreign market conditions. Larsen. A review of the pertinent literature identifies three schools of thought: the two extreme opposites of . we highlight managerial implications of the findings and limitations of the study. subsidiaries play an important role in international marketing strategy formulation and implementation as a result of their closeness to the market and better understanding of local conditions. However. previous standardization studies have commonly been conducted at the headquarters level. Harvey 1993). and then present and discuss the results of the study. Specifically. In this context. this empirical inquiry aims to investigate the factors that play an important role in influencing the degree of international pricing strategy standardization from the standpoint of subsidiary managers. Next. The approach an MNC adopts has important implications because (1) it influences the MNC's ability to match its offerings effectively with the overseas market environments in which it operates. Furthermore. Harris 1994. In view of these limiting empirical considerations. a review of the pertinent literature illustrates that scant attention has been devoted to investigating drivers of international pricing strategy standardization (Samli and Jacobs 1994). Finally. and (3) it determines the areas that should be prioritized in global resource allocation decisions (Jain 1989).g.. requirements. we specify the research method employed. The study begins with an overview of the standardization versus adaptation debate. Hill and Still 1984. The degree to which international marketing programs must be standardized or customized has been a contentious issue for more than three decades now. and the perceptions and attitudes of subsidiary managers have largely been ignored.position.g. and to a lesser extent distribution (e. and Mehta 1997) aspects of the international marketing program. Walters and Toyne 1989).

Walters and Toyne 1989). Proponents of standardization also emphasize several important benefits associated with the pursuit of this strategy. lifestyles. By fully exploiting the potential for economies of scale in all value-adding activities through marketing program standardization. myopic.g.. everywhere. and aspirations. Soehl. Douglas and Wind 1987). According to these authors. The first involves the drivers of standardization. Levitt (1983. Quelch and Hoff 1986). The most significant advantage of standardization is its contribution to the achievement of economies of scale and cost savings in production. uses of leisure time." Similarly. North America and the European Union) (Walters and Toyne 1989). First of all.g.. the United States. and Picard 1986. international firms will be in a position to gain a significant advantage over their competitors by selling high quality products at lower prices (Levitt 1983). Douglas and Wind 1987). research and development. regional economic integration (e. Elinder 1965). p. Other drivers of standardization discussed in the literature include the need of international firms to serve their multinational customers (Buzzell 1968. and contrary to the marketing concept (e. as a result. viewing it as overly simplistic. the ability for worldwide exploitation of new and innovative ideas (Buzzell 1968.. income levels. These people have similar academic backgrounds. Ohmae (1985) refers to the emergence of the Tridians: the residents of Japan. or even inescapable strategy. 95) claims that in this new commercial reality. defined as the developments in the international business environment that make standardization a feasible. Verhage. and better coordination and control of international operations (Douglas and Craig 1986). as well as increasing international travel by tourists and businesspeople." or contingency perspective. the presentation of a consistent image across markets (Harvey 1993). 600 million consumers in all parts of the Triad have strikingly similar needs and preferences.g. wants the things they have heard about. and the growth of international market segments with similar needs and preferences (Yavas. many academics expressed their disagreement with Levitt's (1983) argument about a worldwide homogenization in needs and preferences. seen or experienced through the new technologies.g. The second aspect refers to the potential advantages that may result for a company that pursues a strategy of international marketing program standardization.. These perspectives are examined next. The arguments in favor of marketing program standardization emphasize two main aspects. Other advantages of standardization proposed in the literature include the potential for rapid introduction of new products in international markets (Samiee and Roth 1992. The adaptation school of thought emerged essentially as a reaction to the arguments put forward in favor of standardization.complete standardization versus complete adaptation and the "middle-of-the-road. Boddewyn. In a controversial article. and marketing (e. and Green 1992). Keegan 1969). are considered driving forces behind the creation of a global village and thus a global marketplace (e. advantages that make standardization a desirable alternative. people around the world have the same needs and desires and that "almost everyone. Technological developments in the areas of communication and transportation. and the European Union. no hard evidence can be produced in support of Levitt's thesis (Douglas .

