1

TableofContents

1Introduction.....................................................................................................................31.1ProblemStatement .............................................................................................................41.2Methods ..................................................................................................................................41.3Structure.................................................................................................................................51.4Delimitation ..........................................................................................................................6

2TheJYSKCase ..................................................................................................................82.1Jysk’sValueChain................................................................................................................82.1.1FirmInfrastructure ...................................................................................................................102.1.2HumanResourceManagement ............................................................................................102.1.3TechnologyDevelopment.......................................................................................................122.1.4Procurement ................................................................................................................................122.1.5InboundLogistics.......................................................................................................................132.1.6Operations.....................................................................................................................................132.1.7OutboundLogistics ...................................................................................................................132.1.8MarketingandSales..................................................................................................................132.1.9Services...........................................................................................................................................14

2.2Summary ............................................................................................................................. 143StandardizedVersusAdjustedMarketCommunication................................ 163.1StandardizedMarketApproach................................................................................... 163.2AdaptedMarketApproach ............................................................................................ 183.3CombinedMarketApproach......................................................................................... 213.4Summary ............................................................................................................................. 23

4CultureTheoriesinaMarketingContext............................................................ 254.1Hofstede’soniondiagram.............................................................................................. 264.2IntroductiontoDimensionsofCulture ..................................................................... 274.3ValidityoftheCulturalDimensions ........................................................................... 284.4CulturalDimensions........................................................................................................ 284.4.1IndividualismversusCollectivism......................................................................................294.4.2MasculinityversusFemininity .............................................................................................314.4.3UncertaintyAvoidance ............................................................................................................334.4.4PowerDistance ...........................................................................................................................34

4.5HighversusLowContext................................................................................................ 354.6Summary ............................................................................................................................. 37

5ChoiceofEntryModeandMarket.......................................................................... 405.1PESTELAnalysis ................................................................................................................ 405.1.1PoliticalFuture............................................................................................................................415.1.2Socio‐culturalFuture................................................................................................................425.1.3EconomicFuture ........................................................................................................................445.1.4TechnologicalFuture................................................................................................................45

5.2Climate ................................................................................................................................. 485.3BusinessNetworks........................................................................................................... 485.4Corruption .......................................................................................................................... 495.6Summary ............................................................................................................................. 52

6 Conclusion.................................................................................................................. 55Bibliography..................................................................................................................... 58Books ........................................................................................................................................... 58Articles ........................................................................................................................................ 59Onlinesources .......................................................................................................................... 60

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Videosources ............................................................................................................................ 61Appendix1. ....................................................................................................................... 62Appendix2 ........................................................................................................................ 63

Appendix3 ........................................................................................................................ 64

Appendix4 ........................................................................................................................ 65

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1Introduction

In the industrialized world today companies face the intensified competition in

markets where contribution margins are notoriously diminishing. Due to lower

production costs in primarily newly industrialized countries like Brazil, Russia, India

and China (BRIC) to name but a few, home markets are in abundance presented with

a wide variety of imported and competitive products leaving no time for companies to

dwell on past merits.

However, while the globalisation has increased competition the subsequent

economical growth in the newly industrialized countries has increased the demand for

goods not “accessible” to these regions prior to the industrial growth.

Numbers from the Central Bank of Russia suggests that the inflation regulated GDP

per capita in Russia has doubled in the course of 10 years. What is even more

noticeable is that the Russian import has exploded over the last 10 years. (Appendix

1). The numbers from the Russian Central Bank indicates that in the wake of the

economical boom foreign companies have established themselves in the Russian

consumers every day life. The new global tendency has forced managers to rethink

their business model and many have decided incentivized by pro- or reactive motives

to enter new foreign markets.

At a first glance it seems as the newly established economical wealth of the so-called

BRIC countries among others, has paved the way for large multinational enterprises.

It seems these new markets provided the large multinational companies with an

opportunity to flex their financial muscle and reap the benefits from their hard earned

experience. However, over the years companies have realized what they thought was

a one-way ticket to success ended up being a costly affair leaving financial scars

visible even to Scrooge McDuck without glasses.

Over the years different approaches to cross cultural marketing have been suggested.

The core of the discussion is whether the market communication and product details

should be standardized or if it is necessary to adapt it to the receiving culture.

Proponents of the standardized approach (Levitt, 1983; Jain, 1989) argue that the cost

reduction associated with product development and market communication is the

main strengths of the standardised approach. On the other hand the proponents of a

modified marketing mix (Hofstede, De Mooij) suggest that the cost associated with an

4

adapted marketing campaign and increased product development costs are

outweighed by the subsequent increase in sales.

Seen from the perspective of the cost focused manager, with only economies of scale

in mind, a standardized marketing mix is very lucrative but it is hardly a sustainable

strategy if the imminent effect is withdrawal from the export market. But if

companies are not able to replicate their domestic strategies how much product,

promotion, distribution and price adjustment is needed to align the goods to the needs

and expectations of the export market?

1.1 ProblemStatementAforementioned is exactly what this bachelor thesis will try to highlight. It will assess

the important questions export managers have to ask themselves when moving goods

across cultures and borders. With Jysk as a case example this thesis aims to clarify

why a well-proven concept can fail to gain a foothold in a foreign market and put

forward a number of recommendations to avoid repetition of past failures.

Consequently following research question will be investigated:

How should Jysk compose their marketing mix in order to penetrate the

Russian market?

A number of sub questions will be answered to provide a theoretical foundation and

map possible mistakes that could help answering the research question.

(a) What factors are in favour of a standardized market approach and vice

versa?

(b) How big is the cultural gap between Russia and Denmark?

(c) If any, how does the cultural gap affect market communication for Jysk in

Russia?

(d) Was Russia the wrong entry market or was the entry mode not suited the

Russian market?

1.2MethodsThe thesis will take a problem-oriented approach to answering the problem statement

from a theoretical perspective. Throughout the thesis the arguments for the choice of

5

theories and models will be put forward and their relevance to the problem statement

discussed.

To answer the problem statement the thesis will include a number of analyses. The

thesis will investigate Jysk’s strength by looking into their value chain and observe

where Jysk adds value to its products and services.

To clarify the role of culture in relation to marketing a number of reputable theorists

have performed ongoing studies. This thesis will include the views of Hofstede, Hall,

Levitt, de Mooij among others to establish of theoretical foundation to answer the

problem statement. Hofstede’s cultural dimension will be assessed and along with

Hall’s cultural studies the thesis will try to clarify the differences between Denmark

and Russia. To gain marketing perspective de Mooij will provide an insight into this

specific area.

The thesis will explain the importance of choosing the right export market. By

performing a PESTEL analysis on the Russian market for Jysk the thesis will clarify

if the failure can simply be ascribed wrong choice of export market. Furthermore

Jysk’s choice of entry mode will be elaborated upon by the aid of Hollensen’s book

on international marketing.

Lastly the thesis will especially in chapter 2 and 5 use a number of online secondary

sources. A number of these sources do not have any authors accredited, which

complicates the structure of the bibliography. Consequently to ease the access to these

sources a complete URL will be attached as a footnote.

1.3 StructureThe proceeding section will briefly present the overall structure of this thesis.

Chapter 2 – The Jysk case: Firstly an insight into the company Jysk is necessary for

the proceeding investigations. Therefore this chapter will provide a brief summary of

key historical events along with company culture and strengths that have helped

JYSK become the successful company it is today.

Chapter 3 – Standardized versus adjusted market communication: This chapter will

present the reader with relevant theory and literature regarding the question whether

to standardize or adjust market communication. Furthermore this chapter aims to

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identify motives for a standardized, adjusted or a combination of the two when

constructing a market communication strategy. The chapter is finalized by answering

sub question a.

Chapter 4 – Culture theories in a marketing context: The reader will here be

introduced to a theoretical approach to culture and how it affects cross-cultural

marketing. Hofstede’s and Hall’s culture dimension will be discussed and

comparatively applied to Russia and Denmark. After the analysis question b and c is

answered with respect to the findings.

Chapter 5 – Choice of entry mode and market: Chapter 4 aims to clarify the

importance of choosing the right entry market. Before any export is initiated it is of

paramount importance to locate the market with the highest potential for the concrete

company. The chapter will be completed with a PESTEL analysis on behalf of Jysk,

which should help answer sub question d.

Chapter 6 – Conclusion: The conclusion will summarize the findings from the

previous chapters and answer the main problem statement of the thesis.

