19047972

Component A
Sakshi Ranbahat
International Business
(UMSD7R-15-2)
Module teacher :Sazid Bista
Word Count:

[Considering ‘global integration/local responsiveness’ framework discuss

the standardization of two international marketing components: advertising
and distribution. Support your discussion with relevant examples.]
“Think globally but act locally” (Kotler et al., 2008). Industries today are pressurized to achieve
dual aims that consist of integration-responsiveness framework to understand the tradeoffs
better between global integration (GI) and local responsiveness (LA) (Banalieva & Dhanaraj,
2013). The debate of whether to standardize or regionalize the international business has
divided scholars into either defending globalization or supporting regionalization. The strategies
used in IB for standardization has internal and external environment. Two determinant factors
while generalizing the external environment are: global integration and local responsiveness (Le
and Liao, 2018). Comparing to the efficiency gains in standardization through global integration,
local responsiveness ideas seem expensive because they compromise with standardizing but
they are respondent to specifics of a certain market in a certain country. There are factors such
as culture, legal environment, technology, innovation etc. that must be considered for
international marketing components such as advertising and distribution. There are countless
products around the world that are standardized such as Apple, ZARA, McDonalds, Nestle etc.
The reason why managers feel the pressure of global integration is because through
standardization, firms can achieve competitive advantage. In that process, standardization stays
as a factor that benefits a company in terms of mass production efficiency, low cost and quality
control. Choosing integration or adaption has been a discussion that is long-standing under
different scope of activities and in this context; advertising and distribution. This paper will
discuss why these two international marketing components must adjust to localization as well as
integration in order to sustain and grow globally.

Prahalad and Doz, (1987) conceptualized GI and LR to better understand and tackle
‘environmental pressures’ faced by Multinational Enterprise (MNE) and this framework has been
dominantly used to explore International Business Strategies (IBS). Any entity or industry trying
to go global faces a dilemma on formulating international strategy on adapting global
standardization (adjusting to its parent company) or local responsiveness (adjusting to local
context). According to Porter (1996), the most suitable strategy for internationalization varies
from one industry to another. The globalization of market has strongly put pressure on global
integration to bring standardization as it gains efficiency whereas detecting customer divergence
and its reflection on company pressurizes LR. The aim after this detection is to offer customized
products that fits the local market and regulate international marketing strategies accordingly
(Roth and Morrison, 1990). International markets are complex which is why we need global,
regional as well as LA inputs to move forward with sustainable growth and effectiveness.
Multinational firms follow four strategy modes while reacting to high and low pressures of GI and
LR identified by Bartlett and Ghoshal (1989)-, International, Global, Multidomestic and
Transnational. Along with IR, there are two other theories that can help analyze international
marketing components.

Hofastedes’ cultural model is a comprehensive framework that is widely used in many fields
examining and framing cross-cultures and his work on operationalization of cultures sets the
standard used in international marketing too. It consists of five dimensions: - Uncertainty
avoidance (UA), Power distance (PD), Masculinity (MASC), Individualism (IND) and Long-term
orientation (LTO) (The Impact Of National Cultures On International Marketing Strategy And
Subsidiary Performance Of Portuguese Sme’s, 2013). Studies using this framework have
confirmed that these dimension are very relevant to consumer behavior and international
marketing. For eg. Advertising is influenced by mostly all dimensions of Hofstedes’ cultural
framework (Soares, Farhangmehr and Shoham, 2007). The Uppsala Model is a ‘resource based
view’ which suggests 4 strategy formation during internationalization while having enough
market knowledge to commit further in establishment of chain and direction. ‘Psychic distance’
is the determinant factor for the firms’ direction towards internationalization (Vahlne and
Johanson, 2013). The model suggests learning by ‘doing’ and applying changes to what u learn.
Furthermore, we will examine these two international marketing components(advertising &
distribution) of fast food companies (KFC &McDonalds) and how they used the GI and LR
framework to standardize along with the linkage of Hofstedes’ Cultural model and the Uppsala
Model.

