2005:120 SHU

B A C H E L O R ' S T H E S I S

Standardization vs. Adaptationof the Marketing Program for

International MarketsCase Study of Liko

Tina Nordstrand Maria Öhman

Luleå University of Technology

BSc and MSc Programmes in International Business Administration and Economics BSc

Department of Business Administration and Social SciencesDivision of Industrial marketing and e-commerce

2005:120 SHU - ISSN: 1404-5508 - ISRN: LTU-SHU-EX--05/120--SE

Acknowledgements You are about to read the outcome of ten weeks of hard work resulting in this thesis. We feel that we have gained great experience during this process when working within the area of adaptation and standardization of the companies’ marketing programs for international markets. During this period of time, we were excited to finally see how theories actually are used by a successful company. During the writing process we have experienced both drawbacks and progress. Our supervisor, Associate Professor Manucher Farhang at the Division of Industrial Marketing and e-Commerce at Luleå University of Technology, guided us through the difficulties we encountered during this process and he also motivated us to work very hard. We would like to thank Liko AB, and all people there taking valuable time to help us, especially Karin Edelswärd and Stefan Johansson at the commercial department for providing us with great information and setting time aside for our interview despite their very tight schedules. Not forgetting all the people supporting us, we would also like to thank our families and friends for bearing with us these past weeks; we know we had our ups and downs. Especially, we would like to say thank you to Jan Öhman for helping us get in touch with Liko and guiding us to the right people to talk to, which was Mrs. Edelswärd and Mr. Johansson. Thanking all the other people supporting us when writing this thesis would be too long, so instead we here give our great appreciation to those not specifically mentioned; thank you! We hope that students, researchers and persons interested in this area will find this thesis as interesting reading material. Luleå, May 2005 Tina Nordstrand Maria Öhman

Abstract This thesis focuses on adaptation/standardization of the marketing program done by small and medium sized companies (SME) for international markets. To be able to answer this, four research questions were posed: (1) How are SMEs’ standardization/adaptation of products to international markets influenced by various factors? (2) How are SMEs’ standardization /adaptation of price to international markets influenced by various factors? (3) How are SMEs’ standardization/adaptation of promotion to international markets influenced by various factors? (4) How are SMEs’ standardization/adaptation of distribution channels to international markets influenced by various factors? The empirical work for this study consists of data collected from Liko, an international medium sized company in the industrial sector making medical technical equipment. The findings of the study indicate that a successful international SME is taking the initiative to adapt to customers in foreign markets since this can help the SME to concur market shares. The study also showed that a specialized product often require price adaptation in different international markets since customer demands differ, and when the product is specialized, it is important for the SME to have knowledge over both the market and the product area in order to set the right price. It is also important for the SME to have experience within the promotional area in order to be market leader and it should use tradeshows as a part of their promotion activity. This study also shows that a short distribution channel, and thereby short distribution time, leads to increased sales for the SME.

Table of Contents

1. INTRODUCTION .................................................................................................... 1

1.1 Background ....................................................................................................................................... 1

1.2 Problem Discussion........................................................................................................................... 3

1.3 Purpose and Research Questions .................................................................................................... 3

2. LITERATURE REVIEW.......................................................................................... 5

2.1 Standardization versus Adaptation of Products for International Markets. ....................................... 5

2.2 Standardization versus Adaptation of Pricing for International Markets. .......................................... 7

2.3 Standardization versus Adaptation of Promotion for International Markets. ..................................... 9

2.4 Standardization versus Adaptation of Distribution Channels for International Markets. ................. 12

2.5 Theoretical Frame of Reference...................................................................................................... 16

3. METHODOLOGY ..................................................................................................19

3.1 Research Purpose........................................................................................................................... 19

3.2 Research Approach......................................................................................................................... 20

3.3 Research Strategy........................................................................................................................... 20

3.4 Data Collection ................................................................................................................................ 21

3.5 Sample Selection............................................................................................................................. 23

3.6 Data Analysis................................................................................................................................... 23

3.7 Validity and Reliability...................................................................................................................... 24

4. CASE STUDY: LIKO AB.......................................................................................25

4.1 Company Background..................................................................................................................... 25

4.2 Liko’s Products in International Markets.......................................................................................... 28

4.3 Liko’s Pricing in International Markets............................................................................................. 29

4.4 Liko’s Promotion for International Markets. .................................................................................... 30

4.5 Liko’s Distribution Channels in International Markets. .................................................................... 32

5. DATA ANALYSIS..................................................................................................35

5.1 Factors Influencing SMEs’ Standardization/Adaptation of Products for International Markets....... 35

5.2 Factors Influencing SMEs' Standardization/Adaptation of Pricing for International Markets. ......... 36

5.3 Factors Influencing SMEs’ Standardization/Adaptation of Promotion for International Markets..... 37

5.4 Factors Influencing SMEs’ Standardization/Adaptation of Distribution Channels for International Markets. ................................................................................................................................................. 39

6. CONCLUSIONS AND IMPLICATIONS.................................................................41

6.1 How are SMEs’ standardization/adaptation of products to international markets influenced by various factors? ..................................................................................................................................... 41

6.2 How are SMEs’ Standardization/Adaptation of Pricing to International Markets Influenced by Various Factors? ................................................................................................................................... 42

6.3 How are SMEs’ Standardization/Adaptation of Promotion to International Markets Influenced by Various Factors? ................................................................................................................................... 42

6.4 How are SMEs’ Standardization/Adaptation of Distribution Channels to International Markets Influenced by Various Factors?............................................................................................................. 44

6.5 Conclusions ..................................................................................................................................... 45

6.6 Implications/Recommendations ...................................................................................................... 46

LIST OF REFERENSES............................................................................................48

Books..................................................................................................................................................... 48

Articles ................................................................................................................................................... 48

Websites ................................................................................................................................................ 49

Interview ................................................................................................................................................ 49

APPENDIX 1 (English Version of the Interview Guide) APPENDIX 2 (Swedish Version of the Interview Guide)

LIST OF FIGURES Figure 2.1 Different types of Low Price Competition ............................................................................. .8 Figure 2.2 Target Position of Second Product ...................................................................................... .8 Figure 2.3 A Descriptive Model To Determine the Degree of Standardization/Adaptation of Adv. ......11 Figure 2.4 Degree of Internationalization ..............................................................................................13 Figure 2.5 Considerations in Developing the Adapt Stand Model........................................................16 Figure 2.6 Standardization vs. Adaptation of the SME´s Marketing Program.......................................18 Figure 3.1 Six Sources of Evidence: Strength and Weaknesses………………………………………… 22 Figure 4.1: The Liko Group…………………………………………………………………………………….26

LIST OF TABLES Table 3.1 Relevant Theories for Different Research Strategies…………………………………………...21 Table 4.1: Liko’s Chronological Development over Time………………………………………………......29 Table 5.1 Standardization vs. Adaptation of the Company’s Product for International Markets…........37 Table 5.2 Standardization vs. Adaptation of the Company’s Pricing in International Markets…………38 Table 5.3: Different Promotional Theories …………………………………………………………………..39 Table 5.4: Melewar & Vemmervik’s Six Factors....................................................................................40 Table 5.5 Standardization vs. Adaptation of the Company’s Distribution Channels for the International

Markets………………………………………………………………………………………………41

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1. Introduction In this first chapter, we will present the background to the subject of the thesis to introduce

the reader to the study’s problem area. We will therefore discuss the basics of standardization

versus adaptation for companies’ different international markets. We will then present our

purpose as well as the research questions which we intend to answer in our thesis.

Furthermore, the demarcations of the study are added as well.

1.1 Background

When companies expand their market internationally, they have to consider standardization and adaptation of their marketing program (Jobber, 2001). Adaptation is a strategy regarding change of the marketing program, in other words the company’s product, price, place and distribution, for each international target market. The author continues and describes standardization as an international marketing strategy where the company uses the same marketing program for all their international target markets. The issue standardization vs. adaptation of international marketing programs has been a highly debated issue for over 40 years and it has been the central focus of academics and practitioners, (Ryans, Griffith and White 2003). A tremendous growth in academic research has focused on this topic, most of it originating from a promotion or advertising perspective. They also mean that research has increased significantly during this period of time and general frameworks has been developed, but researchers has been unable to substantiate or failed to explore the underlying key assumptions regarding standardization. Ryans et al (2003) continue their discussion and have a critical angle to the subject since they have the opinion that the research that has been made during the last 40 years often lacks empirical verification. The authors continue and say that the most of the empirical research that has been done has either been replicative in nature or encumbered in small theoretical advances and this might result in stagnation of status and in thought and action that is related to the topic. Looking back from an evolutionary perspective, Ryans, Griffith and White (2003) say that marketing thought and a strategic focus has been developed from simple production and product related strategies to more outward oriented strategies placing greater emphasis on consumer and social needs. The focus had in other words been shifted from products to customers. The issue was also internationalized and practitioners became widely split over the standardization vs. adaptation issue. Some of the scholars said that humanity was possessing common attributes which allowed for standardization and some argued that adaptation was often necessary to appeal to divergent local markets. Once the academics understood the importance of adaptation and standardization in international marketing programs in the late 1950s, they actively engaged in studying the issue. Progress were made, but Ryans, Griffith and White (2003) states that it is unclear today what progress that actually were made, related to the development of a unifying theory. They continue and say that when moving toward a theoretical development, there were an argument whether marketing were an art or a science and thereby know how to develop it further. One factor they agreed on was that a strong, underlying theory was necessary for this development, regardless of the view the academic had upon marketing. The authors continues and says that the marketer have to explain the components of theory and then apply those standards to the research made in the field.

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Ryans, Griffith and White (2003) says that the field has yet the need to develop a rigorous, consistent, conceptualization of marketing program as it related to international standardization and adaptation. Bradly (1999) continues the discussion and says that niche strategy versus global marketing strategies is the old standardization and adaptation debate in new clothes. It is not very different from the debate Ryans, Griffith and White (2003) describes since it bring up question like “can you standardize multinational marketing?” and “are domestic and international markets dissimilar?” Cateora and Keaveney (1987) continues and points out that it is important for the company to consider the differences between countries when conducting business, and thereby decide whether to standardize or adapt their marketing program Those in favor for standardization mean that this makes sales higher because of a consistent product image across different international markets (Bradley, 1999). He continues and states that costs can be reduced by having a standardized product and move the production to low cost locations. Czinkota and Ronkainen (2004) add that this also can result in economies of scale and that this is a driving force for companies to make markets more unified. Czinkota and Ronkainen (2004) continues and says that a firm may identify target markets where products can be marketed with little or no modification, that is, markets where standardized products can be used. The authors continue and say that the benefits of standardization and sell the same product world wide are cost savings in production and marketing. Economies of scale are therefore one of the main forces behind making markets more unified over the world using the standardized approach. They continue their discussion and say that brands and packaging are the most common things that companies standardize across markets. Companies that have the same competitors all over the world usually use standardization. Czinkota and Ronkainen continue and say that the world today is becoming more homogenized and this is something that makes companies chose the standardized approach. Jobber (2001) says that adaptations most likely improve the performance of businesses. Those in favor of adaptation argues the fact that markets are not exactly alike and that it is necessary to adapt the marketing mix to ensure that sufficient customization exists to satisfy buyers’ needs in each market. Czinkota and Ronkainen (2004) say that there are still differences depending on where and how the product is marketed. In the industrial sector, the authors say that there is adaptation needs even if they are not as obvious as they are in the market for consumer products. One example of this can be capacity performance. Czinkota and Ronkainen bring up the example about lift capacity and enlighten the difference between German and US requirements. A German lift will perform exactly what it is said to perform, but a US lifts, on the other hand have a safety margin which results in a higher payload capacity. The authors continue by saying that consumer goods, on the other hand, also require product adaptation, much because of their higher degree of cultural grounding. The amount of change depends both on cultural differences as well as economic conditions on the target market. Czinkota and Ronkainen brings up an example about Unilever who created cheaper packages to their high quality products because they found out that Indians desired them but could not afford them. Unilever therefore developed a package that only cost a few pennies instead of the regular $ 5.00 package.

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Lages and Montgomery (2004), says that pure standardization and adaptation is not the main underlying thought of today’s approach of the marketing program, it is all about the balance between the two. The authors state that researchers today view marketing program along a continuum varying from pure standardization to pure adaptation. There is no right strategy for all situations; the right strategy for a company to use depends on the situation. Lages and Montgomery also say that it is more important to consider the degree of adaptation and the forces that influence it than determine whether or not a company should adapt its marketing program.

1.2 Problem Discussion

Lages and Montgomery (2004) state that the most important determinants for product strategy adaptation to the international market are export market development and the firm commitment to exporting. This is also found to be the most important determines to the adaptation of both promotion and distribution strategies. The authors continue and state that prior performance is the key determinant of pricing strategy adaptation. The authors continue and say that the exporting to foreign countries might sometimes be the only way for companies to survive, especially small and medium-sized exporters (SMEs’). By engaging in exporting activities, SMEs’ may extend the lifecycle of their products, reduce their overall operating costs (e.g. costs associated with marketing, production, R&D and technology) and use the foreign market to absorb their excess capacity. Moen and Servais (2002) continue where Lages and Montgomery left off and states that newly established SMEs’ that quickly internationalize their marketing program is shown to outperform their already established competitors that waited several years with their internationalization. Moen and Servais (2002) explain that there is limited empirical evidence regarding standardization or adaptation in international markets for small and medium-sized enterprises (SMEs). Ryans, Griffith and White (2003), as we discussed earlier in this chapter, also points out the lack of empirical research in the area of whether to standardize or adapt the marketing program to international markets. Therefore, we find this as an interesting area to explore further and shall devote our study to small and medium-sized companies’ standardization/adaptation of the marketing program for international markets. This is further strengthened by the fact that research in individual companies within specific industries and specific product lines always shed additional light on the challenges faced in dealing with standardization vs. adaptation.

1.3 Purpose and Research Questions

The purpose of this thesis is to gain a better understanding of the factors that influence SMEs’ standardization or adaptation of marketing programs in their international markets. To satisfy our purpose we shall address the following research questions:

RQ1: How are SMEs’ standardization/adaptation of products to international markets influenced by various factors? RQ2: How are SMEs’ standardization/adaptation of pricing to international markets influenced by various factors?

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RQ3: How are SMEs’ standardization/adaptation of promotion to international markets influenced by various factors? RQ4: How are SMEs’ standardization/adaptation of distribution channels to international markets influenced by various factors?

Delimitation With a view to the researchers’ time limitation; we shall focus on our research to (a) investigate only medium sized firms and not a combination of small and medium sized companies (b) we choose to focus on industrial, rather than consumer goods companies.

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2. Literature Review Here we will present our theoretical framework that will explain different theories regarding

standardization and adaptation of the marketing program for international markets. First, we

will provide a brief introduction to our literature. The rest of the chapter will provide theories

for each of the four research questions.