1.4 DelimitationCulture will be referred to as what Hofstede calls national culture. National culture is

deeper lying values or collective mental programming that Hofstede explains by his

cultural dimensions (De Mooij, M. 2004, p. 30). Consequently, aspects of culture that

often is administered by a culture minister such as music, theatre and art will not be

considered in this thesis.

This thesis will not investigate the competitive situation on the Russian market. To

gain an insight in the competitive situation in Russia would demand thorough market

knowledge that would be difficult, time consuming and space requiring stretching

beyond the scope of this thesis. Furthermore it is of less importance to answering my

problem statement as this thesis aims to clarify the optimal marketing mix based on

cultural differences and not on the competitive situation on the market.

Furthermore this thesis will exclude the discussion on whether to adopt a standardized

or differentiated pricing strategy as the author lacks critical information regarding the

Russian market in terms of competitor’s prices. Furthermore this will allow the thesis

to steer clear of the discussion of the creation of parallel importing/grey markets.

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Culture brings a number of challenges to the table. This thesis will focus mainly on

how culture and factors such as economy, climate, corruption, infrastructure and

technology affects Jysk’s marketing mix. However it will not consider how these

cultural and external factors affects human resource management and other employee

related issues.

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2 TheJYSKCase

Firstly an insight into the company Jysk is necessary for the proceeding

investigations. Therefore this chapter will provide a brief summary of key historical

events along with company culture and strengths that have helped Jysk become the

successful company it is today.

On April 2nd 1979 Lars Larsen opens the first Jysk Sengetøjslager (Jysk Bed linens)

store in Aarhus, Denmark. Lars Larsen wanted to become the market leader and his

idea was clear. He wanted to sell his products at a lower price than that of his

competitors and thereby make his customers the winner (jysk.com1). Since that day in

1979 Jysk has gone from strength to strength and is now represented in 34 countries,

with a 16000 people strong staff and a yearly turnover of 2,35 billion Euros

(jysk.com2).

In the year 2001 stores in Denmark, Sweden and Finland changed name from Jysk

sengetøjslager or a direct translation of it to simply Jysk. This can be seen as a clear

statement that Lars Larsen is fully obligated to fulfil the goal of becoming the global

market leader within sleeping and living. In the proceeding years Jysk went through a

rapid market development process. Whereas prior to the name change Jysk was

located in the Scandinavian and neighbouring countries Jysk now expanded to larger

parts of Europe and in 2010 Jysk opened two stores in Shanghai, China.

However among these export exploitations, Russia is a stain on Jysk’s seemingly

successful export story. In 1996 Jysk opened its first shop in Moscow, Russia but had

to withdraw from the Russian market two years later in 1998. In 2005 Jysk reinterred

but failed and withdrew two years later in 2007 (Jysk.dk3). However, Lars Larsen is

still determined to succeed in Russia and has stated further plans on entering the

market in the future (Lassen, L. 2007).

2.1Jysk’sValueChainA relevant tool to analyse how Jysk creates customer perceived is the value chain.

The value chain consists of two activities – support and primary activities.

1http://www.jysk.com/frontpage/about_jysk/history.htm2http://www.jysk.com/frontpage/about_jysk/history.htm3http://www.jysk.com/frontpage/about_jysk/history.htm

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Support activities are firm

infrastructure, human research

management, technology

development and procurement.

The supporting activities are

ongoing activities that can be a

tool helping to create customer

perceived value. Contrary to

the primary the supporting

activities has no clear line as to where the activity starts and stops and is difficult to

link to one particular part of the organisation. Primary activities are inbound logistics,

operations, outbound logistics, marketing and sales and finally services. Isolated these

activities are more tangible and easier to measure in terms of customer perceived

value created (Lynch, R, 2009, p. 112-113).

According to Jysk themselves they try to create customer value by delivering good

prices and excellent service. Furthermore they mention three essential factors they

wish to be associated with;

Reliable

- Products are always available - Pricing is clear - Customer policies are favourable

Straight Forward

- Understandable communication - Down to earth - Easy shopping

Responsible

- Socially engaged partner on sourcing - Fair and trustworthy employer - Environmental commitment

(jysk.dk4)

4http://www.jysk.com/frontpage/mission_and_values/jysk_customer_values.htm

10

To see how Jysk achieve these perceived values we return to the value chain.

2.1.1FirmInfrastructureIt has proven difficult to gain access to Jysk infrastructure. However, we know that

Jysk is divided into Jysk Nordic, Dänisches Bettenlager and a number of franchisees.

The full list of which countries administered by Jysk Nordic, Dänisches Bettenlager

and the different franchisees can be found on jysk.com.

2.1.2HumanResourceManagementJysk is aware that to ensure the best service possible they need motivated employees.

A motivated employee is characterised by a constant and high level of work related

achievements, and he or she will show energy and enthusiasm in the process (Brooks,

I. 2009, p. 80). Without digging too much into motivational theory scientist work with

two factors, extrinsic and intrinsic rewards. Extrinsic rewards are company policy and

administration, working condition, salary, status and job security among others. These

extrinsic rewards are believed to cover what Maslow describes as lower level

physiological needs and do not have a direct effect on motivation. Extrinsic rewards

merely works as dissatisfiers, meaning that they will not motivate if they are at a

satisfactory level, but they will demotivate if they do not meet the employees

expectations (Brooks, I. 2009, p. 95). Intrinsic rewards are the real motivators. They

include sense of achievement, recognition, responsibility and personal growth among

others, all what Maslow describes as higher level physiological needs (Brooks, I.

2009, p. 94).

On Jysk’s homepage they have outlined three values essential to effective and

efficient procedures and continued employee satisfaction.

Tradesman

Service minded, cost conscious, reliable, goal oriented and professional.

Colleague

Helpful, mutual respect, flexible, open, honest and straight forward, positive

11

Corporate Spirit

Committed, loyal, cooperative, obligation to challenge (the right to speak up), JYSK ambassador

(jysk.com5)

Namely the last two values have a human resource aspect and can be classified as

intrinsic factors. Evidence show that Jysk is taking the humans resource aspects very

seriously. The mentioned values are supported by a number of initiatives such as Jysk

employee magazine, GO Jysk. GO Jysk has been recognised by the Association of

internal communication (Foreningen for Intern Kommunikation) with employee

magazine of the year 2010 (fikom.dk6). According to communication and CSR

manager at Jysk, Jonas Schrøder, the magazine works as a strategic tool and cultural

link between employees within the organisation (Kommagasinet, January 2011). To

engage the employees, whom Jonas Schrøder describes as the experts, on strategic

level, employees are interviewed regarding a specific strategy and how it works in

practice and thereby ignite fellow colleagues interest in the company strategy through

the magazine (Bredsted, C, 2011).

Along with a healthy corporate culture Jysk also put high emphasis on educating their

employees. Through the Jysk academy, a two-year education with combined school

and trainee experience, future employees gain an insight into the Jysk cooperation.

They gain valuable knowledge about Jysk and its products along with sales

techniques and other practical insight into running a store (jysk.dk7). The Jysk

education has earned itself a prestigious reputation in the Danish business community

where Svend Berg, education manager at Danish business, states that the education is

among the very best and Lars Larsen’s policy of hiring young leaders is a further

incentive for young and driven people to choose the Jysk academy

(karriereportalen.dk8). In fact approximately 55% of of the Danish store managers

finished a Jysk academy education (jysk.dk9).

5http://www.jysk.com/frontpage/mission_and_values/jysk_values.htm6http://fikom.dk/7http://www.jysk.dk/elev8http://karriereportalen.dk/default.asp?Action=Details&Item=4299http://www.jysk.dk/elev

12

To underline how good a work place Jysk is and to attract new trainees a viral

campaign has been initiated (Larsen, J. 2011). The video shows a young trainee on

her way to, and at work in rather awkward situations and is finalized with Lars Larsen

personally showing his appreciation of her employment at Jysk.

2.1.3TechnologyDevelopmentTo optimise the business Jysk are investing in large and technically advanced store

facilities around the world. In 2008 Jysk opened a super storehouse in Uldum,

Denmark. It is the largest of its kind in Denmark and will supply up to 300 Jysk stores

in Denmark, Norway, Holland and Great Britain along with a number of franchise

stores around the world (Jysk.dk10). In a TV interview the logistic manager Henrik

Gromada explains how everything is now registered electronically and goods can

easily be tracked around the storehouse and on their way to the stores. Furthermore

the number of wrong deliveries and damaged goods has reduced (tvsyd.dk11).

