Academic journal article Multinational Business Review

Strategic Choice in International Ventures: A Contingency Framework Integrating Standardization and Entry-Mode Decisions

Academic journal article Multinational Business Review

Strategic Choice in International Ventures: A Contingency Framework Integrating Standardization and Entry-Mode Decisions

Article excerpt

ABSTRACT:

Strategy and marketing scholars look at strategic issues from different points of view and attempt to explain strategic choice and performance from their unique perspectives. This paper combines these perspectives in the context of international ventures and develops a conceptual framework integrating international marketing strategy decisions with entry mode decisions. The resulting contingency framework extends the hierarchical entry-mode decision model and allows for a better specification of the strategy-performance relationship in international business.

INTRODUCTION

The extensive international business research on modes of entry and cross border cooperation has identified numerous antecedents to and consequences of strategic choice (Andersen, 1997; Bery & Bowers, 1991; Bleeke & Ernst, 1992; Hamel, Prahalad, & Doz, 1989; Harrigan, 1987; Luo, 1999). However, finding conclusive empirical support for the relationship between international strategy and performance has been elusive. Results have been mixed because of (a) the difficulties in isolating foreign operations performance from corporate performance, (b) the different measures of performance used (financial and strategic), (c) the time periods used when measuring performance, and (d) the wide variety of alternative approaches to cooperative ventures (Geringer & Hebert, 1991). Similar difficulties arise in the marketing field. The international marketing debate on the issue of standardization versus adaptation of the marketing mix has attempted to relate these decisions to performance with inconclusive results (Birkinshaw, Morrison, & Hulland, 1995; Cavusgil, Zou, & Naidu, 1994; Ozsomer & Prussia, 2000; Quelch & Hoff, 1986; Samiee & Roth, 1992; Takeuchi & Porter, 1986).

We focus on the intersection of international corporate strategy and international marketing strategy literatures and argue that decisions to operate across borders through either equity or contractual arrangements for marketing alliances are related to, and must be studied in conjunction with decisions in the level of standardization of the global marketing program. This relationship between entry mode strategies and global marketing standardization has received little attention in management literature (Heide & John, 1990; Heide & Meiner, 1992; Samiee et al., 1992). As a consequence, empirical research in these two fields (Burgelman, 1983; Porter, 1987; Woodcock, Beamish, & Makino, 1994) may have confounded predictions of relationships and performance because these decisions have been considered independently and in isolation. Grounded on marketing strategy and international business literature, we offer a contingency framework and argue that international marketing decisions and mode of entry decisions are closely interrelated through their antecedents, and the ways in which they are combined will have performance implications.

Characteristics of the global consumer, the global industry, and the organization are explored from both the marketing and the strategy perspectives to develop common strategy drivers. The framework's contribution centers at the interaction between marketing and entry strategic choice, and the effect of this integration on performance. In particular, we extend Pan and Tse's (2000) hierarchical model of international decision-making in which they argue that managers first decide whether or not to make an equity investment in a foreign market and then decide on alternative entry modes as a second level decision. Here we argue that the first level decision of whether to invest or not should be informed by the international marketing strategy being pursued and propose a moderating or mediating interaction to be tested in future studies. Furthermore, this research contributes to the debate on the need for an extension to transaction cost theory, by including contextual variables such as the institutional, the cultural, and, we propose here, the marketing environment (Brouthers, 2002). …

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