2.1 Standardization versus Adaptation of Products for International Markets Products often need to be adjusted when going out to the international market place according to Czinkota and Ronkainen (2004). Some products just need small adjustments and some products are in need for major modifications. The authors continue and say that the changes typically affect packaging, measurement units, labelling, product constituent and features, usage instructions and to a lesser extent, logos and brand names. Calantone, Cavusgil, Schmidt and Shin (2004) on Internationalization and Dynamics of

Product Adaptation Calantone, Cavusgil, Schmidt and Shin (2004) say that two divergent international marketing strategies have been debated over the past two decades. That is standardization versus adaptation of product offerings. They continue to explain that standardization means selling essentially the same products in the same markets. The advantage of this strategy is lower costs due to economies of scale and experience that accumulates from designing, manufacturing, and distributing identical products in multiple countries. The authors say that offering the same product can be undesirable in the legal environment, distribution channels, climates and topography, levels of markets and technological development, and competitive and cultural factors. According to Calantone, Cavusgil, Schmidt and Shin (2004) customers in different countries have different requirements and use conditions; they explain that a standardized product may not satisfy all. Product adaptation refers to the degree to which physical characteristics or attributes of a product and its packaging differs across national markets. Even though modifying the product for different markets increases costs, the authors say that the adapted product may fit the needs and desires of consumers in different countries better, command higher margins and generate much greater revenues. Firms competing in foreign markets can choose to make no changes to the physical product and its packaging, called a product standardization policy, which keep the costs low. The authors continue and say that the product might have a hard time satisfying the customer. Firms have the choice to either modify the products physical characteristics, attributes and packaging to fit the need and desire of the customer. Adaptation increases development, manufacturing, marketing, packaging, and distribution process. Adaptation of the product is a core aspect of customizing an export market offering. Calantone, Cavusgil, Schmidt and Shin (2004) state that in order to be successful in this, the adapted product must add sufficient incremental revenue; the company has to satisfy the customer wants and needs better then their competitors and their product offerings.

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Friedman (1986) on Psychological Meaning of Products This author start by stating that the standardized approach offers benefits like increasing the degree of managerial control, reducing costs, simplifying strategic planning efforts, taking advantages of the home country headquarters expertise, increased simplicity in developing specific sub strategies like packaging, promotional, pricing and distribution. This is overall reduction in problems result from overlaps that is created by the misuse of both human and material resources. Friedman (1986) explains that the psychological meaning of a product is useful for a company when they are making the decision if they should standardize, or not standardize, their product. He continues and argues that the proponents of the product adaptation either can be characterized by regulatory and legislative forces or inescapable and uncontrollable forces in the market place. Examples of uncontrollable forces can be electrical current voltage and measurement standards. From this perspective, Friedman states that, adaptation is taking place in the variables controlled by the international marketer, for example, price, package, product positioning, promotion and distribution. These are said to be guided by historical usage, local customs and use characteristics. These elements are examples of how culture in the market place can influence the product adaptation. The underlying logic of the adaptive approach is that marketers should be aware of the cultural differences of each foreign market. Albaum, Strandskov and Duerr (1998) Albaum, Strandskov and Duerr (1998) argue that there is no universal solution for resolving questions of adaptation. They mean that many firms are formulating decision-support systems to assist in product adaptation and some consider every situation independently. Albaum et al points out that that there are two underlying critical assumptions when it comes to the question whether to standardize or adapt the product:

1. Homogeneity of world wants and an increase of the world number of global market segments.

2. People are willing to sacrifice specific preferences in product features, functions, design etc. for lower prices at higher quality.

Albaum, Strandskov and Duerr (1998) explain that the main reason why companies choose to standardize a product is because it reduces its costs by leading to economics of scale, a big cost reducer. This will eventually lead to increasing revenue for the company. The exporter also makes adaptations to match competitive offers, catering to customer preferences and meeting demands of local distribution systems, according to Albaum, et al. Albaum, Strandskov and Duerr (1998) state that product adaptation either can be voluntary or mandatory. Supporting Friedman (1986), Albaum et al adds language, different measurement systems and product specifications, and governmental requirements to the list of examples of mandatory product adaptation, but contrary to Friedman, Albaum et al mean that voluntary adaptation is where the debate is concentrated. The authors continue by discussing that the uncontrollable conditions relate to legal, economic and climatic conditions in the market. Albaum et al ends the discussion by stating that the more knowledge the company has over the local market, the more successful it will be in balancing the adaptation and standardization of their product and the more it will increase their credibility to the foreign market.

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2.2 Standardization versus Adaptation of Pricing for International Markets

There are three general pricing strategies for a company to use when setting the export price. The alternatives are a standard world wide price, dual pricing (differs between domestic and export price) and market-differentiated pricing (Czinkota and Ronkainen, 2004).

Czinkota and Ronkainen (2004) Describing standard world wide price, Czinkota and Ronkainen (2004) state that it may be the same price regardless the buyer (of foreign product or if foreign costs are negligible) or it may be based on average unit costs of fixed, variable and export-related costs. In dual pricing, the marketer can chose to include all the domestic and foreign costs to the product and thereby chose the cost-plus strategy. Czinkota and Ronkainen (2004) mean that this type of pricing ensures margins, but the final price might be so high that the firm’s competitiveness is compromised. The company can also consider the direct costs of producing and selling products for export as the floor under which prices can not be set. Fixed costs for plants, R&D, and domestic overhead as well as domestic marketing costs are disregarded. Here, the authors say that an exporter can lower export prices in order to be competitive in markets that otherwise might have been beyond access. On certain occasions, especially if the exporter is large, this may open a company to dumping charges. The last alternative, according to Czinkota and Ronkainen (2004), is market differentiated pricing, calls for export pricing according to the dynamic conditions in the market place. Here, the marginal cost strategy provides a base where prices may vary frequently due to changes in competition, exchange rate changes, or environmental changes. When using this alternative, the need of information and control is crucial and this alternative is most likely used when a company wants to penetrate a market, and thereby ignoring many of the cost elements, at least in the short term. Dwyer and Tanner (2002). This author describes product line pricing, a strategy used by companies offering a line of products, which to some extent might be substitutes. A popular approach is to price the leading product low in order to penetrate the market, and then have high margins on follow-up business of parts, consumables and service, but Dwyer and Tanner (2002) points out that companies in the business to business sector usually are aware of such traps. Hilleke and Butscher (1997) on How to Use a Two Product Strategy Against Low Price

Competition. Supporting and developing Tanner (2002), Hilleke and Butscher (1997) discuss two product pricing, another low price strategy. In two product pricing, the product is supposed to have a low price, but it is developed in order to help the successful high priced product to maintain its market share. The authors also point out that a company can develop a new cheaper product when they use this strategy. They continue and explain that companies using this approach to weaken the product offered by low price competitors and to help their own high priced product to maintain its position on the market. There are two forms of low price competition according to Hilleke and Butscher (1997). One is low price with low quality and the other is low price with good or very good quality, but the good quality is often more of an exception rather than a rule. Figure 2.2 shows different types of low price competition.

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Figure 2.1: Different Types of Low Price Competition Source: Adapted from Hilleke & Butscher (1997) p 109 With either strategy, new competitors prefer to attack in markets where the established manufacturers have lived with acceptable margins for years, keeping the price level stable. Hilleke and Butscher (1997) state that in this kind of situation, the market entry of new low priced suppliers can rapidly change the market structure, cutting deep into the profits of existing suppliers. They mean that the new products will not only attract the low price segments that was kept from using the product before because of the high prices, but also attract many of those who that have used the existing products so far. Therefore, the market ends up being split into three major segments. The first one is the top-end segment that for reasons of loyalty, quality, channel use, etc. sticks with the established brands and has a high willingness to pay. In the second segment, the large middle segment, the main focus is on the head-on competition. Finally, there is a small bottom-end segment in many markets that can not be reached even with low price and low willingness to pay, individual type of demand and environmental reasons etc. The result of such market entry is that the overall market grows and that the major part of the bigger market can be reached by the new competitors

Figure 2.2: Target Position of Second Product Source: Hilleke & Butscher (1997) p 112 The ideal positioning of the product is shown in figure 2.3. Hilleke and Butscher (1997) states that it also shows that one brand only can cover a certain width of the quality range. There are advantages and disadvantages of using the same brand. If the price aggressive competitors already have conquered a significant share of market then the second product should be introduced under the current brand. This will increase the second products strength and its

Common characteristic of new competitors: low price

Branded product good/top quality

Non-branded product good/top quality

Non-branded product poor quality

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potential to regain market share compared to a situation in which the second product is just another low prices product. Using the same brand will show a more uniform product strategy. It is important that the second product is strong enough so that it will not jeopardize the future for the number one product.

2.3 Standardization versus Adaptation of Promotion for International Markets When dealing with standardization and adaptation of advertising both in the domestic and international marketplace, business to business (B2B) markets tend to be smaller then consumer markets and relationship with the customer are of higher importance. In B2B markets, the most common typical advertising tools are PR, which focuses on the relationship with the customer, and tradeshows, which also strengthen the relationships and develops relationship with the trade press. (Dwyer and Tanner, 2002) Melewar and Vemmervik (2004) Melewar and Vemmervik start by describing the history of standardization and adaptation for companies over time. They state that companies used adaptation in the 1950’s, which changed into standardization in the 1960’s and in the 1970’s, companies switched back to adaptation. In the 1980s, companies continued using standardization. They explain two reasons for this trend. The first one is increased nationalistic forces, and the second one is a number of advertising blunders. The explanation to why companies went back to standardization in the 1980s is the rise of international advertising strategies that allowed managers to coordinate global advertising strategies. There are three basic approaches to advertising. Melewar and Vemmervik (2004) describes these approaches as standardization, adaptation and a combination of both. The most effective advertising combines the two approaches and that the best advertising strategy depends on the situation. Continuing the discussion, Melewar and Vemmervik (2004) state that the main reason for choosing standardization is because of different views of the world. Those in favor for standardization are mainly concerned about reduction of advertising costs and consistent brand image world wide. The authors continue and say that proponents of adaptation points out differential advantages through local adaptation and benefits of standardization are cost reduction and consistent brand image. The cost reductions of standardization of advertising mainly originate from economies of scale and scope. They mean that there is a strong relationship between standardized advertisements and centralized advertisement functions. There are also several advantages as a result of cost reduction. These advantages are consistent positioning arguments throughout the world. Other benefits of standardization includes sharing of experience, effective use of advertising budget, consistency of communication less duplication of effort, and pre-selling of the company’s product. The perceived advantages of standardization are more important than the disadvantages, but there are also arguments against standardization according to Melewar and Vemmervik (2004). Only focusing on cost reduction is to ignore the needs the target group has for a meaningful message. Standardized advertising is based on homogenous segments and unless this holds in reality, the probability for a communication brakes down increases. A cost reduction does not automatically imply profit maximization as standardization may make the advertising unappealing to target segments and thereby decreasing sales.

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The purpose of adaptation is to gain differential advantages while adapting the advertisement in order to gain maximum effectiveness in terms of response and sales. They say that adaptation of advertising is usually linked with a decentralized advertising culture. The advantage with decentralized advertising function is to allow responsiveness, adaptation of culture, infrastructure and competition. The visual and verbal parts of advertising are particularly sensitive to adaptation and use of local language, models, and scenery increases the probability for the advertisement to be effective. Other reasons for adaptation are accurate positioning arguments and price discrimination. When national markets are more similar within than between countries, adaptation results in a more accurate positioning, leading to higher prices due to price discrimination. The major disadvantages to advertising adaptation are increased costs and a loss of consistent brand image. Melewar and Vemmervik’s (2004) Model The authors describe six different variables that affect the degree of standardization or adaptation of advertising:

1. Product variables – the degree of universality of the product. 2. Competitive variables – the structure of the competitive environment. 3. Organizational experience and control variables – the level of organizational

experience in the corporation. 4. Infrastructure variables – the degree of similarity of the media infrastructure, for

instance, media, advertising agencies, and production facilities. 5. Governmental variables – the restrictions of mass communication. 6. Cultural and societal variables – the differences between home and export market.

Melewar and Vemmervik (2004) then describe this in a model (Figure 2.3) and say that the first two variables influence the company when making the decision whether to standardize or adapt their advertising. The other four variables (organizational experience and control, governmental and cultural and societal), helps the company to deal with their legal and local culture. The influence of these variables should then be mapped on the primary elements of the advertising process to determine the level of standardization/adaptation needed for each element. Melewar and Vemmervik (2004) continue and identify three environmental factors that affect the level of standardization. These factors are local government, level of competition, physical environment. The fact that only three environmental factors affect the decision whether to standardize or adapt is in line with the theory about bounded rationality. This theory implies that managers do not collect all available information to make a profound analysis, but rather develop plans from incomplete information and analysis.

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Figure 2.3: A Descriptive Model to Determine the Degree of Standardization/Adaptation of

Advertising Source: Melewar & Vemmervik (2004) p 869 Melewar and Vemmervik (2004) continue by identifying the three factors, both within and outside the firm (contingency perspective), that determines the approach to advertising. These variables are product related factors, customer segments and organizational factors. The product related factors is describes as one of the most important factors in order to determine the degree of standardization and adaptation. The degree of standardization of advertising depends on the nature of the product. This may be the most important factor that determines the possibility to standardize the company’s advertising. The product categories are usually divided in to consumer durable, consumer non-durable and industrial goods. Industrial goods have the highest level of standardization, followed by consumer durables and consumer non-durables. Melewar and Vemmervik (2004) state that the number of product transfers between headquarters and subsidiaries impact the promotional strategy within the company. This is because the international product transfers enable standardization of the brand through promotion. Melewar and Vemmervik found that composition of the product mix of the company had a significant impact on the frequency of promotion transfers, and therefore, their conclusion was that as product mix localize, the promotional support decreases. Other surveys show that there is a correlation between the number of product adaptations and adaptation of the company’s promotion theme. It also showed that eight out of ten advertising decisions were related to the product. Melewar and Vemmervik (2004) further describe the degree of standardization as dependent on the homogeneity of the markets. The more homogeneity there is on a market, the more standardized the promotion is. Customer homogeneity can be categorized as vertical within the country and horizontal across countries. This means that customers within one country within one country may be very dissimilar, but they might have similarities with customers in another country. The company might therefore have their target market in several nations. Homogenous cross-national segments can give rise to standardized marketing programs and thereby maximize the economies of scale. Regarding the organizational factors, Melewar and Vemmervik (2004) conclude that the more centralized a company is, the more standardized their advertising is. They mean that the

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degree of headquarter control depends on the country of origin of the headquarter. Canadian and Japanese firms tend to exercise more control then US and Western European firms. Papavassiliou and Stathakopoulos (1997) Papavassiliou and Stathakopoulos (1997) created a framework, similar to Melewar and Vemmervik’s (2004) model, for standardization or adaptation of advertising strategy based on three areas of influence. The three are local environment, firm environment and intrinsic determinants. They came to the conclusion that promotion adaptation correlate significantly and positively with cultural specificity of the product, international experience of the company, competitiveness of the market and product uniqueness. Papavassiliou and Stathakopoulos (1997) state that adaptation is used to reach buyers in different markets by fitting the message to each particular country. They continue by discussing that there are insurmountable differences, like cultural, economic, legal, media and product dissimilarities, between countries and regions in the same country. Papavassiliou and Stathakopoulos (1997) explains that components of standardization approach argue that a single advertising message with only minor modifications, or even advertising with proper translation can be used in all countries to reach consumers. The thought behind this is that buyers everywhere in the world share the same, or very similar, wants and needs, and therefore can be persuaded by universal advertising appeals. The authors discuss four major reasons that make this approach appealing. The first is that it allows the multinational corporation to maintain its consistent image and identity throughout the world. The second is that it minimizes confusion among buyers who travel frequently. The third reason is that it allows the multinational company to develop a single coordinated advertising campaign across different markets. The final approach is that it results in considerable savings in media costs, advertising production costs and advertising illustrative material.