Another of Jysk’s major storehouses, Nässjö, Sweden has recently upgraded their

storage system which has lead to an increase in productivity by 7%, reduced lead time

of shop orders and improved responsiveness towards shop demand

(retailtechnologyreview.com12).

2.1.4ProcurementIn order to supply their customers with the best offer Jysk need the best suppliers.

Consequently a purchasing department has been established for the two primary

groups of goods. The first department handles textiles, duvets, pillows. The second

department handles furniture, garden, mattresses, house ware and bathroom hard.

These two departments are responsible for finding the best suppliers from around the

world who fulfil a set of ethical codes and qualitative standards. In cooperation with

the supplier Jysk strive to respect the business social compliance initiatives (BSCI)

ten principles of ethical and social responsibility (jysk.dk13). Over the years Jysk has

been supplied by suppliers who does not meet the expectations but according to

10http://www.jysk.dk/uldum11http://www.tvsyd.dk/artikel/69212?autoplay=1&video_id=2836412http://www.retailtechnologyreview.com/absolutenm/templates/retail_supply_chain.aspx?articleid=443&zoneid=113http://www.jysk.dk/ansvar

13

communications and CSR manager Jonas Schrøder, Jysk are doing their outmost to

secure that suppliers meet the expectations of Jysk (Grünbaum, B. 2008)).

2.1.5InboundLogisticsAlong with the increasing sales, Jysk has decided to engage in cooperation with the

global logistic company DHL. DHL are now responsible for all logistics matters of

Jysk products. According to logistic manager at Jysk, Henrik Bøgelund, this

cooperation was a direct effect of the increasing sales numbers, which made the

previous set-up inappropriate. Key account manager at DHL, Palle Bo Bøyesen,

explains that the agreement with Jysk allows Jysk to maintain competitive, have a

continual flow of goods and information, avoid bottlenecks and create an overview

(transinform.com14)

2.1.6OperationsThe production of Jysk goods is outsourced to external manufacturers all over the

world. However as mentioned Jysk are keeping tabs on the quality of the goods and

the working conditions on the factories.

2.1.7OutboundLogisticsAswith inbound logisticsDHL isalso responsible foralloutbound logistics for

Jysk.

2.1.8MarketingandSalesAt a conference in Denmark Lars Larsen specifically explained how important

marketing is at Jysk. “Sales derive from marketing. Without marketing you may just

as well remain where you are – or become completely invisible. That is why my clear

message is: Marketing, marketing and marketing, that is the most important thing”

(startvaekst.dk15). Early Jysk marketing centered around Lars Larsen who personally

starred in the TV commercials. With “Hello my name is Lars Larsen - I have a good

offer for you” Lars Larsen was first introduced to the Danish public. Lars Larsen

marketing strategy was clear, he knew that buying quilts, pillows and mattresses was

a matter of trust because you could not see what was inside the mattresses. Lars

Larsen had heard that even people from Copenhagen considered things from Jutland

14http://www.transinform.com/index.php/dtt/artikel/dhl_gar_i_seng_med_jysk/15http://www.startvaekst.dk/pls/wopdprod/wt2_nb.nb_preview?nid=338

14

to be trustworthy and solid, and that was why he named the stores Jysk and starred in

the commercials with his no nonsense Jutlandic appearance and dialect (Larsen, L.

2004, p. 44). As mentioned above Lars Larsen highlights marketing as the most

important asset to a company and he is even quoted saying that he during financial

crisis you can cut down on many things but absolutely not marketing. To emphasize

the importance of marketing he further states that marketing is the only weapon to

ride the financial crisis and even gain market shares on the way (Bjerrum, V. 2009)).

Whether you like the Jysk’s advertises or not there can hardly be two opinions about

their effectiveness. With simple instruments Jysk tries to highlight their three core

business values; reliable, straight forward and responsible and they succeed. In

general Jysk’s marketing can be described as down-to-earth, straightforward but none

the less aggressive.

Despite the global financial crisis Jysk has maintained it’s large marketing budget.

Because of the maintained marketing budget Jysk has gained market shares on new

markets. Something that Lars Larsen hopes will pay dividends when the economical

tendency turns (Bjerrum, V. 2009)).

In line with their values Jysk are engaged in a number of sponsorships and

organizations with a more or less direct effect to its production. A full list of

sponsorships and organizations supported by Jysk can be found on jysk.com.

2.1.9Services Contrary to many other discount shops Jysk put high emphasis on service. In order to

ensure their customers the best service Jysk educates their employees at the Jysk

academy where they, among other things, gain insight into the product range and

focus on customer communication and needs (jysk.dk16).

2.2SummaryAfter a review of Jysk’s value chain a number of value creating initiatives has been

identified.

• Streamlined supply chain.

• Centralised storehouses reduce costs and increase efficiency and reliability.

• Highly educated and motivated staff.

16http://www.jysk.dk/elev

15

• Aggressive marketing supported by a large marketing budget.

It seems that the three core values; reliability, straight forward and reliable is deeply

rooted in every part of the organisation. Firstly Jysk ability to provide reasonably and

priced products with a relative high quality is very much down to their streamlined

supply chain and the strategy of bulk-buying. Furthermore the centralisations of

storehouses reduce cost and increase efficiency. By outsourcing all logistics to DHL,

Jysk have engaged in cooperation with an experienced partner who will provide a

reliable and continuous flow of goods. The cooperation allows Jysk to focus on other

core aspects of its strategy such as human resource management and marketing. Jysk

has highly educated and motivated employees with a profound knowledge of the

organisations values and educated to provide the best service to the customers. Jysk is

fully aware that marketing is essential to succeed, which is reflected by the large

marketing budget. Despite the financial crisis Jysk has maintained its high marketing

budget. This may prove to be an asset when the economy stabilises and consumers

from the increased market share starts buying durable consumer goods again.

16

3 StandardizedVersusAdjustedMarketCommunication

This chapter will present the reader with relevant theory and literature regarding the

question whether to standardize or adjust market communication. Furthermore this

chapter aims to identify motives for a standardized, adjusted or a combination of the

two when constructing a market communication strategy. The chapter is finalized by

answering sub question a.

As mentioned in the introduction the globalisation has paved the way for goods and

services to travel beyond borders. But when doing so companies face different

communication challenges than what they are familiar with from their home markets.

The core of the dilemma is if customers from foreign markets are able to decode the

original marketing message or if an adapted approach is necessary. Put in other words

marketing managers face the decision of a standardized or adapted market

communication strategy. A standardized marketing approach is by Jain defined as:

“Using a common product, price, distribution and promotion programme on a

worldwide basis” (De Mooij, M. 1994, p. 89)

Which is the same as offering identical products worldwide at identical prices via

identical distribution channels, supported by identical sales and promotion

programmes (De Mooij, M. 1994. p 89).

Even though theorists do not agree on what the long term best cross cultural

marketing practice is, they seem to agree that technological development has to a

certain degree lead to a convergence of lifestyles at macro level. The question then is

to what degree it affects consumer behaviour and thus the need of an adapted

marketing strategy.

3.1StandardizedMarketApproach“The products and the methods of the industrialized world play a single tune for all

the world, and all the world eagerly dances to it.” (Levitt, T. 1983)

Theodore Levitt rhetorically convincing expressed these words in his now famous

article “The Globalization of Markets” from 1983 and has since been centre of a

heated debate regarding international marketing. Levitt was an advocate for a

standardized approach but on the other side stands an increasing crowd opposing his

view.

17

A standardized market communication approach prevails under the assumption that

consumer preferences are converging as the globalization increases. According to

Levitt two vectors shape the world – technology and globalization. Technology helps

determine human preferences and globalization helps to determine the economic

realities (T. Levitt, 1983). What we can derive from his logics is that because the

technology is no longer a privilege for small parts of the world, lifestyles and

consumer preferences will converge and we as consumers will to a larger degree

prefer the same products all over the world. Because consumer preferences converge

companies can now focus on economies of scale and increasing the quality of the

products. Over time, market forces will then outcompete consumer preferences

derived from the decreasing cultural differences - if the price is right (T. Levitt, 1983).

While Levitt mentions economies of scale as the outmost important factor supporting

a standardized approach De Mooij elaborates and highlights following advantages:

• Economies of scale in procurement, logistics, production and marketing.

• More efficient transfer of tacit knowledge and management resources.

• The possibility of building a uniform worldwide corporate image.

• The possibility of creating a global brand, which is recognizable worldwide.