Zou. the difference between standardization and adaptation is in degree rather than in kind. several authors have claimed that even when cost savings can be made. Onkvisit and Shaw 1990. Schlegelmilch. market. Wind 1986).. Cavusgil..g. technological developments in flexible manufacturing systems and computer-aided design and manufacturing facilitate production of customized products without major cost implications and reduction in the minimum efficient scale of production (Douglas and Wind 1987.. It has been argued that low price positioning is a vulnerable strategy that may not lead to the achievement of sustainable competitive advantage (Douglas and Wind 1987. Second. the . industry) and internal (e. Third.. monitoring market developments overseas. environmental. On the one hand. it has been suggested that certain industries (e. Furthermore. their effect may not be significant if a large proportion of the total cost is determined by factors on which standardization has no impact (e.g. These include deeper penetration of foreign markets and thus increased market share and sales volume for the firm (Cavusgil. and purchasing behavior among different countries (e. and Picard 1986). Quelch and Hoff 1986). and Du Preez 1995). Soehl. there is no evidence to suggest that customers have become more price conscious or that they are willing to trade off specific product features for lower prices. some authors have indicated several important benefits that are likely to result from adapting international marketing programs to local market conditions. Wind 1986). critics of standardization have questioned the significance of economies of scale and the cost savings underlying this approach. according to critics of standardization. organizational structure and processes) factors may limit the degree of standardization that a firm is able to apply (Boddewyn. the decision whether to standardize does not depend on managerial discretion alone. Therefore. According to this perspective.g.and Craig 1986. and quickly responding to shifts in customer preferences (Craig and Douglas 1996). On the other hand. and augmentation of firms' capabilities in analyzing and understanding foreign markets. and the two perspectives are viewed as occurring along a continuum on a bipolar scale (Onkvisit and Shaw 1987).. Cross-cultural empirical research has found significant differences in customer characteristics. Walters and Toyne 1989).g. Moreover.g. because of either legislation and allied governmental regulations or inescapable and uncontrollable marketplace realities (Hill and Still 1984). and Naidu 1993). preferences. defined as the adaptations a company is obliged to make. and Naidu 1993). Certain external (e. Zou. Recent standardization literature has followed a more fruitful research avenue by supporting the contingency perspective of international marketing (e. Diamantopoulos. Such factors are responsible for mandatory adaptations.. enhanced motivation and morale of local managers (Douglas and Wind 1987. Fourth. cost of raw materials and labor) (Douglas and Craig 1986). packaged consumer goods) are less susceptible to manufacturing and research and development economies (Quelch and Hoff 1986).g.

In investigating the factors influencing the degree of international pricing strategy standardization. the relationship between headquarters and local subsidiaries (Jain 1989). legal. only a limited number of these have been empirically tested.challenge facing international marketing managers is to decide which marketing-mix elements they should standardize or adapt. Rau and Preble 1987). Zou. and several classificatory schemes have been proposed (e. Bodur. Quelch and Hoff 1986). product uniqueness (Cavusgil. Zou. from a methodological point of view. such as customer characteristics. attitudes. and Naidu 1993). Samiee and Roth 1992). to limit our effort to the examination of contingency variables whose relevance had been established in previous standardization studies and that could be linked specifically to the degree of international pricing strategy standardization pursued by MNCs. and Naidu 1993. The critical issue in designing international marketing strategies in the framework of contingency theory is to identify contextual factors that determine the appropriate degree of marketing program standardization and determine which individual marketing-mix elements are influenced by each factor and to what extent. However. Although a large number of potentially important variables have been proposed by various authors at the conceptual level (as discussed in the previous section). Zou. and (4) product and/or industry factors. and Naidu 1993). Zou. we attempted to include the largest possible number of relevant contingency variables. A review of the extant literature suggests that these factors can be organized into four broad categories: (1) macroenvironmental factors. and industry technology orientation (Quelch and Hoff 1986. corporate orientation (Perlmutter 1969). Johnson and Aruthanes 1995). Ozsomer.. In response to this challenge. conditions and patterns of product use (Hill and Still 1984). product familiarity of foreign customers (Cavusgil. Zou. the firm's experience in international operations (Cavusgil. hypothetico-deductive research approach was a serious obstacle to this end. such as the nature of product (Cavusgil. and Cavusgil 1991). including the degree of centralization in decision making (Quelch and Hoff 1986. Cavusgil. (2) microenvironmental factors. and to what degree (Buzzell 1968. Craig and Douglas 1996). including economic. and Naidu 1993. cost. (3) firm-specific factors. and behavior (Jain 1989). Jain 1989). . and demographic elements (Douglas and Wind 1987. that the present study represents the first systematic endeavor to examine this issue using a descriptive. cultural. stage of product life cycle (PLC) (Baalbaki and Malhotra 1995. and Naidu 1993). under what conditions. physical. and the availability. Wind and Douglas 1986). and Cavusgil 1991). We therefore deemed it appropriate. Zou.g. cultural specificity of the product (Cavusgil and Zou 1994. Jain 1989). and Naidu 1993. academic researchers have examined the factors that play an important role in the determination of marketing program standardization. Jain 1989. and competencies of marketing intermediaries (Harvey 1993. Ozsomer. and the subsidiary's ownership structure (Rau and Preble 1987). the structure and nature of competition (Cavusgil. Bodur.