2.4 Standardization versus Adaptation of Distribution Channels for International Markets

In both the international and domestic marketplace, companies can engage in the export activity in different ways, but there is a difference between consumer markets and B2B markets. The difference is that the channels are shorter in business to business markets; they are often more direct (Dwyer and Tanner, 2004). Albaum, Strandskov and Duerr (1998) Companies in the international marketplace have four alternative ways to engage according to Albaum, Strandskov and Duerr (1998). They can chose to export from their home country, establish a manufacturing plant in the other country, set up assembly operations or form a strategic alliance with one or more companies. Figure 2.4 shows these alternatives and how involved the management is in each of the four alternatives. As can be seen in the figure, both involvement of management and infusion of capital are concentrated in the foreign country when the company has chosen to establish a manufacturing plant there. If the company is an exporting company, the involvement of management and infusion of capital is concentrated to the home country.

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Figure 2.4: Degree of Internationalization Source: Adapted from Albaum, Strandskov & Duerr, 1998, p 262. Albaum, Strandskov & Duerr (1998) state that exporting might be the easiest and simplest way to meet the needs of foreign markets. This approach has minimal effect on the ordinary, domestic operations in the firm and there is less risk compared to the other alternatives. The authors explain that the company has two ways of conduct exporting activities, indirect and direct export.

Czinkota and Ronkainen (2004) The adoption of e-commerce provides new opportunities for B2B companies in the international market, according to Czinkota and Ronkainen (2004), and new export markets can be reached accessed by expanding network and customer bases. They also state that companies have to study distribution channels in every country they whish to be established in. Companies should study the channel in general but also the types of linkages between channel members for their specific type of product. The company usually has to adjust to existing structures to gain distribution. Czinkota and Ronkainen (2004) also mean that competitors’ channels might sometimes be the only option for the company, and here the company has to use the structure efficiently, effectively and even innovatively. The character of the product will also have an impact on the channel. Generally, the more specialized the product is, the more after sale service it may require and the more likely the channel is to be relatively short. The same reasoning goes for capital. The stronger the finances are, the more likely the firm is to establish channels it either owns or controls. If the company uses intermediaries, Czinkota and Ronkainen (2004) state that it will automatically lose control over the marketing of its products. The looser the relationship between company and intermediary, the less control the company will have.

Exports

Strategic Alliances

Assembly Operations

Manufacturing Plant

100 %

In host country In home country

Involvement of management

In host country

In home country

Infu

sio

n o

f C

ap

ita

l

100 %

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Kale and McIntyre (1991) In an article written 1991, Kale and McIntyre explain Hofstedes Framework, a general theory regarding international distribution only can be developed through the study of different cultures in different countries. Kale and McIntyre continue by discussing the framework and state that the distribution channel has to be adjusted to the culture in the country and the already existing channels in it. The account for cross cultural differences in countries across the globe can be argued by four dimensions. They continue and state that these dimensions in Hofstedes Framework consist of:

• Individualism (“I” versus “we” attitudes; individual versus group decisions, tolerance of private life and option, etc.)

• Power Distance (level of inequality in society, attitudes towards superiors and subordinates, privileges of power holders, attitudes of conflict and co-operation and means of achieving changes in relationship structures etc.)

• Uncertainty Avoidance (attitudes towards uncertainty in life, level and sources of stress in life, degree of tolerance towards deviance, attitudes towards younger people, and need for formal rules and regulations)

• Masculinity (roles of men and women, level of inequality between sexes, attitude towards work, achievement, confrontation etc.). The adaptation of the channel to the specific market has to be done according to these dimensions.

Kale and McIntyre (1991) mean that previous studies in the distribution channel area have not taken into account either the culture or economic context in which the interaction occur, they have only contributed substantially to our understanding of the behavioral dimensions regarding channel relationships. This support the view that culture is essential in the issue of distribution channel management when a company expands internationally.

Seifert and Ford (1989) The most common used distribution channels are sales representative and export distributors, the second most employed channel are commission agent. Seifert and Ford (1989) continue and discusses that the domestic channels differ a lot from the distribution channels used in exporting. One explanation might be that the domestic channels might not have to right knowledge for the foreign market; they do not have the contacts and market knowledge needed. This heavy use of export distributors suggest that firms is often more satisfied when they have less responsibility for market sales. The greater the sales, the greater the time the firm can devote to find a suitable distribution system. They state that the longer the firm has been in the export business, the greater the satisfaction it will have with the distribution system since the firm has had time to make necessary adjustments if a particular distribution channel has not been effective. Seifert and Ford (1989) argues that companies choosing their distribution channel when going abroad have very little information and therefore have to ask themselves two questions. “What types of channel intermediaries are actually being used by firms in their export activities?” and “How satisfied are firms with their chosen channel members?” The authors also point out that it can be very a costly mistake for a firm that enters an export distribution arrangement the quickest possible way, both in time and money.

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The cost for the channel usually varies along the product life cycle as well as the lifecycle of the relationship with channel members. The Seifert and Ford (1989) explain that since the choice of distribution channels, both for domestic and international markets, are of high importance for any industrial firm, a mistake can be extremely costly over time in terms of time, money and market opportunities The research of export channels appears to follow three major thrusts according to Seifert and Ford (1989). The first one looks at the sophistication of the distribution channel and the level of economic development in the country. The second focuses on the nature of channel dependence and conflict that may be presented. The third has its focus on the appropriateness of dealing with a direct, foreign based channel member as opposed to an indirect, domestic based channel member. Seifert and Ford (1989) made a study that showed that SMEs’ export pattern tended to be the same goods as those already sold in the foreign market, and they concentrated on the developed countries. The companies exported mainly because they wanted to increase their sales and not just because the domestic market was unwilling to accept their products. Vrontis (2003) on Integrating Adaptation and Standardization In an article, Vrontis, (2003) states that “The truth lies in neither of these two polarised positions. Both processes, internationalism and globalization, coexist”. He continues by explaining that the debate on adaptation and standardization is a huge issue and that it is often suggested that the use of either approach is too extreme to be practical. He believes that the right balance between standardization and adaptation is important, and therefore determine the impact of globalization and adapt organizations response accordingly. He provides a picture that shows the right balance between standardization and adaptation in the marketing program he believe the company should have. In our conceptualization, we will simplify it in order to imply it as our theoretical framework. The model, shown in figure 2.5 on the next page, brings up reasons pulling towards standardization and reasons pulling towards adaptation. It also brings up the factors (SH1-SH9) that affect the marketing mix and the reasons pulling towards standardization and adaptation.

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Figure 2.5: Considerations in Developing the Adapt Stand Model Source: Adapted from Vrontis, (2003)

2.5 Theoretical Frame of Reference

According to Miles and Huberman (1994), a theoretical framework should explain, graphically or in narrative form, the main things that will be studied. They add that it is easier to make a theoretical framework after research questions have been made. In this thesis, the research questions were presented in the first chapter. Our first research question is about how a company can standardize or adapt the product internationally. Here, we will focus three main factors. First, we will look into standardization of the product and see if the benefit with economies of scale, the fact that standardization reduces costs and that it simplifies is something that a company takes into consideration. Secondly, we will look into the voluntary/mandatory adaptation; is the company forced to make any adaptations or is that something they have to do by themselves? Finally, in this section, we will look into the two main assumptions brought up by Albaum, Strandskov and Duerr for a company to consider when they have to make the decision whether to standardize or adapt their product. We have therefore considered taking theories from Calantone, R.J., Cavusgil, S.T, Schmidt, J.B. & Shin, G.C. (2004), Friedman, R. (1986) and Albaum, G., Strandskov, J. & Duerr, E. (1998) when discussing product standardization versus adaptation. (See Figure 2.6 the column under “Product” heading for the variable borrowed). The second research question is regarding standardization versus adaptation of pricing. Here, we have chosen to discuss four main pricing strategies, and we will bring up all of them here in our conceptual framework, but we will mainly focus on product line pricing and the two

Product

1. Product or service variety, design features 2. Quality 3. Brand name 4. Packaging, styling 5. Size ad colour variables. 6. Performance 7. Image 8. Pre-sales service 9. Delivery, installation 10. After-sales service, warranties.

Price

1. Price levels, price list, price changes 2. Discount allowances, payment period, credit term

Place 1. Distribution channels, distribution value, place of shops, logistics.

Promotion

1. Advertising 2. Sales promotion 3. Personal selling 4. Direct marketing 5. Public Relations

A D A P T A T I O N

S T A N D A R D I Z A T I O N

Reasons pulling toward adaptation - Market development - Economic differences - Culture - Differences in customer perception - Competitor - Differences in physical conditions - Laws - Levels of customer similarity - Political environment - Marketing infrastructure -Technology -Sociological

Reasons pulling toward standardization

- Economies of scale in production, R&D and promotion - Global uniformity and image - Consistency with the global customer - Easier planning and control - Stock costs reduction - Synergetic and transferable experience

Factors Affecting the Importance of Reasons and Elements 1. Industrial Sector 2. Business-to-business, business-to-consumer 3. Product/service category 4. Places and continents 5. Entry Method 6. Delegated authority to foreign subsidiaries

SH1

SH3 SH4 SH5 SH6

SH2

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product strategy. Product line pricing is, as we said before, when a company sets a price for its line of products, described by Tanner (2002). We will also talk about the two product strategy were a company develops a new product in order to help the leading product to maintain its position on the market. When considering pricing adaptation versus standardization, we will use theories mostly from Tanner, J.F. & Dwyer, R.F. (2002) and Hilleke, K. & Butscher, S.A. (1997), but also from Czinkota and Ronkainen (2004). (See Figure 2.6 the column under “Price” heading for variable borrowed). In our third research question, “How are SMEs’ standardization or adaptation of promotion to international markets influenced by various factors?”, we have chosen to concentrate on the fact that relationships are much more important in business to business markets compared to consumer markets and see what impact this can have on a company. We will also look into which media a company use when trying to advertise in a business to business market. How are they using TV and radio? Are they using PR and tradeshows, something typical for an industrial market according to Dwyer and Tanner (2002). Melewar and Vemmervik states that a centralize company often used a standardized approach, and this is also something that we will look into. We will investigate if the company thinks in terms of saving money because of a standardized approach, how much money and time do the company really put in the promotion activities? (Papavassiliou and Stathakopoulos, 1997) Finally, we will look into the six variables that affect the decision whether to standardize or adapt a product, written by Papavassiliou and Stathakopoulos, and therefore look into what degree a company adapts or standardize their promotion. The theories we will use here are from Dwyer and Tanner (2002), Melewar and Vemmervik (2004) and Papavassiliou and Stathakopoulos (1997). (See f Figure 2.6 the column under “Promotion” heading for variable borrowed). When discussing our fourth research question, “How are SMEs’ standardization or adaptation of distribution channels to international markets influenced by various factors?” we will focus on theories written by Kale and McIntyre (1991), Czinkota and Ronkainen (2004) and Seifert and Ford (1989). Hofstedes framework, discussed by Kale and McIntyre, says an understanding for different cultures is the foundation for the development of a general theory for international distribution, and therefore we will use this. We will also bring up the fact that a specialized product have a short distribution channel, and see if this is a fact even in reality. We will also bring up new possibilities due to Internet discussed by Czinkota and Ronkainen as well as Seifert and Ford’s view upon SMEs’ export pattern. Finally, we will describe two questions, discussed by Seifert and Ford, a company can ask when choosing a distribution channel in order to find out what companies answer. (See figure 2.6 the column under “Distribution Channel” heading for variable borrowed). For the purpose of constructing a theoretical framework to aid us in our data collection we believe the model presented by Vrontis (2004) is a comprehensive model which suits our purpose. However the model incorporates other aspects such as people, physical evidence and process management. It incorporates also different factors pulling towards standardization or adaptation, some of which we have not included. This is something we are not addressing in our research. Thus we shall use the model in a simplified and limited form as graphically shown in figure 2.6 on the next page.

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Figure 2.6: Standardization vs. Adaptation of the SMEs’ Marketing Program Source: Authors construction based on a simplified version of Vrontis (2004) Adapt Stand

Model

Product • Standardization: gain benefit from economies of scale? • Adaptation: voluntary or mandatory? • Two assumptions to consider when making the standardization /adaptation decision: - Homogeneity of the

demand of the market and an increasing number of market segments.

- Are customers willing to sacrifice specific preferences on product features, functions, deign etc for lower prices at higher quality.

Pricing • Standard price world wide. • Different pricing for domestic and international market (dual pricing). • Set prices after the varying conditions in the market place (Market-differentiated pricing). • Set prices according to the line of product provided by the company (Product line pricing). • Develop a new, low priced product to help the top product maintain its market share (Two-product pricing)

Promotion • Importance of (long-term) relationships with the customers. • The use of PR and tradeshows. • Melewar and Vemmervik’s model (6 variables that affect standardization vs. adaptation decision): - Universality of the

product - Structure of

competitive environment

- Level of organizational experience.

- Degree of similarity in infrastructure

- Governmental variables, restrictions in e.g. mass communication.

- Differences between home and export market.

• Centralized

promotion activities = standardized advertising.

•

Distribution Channels • Adjustment of the channel to the culture in the country. - Individual vs.

group decisions - Attitudes toward

superiors and subordinates.

- Attitudes toward stress, younger people and need for rules and regulations

- Roles of men and women.

• Specialized product → short channel. • New possibilities due to Internet? • Investigation of similar firms’ satisfaction with their distribution channel. • SMEs’ export pattern.