• Lower risk of brand dilution and costumer confusion.

• Easier to create global guidelines with respect to after-sales service and sales

training. (De Mooij, M. 1994. p. 84-85)

The idea of a standardized marketing programme is further ignited by rapidly growing

youth culture. Susan Carley and Michael Dailey argue that young people today are

more similar to one another than they are to their parents. This trend is especially

observable in terms of lifestyle-oriented products such as music, clothing and

consumer electronics (Rugimbana, R & Nwankwo, S, 2003, p. 326)

Apart from the above-mentioned positives from a standardized marketing programme,

there are certain conditions that increase the likelihood of a standardized campaign

succeeding. Marketing professor Subhash Jain has developed a set of proposition with

conditions that summarize factors favouring a standardized marketing approach seen

from the perspective of the exporting company.

1. Economically alike markets.

18

2. Worldwide consumers, not countries, are the basis for identifying the segment

to serve.

3. High similarity in terms of consumer behaviour and lifestyle in markets.

4. High degree of compatibility of the product across the host country.

5. Similarity in a firm’s competitive position in different markets.

6. Same competitors and similar market share proportions in the host country

opposed to competing against local campaigns.

7. If your product is high technological.

8. Similar marketing infrastructure.

9. If key managers in the company share the same worldview.

10. If there is a strategic consensus among parent-subsidiary managers on the

standardization question.

11. If company policies and strategy is centralized. (Jain, S, 1989. p 72-76)

3.2AdaptedMarketApproachAs mentioned Levitt received massive critiques for his article and the crowd opposing

his view on cross-cultural marketing is gathering strength in numbers. The opponents

do not deny that the technological development is making the world smaller and to a

certain degree consumer preferences and tastes are converging. However the

convergence is merely on a macro level while countries is nowhere near as

converging at micro level (De Mooij, M. 2004. p. 57). Dibb, Simkin and Yuen further

argues that even though global products or brands such as Persil, Kodak, Sony,

BMW, Aldi and IKEA is highly visible throughout much of Europe, there is little

evidence that consumers buying these products have common goals and expectations

(De Mooij, M 2004. p. 57).

The core idea behind Levitt’s theory was that as globalization increased consumer

preferences would converge and consumers would to a larger degree prefer the same

products. Hofstede and de Mooij have since strongly warned not to use globalizations

as an excuse for a standardized market approach. The globalization has made the

world more homogeneous in terms of economic wealth and technological

development and according to de Mooij there are signs that consumer preferences are

actually diverging as people gets educated and wealthier and consequently

GNP/capita is no longer the explaining factor when considering differences in

19

consumption and consumer behaviour. That is because when countries develop and

economically converge, value differences become manifests and consumer behaviour

diverges. The most suitable factor for explaining the differences in consumption and

consumer behaviour is then cultural values (De Mooij, M. 2004. p. 86). This theory

obviously stresses the need for an adjusted market communication because as Ness

and Stith put it: “successful marketing program can only occur when the marketing

mix of the products is matched with the values of the consumer” (Ness & Stith, 1984,

p. 232).

In her book on worldwide advertising de Mooij advocates marketers to think global,

act local and identifies a number of external factors favouring the adaption strategy:

• Different competitive situations in different countries.

• Infrastructural differences.

• Cultural differences which influence consumer behaviour.

• Economic and technological differences. ‘

• Consumer ethnocentrism and country-of-origin attitudes.

(De Mooij, M. 1994, p. 81-84)

Different competitive situations in different countries calls for a differentiated

marketing strategy in terms of price setting, sales activities and advertising.

De Mooij highlights infrastructural differences as a factor in favour of an adapted

marketing approach. Differences such as transport systems, distribution, available

media, legal conditions, physical environment and communication systems have a

profound impact on marketing approach and may force the exporting company to

adapt to the new conditions (De Mooij, M. 1994, p. 82). Whether available media

should be classified a technological difference or infrastructural difference can be

discussed. Anyway, an obvious example could be how a company with emphasis on

their visual appearance of their printed advertisements may consider if their marketing

message would have the same effect in a non-colour magazine.

The technological development of the host country is another incentive to adapt your

marketing strategy. Different stages in the technological development in the host

country means different premises for the exporting company, and hence a need for

local adaption.

20

Economic differences are important because spending patterns change when people

get wealthier. For example people only buy certain, especially luxury, goods when

their basic needs are fulfilled (De Mooij, M. 1994, p. 84). This suggestion is in line

with the micro economical theory Engels law. Engels law suggests that when

household’s income increases spending patters will at some point change. Pindyck

and Rubinfeld exemplifies this with the consumption of hamburgers which will

increase as the household income increases, but at a certain point, as income

increases, hamburgers will become an inferior good and will be substituted with

different goods (Pindyck, R & Rubinfeld, D, 2005, p. 112). The theory of course

covers other product groups than hamburgers and the rule of thump is that the

wealthier people the proportional size of their income is spend on superior goods

increases.

Regarding the question about ethnocentrism and country-of-origin attitudes there has

shown to be divided opinions. In certain parts of the world consumers prefer

domestically produced products. This urge for country-of-origin products goes hand

in hand with national pride, which can be enforced during and after political

turbulence, and varies greatly across the world (De Mooij, M. 2004, p. 121). In

general there are two factors that are thought to explain the degree of ethnocentrism.

Ethnocentrism is believed to be high; if products are perceived as unnecessary and if

consumers perceive themselves or the domestic economy to be threatened by the

import of a particular product (Rugimbana, R. & Nwankwo, S, 2003, p. 111)

However research also suggests that consumer attitudes towards imported goods are

related to the combination of product category and country of origin. If they match we

have what is called prototypicality (De Mooij, M. 2004, p. 121)(Usunier, J. 1993, p.

260). For example if consumers in a certain country perceives furniture from

Denmark to be of high quality it might actually works as an advantage to introduce

your products as Danish when constructing your marketing strategy. In addition

Rugimbana and Nwankwo argues that consumers rate local assembly over local

design. This means that exporting companies could advantageously move production

to the host country but maintain the design department of the product domestically

(Rugimbana, R. & Nwankwo, S, 2003, p. 111). Furthermore there has proven to be a

price/quality trade-off meaning that consumer only prefer imported products as long

as they are of superior quality or better priced than domestic products (De Mooij, M.

2004 p. 211). All in all it is plausible to suggest that country of origin attitudes can be

21

considered an advantage but also a disadvantage depending on the extent of

ethnocentrism, price/quality trade off and prototypicality. Generally speaking Russia

is divided on the question of country of origin products. Research has proven that

Russian consumers to a large degree prefer domestic products when considering

consumable product. However, when Russian consumers buy durable goods they tend

to prefer foreign made products (Thelen, S. et. al, 2006, p. 694)

Cultural differences were mentioned to be the best factor to explain differences in

consumption and consumer behaviour and the thesis will investigate that thoroughly

in chapter four.

Now that reasons to adapt your marketing strategy in foreign markets has been

highlighted it would be appropriate to finalize this section with how an adaption

contributes to the success of the company. De Mooij highlights a number of

advantages to this strategy:

• An adaption of marketing strategies to different stages of a products life cycle

in different countries.

• The possibility to downplay the products country-of-origin if it does not

positively contribute to sales.

• More efficient market communication as it takes it departure in the receiving

culture.

• Adjusted marketing mix to meet specific economical aspects, consumer

perceived values and preferences in the receiving culture.

• More efficient market communication because advertisement is adjusted to

locale media infrastructure.

• The possibility to counter the different competitive forces on different

markets. (De Mooij, M. 1994)

3.3 CombinedMarketApproachAs the discussion on a standardized or adapted marketing approach seems to go on

theorists agree that a standardized or adapted approach, in its purest form, are two

extremes and it might be beneficial to combine the two. Usunier, who is advocating

this approach, states that it is not a dichotomous choice but a matter of the extent of

adaption and which parameters should be adjusted to adapt to different external

factors and to meet preferences of the receiving culture (Rugimbana, R. & Nwankwo,

S. 2003, p. 109). Hence some elements of a company’s marketing mix can be

22

standardized while others need adjustment. In general it is possible to give your

message a universal appeal such as quality for money however the instruments you

use to communicate the message needs adjustment (De Mooij, M. 2004). For example

it is the core business idea of Jysk to provide their costumer with a quality product at

a low price, which is a universal appeal. This concept is so deeply rooted in the

business and its USP therefore it would make little sense to change it however the

way you communicate your message has to be adjusted in order for the message to be

interpretable for the receiving culture.