the economic environment of the host country determines the cost of raw materials. the higher is the degree of pricing standardization. A common law found in many countries that directly influences pricing is retail price maintenance. Cavusgil. Furthermore. pharmaceuticals) are easily accessible to almost everybody in the population.Accordingly. and the like that may prevail in foreign markets (Buzzell 1968. . The level of such costs has a direct impact on the overall cost structure of local subsidiaries. Moreover. Empirical research has shown that differences in government laws and regulations across markets are among the major obstacles to standardization (Baalbaki and Malhotra 1995. legal environment. the pricing policy pursued by an international firm in a particular foreign market should reflect these factors. Samli and Jacobs 1994). and Naidu 1993). weight. which is determined by the level of economic development of the country (Jain 1989). which requires firms to sell certain products at specified prices. because they determine demand potential for a particular product and have a significant impact on a firm's cost structure. the higher is the degree of pricing standardization. and Naidu 1993. customer characteristics and behavior. On the demand side. Cavusgil. a review of the limited empirical evidence. and measurement systems. in addition to the prices they are able and willing to pay for certain products (Jain 1989). The economic conditions prevailing in a host country can influence pricing decisions in several ways. pricing is influenced indirectly by laws and regulations that necessitate product modifications in compliance with different technical specifications. Zou. revealed five factors that are potentially important in influencing the extent to which MNCs standardize their international pricing strategy: economic environment. and other resources a firm needs to purchase or hire in order to carry out its everyday operations (Douglas and Wind 1987. the overall level of economic and industrial development of a country determines customers' priorities in terms of the products they consider essential. combined with relevant conceptual work. firms incur extra costs. For example. Governments may also impose price controls on certain products to protect local producers from international competition that is deemed unfair.g. a product considered essential in a developed country may be viewed as less necessary or even as a luxury item in a less developed country (Hill and Still 1984).. labor. electric. which forces them either to charge higher prices or to compress their profit margins. We therefore advance the following: H1: The greater the similarity in the economic environment between an MNC's home and host countries. Zou. We therefore expect the following: H2: The greater the similarity in government laws and regulations between an MNC's home and host countries. Douglas and Wind 1987). distribution infrastructure. To make the required modifications. Thus. On the cost side. energy. demand for a product at different price levels is a function of the purchasing power of targeted customers. health and safety standards. The purpose of such laws is either to protect customers from unfair exploitation or to ensure that certain sensitive products (e. The relevance of each factor is considered next. environmental protection acts. and stage of PLC.