Standardization versus Adaptation of the SMEs' marketing program

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3. Methodology In this chapter, we will present how we collected and analyzed data in order to find answers

to our research questions, and thereby fulfilling the purpose of the thesis. The chapter starts

by stating the purpose of the thesis, continues by describing the research approach and

research strategy. Then, a presentation how the data collection was carried out and how the

sampling was conducted follows. After we explained the choice of analytical strategy, the

quality standards of the research are assessed.

3.1 Research Purpose

According to Gummesson, there are three types of case study research, exploratory, descriptive and explanatory. The author then continues by explaining these three approaches further. Exploratory Research

This approach is used when a modest amount have been written about a problem according to Wiedersheim-Paul and Eriksson (1998) and Yin (1994). The idea with this approach is to collect as much information as possible about the research area. The result of the study is then composed aspects of a conclusion of the problem area, which the authors believe is important to work further with. Studies of the exploratory character are often suitable when the relevant theory is unclear and when problem and relations are hard to demarcate and determine. Gummesson (2002) continues to say that exploratory approach is a pilot study that can be used as a basis for formulating more precise questions or testable hypothesis. Descriptive Research This approach used when the problem is well structured. Here, the researcher wants to find out the relevant aspects of the problem, and wants to describe these aspects more thoroughly. The descriptive approach has no intention of conducting research about existing connections between causes and symptoms. According to Wiedersheim-Paul and Eriksson (1998) and Yin (1994), this approach attempts to describe, for example, when a product is launched on a market. Here, the researcher has an overview of the research problem from different sources, and has its focus around these important aspects. The methods used by the researcher often results on detailed and exact facts. The conclusion of the study is from a conclusive description of the examined aspects or variables. Explanatory Research This approach is used when an assumption is about to be made about what existing interactions there is between different variables. The purpose of this approach is to either prove or disapprove whether a relation takes place or if it is of a certain characteristic. It can also be used to find a correlation between causes using data collection methods that give exact hard data. Paul and Eriksson (1998) and Yin (1994) continue and say that whether the result can be proved or disapproved is determined by the result. The purpose with this thesis was to investigate how companies standardize/adapt their marketing program to international markets. In the thesis there is number of variables describing standardization and adaptation of the marketing program, and based on the research questions, this thesis is for the most part descriptive.

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3.2 Research Approach

According to Denscombe (1998), there are two types of research approaches, qualitative and quantitative. Denscombe (1998) state that the qualitative method goes more in depth of the problem compared to the quantitative. This method is used when the researcher wants to investigate the problem from the inside; the researcher him/herself plays an important role in the qualitative method. The researcher’s personality is an important part of the analysis of qualitative data, and therefore has to be accepted. The strength of this method is that it will provide a deeper understanding of the problem instead of just exposing it. The major disadvantage with this method is that it is difficult to compare the collected information from the different objectives that was studied. Denscombe (1998) continues and stating that when a problem is viewed up on from a broader perspective, the qualitative approach is used. Since the quantitative approach is based up on numbers, this is often made by conducting a survey or a questionnaire with answer alternatives. The main strength with this method is that the study can be generalized since it is aimed at large target groups. Our approach is qualitative since we want to gain a deeper understanding of the research area and not just look up on it from a broad perspective. By considering a case study our purpose was to investigate how companies standardize and/or adapt their marketing program to international markets, and in order to do this, an in-depth explanation is needed. Based on this, we have chosen the qualitative method.

3.3 Research Strategy

According to Denscombe (1998), Wiedersheim-Paul and Eriksson (1998) and Yin (1994) there are five primary research strategies, surveys, experiments, case studies, archival analysis and histories. Yin (1994) says that the strategy used should follow three conditions:

• Type of research question • Extent of control an investigator has over actual behavioural events. • Degree of focus on contemporary events as opposed to historical events.

Below, figure 3.1, summarizes these five strategies, but in order to explain further, Denscombe (1998) says that a survey should be broad and have a large coverage, it shows a certain point in time, and it shows empirical research. He continues to say that an experiment has three basic points regarding purpose and design: control, identifying cause factors, and observation and measure. The characteristics of a case study can be described as an in-depth study, aimed towards one research area, has its focus on relations and processes, in takes place in a natural environment, and it allows the researcher to use several sources and methods. Archival analysis is practical, changeable, process cycle, and participation. History is a strategy that focuses on describing humans and culture (ibid).

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TABLE 3.1 Relevant Situations for Different Research Strategies Research Strategy Form of research

questions Requires control over behavioural

events

Focuses on contemporary

events Experiment How, why

Yes Yes

Survey Who, what, where, how many, how much

No Yes

Archival Analysis Who, what, where, how many, how much

No Yes/No

History How, why

No No

Case Study How, why

No Yes

SOURCE: Adapted from Yin, 1994, p.6 Since the purpose with this thesis was to gain a better understanding regarding company’s standardization and adaptation of their marketing program in international markets, control over behavioural events are unnecessary, and therefore experiments are excluded. Yin (1994) says that surveys and archival analysis are quantitative, and since the purpose with this thesis is qualitative, this excludes these two. Because of the fact that we want to focus on contemporary events, this also eliminates history. This reasoning leaves us with one element left, the case study. According to Denscombe (1998), Wiedersheim-Paul and Eriksson (1998) and Yin (1994) a case study seeks to gain a better understanding and knowledge of the cases. This allows the researcher to study a few objects in many aspects. Since a case study requires extensive data access, it might be hard to find empirical data and also know how the data should be collected and interpreted. A case study is preferred when “how” and “why” questions are asked, when the researcher has little or no control over behavioural events and the focus in on contemporary phenomenon with some real life connection. In this study our research questions area all of the “how” type. Yin (1994) sates that there are two ways of conducting a case study. The first one is a single case study, where just one object is looked upon, and the multiple case studies, where the researcher looks at several objects in order to compare the cases with each other. In this thesis, a single case study is conducted since we want (a) to gain a deep understanding of the topic (b) we would have time for only one case study. We want to go in-depth and see the whole picture within a company and how they approach their international markets when it comes to standardization and adaptation.

3.4 Data Collection

Yin (1994) says that there are six sources rely on when collecting data for case studies. They are: documentation, archival interviews, direct observation, participant observation and

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physical artifacts. All these sources complete each other and can therefore not be used as a single one. Figure 3.1 will explain this.

Source of Evidence Strengths Weaknesses Documentation • Stable, it can be reviewed

repeatedly • Unobstructive: not created as a

result of the case. • Exact: Contains exact names,

references and details of an event.

• Broad Coverage: long span of time, many events, and many settings.

• Retrievability: can be low • Biased selectivity: if collection

is incomplete. • Reporting bias: reflects

(unknown) bias of author. • Access: may be deliberately

blocked.

Archival Records • (same as above for documentation)

• Precise and quantitative

• (same as above for documentation)

• Accessibility due to privacy reasons.

Interviews • Targeted: focuses directly on case study topic.

• Insightful: provides perceived causal inferences

• Bias due to poorly constructed questionnaires.

• Response bias. • Inaccuracies due to poor recall • Reflexibility: interview gives

what interviewer wants to hear.

Direct Observations • Reality: covers events in real time

• Contextual: covers context of event

• Time consuming • Selectivity: unless broad

coverage • Reflexivity: event may

proceed differently because it is being observed

• Cost: hours needed by human observers

Participant Observation • (same as for direct observations)

• Insightful into inter-personal behaviour and motives.

• (same as for direct observations)

• Bias due to investigators manipulation of events

Physical Artifacts • Insightful into cultural features • Insightful into technical

operations

• Selectivity • Availability

Figure 3.1 Six Sources of Evidence: Strength and Weaknesses Source: Yin (1994, p 80) Because of the fact that this thesis is qualitative, the archival record could not be used. Direct observations and participant observations are not possible as a source because of time limitations and financial resources. Since we are not looking at technical operations or cultural features, physical artefacts are not used. This limits us to two sources of evidence, interviews and documentation and this we have used. The researcher can chose to conduct a personal interview, do a telephone interview and conducting a questionnaire when conducting an interview. According to Yin (1994), the telephone interview can pose complex questions and also help avoiding misunderstandings, but the duration is limited, both of the interview and time, when using a telephone interview.

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In this thesis, we used the personal interview. The personal interview gave us the opportunity to interact with the respondent and explain our questions further in order to avoid misunderstandings. This kind of interview also allows open answers and the focus is on the respondent who develops his point of view. This was also the most appropriate alternative since the respondent’s main office is located in Alvik, 20 km from Luleå. Therefore, we could easily go there in person and meet with the respondents. Because we did a semi-structured interview, we followed an interview guide during the interview with the respondents, and they were able to add anything they wanted during the interview. When we created the interview guide, we went through the literature we collected as our list of references, and since the respondent’s native language is Swedish, the interviews were conducted in Swedish.

3.5 Sample Selection

According to Yin (1994), collecting data from all potential units is impossible because of time limitation and limited financial resources. In order to describe the relevant distinctive features of the entire problem area, smaller samples are gathered. The researcher can not be certain that the conclusion he/she will end up with will be able to generalize the whole research area since the samples chosen are not all representative for the research area for which they are gathered. In this thesis, we have limited our sample selection to one SME to conduct a case study from. The chosen company is Liko AB and we chose this company since we, the researchers, knew by experience that the company conduct business in many countries all over the world. Liko is a company within the medical technical industry, manufacturing medical lifts. We also knew that Liko is a medium sized company and its head quarters are located in Alvik, a small village outside Luleå, Sweden. We also knew that Liko were in the business to business market, and this suited our purpose as well. Our first contact with Liko was through Jan Öhman who recommended us to talk to Barbro Liljedahl, the head of marketing and one of the founders of Liko. Mrs. Liljedahl helped us get in touch with Karin Edelswärd at the commercial department. We explained our topic for Mrs. Edelswärd and she booked the interview. When looking for an appropriate second respondent, Mrs. Edelswärd decided to take contact with Stefan Johansson, also working at the commercial department, and both of them attended the interview. We sent a summary of the interview guide to the respondents so they could prepare themselves one week before the interview. The interview took place at Liko’s head quarter in Alvik. The interview lasted one hour and we used a tape recorder in order to get as correct results as possible. Before we started the interview we asked the respondents if we could record the interview, and they did not mind. The interview was held in Swedish to prevent misunderstandings. This is because both our and the respondents native language is Swedish. In order to avoid misunderstandings, the respondents got a copy of the compiled interview to skim through and correct minor mistakes we may have made.

3.6 Data Analysis Yin (1994) says that theoretical propositions are the most used strategy. The data collection is based on the research questions from previous studies and the result of the research will be compared with the result from these studies. The development of case description is another strategy, but it is less promising and should preferably not be used when little previous research has been done.

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The goal when analyzing the data from the interviews is to find answers to the stated research questions. We will not conduct a cross-case analysis because it involves comparing data from one case to another. Since our research represents a single case study, we will therefore conduct a within case analysis. This is done by comparing the data collected from the case study with relevant theories. Miles and Huberman (1994) say that data analysis consists of three activities, data reduction, data display, and data conclusions drawings/verification. Data reduction is the process of selecting, simplifying, focusing, abstracting and transforming the data. Data reduction should not be separate from analysis but a part of it. The purpose is to organize data in a way that final conclusions can be drawn and verified. Data display is the stage that includes taking the reduced data and displaying it in an organized and compressed way in order to facilitate for conclusions to be drawn. Conclusion drawing/verification is the stage were the researcher start to find what the finding actually mean, to note regularities, explanations, patterns, casual flows and propositions. We followed the theories stated above when we conducted the data analysis.

3.7 Validity and Reliability Validity means that the data is collected subjectively and therefore shows whether the methods, research approaches and techniques used actually measure the explored research problem (Yin, 1984). The validity also concerns if the case study is generalizable or not. In order to increase the validity of this study, we used triangulation. When using triangulation, several methods are compared in order to come as close to the truth as possible (Denscombe, 1998). The fact that we used interviews and documentation from the company and later compared the result from both sources helped us to obtain a correct result and increase the validity in the thesis. The validity can also be damaged due to the fact that our interview were performed in Swedish because both the respondents and our native language are Swedish The interview was later translated into English damage the validity. Generalizations will be hard to draw from this study since we only studied one company, but a case study can be generalized in an analytical way (Yin, 1984). The objective of reliability is to be sure that a later researcher should come up to the same findings and conclusions as the earlier researcher if the same procedures were followed when the same case study were conducted all over again. Yin (1984, p 45) state that “the goal of reliability is to minimize the errors and biases in a study”. In order to increase the reliability, we have attached the interview guide in the appendix so that future researchers will be able to repeat our study. To increase the reliability further, we used a tape recorder and recorded the interview. By doing this we were less likely to misunderstand or forget anything of importance. The negative side with interviews is that personal interpretation can be difficult to avoid, but this was prevented in this study since we did not ask the respondents leading questions during the interview.

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4. Case Study: Liko AB The information obtained from the primary data collection will be presented in this chapter in

the focus of a case study. Our interviewees, Karin Edelswärd and Stefan Johansson, at the

commercial department of the company Liko AB, a specialized medical lift company. Mrs.

Edelswärd is the secretary for Liko’s CEO, Hardy Brännström, and she have been working

there since 1997. Mr. Johansson is responsible for the business conducted with the

Mediterranean countries (Greece, Spain, Italy, Portugal, Turkey and France).

4.1 Company Background

Liko was registered as a company in 1979, by Gunnar and Barbro Liljedahl, and had only one employee in the beginning. Both founders of Liko, Mr. and Mrs. Liljedahl, still work within the Liko group today. Hardy Brännström, Liko´s current CEO, is also responsible for Liko’s future development. Liko is a medium sized company, but conducts business all over the world. The main office, called Liko AB, is located in Alvik, a village 20 kilometres south of Luleå in the northern part of Sweden. Liko is a company specializing in medical lifts, and has developed many products over the years. In 1979, Liko started with the furniture riser “Liljan” and a lot of new products have been developed since then. Today, Liko makes mobile- and overhead lifts as well as slings, but Liko’s speciality is the harnesses to the different lifts. This is because Liko is the only one on the market that customizes these harnesses after the different users. Liko AB is a part of the “Liko Group”. The Liko Group consists of manufacturing companies, subsidiaries and also educational companies. This is companies owned by Liko. The Liko Group is shown in figure 4.1 below.