In the two previous sections on adapted and standardized marketing approach factors

influencing the degree of standardization possible were highlighted. Marc Hermeking

(Marc Hermeking, 2005)

has made this framework that will help us explain the degree of standardization

possible. The inner circle is a company’s marketing mix in its domestic market. We

can assume that before a company decides to export they are relatively successful on

their domestic market hence their marketing mix is adjusted to the domestic

environment, which is represented by the middle circle. When a company decides for

pro- or reactive motives to expand to foreign markets they have to expand their

marketing mix, inner circle, to the foreign environment, the outer circle. The outer

circle consists of uncontrollable factors from the middle circle along with a number of

new factors that the marketing mix needs to adjust to. The match between the middle

23

and the outer circle can then plausibly explain to a certain extent the degree of

standardization. However we see that there in the outer circle are a number of factors

not represented in the middle circle. These factors and their applicability to the

existing marketing mix decide the degree of adaption needed.

3.4SummaryIn the light of the examined theories of the three market communication approaches

the thesis will now answer sub question a:

What factors are in favour of a standardized market approach and vice versa?

The question of standardization is tricky and each approach has its advantages and

disadvantages and consequently many theorists are leaning towards a combination of

the two. Theory suggests that a number of internal and external factors can help a

company decide how much standardization is needed.

For a company to succeed with a standardized approach it is important that the export

market resembles the home market in terms of economy, consumer behaviour,

lifestyle, competitive situation, technological development, marketing infrastructure

and shows low ethnocentrism. Levitt suggested that the technology would pull these

factors together on a micro and macro-level. Furthermore it was suggested that certain

products could more easily withstand the geographically expansion. In this category

we find lifestyle and high-tech products along with products with universal appeal

and strong brand equity.

24

While researchers agree that a standardized approach allows companies to utilize

economies of scale, some theorist suggests that the savings from a standardized

approach cannot outweigh the increasing sales numbers from an adapted approach

despite its lower cost. Advocates for the adapted approach believe that the

convergence Levitt suggests is only found on macro level. Despite countries converge

on macro level national value systems have not vanished but instead the globalization

has lead to value differences becoming manifests that has made consumer behaviour

diverge. The diverging consumer behaviour forces exporting companies to rethink

their marketing plan when moving abroad. De Mooij highlighted five important

factors on page 18 where cultural differences influencing consumer behaviour was the

biggest incentive to adapt your market approach.

The combined approach acknowledges that the question of standardization or

adoption is not a dichotomous choice. A complete adaption has its obvious

advantages but is also very costly. The standardized approach is beneficial to the cost

obsessed manager, however it might prove difficult to communicate your message to

the foreign consumer with your current marketing mix. The combined approach tries

to take the best from each strategy by locating important factors to adjust while others

are kept unchanged.

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4 CultureTheoriesinaMarketingContext

The reader will here be introduced to a theoretical approach to culture and how it

affects cross-cultural marketing. Hofstede’s and Hall’s culture dimension will be

discussed and comparatively applied to Russia and Denmark. After the analysis

question b and c is answered with respect to the findings.

A lot of people are interested in culture and have been studying culture to gain a

deeper insight into what culture really is. In Denmark we have a culture minister (red.

Per Stig Møller, 2010 - present) but that does not mean that he decides how our

culture is, it mere means that the minister decides where government funds should be

spend on cultural arrangements such as theatre plays, local sports clubs and if we

should apply for major sports events such as the Olympics or the football world cup.

When the talk centres on culture in a marketing sense what we think of is national

culture. Experts have over the years tried to define national culture more generally.

Edward Hall compares culture to a giant computer. The computer programs our way

of thinking and doing things (Hall, E. 1990, p. 4). Whereas Hofstede defines culture

as “the collective mental programming of the people in an environment. Culture is

not a characteristic of individuals; it encompasses a number of people who where

conditioned by the same education and life experience”(De Mooij, M. 1998, p. 42).

Because culture is a word of such magnitude and it applies to various things such as

music, theatre and art in general we need to understand what culture is in the eye of

the advertiser. Rice defined culture as “the values, attitudes, beliefs, artefacts and

other meaningful symbols represented in the pattern of life adopted by people that

help them interpret, evaluate and communicate as members of society.”(Rice, C,

1993. p. 243) Therefore culture both affects and describes human behaviour (De

Mooij, M. 1998, p. 43). Basically what Rice state is that we act upon our culture,

culture is a cognitive instrument we use when making decisions in our everyday life.

Culture works as a framework when we determine our preferences and consequently

is what we use when we make decisions on the consumer market as well. For

marketing this means according to Trompenaar and Wooliams that “culture

challenges the fundamental strategy of marketing, customer relations, definition of

products, price, and advertisement. In short culture is all pervading.” (F. Trompenaar

& P. Wooliams, 2004, p. 7)

26

4.1Hofstede’soniondiagram

Hofstede constructed in 1991 a model depicted like an onion consisting of four layers.

The model will help to get a more systematic approach to the term culture.

The outer layer of the onion is

symbols followed by heroes, rituals

with values in the middle, where

symbols are the most superficial and

values the deepest manifest of

culture. Symbols are things that

have a deeper meaning and only

people from its native culture would

understand. It is often pictures or

physical items such as a flag that

has a particular meaning to a

culture, but it can also be gestures or words. The next layer is heroes. A hero is a

person alive or dead, real or imaginary that is well know and somehow attached to the

culture and serves as a role model. Examples could be Superman to the Americans or

Nelson Mandela to the South Africans. Rituals are collective activities considered

essential within a culture (De Mooij, M. 1998, p. 46) A well known ritual is greetings

but the way we greet are different across cultures. Rituals often differ across religions.

Symbols, heroes and rituals are all what is visible to the outsider and are all what is

referred to as the sociological culture, meaning “way of life” adopted by groups of

people (De Mooij, M. 1998, p. 46). Varner and Beamer call these elements of culture

onstage behaviour (Varner & Beamer, 2005, p. 3). The final layer, or the core, in

Hofstede’s onion diagram is values and it is by far the hardest to explain. Values are

by Rokeach defined as “an enduring belief that one mode of conduct or end-state of

existence is preferable to an opposing mode of conduct or end-state of

existence”(Rokeach, 1973, p. 5). So values are what is deeply rooted in us and the

most important part of our culture, and hard to change.

When considering marketing, these four elements are all of very high importance. For

instance symbols are important to get right in order to address the market in which

you launch your marketing campaign. Symbols vary across different cultures and

takes on a completely different meaning. For example the colour black symbolizes

27

mourning in America whereas in China it is white and in some cultures symbolic

language is considered more important than verbal language. (De Mooij, M. 1998, p.

56) Heroes serve as role models and opinion leaders but role models do not have the

same effect on advertising in all cultures and they certainly are not the same. If we

look at the dimensions of culture (more on that later) masculine cultures are defined

by high emphasis on successfulness, which enforce the use of role models. In

collectivistic cultures elderly are regarded as important opinion leaders (De Mooij, M.

1998, p. 133). Trompenaar and Woolliams on the other hand argues that the effect of

using heroes is not only determined by your rank on the individualistic index, as it has

also proven efficient in more collectivistic countries as Japan and China (Trompenaar

& Woolliams, 2004, p. 100). As rituals change across cultures it is definitely

something for advertisers to be aware of.

4.2IntroductiontoDimensionsofCultureAs mentioned above culture is a framework that determines our preferences. It is a

cognitive instrument we use when making decisions in our everyday life.

Consequently, within international marketing it is of paramount importance to gain

thorough knowledge of the deeper lying cultural values, in order for the market

communication to reflect these values in the marketing message.

In order to gain a framework to describe and compare cultures, Geert Hofstede has

through extensive research identified five dimension of culture;

• Individualism versus Collectivism

• Masculinity versus Femininity

• Uncertainty Avoidance

• Power Distance

• Long- and Short-Term-Orientation

Initially Hofstede initiated his study to see how values at the workplace were

influenced by culture. However his research has proven to be applicable to other

paradigms. Hofstede collected his data from IBM between 1967 and 1973 and today

he has recorded scores from 74 different countries and regions all over the world.

28

Each country is allocated points from 1-100 on each of the five cultural dimensions in

order in such way that comparison is possible (geert-hofstede.com17).

It should be mentioned that Hofstede created his framework in such way that when

for example a country scores high on masculinity it infers that they are low on

femininity. The same rule applies to the entire five indexes.