g. the higher is the degree of pricing standardization. Johnson and Aruthanes 1995). an MNC must be aware of foreign customers' preferences. profit margins.International firms often must rely on existing distribution channels to distribute their products in foreign markets. Therefore. type. including sales and credit terms and discounts offered. if the distribution channel used in a particular foreign market involves a greater number of intermediaries or channel members are less competent and efficient than those in the domestic market. growth. It is therefore possible to hypothesize the following: H3: The greater the similarity in the distribution infrastructure between an MNC's home and host countries. the number. As a result. may influence price levels. The significance of such an approach diminishes in circumstances in which there is no difference in a product's life . in turn. and decline--and marketing strategy programs differentiate across the various stages. a firm may also decide to modify other elements of its international pricing policy. costs. The additional cost incurred is likely to result in higher final selling prices and/or reduced profit margins for the firm. competencies. This is more likely to happen when a company is targeting similar customer segments in domestic and foreign markets (Jain 1989). The extent to which an MNC will achieve its objectives in a particular foreign market will depend largely on its ability to satisfy the needs and preferences of target customers. The life cycle of a product consists of four major stages-introduction. and allied international pricing policy elements (Buzzell 1968). MNCs may need to modify their pricing programs to take account of particular local market conditions (Rau and Preble 1987). maturity. a significantly higher cost will be added to the product by the time it reaches the end user. This. in developing its pricing policy. some products may be at different stages of their life cycles in different countries (Buzzell 1968).. Price level is among the most important criteria used by customers in evaluating competing products (Levitt 1983). Therefore. Therefore. product quality and performance) may be equally or even more important to certain customers (Douglas and Wind 1987). Because of possible differences in economic and market development levels among countries. However. A standardized pricing policy is more appropriate if domestic and foreign customers place an equal emphasis on and have similar perceptions of price. Therefore. Several empirical studies demonstrate the important role PLC plays in determining the degree of international marketing strategy standardization (Baalbaki and Malhotra 1995. For example. Under such circumstances. the higher is the degree of pricing standardization. perceptions. a careful examination of overseas customer characteristics and purchasing behavior is essential in selecting an appropriate pricing strategy for a specific foreign market. The stage of PLC is a fundamental variable affecting business strategy (Anderson and Zeithaml 1984). other criteria (e. we suggest the following: H4: The greater the similarity in customer characteristics and purchasing behavior between an MNC's home and host countries. and purchasing behaviors with respect to various price levels. not all customers are price sensitive. and margins of the intermediaries involved in the process of transferring the product from the point of production to the end user have a significant effect on a firm's cost structureparticularly if the distribution cost constitutes a significant proportion of the total cost.

Therefore.cycle stage between the domestic and international markets (Sorenson and Wiechmann 1975). Finally. We initially reviewed the relevant literature and simultaneously conducted exploratory interviews with executives in subsidiaries of MNCs to identify items for operationalizing the constructs under investigation. manufacturing subsidiary. we identified individuals who met the knowledgeability criterion for key informants and were willing to participate and whose companies had a product or product line that the parent firm also manufactured and marketed in its own domestic market. All these firms were targeted in this research. or the unavailability of correct contact details. and Japan. which we then asked several academic researchers in the field of international marketing to evaluate. We gathered data for this study from a mail survey of manufacturing subsidiaries of MNCs operating in the United Kingdom. We developed the sampling frame for this study using the Financial Analysis Made Easy electronic database of U. the higher is the degree of pricing standardization. we excluded 201 firms for a variety of reasons. the subsidiary) is manufacturing and marketing in the United Kingdom but that is also manufactured and marketed by the parent firm in its home market. they served as expert judges to appraise the face validity of the items selected. in addressing this problem in the study of pricing strategy standardization of MNCs. We designed a preliminary questionnaire. Specifically.. This is because international firms often employ different marketing strategies across countries and product-markets. Cavusgil and Zou (1994) argue that any study on international marketing strategy standardization conducted at the overall company level is likely to result in confounded and thus unreliable findings. subsidiary produced and marketed in their home markets.e. discover whether there was a product or product line that both the parent firm and its U. we adopt the product or product line as the unit of analysis.. Upon completion of the telephone contacts.K. which originated mostly from the United States. . Germany. the key informant). firms. including an absence of common products in the portfolios of the parent firm and its U. which thus assured content validity. and encourage respondent participation in the survey. we extensively pretested and refined the revised questionnaire in personal interviews with managers in subsidiaries of MNCs. a company policy of not taking part in external research studies. identify the person in each company who was the most qualified to provide the required information (i. We identified 706 manufacturing subsidiaries of MNCs. a change in the firm's status as a result of a merger or acquisition.K. We then contacted each of these firms by telephone to ensure that the correct address of each company was available. We developed the questionnaire used in this research in several steps.K. We therefore hypothesize the following: H5: The greater the degree of similarity in the stage of PLC between an MNC's home and host countries. we ask respondents to answer the questions of the research instrument with reference to a particular product or product line their company (i. In 505 of the 706 (72%) firms.e.