Figure 4.1: The Liko Group Source: Adapted from Liko

Liko R&D

Liko Production

Liko Textile

Liko AB

Liko Competence Nordic Rehab

Liko Inc. (USA)

Liko GmbH (Germany)

Liko UK

Swedish division

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The main office, Liko AB, focuses on the high price segments in the market for medical lifts. Liko R&D, Liko Production and Liko Textile are manufacturing companies, located in the northern part of Sweden. Liko R&D and Liko Production are located at the headquarters in Alvik, and Liko Textile is located in Voullerim. Since Liko AB focus on the high price segment (hospitals etc.), Nordic Rehab focus on the low price segment and makes another branch of less complicated lifts for the homecare market. Liko Competence is an educational company whose main task is to educate all within the Liko Group and their employees, as well as the distributors and the final users of Liko’s products in the Liko spirit. Liko Competence and Nordic Rehab are located in Alvik as well. Liko’s number of employees in Sweden is 147. There are 18 employees in the US, 35 people in UK and 18 working in Germany. Liko’s subsidiaries is a part of the Liko Group and distribute their products to different markets. The subsidiaries consist of the Swedish division, Liko UK (based in Gloucester, England), Liko GmbH (located in Berlin, Germany) and Liko Inc (located in Boston, USA). Besides the main office in Alvik, Liko has sales offices in Stockholm, Örebro, Lund, Göteborg and Jönköping and there are also service technicians on some of them. Liko also have service technicians Uppsala, Östersund, Karlskrona. Liko has around 30 distributors, companies not owned by Liko, in the other countries they conduct business in. These countries are Australia, Austria. Belgium, Canada, China, Denmark, Finland, France, Greece, Hong Kong, Hungary, Ireland, Italy, Israel, Japan, the Netherlands, New Zeeland, Norway, Portugal, Russia, Spain, Switzerland, and Turkey. The distributors are seen as the final customers, and not intermediaries. The subsidiaries, on the other hand, are a part of the Liko Group, wholly owned by Liko, and are therefore not seen as intermediaries either. Mrs. Edelswärd and Mr. Johansson describes Liko’s business concept as: “Liko shall offer care staff and physically disabled patients efficient, easy-to-use, safe assistive devices, mainly for use in connection with lifting.” They also point out that Liko in the first hand deals with the lifting of the user and not the transportation, for example wheelchairs etc. In connection with the business concept is the “Liko Philosophy”. It was very important for Liko’s founder, Gunnar Liljedahl, to be able to work in a comfortable setting when he started Liko back in 1979. The location of Liko does not matter since they have customers all over the world. This is why Liko is located on the countryside in the northern part of Sweden, in Mr. Liljedahl’s birthplace, Alvik. It was here the “Liko Spirit” was born, and Mr. Liljedahl explains it by saying that every individual is important at Liko, all employees are equally in need of one another. Every employee should feel that he/she is contributing in the best way possible to make life easier for people in the care sector. Liko has also developed a policy in line with the Liko spirit. Every employee should be aware of this policy, and it is therefore placed in all bathrooms. Mr. Johansson and Mrs. Edelswärd describe Likos logotype as an egg, surrounded by wings, a symbol for life, good ideas and good design. The logo is also a part of Liko’s first product, the furniture riser “Liljan”, seen from above. The egg in the logo is the chair leg, and the wings are the support from the furniture riser. In the beginning, when Liko’s only product was the furniture riser, the business concept was different from the business concept today. The respondents add and points out that the name “Liko” works internationally. The name Liko

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means Liljedahl Konstruktion (construction) AB. When creating the name, they simply took the first two letters in “Liljedahl” and the first two in “konstruktion”. During the years, Liko has expanded their industrial area in Alvik, and the newest building was inaugurated 11 April 2005, and the next day, they were visited by the Prime minister of Sweden, Göran Persson. Liko has two main competitors in terms of turnover. One is Ario, an old Swedish manufacturer located in Lund in the south of Sweden. Ario outsourced their business to Gloucester around the year 2000. The other is Inva Care, located in the US. They are a main competitor when it comes to size. They also have around 30 smaller competitors, but this differs between different markets in different countries. The respondents give Denmark as an example. There are many small manufacturers in Denmark, competing with Liko. The respondents say that Liko is facing a lot of competition. The more market shares Liko gains, the more competitors Liko would face. The competition leads to, for example, lower prices according to Mrs. Edelswärd and Mr. Johansson. Liko’s market is divided in to two segments. The first segment is the institution/hospital market, and the other segment is the home care market. Our respondents say that Liko sells to a governmental authority in Sweden who then provides Liko’s products to different users. Liko sells directly to the final user in other countries outside Scandinavia; the final user buys the product directly from Liko’s distributor/subsidiary. The reason for this difference is, according to our respondents, the tax system in Scandinavia since there is no private health care. This system results in the country council buying the product and distributing it to the final users, which are hospitals etc. In countries with private health care, the product is sold directly to the hospital. In 2004, Liko AB’s turnover was 280 million SEK and the total turnover for the whole Liko Group was 350. Liko’s market share in Sweden is 60 percent. They have 50 percent of the Scandinavian market and 13 percent of the world market. Of Liko’s total sales, 70 percent goes to export. Liko decided to put much effort in their international market activities in the beginning of the 1990s because they felt they were large enough on their home market. Liko could handle an expansion abroad because they felt that they had resources for it. The respondents say that it takes knowledge, experience and big investments for a successful establishment abroad. They also say that a company has to be big on the home market. If you are not successful on your home market, you should not go international. Liko UK was started in 1996, and from this point, Liko’s international establishment has been rapid. If you look at Liko’s turnover curve, the respondents explain that it went straight up, like a jet plane taking off, from this point in time. This continued with establishment of Liko Inc in Boston 1997 and Liko GmbH in Berlin 2000. Liko believes that this development will continue and increase even more in the future, and they can see that it will continue for at least the next five years. Table 4.1 shows when new products were released, when new houses were built, and when the subsidiaries were founded.

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Table 4.1: Liko’s Chronological Development over Time. 1979: Liko AB is registered – one employee 1979: Furniture riser Liljan 1980: New Product - Liko Master Lift, mechanical emergency lowering, aluminium rails, support-leg installation 1980: Liko Original Sling – the first all-textile sling 1986: Golvo, the world’s first mobile lift capable of lifting from the floor 1988: Extra small – slings for small children 1992: Uno, a mobile lift for the home 1994: Liko UK – sales company in the UK 1994: Likorall 240 overhead lift 1994: Liko Textil – manufacture of slings under our own management 1997: Quality management system certification according to ISO 9002 1997: Liko Inc. – sales company in the USA 1997: Sabina sit-to-stand lift 1999: Environmental management system certification according to ISO 14001 1999: Likorall 242 lift unit - 200 kg 1999: LikoLight – lightweight mobile lift 2000: Liko GmbH – sales company in Germany 2000: Multirall lift unit 2001: FreeSpan 2001: Sabina II sit-to-stand lift 2002: Ultra – system for lifting up to 400 kg 2002: Viking 300 – mobile lift for up to 300 kg 2002: Likorall 242 ES & S lift units 2003: Quality management system certification - ISO 9001 2003: FreeSpan Traverse 2004: Viking - The new generation of mobile lifts 2004: Liko celebrates 25 years! 2004: Likorall 243 - 230 kg (506 lbs.) Source: Adapted from Liko

4.2 Liko’s Products in International Markets Liko tries to have a European product standard called ISO 10 535. This standard is a foundation for Liko so that they can c-mark their products. Most of the customers outside the European market accept this standard as well; ISO is considered to be accepted world wide but with some exceptions. USA has their own standard that Liko have to follow. It is called FDA. This is a Canadian/American standard that it pretty close to ISO 10 535, but the electronic (EMC) demands differs. Australia has also their own standard, and the respondents summarize and say that Liko have to adapt their products to the different standards in different countries over the world, all countries may not have the ISO standard. There are two countries in Europe that has not accepted ISO 10 535. This is because a company can cheat when using this standard and simply just put a c-mark on their product without fulfilling the specific demands for the standard. It is because of this risk that these two countries do not accept the ISO 10 535 fully. Germany started a complementary standard called TÜD and France has NF as a complement to fill the demands from authorities. This complicates things for Liko. All distributors have the same product range, it is then up to them to chose the right product for their country. The price-/product list contains the same items in all countries they conduct

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business in, nothing differs here. It is all up to the distributor to choose the right product and price for the country, with guidance from Liko. Liko’s products are similar to the competitors when it comes to the lifts and as said before, the harnesses are their specialty and differs Liko from their competitors. The functional part is different; the competitors can not solve as many problems as Liko can, mostly with the harnesses. The special factors Liko has to take into consideration when making the standardization /adaptation decision is mostly requirements from public authorities when it comes to the product. This often leads to adaptation for Liko, and it differs from case to case who is taking care of the adaptation. In some cases, it might be Liko themselves, and the distributors in the different countries are doing the adaptation in other cases. The respondents talked about the adaptation Liko made in France. Liko did the first part of the adaptation in France, and once in France, the product was adapted further to the NF standard by the distributors in the country, and after this, the product was right according to the standard. The reason why Liko are doing this is that according to agreement, they are supposed to deliver products that fulfil the ISO standard; further complements have to be done by the distributor in the foreign country. This is done because it is not possible for Liko to do all adjustments required in all countries they conduct business in. Therefore, this responsibility is on the local distributor. When conducting the agreement, it is important to take into consideration what can happen, doing a so called risk analysis. As said before, it is most of the time the electronic that has to be adjusted. The different factors that Liko have to take into consideration when making the standardization/adaptation decision of the product is the mass production, which leads to cheaper manufacturing costs due to economies of scale. Liko buys cheap components and put them together to usable products. Liko then sells these products and tries to make as large profit as possible on them. Many components can be used for many different products, and this also leads to an increasing profit due to cheaper purchases. This is something that Liko constantly thinks about, especially in the R&D department. Liko is forced to adapt their products due to requirements from public authorities, as we said above, but the respondents say that the adaptation to the market is done voluntarily. This makes them more competitive at the market because of a good product at a right and suitable price. Due to Liko’s wide range of products, their customers can chose whether or not they whish to sacrifice product preferences, like function and design, for a lower price at higher quality. Liko have developed a product especially for foreign markets, called Caroli Capella, with a price lower than the other products. According to the respondents, Liko’s products have to be developed in line with this. They aim to force the product price down and still maintain the high quality of the product; the products will be better, cheaper and more tasteful.

4.3 Liko’s Pricing in International Markets The respondents say that it is every country’s responsibility to put a price on Liko’s products. Liko recommends a price, but the final price is set by the distributor in the country. Liko has a fixed price list to their distributors. The price has to be according to the suggested price because the product price should be kept low. Liko use certain factors in order to help the distributors to know where to set the price. Liko then puts a discount on the product due to

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volume sales and volume purchase from the distributor. Since the subsidiary is seen up on as a part of the Liko Group, the pricing is an issue still within the company. Factors playing a part when deciding if the price should be adapted or not is very much depending on the competitors, Liko looks into their price level when setting their price. In other words, Liko looks at the market price in every country. Liko consider their products as price insensitive. Liko tries to have the same price regardless if they are alone on a market or not. It is a large difference in price when looking at Scandinavia and the rest of the world. The price is twice as much on the markets outside Sweden and Scandinavia. The reason why the prices are so low in Scandinavia is because the fact that Sweden and Scandinavia has had medical technological equipment eight to ten years longer compared to the rest of the world. Foreign manufacturers are not as exposed to competition as Liko and other Scandinavian manufacturers. Our respondents predict that the prices will probably decrease on the rest of the world as well in the future. This is probably because more competitors will enter the markets outside Scandinavia; there will be more competition on these markets on the future as well. The market affects the prices initially when Liko enters a new market. The competition affects the price setting, but it is seldom too low, it is rather high, except in one country, Belgium. This was surprising for Liko since they expected the market price to be high there. The environmental conditions, like different demands, has low impact on Liko’s decision, it is only the public authorities that have an impact in this area. When it comes to the question if Liko includes all domestic and foreign costs to ensure margins when setting the price, the respondents say that Liko looks at the costs individually for every country. Since the distributor is seen up on as the final customer, Liko separates the costs from the different countries they conduct business in because the discount, due to volume purchase done by the distributor, varies from country to country. This leads to the fact that Liko looks at the profit gained and the manufacturing cost for every country. Liko points out that all products are assembled in Alvik and then shipped out to the different markets. Everything is assembled in Sweden. The only thing that may be sent unassembled is the slings.

4.4 Liko’s Promotion for International Markets Liko’s promotion consists to for the most part of brochures, directions for use, and instructions for installation. Liko also uses tradeshows a lot in their promotion activities. Liko works a lot with relationships and relationship selling, and the tradeshow help Liko to achieve success in this. It is here where they meet, for example new distributors and makes new connections. The material in the brochures is the same all over the world, but it is still adapted to a certain extent. The adaptation is not only language adaptation; the pictures can be adapted in some cases as well. The respondents give the US as an example. Pictures that are appropriate in Scandinavia can be seen as vulgar in the US. The main difference is that the US prefer not having real humans in their pictures, they prefer puppet dolls. The southern part of Europe is a third culture segment that Liko has to adapt to. Liko tries to keep a profile in their brochures etc. so that only the language, pictures etc. have to be changed in new countries. Different countries can chose between different pictures, but Liko tries to control the pictures

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chosen. They want the pictures to reflect the company in the right way. The US is a big market, and therefore Liko have to listen to them, it affects their material. The promotion is mostly affected by the image Liko want to have towards the market, and the brochures etc. is made after this. The respondents say that a picture of an old woman embraced by a nurse is a good reflection of Liko and the Liko-spirit. They want to create feelings and emotions; “lifts with care”. This shows emphasis for the user of the product. The respondents say that many competitors have started imitating Liko in their promotional approach; they see that Liko have a successful concept. The competitors do not know exactly how to do it yet; the respondents mean that they do not know what button to push. Liko are starting to see pictures of people, pictures caring for the user in the competitors’ promotion, and not only sterile hospital environments. The sterile hospital pictures has not the caring touch in the pictures, they do not create feeling and emotion towards the person using the product. Liko also think about people working with their lifts etc. Liko’s products should work just as good for the nurse or the parent, working with the person in need for the lift. The respondents’ points out that Liko do not whish to reflect technology in their promotion; they want to reflect the caring for the user. They develop this reasoning and says that Liko will focus even more on the care giver, the nurse or the parent, in the future, this without loosing the focus from the user. Many evidence-based studies show that a lot of neck- and back injuries are originating from bad lifts. This is something that Liko tries to capture. The ergonomic part of Liko, Liko Competence, works with this. Liko is not only focusing in the user in their promotion, they are also focusing on research results. Liko want to have the same image all over the world, and the respondents believe that it is very likely that this is a fact as well. They believe that Liko is seen as Liko, and the image that comes with it. It is not that big of a difference between the different markets. The big difference is the development phase. Sweden and Scandinavia has come a long way in their approach caring for the user, while the other markets still has long way to go. The modifications made in Liko’s promotion are mainly modifications on the homepage. The homepage is adapted after countries, mostly in terms of language, but also in term of differing preferences between countries. Liko adjust their homepage to USA, Germany, UK, and Sweden. Every country has their own entrance/flag on the main homepage (www.liko.com). The respondents say that the homepage for the US is different from, for example, Germany’s homepage. Liko just released a new US-homepage. If it shows to be successful, the respondents say that it is most likely that it will be released on the other markets as well. TV/radio is something that Liko do not use at all. Tradeshows help Liko to contain its profile all over the world. Therefore, tradeshows play a significant role for the company. The most important trade show is one held once a year in Düsseldorf, Germany. On this trade show, Liko meets their future distributors from all over the world; they make new connections and maintain old ones. The respondents continue and say that public relations are important for Liko, and the trade show in Düsseldorf is an example on that. The relationships with distributors and customers are very important for Liko. The universality of the products has no significant meaning for the promotion. Customers on a trade show see both the promotion and the product, so the product plays a huge role when seen from that angle. The customers react on the trade show booth, the promotion, and after noticing the booth, they stop and ask about the product, and so therefore the product is of