4.3 ValidityoftheCulturalDimensionsHofstede’s five cultural dimensions have since their introduction in the 70’s received

significant criticism. Opponents suggest that Hofstede’s population is not

representative and cannot describe general tendencies in a country because the survey

was conducted using IBM staff only. Hofstede on the other hand argues that using

employees from one company only is actually one of the strength of the survey. He

argues that because the population from one company can be assumed to be from the

same social layer of any deviations in the findings can only be described by cultural

differences (Jones, L. M., 2007, p. 5).

Another point of criticism centres on how Hofstede divides national culture by

borders. Opponents suggest that cultures are not necessarily bounded by borders

(Jones, L. M., 2007, p. 5).

A final critique questioning the validity of Hofstede’s study addresses the date of the

study. Opponents suggest that a 30 year old cultural study does not give a useful

picture of how cultures are today because the globalization has changed the world we

live in. Contrary Hofstede argues that culture is deeply rooted in the population of a

country and does not easily change (Jones, L. M., 2007, p. 5).

4.4 CulturalDimensionsBecause no data on long- and short-term orientation exists for Russia it will not be

considered in this thesis. The following sections will describe the four cultural

dimensions and Hall’s high/low context theory and how they affect cross-cultural

marketing between Denmark and Russia.

For the convenience of the reader the thesis will use following abbreviations;

PD(I) Power distance (index) MAS Masculinity versus Femininity

17http://www.geert‐hofstede.com/

29

IDV Individualism versus Collectivism UA(I) Uncertainty avoidance (index)

As mentioned Hofstede’s studies allow for comparison therefore this chapter will,

before any deeper going comparison and consequences of deviations, give us an

overlook of how Denmark and Russia respectively is placed on the four dimensions of

culture. According to Hofstede’s revised edition from 2001 Russia and Denmark are

two diametrical countries on the PDI and UAI where Denmark scores 18 and 23 and

Russia scores 93 and 95. On the MAS and IDV the countries seem to be slightly more

similar. Here Denmark scores 16 and 75 and Russia scores 36 and 39 (De Mooij, M,

2004, p. 319-320).

4.4.1 IndividualismversusCollectivismThe individualistic versus collectivistic index deal with if the population of a country

values in-group over individualistic values. In collectivistic cultures members of the

in-group expect other members to care for them and in return members pledge

complete loyalty. In individualistic cultures in-group bonds are less significant and

people only consider their family as members of their group (Usunier, 1993, p. 74).

Furthermore findings suggest that primarily wealthy countries score high in

individuality (Hofstede, G. 2005, p. 78). As we move from an individualistic to a

collectivistic culture values change. Following values are mentioned as important to

individualistic cultures:

• Variety

• Adventure

• Self-actualization

• Explicit verbal communication

• “I” conscious

• People want to differentiate themselves from others

Whereas in collectivistic cultures these values are of high importance:

• Filial piety (obedience to parent, respect for parents, honouring of ancestors,

financial support of parents)

• Identify is based on social networks to which on belong

• Harmony

• Avoid loosing face

• “We” conscious (G. Hofstede, 2005, p. 80)

30

These trademarks of collectivistic cultures support the statements that focus is on in-

group relationships. Hofstede argues that there is no need to make friends, as family

or group membership, is predetermined and people are here born and raised as a

member of a group that defines their identity (Hofstede, G. 2005, p. 81).

Consequently in a collectivistic culture people share very close family bonds and

family values dominate individualistic goals. The opposite is the case for

individualistic cultures. Because people are not born into a group, relationships are

here completely voluntary and something that has to be fostered. Because

collectivistic cultures has high emphasis on group conformity they tend to yield to

group norms

When Russia is compared to Denmark we see a clear divergence. Denmark scoring

74, which is fairly individualistic, and Russia scoring 39, which shows trade of a more

collectivistic culture.

From a marketing perspective the difference implies that advertisement should aim

their attention to what serves the group over individualistic needs. This means that

Jysk shall be extra careful and try to highlight values as trust and confidence in their

brand and corporation, including well respected in-group role models and peer

approval (De Mooij, M. 2004, p. 159). Moreover a typical trade of the collectivistic

advertisement is showing collectivistic relationships instead of individuals (De Mooij,

M. 2004, p. 159).

As mentioned earlier individualism is closely connected to wealth. The question then

remains if Russia is, because of its GNP/capita increase, moving towards becoming a

more individualistic culture? According to Mooij and Hofstede it does but it remains a

31

relative concept (G. Hofstede, 2005, p. 114). Russia, a collectivistic country and at the

same time a place where western brands are prevailing, may seem as individualising

but it is merely a sign of rebellion against the “old” collectivism. In the “old”

collectivistic society people are seen as a part of the group, to the extend that all

individualistic features are taken away and replaced with what serves the group. So to

state that Russia is becoming individualistic is not true, it is rather a redefining of

collectivism by rebelling against the overly strong conformance to the group (De

Mooij, M 1998, p. 80).

This brings an interesting topic to the table. As stated by Hofstede and de Mooij

Russia should be moving towards being more individualistic on a relative scale due to

their growing wealth. If relative scale means that the global tendency is shifting

towards individualism can previously assumed advertising strategies for collectivistic

countries then be ignored and replaced with what was previously advertising adjusted

to individualistic cultures? This question seems unanswered and further research

could perhaps clarify the matter.

4.4.2 MasculinityversusFemininityThe masculine versus feminine index (MAS) deals with the differences between the

overall goals of life, what makes one happy and what determines successfulness. In

contrast to collectivistic versus individualistic countries and masculinity versus

femininity is not determined by wealth (G. Hofstede, 2005, p. 120). As the case was

with the previous dimension, values also change according to the score on the MAS

index.

Examples of masculine values:

• Performance.

• Achievement.

• Success.

• Big is beautiful.

• Being a “winner”.

• Consume for show.

Examples of feminine values:

• Caring for others

32

• Quality of life

• Service oriented

• People oriented

• Consensus

(De Mooij, M. 2004, p. 34-35)

For the masculine society the core values are achievement and success, all harder

values. In contrast with the feminine society where values as caring for others,

security, modesty and quality of life, all softer values are important. The position on

the MAS is closely related to role differentiation, small in feminine and large in

masculine. Men in feminine cultures participate in daily task in the household and

there is no such thing as a typical female job (De Mooij, M. p. 2005, p. 80).

In general the MAS score has an immense influence on marketing. Advertising

campaigns in masculine countries tend to focus on hard values such as results,

winning and success, and celebrities reflecting such values are often used. In general

advertising can be categorized as more aggressive. In contrast the values addressed in

feminine cultures is modesty, in general softer (De Mooij, M. 1998, p. 82). In

feminine cultures it is common to show men performing what would be seen as

woman’s job in a masculine culture. Furthermore advertisement overestimates in

masculine cultures whereas in feminine advertisement underestimates (De Mooij, M.

2004, p. 220).

When comparing the two countries we see that Russia is moderate masculine with a

MAS score of 36. Denmark is a very feminine culture with a MAS score of 16.

33

The difference between the countries must according to Hofstede’s theory be reflected

in the values of the two countries. Above typical masculine and feminine values were

highlighted. For marketers this applies that advertisement should reflect the more

masculine values in the Russian culture. Consequently Jysk’s parameter mix needs to

reflect values such as; big is beautiful, success and consume for show.

One obvious paradox when talking about values and buying habits in relation to a

masculine culture is the practical buying process. If as theory suggests there are clear

role definitions we could plausibly assume that the woman is accountable for most of

the shopping. Does it then make sense to address all marketing to masculine values? It

does as long as there is no deviation in the MAS score between men and women but

again that is questionable.

4.4.3 UncertaintyAvoidanceUncertainty is by Hofstede defined as:

“the extent to which the members of a culture feel threatened by ambiguous or

unknown situations.” (Hofstede, G. 2005, p. 167)

The term uncertainty avoidance (UA) is related with anxiety, high UA means high

level of anxiety. Anxiety comes to show in the way people express themselves.

Anxious cultures tend to be more expressive, they talk louder and use body language.

On the contrary weak anxiety cultures correlates with low levels of UA. The way

people express themselves in a low anxiety culture is more subdued (Hofstede, G.