Principal components analysis was thus employed in each set of items to explore the presence of an underlying structure in the data. We therefore conclude that nonresponse bias is not likely to be a problem in this research. and distribution infrastructure between the U. Following Kotabe and Omura (1989) and Johnson and Aruthanes (1995). Table 1. anchored by "very different" (1) and "very similar" (7). Therefore. which is based on the contention that. was personally mailed to the key informant in each target firm who had been identified during the telephone contacts. When we used an eigenvalue of one or greater as the . Regarding the factors that potentially influence pricing strategy standardization. A copy of the questionnaire. a set of items was used to measure the degree of similarity in economic and legal environments. A seven-point scale. Table 2.K. Respondents were asked to compare the pricing policy followed by the subsidiary with that pursued by the parent company in its home market. postage-paid envelope and a cover letter. Scatter diagrams and bivariate correlation analyses pertaining to (1) the international pricing strategy standardization indicators and (2) the external elements that potentially influence the degree of pricing standardization indicated that certain items were highly correlated. Using a t-test under the assumptions of both equal and unequal group variances. a single item was employed to assess the extent to which the focal product or product line is in the same life cycle stage in both the United Kingdom and the parent firm's home market. responses were captured on a seven-point scale ranging from "very different" (1) to "very similar" (7). Table 1 exhibits the results of principal components analysis for the international pricing strategy standardization items. as contrasted with early respondents. anchored by "strongly disagree" (1) and "strongly agree" (7). together with a self-addressed. customer characteristics and behavior. market and that in which the parent firm was based (see Table 2). was used to measure participant responses. late respondents are more likely to be similar to nonrespondents. To assess possible nonresponse bias. followed by two further reminders. we found no significant between-group mean differences between the early and late respondent groups with regard to any of the variables examined in the study. produced 129 usable responses.The extent of international pricing strategy standardization was measured on the basis of five items (see Table 1). Reminder/thank-you postcards to all managers and two additional follow-up mailings. The guidelines of the total design method (Dillman 1978) were followed to enhance respondent participation in this mail survey. a satisfactory response rate of 26% was achieved. was used to capture individual responses. we followed Armstrong and Overton's (1977) formal extrapolation procedure. Again. A sevenpoint rating scale.

and PLC stage. Germany. Therefore. and stage of PLC (independent variables) with subsidiary performance (dependent variable). legal environment. .. and distribution infrastructure.g. it can be concluded that H1. The analysis revealed four significant. Multiple regression analysis was used to estimate the relationships of economic conditions. standard deviations. economic conditions. the focus of the present study is the nature of pricing strategies followed by MNC manufacturing subsidiaries and the identification of the factors that drive the extent of international pricing strategy standardization. The four factors have been labeled legal environment. Factor scores were then computed for all five factors that emerged for use in subsequent analysis. This is signified by the mean scores. little empirical work has been undertaken examining the issue of standardization within the context of MNCs' pricing strategy. customer characteristics. The solution featured strong individual loadings on each factor. economic conditions. Japan. and Cavusgil 1991). Ozsomer. industrial. economic conditions. Notably. our findings appear to suggest that the opposite is true for MNCs domiciled in a developed country and operating in another developed country. No relationship was established between similarity in distribution infrastructure and pricing standardization. enabling straightforward interpretation. To contribute toward filling this void in the global marketing literature. and market development. positive relationships in the equation. pertaining to customer characteristics. and one-sample t-test results for the items used to measure the pricing standardization construct (see the Appendix). distribution infrastructure. and PLC stage. thus testing H1-H5. and this similarity is conducive to the pursuit of international pricing standardization. The study found that the majority of the participant MNC subsidiaries adopt a relatively high degree of pricing strategy standardization. a single-factor solution emerged that explained nearly 70% of the total variance. H2. legal environment. legal environment. These results suggest that the degree of international pricing strategy standardization of MNCs is influenced by the level of similarity between home and host countries in terms of customer characteristics. These countries have considerable resemblance to the United Kingdom in their levels of economic.factor selection criterion along with the screen test. This evidence may be attributed to the fact that the vast majority of the sample firms originate in the United States. A four-factor solution emerged that accounted for approximately 67% of the total variance. However. previous research shows that a high level of pricing standardization is uncommon among MNCs that operate in less developed host market contexts compared with their home market bases (e. H4. Table 2 shows the principal components analysis results with respect to the environmental elements that potentially influence the degree of pricing standardization. or another developed nation. As shown in Table 3. and H5 are validated and H3 is rejected. Bodur. both the goodness-of-fit and explanatory power of the estimated regression model were acceptable. customer characteristics. Despite the substantial amount of research attention devoted to the subject of marketing program standardization in international markets.