KFC was the first Western fast food company to enter China in 1987 which was a high context
culture during that time and currently KFC stands as the market leader (Parker et al., 2006).
Customer preferences and values in a specific culture play a significant role in pushing MNE’s
towards local responsiveness. KFC incorporated localization in their advertising in areas of
language, value, family backgrounds and all other cultural aspects of the Chinese society where
tradition is close to heart (Cui and Ting, 2009). Advertising in Chinese language instantly
lowered the psychic distance for the company. KFC even named themselves “No. 1 Chinese
Style Fast Food Brand” (KFC, 2012). Instead of figuring out simple things like Chinese
consumers preferred ‘dark thigh meat over breast meat’, KFC strategized itself to present itself
as part of the local community than to be seen as a foreign brand. Although KFC had first
mover advantage, soon they had to move towards deeper localization. KFC had already
developed a good logistics network which was a huge investment in the early years and slowed
down expansion but with its domestic supply chain, distributors and local labour hiring, KFC
ensured its quality and gained local responsiveness (Bell and Shelman, 2011). Advertising in
their mother tongue and establishing a distribution channel involving the Chinese people fit
perfectly as China follows collectivism rather than individualism. China having low power
distance towards foreign cultures and KFCs effort of towards achieving less psychic distance
helped in demographic participation of Chinese people at KFC. “To compete around the world,
a company needs three strategic capabilities: globalscale efficiency, the ability to leverage
learning worldwide, and local responsiveness” (Bartlett & Ghoshal, 1992). Aiming directly for
manufacturing in a foreign market helped KFC acquire more knowledge in customer
preferences and the overall culture in China. Experimenting with micro localization helped KFC
figure out that Asian market preferred rice dishes over western meals such as burgers which is
followed by other Multinational food chains today. Numerous authors throughout literature
consider adaption or LR as the successful driving factor for internationalization (Miao and
Barbaroux, 2006; Boumphrey and Bevis, 2014; Brock and Siscovick, 2007). In terms of
international marketing components such as advertising and distribution, KFC put high pressure
for local responsiveness as well as GI which is why they fit as a transnational company in the
framework (McMicheal, 2014).

Three years after KFC launched in China, McDonalds also entered the Chinese market. Known
for its standardization, McDonalds chose a completely separate path for entrance. For logistics
network, McDonalds relied on its global partner, HAVI Foods instead of creating a local supply
and distribution channel. McDonalds wasn’t Acquiring market knowledge that leads to market
commitment and they went the opposite way in the first step of the Uppsala Model by exporting
through HAVI Foods. Aiming for consistency globally, McDonalds almost kept the same menu
as it is in USA with a few local items added but Chinese people were loyal to their own cuisine
as they followed collectivism, having low power distance McDonalds couldn’t make an impact
through standardization. Instead of adapting and localizing, McDonalds imposed its parent
company culture (Marchini, 1998). The McDonalds culture created high uncertainty avoidance
(UA) for the Chinese consumers. They relied on their strategy to franchise but there were no
laws on how to operate franchising (Yeu et al., 2012) and in this long haul, YUM KFC has won
in expansion. This directly relates to their distribution as KFC explored micro localization in 3 rd to
5th tier cities whereas distribution of McDonalds is focused only capital cities and expansion is
slow (Rui, 2016). Lack of local quality suppliers also caused distribution difficulties for
McDonalds in China and customers thought their products were ‘too greasy’. Soon realizing
their mistakes, MCDs followed in KFCs’ footsteps by localizing their products which was a
winning choice. Mcdonalds already had promotional activities in Chinese language from their
entry that supported traditional beliefs in China. Not having an age demographic to enter the
restaurant and not serving alcohol lifted the Chinese customs through femininity and more
collectivism. However, they were a bit slow to towards adaptation which is why by 2016, KFC
had 4563 outlets (YUM, 2013) whereas McDonalds has only 2003 outlets (Zhou and Zhang,
2012). Although McDonalds entered China using global strategy, they slowly had to move
forward as a transnational company.

In order to meet some needs of a country such as culture, customer preference, income etc. the
adaptation marketing strategy suggests to change the components such as product, advertising,
distribution etc. while operating internationally. This doesn’t necessarily mean that company
cannot apply global integration. A company can still grow globally by taking standardization and
adaptation side by side (Bartlett and Ghoshal 1989). In terms of the marketing components:
advertising and distribution, it is a necessity to maintain local responsiveness to gain
competitive advantage and maximize initiatives on subsidiaries (Luo, 2001). Although
globalization can give a global platform to companies, it is crucial for businesses today to
include regionalization to sustain.

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