2005, p. 171). UA also deal with how we relate to rules. High UA cultures dislike

uncertainty and consequently have a need for rules to structure life and the opinion of

experts are highly regarded (De Mooij, M. 1998, p. 83). On the other hand low UA

cultures does not have the need for rules to guide their life, thus value personal

freedom highly (De Mooij, M. 2005, p. 84). Uncertainty avoidance should not be

confused with fear for something particular. Instead it should be considered a wish to

avoid ambiguous situations.

34

When we look at how Russia and Denmark scores on the UAI respectively we see a

clear difference. Russia can be described as very high levels of uncertainty avoidance

while Denmark is located on the other end of the scale.

A typical high UA country advertising style is using examples, details, expert

statements, test reports, showing emotions and well-groomed people. That is because

nations scoring high on the UAI need proves that others have approved the product

they are about to purchase. The pattern is clear and in parallel with typical traits of the

high UA cultures. Contrary in low UA cultures the message seems to be more

implicit, creative and humour is frequently applied (De Mooij, M. 1998, p. 202).

4.4.4 PowerDistancePower distance is by Hofstede defined as:

“the extent to which the less powerful members of institution and

organizations within a country expect and accept that power is distributed

unequally.” (Hofstede, G. 2005, p. 46)

In large power distance societies everyone accepts one’s position, and to be given

authority comes natural and is unquestioned. In low power distance cultures the word

authority has a negative tone. Everyone should be expected to be listened to when

decisions are made, basically all are equal. PD is also shown by interrelations between

people. A baby combing his grandfather, and people of lower status driving their

supervisor crazy is unaccepted in large power distance cultures because elderly and

people with authority are seen as superior (De Mooij, M. 1998, p. 186).

35

A good example of effective advertising in a high versus low PD country is the use of

elderly in commercials. In high PD countries it would make sense to show an elderly

person guiding a teenager and teaching him the importance of keeping with tradition.

In a low PD country a commercial starring a young person showing an elderly how to

do something differently might be efficient (Rugimbana, R & Nwankwo, S, 2003, p.

144). Another trade typical for high PD cultures is the guidance people seek from

persons perceived as superior (De Mooij, M. 2004, p. 203). This is something

advertisements need to take notice about. An example could be that a person would

seek guidance from a person with higher status than one self. Consequently using role

models is a very common trade in high PD cultures (De Mooij, M. 2004, p. 221).

4.5 HighversusLowContextWhen moving your marketing abroad an obvious hazard is the language barrier. One

could easily fall into the trap of underestimating the importance of culture regulated

market communication and theorist agree that it is a wrong assumption that words and

their combinations carry the same meaning across boarders (Usunier, 1993)(Hall,

1990)(de Mooij, 1998). One of the reasons why it is important to adjust the wording

in your marketing campaign is because words often demonstrate a deeper meaning

that is not captured when translated. Consequently it is important to bear in mind that

words often contain values that cannot be translated (De Mooij, M. 1998, p. 55). The

degree to which communication within different cultures align is by Edward Hall

described by categorising cultures on a high and low context scale.

Edward Hall suggested that the way people in different cultures understand a message

is very much different. He suggests that the context in which the message is received

0

20

40

60

80

100

Russia Denmark

93

18

PDI

PDI

36

plays a prominent role in how people decode and understands the meaning of the

message. This is by Usunier exemplified by the degree a young speaker deserves trust

and credibility because of his or her age. The age is here the context and high context

cultures tend to put high emphasis on the age of the speaker whereas low context

cultures merely focus on what the speaker say – low emphasis on the context of the

message. Usunier explains this spot on by stressing; “Context brings together the sum

of interpretation mechanism that originate within culture and which allow the

explanation of a message.”(Usunier, 1993, p. 102).

Furthermore high/low context culture theory embraces the extent of a message that

can be decoded by the sheer use of language. In high context cultures most of the

information in a message is in the person communicating and is implicitly coded.

Contrary in low context cultures most of the message is in the explicitly

communicated thus what is being said is what is meant (Usunier, J. 1993, p. 102).

What is interesting to look at is the way people in different cultures react when

exposed to a wrong level of context. It is of paramount importance that the audience

the advertisement addresses is able to decode and understand the message the

advertiser is trying to push through. According to Mooij low context cultures seems

not to fully understand the message when not enough context is provided. On the

contrary high context cultures seems to become impatient or irritated when given

information they do not need (De Mooij, M. 1998, p. 157). Consequently the right

level of context must be reached in order to communicate efficiently. An example of

how an advertising campaign would differ between a high versus low context culture

is that in a high context culture indirect communication would be more efficient using

less text and more symbols, whereas in a low context culture the advertisement should

contain more explicit information such as facts and argumentation (De Mooij, M.

1998, p. 158).

When we look at how Russia and Denmark compare on the high/low context

parameter we see a clear divergence. Russia is a high context culture (G. Colin, 1999)

and Denmark is a low context culture (Usunier, J. 1993, p 102). According to theory

this would force the market communication to be adjusted. Because Russia is a high

context culture they would require less written information about the product they are

about to buy. Instead advertisement should focus on more implicit tools such as

symbols and metaphors to address the market in a proper manner.

37

4.6 SummaryAfter analysing cultural differences between Russia and Denmark comparatively the

thesis will now answer sub question b.

How big is the cultural gap between Russia and Denmark?

Chapter four has highlighted some obvious cultural differences between Denmark and

Russia. As the illustration shows there is a difference on all Hofstede’s four cultural

dimension though some dimensions more obvious than others. Most noticeable are

the differences on the PDI and UAI and Russia was also shown to be more masculine

and collectivistic compared to Denmark. Russia is characterized by having extremely

high uncertainty avoidance and power distance levels. Moreover Russia can be

characterised as being moderately masculine and collectivistic. When considering

communication characteristics, Russia was shown to be a high context culture. This is

in contrast to Denmark, which is a low context culture.

If any, how does the cultural gap affect market communication for Jysk in

Russia?

As shown the most significant cultural difference between Russia and Denmark is

PDI and UAI. These cultural differences have proven to have a significant impact on

market communication. Consequently what these dimension of culture implies to

effective market communication needs to be carefully incorporated in the marketing

plan.

38

First and foremost the extremely high power distance differences between the two

countries mean that marketers need to be aware of a number of things. The high

power distance implies that there is a strict division between authorities. In

advertising Jysk should be aware that people with authority are seen as superior to a

larger degree than in a low PDI culture as Denmark. This implies that the use of well-

respected people in advertising is a strategic strong tool to increase awareness and

sales. Furthermore the strict division of authorities means that interaction between

members from different social layer and people with different status levels needs to be

carefully regulated. In contrast to advertising in Denmark and for Jysk in particular it

is doubtful that using Lars Larsen in the advertisement would have any positive effect

due to his very much down to earth and his very unauthoritarian appearance.

The second cultural dimension with a profound difference is the UAI. With Russia

scoring very high on the UAI and Denmark on the other end of the scale Jysk needs to

be aware that in high UA cultures the need for proves is eminent. Prove could be in

form of examples, details, expert statements, test reports and well-groomed people

approving the product. This implies that Jysk should adjust their advertising by not

using Lars Larsen as a front figure before he has obtained a good reputation in Russia.

This might prove impossible and Jysk could therefore use persons with an already

well-established reputation in Russia.

The two last cultural dimensions investigated, MAS and IDV, showed less divergence

than the PDI and UAI. However Jysk should be aware that Russia was proven to be a

more masculine culture than the Danish. This implies that Jysk should try to highlight

“harder” values such as; big is beautiful, success and consume for show compared to

the Danish marketing campaign. Also Russia proved to be more collectivistic than

Denmark. Market communication in collectivistic cultures should aim its attention to

what serves the group over individualistic needs. In order to do so values such as trust

and confidence in their brand and corporation and include well-respected in-group

role models. As mentioned Russia and Denmark score relatively close on these

dimensions thus emphasis should be on PDI and UAI where the largest cultural gaps

exist. However we see that what theory suggests for Russia with respect to the MAS

and IDV correlates neatly with suggestions supported with PDI and UAI theory.

Furthermore Russia was in contrast to Denmark shown to be a high context culture.

The degree of context was proven to be of paramount importance for different

39

cultures when they are presented a marketing message. High context cultures, such as

the Russian, tend to prefer less written text but instead focus should be on symbols

and metaphors to get your marketing message through.

Investigation proves that a number of paradoxes exist when we compare best

practices of market communication. For example it was suggested that in high UA

cultures the use of test results, product details and examples was important to reach

the target group. This is in sharp contrast to the results high/low context theory

brought to the table. Here it was suggested that more implicit communication was

necessary in high context cultures such as Russia and consumers would require less

written text and more implicit tools to fully understand the marketing message.