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importance in the promotion. The whole Liko profile is important on a trade show, and the product in the profile. The competitors and the marketing structure have no significant impact on the promotion, since Liko consider themselves as the market leader in this area. They might not be the market leader in terms of volume, but they are number one when it comes to marketing, and as mentioned before, many competitors are imitating Liko when it comes to both the profile and products. This may result in the unique Liko profile might not being so unique if many competitors are imitating Liko’s concept. The experience within the company is of big importance in the marketing area. They are the market leader in this area much because of the organizational experience, and the respondents state that good marketing is built of experience. Liko is not adapting themselves so much after the infrastructure in the different countries; the only thing that might affect this is the delivery time which can vary a lot depending on which country it is. Governmental regulations can be both an opportunity and a threat. The governments in the different countries can stimulate the market for a certain product if they believe that it is good, and differing (product) standards can complicate thing for Liko, as mentioned before. Liko have their own subsidiaries, within the Liko group that handles the business conducted in Germany, UK, and USA. These subsidiaries also take care of the cultural differences that may occur. Liko do not have to consider cultural differences in countries where they have distributors either since the cultural difference between Liko and the distributors can be considered as small. The distributors then take care of possible cultural differences between themselves and their customers; the final user of Liko’s product. The differences that exist are mostly regarding what product preferred in the different countries, not product preferences. Some countries prefer products that have been out on the market for a while, not the newest product. The only thing that differs is the pictures in, for example, the US, but the message is still the same all over the world. Liko’s promotion is centralized. It happens that countries can do their own thing, but this seldom occurs. The promotion is centralized in order to have the right touch of the promotion. Liko want their philosophy, “lifts with care”, to reach all countries and have the same meaning. This is because Liko want to maintain its image all over the world. The purpose is for the booth on the tradeshow to should look the same all over the world, the customer should recognize Liko’s booth no matter where in the world they are. The intention is that Liko should be understood as Liko is, and this is something they work very hard with. They try to force their distributors in a gentle way to follow this. They do not try to save money by using the standardized approach. Liko put a lot of energy in the promotion area, and have therefore increased the promotion budget.

4.5 Liko’s Distribution Channels in International Markets Liko have made it simple when it comes to the distribution channel. Once again, the respondent refers to the distributors. The distributors buys the products from Liko, and after that, the distributor has the responsibility over the product. Liko will adapt to CIP from 1 May 2005. CIP is terms of delivery that in short mean that Liko, the selling company, insures the

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product during the transportation to the buyer. Liko still insures the product, but the distributors are responsible for the product transportation. The agreement plays a significant part when Liko is about to chose a distributor. The respondents say that agreement should be as “waterproof” as possible. This is to prevent unpredictable events and to always be able to deliver their products. It is important to do a risk analysis. Liko have a short distribution channel. When good are shipped to, for example USA or Australia it might take a long time, but the delivery time is quick in Europe. As we explained on page 27, Liko do not have intermediaries. They have wholly owned subsidiaries within the Liko Group and distributors in form of end customers. Regarding the distribution in Sweden, they hire a trucking company. Liko’s products go directly from Liko (the warehouse in Alvik) to the end customer in Sweden. The product goes via the distributor/subsidiary to the end customer in all the other countries. Products are shipped to the US once every or every other week. Because of the delivery time, Liko have a warehouse in the US in order for the products to be available for the customers. Liko have seen new possibilities for the distribution channel due to the internet. The customer can go online and see where the product is in the distribution chain. The customer can access more control over the transportation of the product since they have to make their own deliveries, often depending on Liko’s product. The fact that the distribution chain now can be overlooked via the internet have a calming effect on Liko’s customers since they can be sure to receive the product and make their deliveries in time. Liko’s internet service provides the customer with a helpful tool when planning and organizing the business activities. The delivery time is very important for Liko, and the respondents say that Liko have closed many deals just because of their short delivery time. So it is true for Liko that big sales is vary much because a good distribution system. Liko do not see any problems with culture differences regarding distribution channels since the distributor is the end customer for Liko. Because the distributor has bought the product from Liko, it is their own responsibility to make the delivery to the final user. Problems within the distribution channel can arise, in the US for example, but Liko sees this as a local problem for, in this case, the subsidiary, to solve. When entering a new market, Liko investigates it carefully before the entrance. They conduct a market research; they visit a tradeshow in the country in order to meet new distributors. Liko also looks into the competitors in the market research. When doing the market research, Liko can do it themselves or hire someone doing it for them. Which alternative is chosen all depends on the resources they have for the particular country. Liko investigate the market before entering it more today (2005) compared to ten years ago. Liko has gained experience after all years conducting business abroad, so they recognize and have a feeling for a good distributor when they see one. Now they know what type of distributor they want. The distributor has to speak English, have a certain organization with an occupational therapist and a physical therapist, and financial strength. They should also quickly learn the Liko-philosophy and what it means. The respondents say that the distributor should follow Liko’s guidelines and not drive their own race. The distributor should be willing to invest and use their money, and this requires capital according to the respondents. If the distributors are

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willing to invest, things will be less complicated for Liko. Liko have done mistakes in this area in the past, but they have learned from them and gained experience. To sum up the interview, the respondents say that Liko is more an adapting company than a standardized one compared to the competitors. They say that because Liko adapts the harnesses, the rest follows with that, they are very adjustable as a company. At the same time, they offer the same range of products for all markets, but this is in constant change. Liko want their philosophy all over the world, they want to have the same profile all over the world. The respondents say that Liko is more of an adapting company because of the fact that Liko is not as big and heavy as their competitors. Liko can therefore change and adjust their products quicker then their competitors. Another reason why Liko can adapt their products quick is because that the R&D department is in the same building as the manufacturing department, so the communication between these two is good.

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5. Data Analysis We will analyse the data received from the respondent, Liko. A within- case analysis will be

conducted for each research question. In the within-case analysis, the findings from the

company, Liko, will be compared to our conceptualization. We will not conduct a cross-case

analysis since we only had one company as a respondent.

5.1 Factors Influencing SMEs’ Standardization/Adaptation of Products for International Markets In this section, we will look into three major factors stated in our conceptualization:

• Do the company gain benefits from economies of scale? • Is the adaptation mandatory or voluntarily? • Does the company consider the two main assumptions stated by Albaum, Strandskov

and Duerr (1998) when taking the standardization/adaptation decision? The major factor Liko takes into consideration when making the decision whether to standardize or adapt their product to the international markets is mass production. Liko tries to buy cheap components and put them together into usable products. The components can be used for many different products that eventually lead to increasing revenue due to cheaper purchases made by Liko, and they work with this when manufacturing their products. This goes in line with what Calantone, Cavusgil, Schmidt, and Shin (2004) as well as Albaum, Strandskov and Duerr (1998) discusses. They talk about how a company can gain benefits from economies of scale (and mass production) due to standardization of the product for the international marketplace, and they state that increasing revenue due to reduced costs often is the main reason for a company to use this approach. Friedman (1986) and Albaum, Strandskov and Duerr (1998) states that language, product specifications and governmental requirements can differ when going abroad and therefore a company often is forced to adapt; it is a mandatory product adaptation. Liko is often forced to adapt to requirements from governmental authorities in different countries. The authors also discusses that the more knowledge the company has over the foreign market, the more able it will be to balance their standardization/adaptation and in the end, the more credibility it will have towards the market. Liko follows this since they carefully investigate a market before entering it; they conduct a market research. Calantone, Cavusgil, Schmidt, and Shin (2004) says that a successful company satisfies the customer wants and needs better than their competitors and their product offerings, and Albaum et al discusses that a company should concentrate on voluntary adaptation. Supporting this, Liko confirm that their adaptation to the market is done at their own initiative since a good and not overpriced product makes them more competitive. Homogenity of customers’ demands and desires around the world and the increase of the number of global market segments are not something that Liko takes into consideration to the same extent as the second factor Albaum, Strandskov and Duerr (1998) discusses. The second factor involves the question whether the customer are willing to sacrifice product preferences like function and design etc. for lower prices at higher quality. Liko’s customers are willing to do this since they can chose from Liko’s wide range of products available at many price levels (one example is Caroli Capella which is developed especially for the foreign market and is

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priced lower than the other products). Liko explain that they try to develop their products according to this; they try to force the price down and still maintain the good quality of the product. Table 5.1, shows a summary of our findings for this section. We have looked into how well Liko fits with the theories we stated in our conceptual framework regarding the standardization/adaptation of the product for international markets. Table 5.1 Standardization vs. Adaptation of the Company’s Product for International Markets Issues of Product S/A* Agree with Theory Gaining benefits from economies of scale? Yes Voluntary/Mandatory product adaptation Yes Homogeneity of the market and number of market segments

No

Are customers willing to sacrifice product preferences for a cheaper product at a higher quality?

Yes

* S/A= standardization versus adaptation Source: Authors’ own construction

5.2 Factors Influencing SMEs' Standardization/Adaptation of Pricing for International Markets

It is up to Liko’s distributors/subsidaries to set a price for the country they conduct business in. They will receive pricing recommendations from Liko, but they set the final price for the market. Liko also put a discount on the product, originating from their fixed price list, to the distributor due to volume sales and purchases. Liko controls that the distributor do not set the price too high, since they want the price to be kept as low as possible. When setting the price, Liko looks at the competitors on the particular market. They look at the market price and the price level in every country, and they consider their product to be price insensitive. They try to have the same price, regardless if they are alone on a market or not. Comparing this to our theories, we see that Liko do not follow the existing theories literally. We see that they for most part use a standard world wide price. Czinkota and Ronkainen (2004) state that this involves having the same price regardless of the buyer, and Liko try to have the same price, regardless if they are alone on a market or not. Liko have the same price list to all distributors who sets the price depending on the market conditions in their country. This moves Liko towards market differentiated pricing and away from standard world wide price. Czinkota and Ronkainen describe market differentiated pricing as a strategy used by a company to penetrate a market. This strategy focus on the dynamic conditions in the market place, and the authors say that the prices may vary frequently due to changes in competition, exchange rate changes or environmental changes. This partly fits with Liko, since they look at the competitors’ price level on each market. In table 5.2 below, we have summarized our findings when comparing the theories with the data collected from our interview.

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Table 5.2 Standardization vs. Adaptation of the Company’s Pricing in International Markets Issues of Price S/A* Agree with theory Standard world wide price Partly Dual pricing No Market differentiated pricing Partly Product line pricing No Two-product pricing No * S/A= standardization versus adaptation Source: Authors’ own construction

5.3 Factors Influencing SMEs’ Standardization/Adaptation of Promotion for International Markets

Dwyer and Tanner (2002) discuss the importance of long-term relationships with the customers. This is something that Liko follows thoroughly. Dwyer and Tanner explain that PR, tradeshows etc. is very important for a company strengthening their relationship with the customer. Tradeshows are very important for Liko since this is where they meet their distributors. A tradeshow is also an opportunity for Liko to maintain their already existing relationships they have with distributors. The tradeshow in Düsseldorf, Germany is very important for Liko since it is here they have an opportunity to maintain old and develop new relationships with distributors. In line with Dwyer and Tanner (2002), we can see that Liko follows the pattern of a firm conducting B2B activities. They do not use TV/radio in their promotion activities. Liko continue agreeing with Dwyer and Tanner since they consider a trade show as a very important tool for maintaining their relationships. A tradeshow is also important for Liko when it comes to keeping the same profile all over the world since it is here Liko meet the distributors and customers. Dwyer and Tanner also say that PR is very important when it comes to handling the relationships with the customers. Supporting Dwyer and Tanner, Liko says that PR is very important for them when it comes to handling relationships. The tradeshow in Düsseldorf is a good example on how Liko handles the PR activities. Melewar and Vemmervik (2004) have a model describing six different variables. The first variable, the universality of the product, is not significant for Liko’s promotion activities, but it is very important from a tradeshow perspective since it includes both the product and promotion. On a tradeshow, the customer notices the booth (the promotion), reacts on it, stops and asks about Liko’s product. Liko want their profile, and the product in it, to be consistent all over the world. The competitors and the marketing structure have no significant impact on Liko’s promotion since they are the market leader in the area. Liko might not be the market leader in terms of volume, but they are number one when it comes to the promotion, and the competitors try to imitate Liko’s marketing concept. The organizational experience within the marketing area is very important for Liko. They are the market leader much because of the organizational experience. The respondents say that Liko’s marketing is built on organizational experience. Liko is not considering the degree of similarity of media infrastructure to a large extent. The only thing that might vary between countries is delivery time of the products, that can vary a lot depending on the country.