this is an issue that warrants further empirical investigation. At the same time. Sometimes. This objective can be achieved through either premium pricing when market conditions are favorable (i. Nevertheless. Jain 1989. These findings are consistent with earlier research efforts that have examined determinants of standardization.Regarding the determinants of pricing standardization. appropriate pricing strategies must be developed with respect to each market. The results of the present study substantiate the conclusion drawn in previous empirical research (Cavusgil and Zou 1994) that success in international markets is within the reach of management. Despite the existence of a large and complex set of factors that influence international business activities.e. legal environment. the results indicate that the extent to which MNCs standardize their international pricing strategies depends on certain environmental and market conditions-the degree of similarity between a firm's home and host markets in terms of economic conditions. our study suggests that these elements are significant correlates of standardized pricing programs. Samli and Jacobs 1994).e. . One possible explanation for this result is that distribution costs represent a minor component of the product's total cost and. the level of similarity in the distribution infrastructure between home and host countries was found. Samiee and Roth 1992. four factors-customer characteristics and behavior.. Johnson and Aruthanes 1995. demand is strong and competition is weak) or competitive pricing when they are hostile (i. because the standardization versus adaptation decision is situation specific. Then. not to play an important role in the determination of the degree of international pricing standardization.g. It should be remembered that because pricing affects the revenue side of the profitability equation. Douglas and Wind 1987. however. managers may be able to enhance the performance of their firms by formulating and implementing marketing programs that match the environmental and market conditions of each foreign market targeted (see Venkatraman and Prescott 1990). and stage of PLC. have no significant effect on the international pricing strategies of the participant MNCs. contrary to expectations. economic and legal conditions. customer characteristics.. However. and stage of PLC-must be taken into account. but within the framework of an overall marketing strategy (e. Furthermore. special attention should be paid to the coordination of business operations across different foreign markets and the exploitation of potential scale economies and synergies with the ultimate objective of enhancing the overall company efficiency and effectiveness. firms may be forced to adopt uniform pricing across markets as a defensive measure against the graymarket imports of unauthorized intermediaries that are completely out of their control (Cavusgil 1996). Managerial decision making regarding standardization or customization of pricing strategies in international markets should be based on a thorough analysis and assessment of the degree of similarity (or difference) between the firm's home and host markets. a separate analysis and assessment of the environmental and market conditions that prevail in each targeted foreign market should be performed. however. In this regard. in turn. the ultimate long-term objective of managers in setting international pricing policy centers on revenue maximization. demand is weak and competition is intense)..

Future research efforts could add to the body of existing knowledge by exploring the extent of standardization of the process MNCs follow in formulating their pricing strategies across different foreign markets. First. Fourth. which involves the use of uniform structures and processes for the design. the present study looked only into the content aspect of standardization with reference to pricing. the study employed a cross-sectional research design that prevents us from making cause/effect inferences. though costly and time consuming. there is a need for more exploratory research to gain insights into the interrelationships among these variables and how they affect international pricing programs. ACKNOWLEDGMENTS . The pursuit of a particular international pricing strategy makes sense from a managerial perspective only to the extent to which it has a positive effect on the performance of the firm. a natural extension of the present study would be to consider performance outcomes of international pricing standardization. especially if making inferences to other significantly different economic settings such as former Eastern Bloc or newly industrialized regions. Conceptual and empirical studies focusing on the drivers and performance consequences of international marketing pricing standardization would have important implications for both theory development and the advancement of management practice in the field. Testing the external validity of the present evidence requires an examination of the issues addressed in this study within other international business contexts. and control of marketing programs in overseas markets (Jain 1989). implementation. combined with the limited amount of available empirical evidence. Second. which suggests that the results may suffer from limited external validity. For example. Therefore. Certain limitations evident in the explication of this study should be taken into account.Table 3. the empirical inquiry focused on a specific international market framework (i. can help track dynamic phenomena such as the relationships of extent of international pricing strategy standardization with its determinants.. Finally. Another relevant aspect could be process standardization. Future research efforts may consider the use of a longitudinal methodology that. because of the descriptive nature of the present study. the United Kingdom). readers should exercise caution in attempting to generalize from this investigation. Third. Further research should investigate the significance and relative importance of other contingency factors.and/or industry-specific factors on the degree of international pricing strategy standardization. a relatively limited number of potential independent variables have been examined. Given the absence of pertinent empirical evidence. more emphasis should be placed on investigating the influence of various firm characteristics and product.e.

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Katsikeas is Sir Julian Hodge Chair in Marketing Fr International Business. Cardiff University. . Cardiff Business School. [Author Affiliation] Constantine S. School of Economics Fy Management. University of Cyprus.[Author Affiliation] THE AUTHORS [Author Affiliation] Marios Theodosiou is Lecturer in Marketing.

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