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The governmental regulations can be both an opportunity and a threat for Liko. Governments in different countries may stimulate the market for a product they believe is good. Different product standards in foreign countries can complicate things for Liko. Liko do not have to consider cultural differences between countries they conduct business in since the cultural difference between Liko and their distributors/subsidiaries are small. There are cultural differences between Liko and the final user but the distributor/subsidiary handles that part of the transportation, and therefore, these differences is not a big issue for Liko. The differences that Liko have to consider mostly concerns the product preferred in the different countries, and not product preferences. For example, some countries prefer established products, and not newly released. The pictures in the brochures, Liko’s most common advertising tool, may differ, but the message is still the same. The US market want, for example no real humans in their pictures. Pictures that are considered appropriate in Sweden might be considered vulgar in the US. Melewar and Vemmervik explain that companies with centralized promotion activities tend to have standardized advertising. Liko’s promotional activities are centralized because they want to have the right touch on the promotion and maintain their image all over the world. Liko want their philosophy, “lifts with care”, to have the same meaning in all countries. Liko want the tradeshow booth to look the same all over the world; the customer should recognize Liko all over the world. Successfully maintaining the image worldwide is something Liko work very hard with, and therefore, they gently force their distributors to follow their guidelines. In their guidelines for standardization, Papavassiliou and Stathakopoulos (1997) talk about cost savings due to a standardized promotional approach, and despite Liko’s approach we described above, they are not trying to save money. They are putting even more money in their promotional activities in order to improve. Liko’s standardized approach is not about savings, it is about maintaining the world wide image. We have summarized the findings for this section in table 5.3, and table 5.4 shows a summary of Melewar and Vemmervik’s six factors. Table 5.3: Different Promotional Theories Issues of Promotion S/A* Agree with theory Importance of long term relationship Yes TV/radio Yes Tradeshow Yes PR Yes Cost savings due to standardized advertising No Centralized promotion Partly * S/A= standardization versus adaptation Source: Authors’ own construction

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Table 5.4: Melewar & Vemmervik’s Six Factors Factor Standardize or Adapted

Approach Universality of product Insignificant Competitors and marketing structure Insignificant Organizational Experience Very significant Infrastructure Insignificant

Governmental regulations Significant Cultural differences Significant

Source: Authors’ own construction

5.4 Factors Influencing SMEs’ Standardization/Adaptation of Distribution Channels for International Markets

Kale and McIntyre (1991) explain that a distribution channel have to be adjusted to the culture in the country and the existing channels in it. The count for cross cultural differences in countries across the globe can be argued by four dimensions known as Hofstedes Framework. The first dimension talks about individual versus group decisions (individualism), the second one talks about attitudes toward superiors and subordinated (power distance), the third one talks about attitudes towards stress, younger people and need for rules and regulations (uncertainty avoidance), and the last one talks about roles of men and women (masculinity). This is not something that Liko have to consider since the distributors in the different countries they conduct business in handles the possible cultural differences that may arise. Czinkota and Ronkainen (2004) state that a company with a specialized product, which often requires after sales service, often has a short distribution channel. Liko have a short distribution channel with no intermediaries because they have their own subsidiaries and distributors as final customers. The product goes directly from Liko, through a trucking company, to the final customers in Sweden. The product is going from directly from Liko in Alvik through the subsidiaries to the final customers in UK, USA, and Germany. In the other countries, the distributor buys the product from Liko, and this means that the distributor now have full responsibility for the product. The distribution is handled quickly in Europe, but the distribution time might be longer in the US or Australia. Liko have seen new possibilities for their distribution activities due to Internet. Nowadays, Liko’s customers can trace the product through the Internet and they can easily see where in the distribution chain the product is. Internet has therefore become a source of safety for Liko’s customers. This is in line with Czinkota and Ronkainen (2004), who say that a company within the B2B industry can reach new opportunities via internet. Czinkota and Ronkainen (2004) explain that the company expanding abroad has to investigate the market carefully before entering it, they have to consider the existing structure in the country. Seifert and Ford (1989) continue in line with Czinkota and Ronkainen and state that the company should look into the intermediaries already used in the foreign market and the existing firms satisfaction with these intermediaries. Following this, Liko carefully investigates a new market before entering it. They usually conduct a market research in the foreign country where they for example are looking at the already existing competitors in the market and how they distribute their products. Liko have learned from mistakes made in the past. Today they therefore carefully investigate the new market before entering it, something they did not do ten years ago.

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Seifert and Ford (1989) discusses SMEs’ export pattern and explain that it tend to be the same goods already sold in the foreign market. This is partly true for Liko, since the lifts are similar to their competitors, but the harnesses is different since they are customized to the final user. We have summarized the findings regarding standardization/adaptation of distribution channels for international markets in table 5.5 below. Table 5.5 Standardization vs. Adaptation of the Company’s Distribution Channels for the International Markets Issues of Distribution S/A* Agree with theory Hofstedes framework Partly Specialized product often have a short distribution channel

Yes

New possibilities due to Internet Yes Careful investigation of the new market Yes SMEs’ export pattern Partly * S/A= standardization versus adaptation Source: Authors’ own construction

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6. Conclusions and Implications In this chapter, an attempt to answer the research questions stated earlier will be made. To

make this chapter clearer, the research questions will be re-stated and we will then try to

answer them. We will end this chapter by giving implications for management, theory and

future research. Our study is qualitative in nature; no generalizations can therefore be drawn from our data since we are only studying one company. This study can still be interesting from a company perspective since Liko is a successful company with a successful concept. Therefore Liko is a good example when writing about international SMEs’. As we understand it, Liko is a company making niche products and this might be another reason to why it is hard for us to generalize our findings. The purpose of the thesis was to gain a better understanding of the factors that influence SMEs’ standardization or adaptation of marketing programs in their international markets. We also delimitated us only to investigate medium sized companies and not a combination of small and medium sized companies. We also focused on industrial and not consumer goods. The following research questions were stated in order for us to reach our purpose:

RQ1: How are SMEs’ standardization/adaptation of products to international markets influenced by various factors? RQ2: How are SMEs’ standardization/adaptation of pricing to international markets influenced by various factors?

RQ3: How are SMEs’ standardization/adaptation of promotion to international markets influenced by various factors? RQ4: How are SMEs’ standardization/adaptation of distribution channels to international markets influenced by various factors?

6.1 How are SMEs’ standardization/adaptation of products to international markets influenced by various factors?

Looking at Liko as an example, we understand that mass production due to economies of scale and governmental requirements in foreign countries is important factors that influence an industrial (SME) company entering an international market. Partly supporting our theories previously presented in this thesis, we see that these two factors are of importance when Liko, an SME within the industrial market, are going internationally. Other factors, like language, and product specifications, were not brought up to the same extent. When entering a new market, it is important for the SME to investigate the market carefully, for example by conducting a market research. This research will eventually lead to increased knowledge, and thereby increased competitiveness on the new market. This will help Liko when making the decision whether to standardize/adapt the product. It is only the adaptation after governmental requirements that are done mandatory; adaptation to the market is done voluntarily. The use of mass production due to economies of scale is done voluntarily by Liko since they believe that it makes them more competitive and also increases their revenue.

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In line with Albaum, Strandskov and Duerr (1998), some of Liko’s customers are willing to sacrifice product preferences for a lower price and higher quality. Liko try to force the product price down and still maintain the high quality of the product. We see that this is something that easily can be achieved through standardization since Liko tend to use mass production due to economies of scale for their products for the international market. Below we have summarized our conclusions for this section.

• Mass production due to economies of scale makes an industrial SME more competitive and increase the revenue.

• An industrial SME are often forced to adapt to governmental requirements, but usually voluntarily adapts to the market and customers when entering a new foreign market.

• It is important to investigate a new market by conducting a market research.

6.2 How are SMEs’ Standardization/Adaptation of Pricing to International Markets Influenced by Various Factors?

When discussing factors that influence the pricing issues for international markets, we discovered that Liko did not follow any one of the theories we brought up in our literature review. Instead, we saw that they partly used a standard world wide price and partly market differentiated pricing. Liko have a standardized pricelist towards their distributors and subsidiaries, but it is up to the distributor/subsidiary to set the final price toward the final user in each country according to this price list. We believe that Liko uses this mixed strategy because they want to control the price level and make sure that their product is not priced to high. They want their product to have the right price. This is something that we believe is evidence in the direction of price standardization. Factors affecting the price (for Liko) are the competitors’ price and the accepted price on the market. This is factors almost every company has to consider, but since Liko is an industrial company, with their own distributors and subsidiaries setting the final price, the pricing for foreign markets is not a problem for Liko. They do not have to care about the necessary adjustments often required when going internationally. For an overview of this section, we have summarized the findings in bullet form.

• Liko uses a mix of standard world wide price and market differentiated pricing in order to control the price level in foreign countries.

• Liko have a standard pricelist towards their distributors/subsidiaries in foreign countries.

• The accepted price on the foreign market and the competitors’ price affects Liko’s pricing.

6.3 How are SMEs’ Standardization/Adaptation of Promotion to International Markets Influenced by Various Factors? An important factor for a company within the business-to-business sector is personal relations both according to Liko and to the theories we reviewed earlier. Liko also say that tradeshows helps them a lot in maintaining customer relations. Personal relationships are the most important part of Liko’s promotion and they constantly work maintaining these. We also see that this is correct according to the theory since an industrial company often have fewer

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customers compared to a company making consumer goods, and therefore have to work more with customer relationships. We believe that Liko is leaning towards standardization in their promotion since they have centralized promotion in order to have control over it. Liko does this since they want to keep the same profile all over the world, a customer should be able to recognize the Liko profile no matter where in the world he/she is. We still believe that Liko considers adaptation factors in their promotional approach. One example can be the adjustment of the pictures in American brochures where they want puppet dolls instead of real humans in the harnesses. In line with Dwyer and Tanner (2002), Liko, does not use TV/radio commercials in their promotional activities. We see this as a validation for the fact that it is not common among firms within the industrial sector to use TV/radio as a promotional tool for advertising towards the final user. Instead, Liko put much emphasis in their personal relations. Liko tries to maintain their already existing relations, and trade shows plays an important role in this. It is here where Liko meets their distributors and also end users to a certain extent and therefore this is an excellent opportunity for Liko to maintain relations. In general, this is also very common among industrial firms. There are not many industrial companies using TV/radio in their promotional activities. Liko believe that they are the market leader in the promotional area and therefore they do not look into the competitors’ advertising. Liko believe that the competitors try to imitate them as the market leader in the area. We believe this shows that good knowledge within the promotional area is useful for an SME expanding their business to international markets. Good promotional knowledge and a clear picture on the company image and profile is good knowledge for the expanding SME. If the company has a strong profile when starting the expansion, the customers will know what to expect, and sticking to this profile is also necessary. If the company changes the profile completely, we believe this might lead to confusion among the customers. The subsidiaries/distributors is Liko’s final customers and we believe that the fact that Liko therefore do not directly have to consider cultural differences other than what products preferred, in the countries they conduct business in, is very helpful for them when trying to maintain the same profile all over the world. A company forced to adjust a lot after cultural differences might have a hard time maintaining the same company profile all over the world since the cultural differences might demand a different approach from the company, an approach not necessary in line with the company profile. Below, we have summarized the most important facts regarding promotion.

• Personal relations and tradeshows are important promotion tools for Liko. • Liko have centralized promotion in order to have control over their image world wide. • TV/radio is not commonly used among industrial companies on international makets. • It is important for the SME expanding internationally to have and maintain a clear

company profile and image.

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6.4 How are SMEs’ Standardization/Adaptation of Distribution Channels to International Markets Influenced by Various Factors?

Kale and McIntyre (1991) states that the distribution channel have to be adjusted after the culture in the country, but this is not something Liko considers since it is up to the distributor/subsidiary in the country to distribute the product. Liko have short distribution channels with no intermediaries because they have wholly owned subsidiaries handling the transportation in UK, USA and Germany. The distributors is seen upon as final customers. In Sweden, the product goes from Liko, through a trucking company, to the final user. This is because Liko have a specialized product, and Czinkota and Ronkainen (2004) said that a specialized product often have short distribution channels because it often requires after sale service. Liko fits in this reasoning and the fact that they have many service offices might be evidence of that their product requires after sales service. A short distribution chain means short distribution time, and this is also true for Liko. They have closed a lot of deals just because their short distribution time. Internet plays an important role for a lot of companies and it has also made it easier to reach new markets. In Liko’s case, their customers can use the Internet in order to see where in the distribution chain their product is so they can make their own deliveries in time. Therefore, we see that this opportunity have a calming effect on Liko’s customers. They do not have to worry about the delivery of their product being in time since they can see where in the distribution chain it is by themselves. Especially when the customer is depending on Liko’s product in order to make other deliveries, it is particularly important that they into some extent can overlook the distribution chain to plan their own deliveries. We believe that this also might be one reason to Liko’s success, the fact that they have short channels they have almost complete control over. This makes them able to shorten their distribution time, which we believe has given them a huge competitive advantage against the competitors. Liko has closed a lot of deals because of the short distribution time as stated before. We believe that this might show that Liko has a well developed distribution system compared to the competitors. Liko have learned from their mistakes, and therefore we believe that it is important for a company to thoroughly investigate the new market before entering it. Looking at Liko, we see that they now carefully conduct market research before entering a new market. They investigate the other companies on the market and how they conduct their distribution themselves. Liko’s products are partly similar to the already existing products on the foreign market. This is because the lift can not be done much differently. The harnesses on the other hand can be done differently, and as said before, Liko’s strength is their ability to customize the harnesses. We see that Liko partly follows the typical SME’s export pattern since they partly sell the same good that is already sold in the foreign market. Below is a summary for the findings regarding standardization/adaptation for distribution channels.

• Liko have specialized products and therefore a short distribution channel since specialized products often require after sales service.

• Following the theory, Liko have short distribution time due to their short distribution channel.

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• Internet has developed Liko’s distribution system and made it even more effective. This is because the customer now online can see where in the distribution channel their product is in order to be able to make their own deliveries in time.

6.5 Conclusions

Even if no generalizations can be made from this study, we believe that Liko’s experience within this area can be useful for other SMEs deciding whether to adapt or standardize their product to the international market. They can look at Liko to see the importance of adapting to the customers on the foreign market in order to succeed. This might show that a company taking the initiative to adapt to customers needs, also listens to customer demands and works in line with these when improving and developing their product. This adaptation and close integration with the customer might help the SME to concur market shares. SMEs’ can also realize the importance of adapting the price for a specialized product to the foreign market set by someone with knowledge about the particular market. This is important since customer demands differ between different markets in different countries. Therefore, it is important for the SME to have someone with thorough knowledge about the particular market to set the price since the final users (in Liko’s case people in the health care sector) often have precise product requirements.

Liko can also state an example on how important it is for an SME within the industrial sector to use tradeshows in their promotional activities to enhance their relationship with the customer. A tradeshow is an excellent opportunity for the SME to strengthen their relationship with the customers. Organizational experience is very important for an SME to have if they wish to be the market leader in the promotional area since they learn from past mistakes and successes. This experience will also give the SME knowledge about what the customer requires and wants out of the promotion. Finally, this study shows that a short distribution channel leads to short distribution time. Liko has this, and it has also closed a lot of deals because of it; they have shown increased sales. This might state as an example for other SMEs’ since they can see and be reminded of the efficiency of a short channel by looking at Liko. Below, we have summarized these conclusions and stated them as hypothesis.

• Initiative-taking for product adaptation leads to success in international markets.

• The more specialized the product is, the more specialized pricing for international markets has to be.

• Active tradeshow participation lead to successful relationship with customers.

• The more experienced the company is internationally, the more successful

international promotion activities become.

• A short international distribution channel leads to increased sales for the SMEs.

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6.6 Implications/Recommendations

Here, in the final section, we will provide our recommendations based on the findings of the

thesis.

Implications for Practitioners/Management Liko is a very successful company, but improvements can still be made. Liko is the market leader within the promotional area at the moment, but they believe that the competitors will catch up in about 8-10 years. Therefore, we believe that Liko have to develop their promotion in order to maintain their uniqueness. Their concept might be unique now, but in 10 years, when many competitors may catch up with them; this concept is not unique anymore. One example might be to create knowledge in other ways than just trade shows. There is not that many tradeshows during the year, so therefore Liko might have to develop their advertising in order to maintain their market leading position in the area. Since they already put much effort in personal relations, we believe that they can develop this even more and it would be a natural path for them to follow. In other words, Liko has to maintain the uniqueness it has today, and this can only be done by further development of the promotional activities. We also believe that Internet can provide Liko with new opportunities. If Liko does not have distributors in certain countries, it can provide the opportunity for the customer to order the product online. Since Liko already put much effort in improving in this area, we feel that this also might be a natural development for them. It might also be a good opportunity to test the demand for their product on a new market, before they decide to establish themselves in the country, which can be very costly. Financial risk is often low when using the Internet. This might be a good alternative for Liko in, for example uncertain markets and markets with few customers. By developing their online activities, they will reach more customers. Implications for Theory The main purpose of this thesis was to gain a better understanding of the factors that influence SMEs’ standardization or adaptation of marketing programs in their international markets. In order to fulfill this purpose, we investigated how a medium sized company, Liko, standardizes/adapts their marketing program for international markets and what important factors they consider. More over, we analyzed the empirical data and came to the conclusion that Liko party follows the theories brought up in this thesis and partly not. For example, they investigate the market carefully before entering it, but they do not consider cultural differences in different countries since they have different distributors handling that part. This points to the significant role of intermediaries in handling cultural issues, rarely investigated in the past. We also came to two important conclusions that we believe truly contributes to future research since it develops the existing theories. First, we came to the conclusion that a successful industrial SME often takes the initiative for adapting its products to the international market. The other conclusion is that a specialized product often requires specialized pricing when expanding to the international market. Implications for Further Research This thesis has given an understanding of what important factors that has to be considered when an SME decides to expands their business internationally. Based on our findings in this thesis, we have suggested implications for further research:

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• To expand this study and investigate more than one company in order to be able to generalize the findings.

• Also investigate small, and not just medium sized companies, and then compare if there is a difference between what factors considered by a small sized company and what factors considered by a medium sized company.

• See what factors a company already conducting business abroad consider and compare them to what factors a company that just expanded their business considers.

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List of Referenses

Books

Albaum, G., Strandskov, J. & Duerr, E. (1998). International Marketing and Export

Management (3rd edition). Essex, UK: Addison Wesley Longman Limited. Bradley, F. (1999). International Marketing Strategy (3rd edition). London: Prentice Hall Europe. Cateora, P.R. & Keaveney, S. (1987). Marketing. Homewood (IL), USA: Richard D. Irwin Inc. Czinkota. M.R. & Ronkainen, I.A. (2004). International Marketing (7th edition). Mason, Ohio: Thomson South-Western. Denscombe, M. (1998). Forskningshandboken. Lund: Studentlitteratur. Gummesson, E. (2000). Qualitative Methods in Management Research (2nd edition). Thousand Oaks, CA: Sage Publications Inc. Jobber, D. (2001). Principle and Practice of Marketing (3rd edition). London: McGraw-Hill Publishing Company. Nagle, T.T. & Holden, R.K. (1995). The Strategy and Tactics of Pricing (2nd edition). Upper Saddle River: Prentice-Hall, Inc. Tanner, J.F. & Dwyer, R.F. (2002). Business Marketing, Connecting Strategy, Relationships

and Learning (2nd edition). New York: McGraw-Hill Higher Education. Thurén, T. (1991). Vetenskapsteori för nybörjare. Malmö: Liber. Wiedersheim-Paul, F. & Eriksson, L.T. (1998). Att utreda, forska och rapportera, 5th edition. Malmö: Lieber Utbildning. Yin, R.K. (1994). Case Study Research, (2nd edition). Thousand Oaks, CA: Sage Publications. Yin, R.K .(1984). Case Study Research-Design and Methods, (revised edition). Newbury Park, CA: Sage Publications

Articles

Calantone, R.J., Cavusgil, S.T, Schmidt, J.B. & Shin, G.C. (2004). “Internationalization and

Dynamics of Product Adaptation. An Empirical Investigation”, Journal of Product Innovation Management, no 21, p 185-198. Friedman, R. (1986). “Psychological Meaning of Products: A Simplification of the

Standardization vs. Adaptation Debate”, Columbia Journal of World Business, p 97-104. Hilleke, K. & Butscher, S.A. (1997). “How to use a two product strategy against low price

competition”, Pricing Strategy and Practice, vol 5, no 3, p 108-115. Kale, S.H., & McIntyre, R.P. (1991). ”Distribution Channel Relationships in Diverse

Cultures”, International Marketing Review, vol 8, no 3, p 31-45. Lages, L.F., & Montgomery, D.B. (2004). “Export Performance as an Antecedent of Export

Commitment and Marketing Strategy Adaptation. Evidence from Small and Meduim Sized

Exporters”, European Journal of Marketing, vol 38, no 9/10, p 1186-1214. Melewar, T.C., & Vemmervik, C. (2004). ”International Advertising Strategy. A Review,

Reassesment and Recommendation”, Management Decision, vol 42, no 7, p 863-881. Moen, O., & Servais, P. (2002) “Born Global or Gradual Global? Examining the Export

Behaviour of Small and Medium-Sized Enterprises”, Journal of International Marketing, vol 10, no 3, p 49-72. Papavassiliou, N., & Stathakopoulos, V. (1997). “Standardization versus Adaptation of

International Advertising Strategies. Towards a Framework”, European Journal of Marketing, vol 31, no 7, p 524-527.

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Ryans, J.K.Jr., Griffith, G.A., & White, D.S. (2003). “Standardization/Adaptation of

International Marketing Strategy”, International Marketing Review, vol 20, no 6, p 588-603. Seifert, B, & Ford, J. (1989) “Export Distribution Channels”, Columbia Journal of World Business, p 15-22. Vrontis, D. (2003). “Integrating Adaptation and Standardization”, Journal of Marketing Management, vol 19, issue ¾, p. 284.

Websites

http://www.liko.se

Interview

Respondent 1: Karin Edelswärd Position: Commercial Department (secretary of the CEO) Company: Liko AB Interview date: 2005-04-13 Respondent 2: Stefan Johansson Position: Commercial Department (responsible for business conducted with Mediterranean Countries. Company: Liko AB Interview date: 2005-04-13

Appendix 1 (English version)

Interview guide

COMPANY BACKGROUND • Respondents name and position in the company? • Number of employees in the company? • Present your products. • Who are your customers, both domestically and internationally? • Competitors? • Growth rate of the company? • Turnover • Why and when did you go international?

- How many foreign markets are you supplying your products to? - Hoe do you operate abroad in terms of market mode of entry, e.g. export,

licensing, FDI etc.? • What are your major markets? • Exports (growth in exports) • Changes in the company over time

PRODUCT

• How do you deal with the questions of standardization versus adaptation of your product in various international markets?

• What are the determining factors for you to decide whether your product in a specific

market should be the standard product or if adaptation is required?

• Generally specifying, what types of modifications do you make in your product? Describe.

• How do the following factors impact the decision of standardization vs. adaptation of

product: - Gaining benefits from economies of scale? - Are you forced to adapt your products or do you do it voluntarily? - Do you consider the homogeneity of the market and number of segments on

the market? - Are your customers are willing to sacrifice any of their preferences on product

features, functions and design for a lower price at higher quality? PRICE

• How do you deal with the questions of standardization versus adaptation of your price in various international markets?

• What are the determining factors for you to decide whether your price in a specific

market should be standardized (market price) or adapted (e.g. product line pricing)?

• Generally specifying, what types of modifications do you make in your price?

Describe. o Have you developed a cheaper product for the foreign market to penetrate the

market better and help the successful product to maintain its market share? o Do you set the prices according to your product line?

• How do the following factors impact the decision of standardization vs. adaptation of

price: o Market o Change in competition o Exchange rates o Environmental conditions o Do you include all domestic and foreign costs to ensure margins?

PROMOTION

• How do you deal with the questions of standardization versus adaptation of your promotion in various international markets?

• What are the determining factors for you to decide whether your promotion in a

specific market should be standardized or adapted? • Generally specifying, what types of modifications do you make in your price?

Describe. • How do the following factors, on a scale between 0-10 (0=low, 10=high) impact the

decision of standardization/adaptation of promotion? Motivate!:

o Homogeneity of the market → is your product standardized? o TV/radio, PR, tradeshows o (Universality of ) Product (has it any impact on your promotion?) o Structure of the market (competitors etc.) Is it similar or dissimilar? o Experience of the organization o Similarity of the infrastructure between countries (media, advertising agencies,

production facilities) o Governmental regulations (laws etc.) o Culture o Centralized or decentralized company/promotion o Maintain the image of the company o Minimize confusion for the customer o Money (do you want to save)?

DISTRIBUTION CHANNEL

• How do you deal with the questions of standardization versus adaptation of your distribution channel in various international markets? How do you engage in distribution? (export, establish a manufacturing plant, assembly operations, strategic alliance)

• What are the determining factors for you to decide whether your distribution channel

in a specific market should be standardized or adapted? • Generally specifying, what types of modifications do you make in your distribution

channel? Describe. • How do the following factors impact the decision of standardization/adaptation of

distribution channel: o Internet (have you reached markets because of it?) o Sales (big sales is often because of a good distribution system, is this true for

your company?) o Culture in the foreign country (is it considered?)

� Individualism (“I” vs. “we”) � Power distance in society (Individual vs. group decisions, relation

between superiors and subordinates, equalness in society?) � Attitudes towards younger people, need for formal rules and

regulations, level and source of stress in life. � Roles of men and women, equality between sexes

o Are your products similar to your competitors’ products? o Investigating the market before going abroad; development of distribution

channel.

• To sum this up, where in the continuum regarding standardization and adaptation would you say your company is?

• Is there anything you whish to add?

Appendix 2 (Swedish version)

Intervju guide

FÖRETAGETS BAKGRUND • Intervjuades namn och position i företaget? • Antal anställda i företaget? • Berätta om era produkter. • Hur ser er kundkrets ut, både i Sverige och utomlands? • Vilka är era konkurrenter? • Hur stor är tillväxten i företaget? • Hur stor är omsättningen? • När och varför expanderade ni utomlands?

o Hur många utländska marknader erbjuder ni era produkter till? o När ni verkar utomlands, vilket inträdessätt använder ni er av? Använder ni er

av export, licensing (andra sköter era affärer i ert namn), foreign direct investment (direktinvestering utomlands) etc.?

• Vad är er största marknad? • Har ni sett tillväxt i er exportverksamhet? • Förändringar i företaget över tiden (gällande den utländska marknaden), utveckling av

export etc. STANDARDISERING OCH ANPASSNING AV PRODUKTEN

• Hur hanterar ni frågan standardisering och anpassning av era produkter på era olika internationella marknader?

• Vilka faktorer spelar in då ni ska bestämma om produkten på en speciell marknad ska

vara standardiserad eller om anpassning behövs? Vad tar ni hänsyn till? • Generellt sett, vilka förbättringar/förändringar görs av produkten? Beskriv! • Hur påverkar följande faktorer ert beslut att anpassa/standardisera produkten:

o Erhållen vinst från eventuell massproduktion o Tvingas ni på något sätt anpassa produkten eller gör ni det frivilligt? o Ser ni till marknadens homogenitet och antalet segment på marknaden? o Är era kunder villiga att offra produktpreferenser, funktion och design etc. för

ett lågt pris men bra kvalité i förhållande till priset? STANDARDISERING OCH ANPASSNING AV PRISET

• Hur hanterar ni frågan standardisering och anpassning av priset på era olika internationella marknader?

• Vilka faktorer spelar in då ni ska bestämma om priset på en speciell marknad ska vara

standardiserat eller om anpassning behövs? Vad tar ni hänsyn till?

• Generellt sett, vilka förbättringar/förändringar görs av priset? Beskriv! • Hur påverkar följande faktorer ert beslut att anpassa/standardisera priset:

o Marknaden o Förändringar av konkurrensen o Valutakurser o Omgivningen (I landet, utöver marknaden) o Inkluderar ni både kostnader för den inhemska marknaden så väl som

kostnader för den utländska marknaden när priset sätts? STANDARDISERING OCH ANPASSNING AV REKLAMEN (PROMOTION)

• Hur hanterar ni frågan standardisering och anpassning av reklamen på era olika internationella marknader?

• Vilka faktorer spelar in då ni ska bestämma om reklamen på en speciell marknad ska

vara standardiserad eller om anpassning behövs? Vad tar ni hänsyn till? • Generellt sett, vilka förbättringar/förändringar görs av reklamen? Beskriv! • Hur påverkar följande faktorer, på en skala från noll till tio (0= låg och 10=hög) ert

beslut att anpassa/standardisera reklamen: o En homogen markand betyder ofta att produkten är standardiserad, hur väl

stämmer det för er? o TV/radio, PR, mässor, hur stor inverkan har dom? o Universalitet av produkten, vilken inverkan har detta på er reklam? o Marknadsstruktur (konkurrenter etc.) Är det likt eller olikt? o Organisationens erfarenhet? o Likhet av infrastruktur mellan olika länder (media, reklambyråer,

produktionsanläggningar etc.) o Satliga regleringar (lagar etc.) o Kultur o Centraliserad eller ocentraliserad organisation/reklam o Behålla företagets image o Minimera förvirring bland kunder

o Pengar (vill ni spara in?)

STANDARDISERING OCH ANPASSNING AV DISTRIBUTIONSKANALERNA (LOGISTIKEN)?

• Hur hanterar ni frågan standardisering och anpassning av distributionskanalerna på era olika internationella marknader?

• Vilka faktorer spelar in då ni ska bestämma om distributionskanalen på en speciell

marknad ska vara standardiserad eller om anpassning behövs? Vad tar ni hänsyn till? • Generellt sett, vilka förbättringar/förändringar görs av distributionskanalen? Beskriv! • Hur påverkar följande faktorer, ert beslut att anpassa/standardisera

distributionskanalen: o Internet (har ni nått nya marknader pga. det?) o Försäljning, bra försäljning beror ofta på ett bra distributionssystem, hur väl

stämmer detta överens med ert företag? o Kultur i utlandet (hur hanterar ni det?)

� Individualism (“jag” vs. “vi”) � Klasskillnader i samhället (individuellt- eller gruppbeslut, relation

mellan över- och underordnade, jämlikhet i samhället) � Attityder mellan åldersgrupper (äldre vs. yngre), behov av formella

regler och bestämmelser, stressnivå hos landets invånare. � Manligt och kvinnligt i samhället, jämlikhet mellan könen.

o Är era produkter lika konkurrenternas? o Till vilken grad undersökte ni marknaden när ni gick utomlands för första

gången? Utveckling av distributions kanalen.

• För att summera intervjun, var står ert företag som helhet när det gäller anpassning och standardisering av er marknads mix? Hur mycket standardiserar ni och hur mycket anpassar ni?

Något ni vill tillägga?