Consequently theory leaves a number of questions unanswered.

40

5 ChoiceofEntryModeandMarket

Chapter 5 aims to clarify the importance of choosing the right entry market. Before

any export is initiated it is of paramount importance to locate the market with the

highest potential for the concrete company. The chapter will be completed with a

PESTEL analysis on behalf of Jysk, which should help answer sub question d.

How come some companies succeed and others fail when entering new foreign

markets? Maybe the answer should be found in the mismatch between consumer

preferences and the product that is introduced to the market. Maybe the distribution

methods are unknown and frowned upon. Maybe the demographics in the desired

export market leave much to be desired. Perhaps the market communication is

misunderstood and is digging ditches instead of building bridges or perhaps the

market is simply not ready for the product. It is a tricky question and the answer is

probably well hidden in the cultural gap and the exporting companies ability to

decode this gap and adjust their marketing mix to the changed set of underlying

cultural values.

According to Ness and Stith a “successful marketing program can only occur when

the marketing mix of the products is matched with the values of the consumer” (Ness

& Stith, 1984, p. 232). Consequently, if a company with either pro- or reactive

motives decides to move onto a new and foreign market, it is of paramount

importance to gain an insight into the value set of the new culture. However, other

external factors besides culture affects the choice of export market. Factors such as

the political climate and stability, economical state of the export country, the level of

technological development, focus on environmental issues and possible legal

implications are important issues to address and can help an exporting company

determine the optimal market. Many of these questions can be answered by the

PESTEL analysis.

5.1PESTELAnalysisThe PESTEL framework is a prescriptive strategic tool to predict the future by

analysing past events. In its prescriptive nature it is a static tool and should be used

carefully and conclusions drawn from the analysis should bear in mind the possibility

of changes in the environment. These environmental changes could be easier to adjust

41

to by using an emergent approach (Lynch, R, 2009, p. 42). However the PESTEL

analysis can help a company foresee obstacles and counter possible threats the new

environment could possibly pose to the organisation and therefore it is a useful tool

for Jysk. Richard Lynch advocates that a PESTEL analysis should not list every

conceivable item on the checklist but instead choose three or four factors with high

relevance to the corporation (Lynch, R, 2009, p. 82). However to reach the conclusion

as to which factors are most relevant this thesis will investigate a broad variety of

factors and finally give its evaluation of which factors are most important for Jysk to

consider before initiating market entry.

5.1.1PoliticalFutureCurrently Russia is not a member of the European Union and consequently they are

not forced to oblige to current EU regulations such as the common market. However a

strong cooperation between Russia and current EU member states does exist. This is

in form of the Partnership and Co-operation Agreement (PCA), which entered into

force on 1 December 1997 (ec.europa.eu18). The PCA is a set of agreements that

regulates the political and economical relationship between Russia and the EU. One

of its main objectives is to promote trade and investment between the parties and to a

very large extent prevent any restrictions to export to Russia (ec.europa.eu19).

However at its current form the PCA does leave some manoeuvre space for Russia in

terms of unilateral tariffs. However a new and improved contract, which is meant to

be the successor to the PCA, is currently being negotiated. The new agreement should

provide a more bilateral framework with stable, predictable and balanced rules for

bilateral trade and investment between Russia and the EU (ec.europa.eu20).

Russia’s absence in the EU is due a number of factors, which this thesis will not

investigate. However, as the PCA underlines a strong cooperation exists. On top of

the PCA, Russia is also engaged with the EU in what is described as the four common

spaces. The four common spaces are; economic space, space on freedom, security and

18http://ec.europa.eu/trade/creating‐opportunities/bilateral‐relations/countries/russia/19http://ec.europa.eu/trade/creating‐opportunities/bilateral‐relations/countries/russia/20http://ec.europa.eu/trade/creating‐opportunities/bilateral‐relations/countries/russia/

42

justice, space on external security and space on research education and culture. Most

relevant to Jysk is the common economic space. The main objective with the common

economic space is to ease export to Russia by pursuing elimination of trade barriers,

regulatory convergence, market opening, trade facilitation, infrastructure and

economic integration (ec.europa.eu21). According to material from the Russian

embassy in Denmark, approved by the President of the Russian Federation Dmitry

Medvedev, Russia do have a profound interest in a sustainable cooperation with EU

member states;

The Russian Federation is interested in the strengthening of the European

Union, development of its capacity to present agreed positions in trade,

economic, humanitarian, foreign policy and security areas.

(denmark.mid.ru22)

This leaves the impression that there is mutual interest in a long-term cooperation

between the two parties. All in all it seems that the relationship between Russia and

the EU is developing positively and exporting companies will have better conditions

on a long-term scope in Russia.

Despite Russia’s increasing conformity with EU law there are still some specific

standards applying to the Russian market specifically for exporting companies. This

means that most companies wishing to initiate export to Russia needs to obtain a

GOST-R certificate depending on product category (gost-r.info23). Furniture is a

product category embraced by the GOST-R and consequently Jysk would need to

apply for such. However since Jysk has previously been approved for export to Russia

obtaining the GOST-R certificate should prove an obstacle easy to overcome.

5.1.2Socio‐culturalFutureThe Socio-cultural future deals with a number of factors such as values, culture and

changes in lifestyle. These factors were previously discussed in the thesis. The Socio-

21http://ec.europa.eu/trade/creating‐opportunities/bilateral‐relations/countries/russia/22http://www.denmark.mid.ru/vnpol_e_01.html23http://www.gost‐r.info/russian‐certification‐nuzen.php

43

cultural future also deals with other factors relevant to Jysk. In particular the

demographic changes and distribution of income seems relevant factors to include.

As we learned by looking into Jysk’s value chain Jysk offers a relatively cheap

product at a reasonably quality. The combination of reasonably quality products

priced relatively cheap is especially appealing to the middle-income family. To

measure the general income inequality in a country the GINI coefficient is a useful

tool. Without going into too much detail the GINI coefficient tells us how equal

income is divided within a country ranging from 1 to 100. In a country where

everybody has the same, perhaps if communism had worked, the GINI coefficient

would be 1. On the other hand if one person owns everything the GINI coefficient

would be 100 (De Mooij, M. 2004, p. 56). Looking at numbers from CIA we see that

Russia is a more diverse country in terms of income scoring 42,2 (cia.gov24)

compared to Denmark scoring 29 (cia.gov25). When we look at household income or

consumption by percentage, the conventional idea that the 10% richest people in

Russia takes up a larger sum of total income or consumption, compared to Denmark,

must be abolished. Numbers show that Denmark and Russia is to a large degree

aligning, with the 10% richest Russians accountable for 30,4% of total income or

consumption (cia.gov26) whereas in Denmark the 10% richest are accountable for

28,7% (cia.gov27). This could however also be explained by the significant large

number of billionaires in Russia and the 10% fractile might be misguiding. However,

in general, numbers indicate that Russia and Denmark is not as different in terms on

income distribution. This intuitively indicates that the Russian middle class is

increasing which is a positive tendency for Jysk as they primarily target what can be

described as middle-income families. In fact it is estimated that approximately 51,2%

of the Russian population can be described as middle class (Ridley, L. & Clarke, R).

Another interesting statistic to look at is the degree of urbanization. The larger the

degree of urbanization the closer people live together and consequently the more

people Jysk could reach per store. In Russia 73% of the population live in urban areas

(cia.gov28) whereas in Denmark the number is 87% (cia.gov29). It should however be

24https://www.cia.gov/library/publications/the‐world‐factbook/geos/rs.html25https://www.cia.gov/library/publications/the‐world‐factbook/geos/da.html26https://www.cia.gov/library/publications/the‐world‐factbook/geos/rs.html27https://www.cia.gov/library/publications/the‐world‐factbook/geos/da.html28https://www.cia.gov/library/publications/the‐world‐factbook/geos/rs.html

44

mentioned that cities such as Moscow, St. Petersburg, Novosibirsk and Nizhniy

Novgorod all have a population equal to or significantly larger than Copenhagen. This

provides Jysk with plenty opportunities to reach a large group of people within a

relatively small geographical area.

When Jysk previously entered the Russian market they relied on massive marketing to

make up for their cheaply located stores (Lassen, L. 2007). It is no well-kept secret

that the strategy failed. This could be ascribed a number of factors, such as wrong

marketing that did not consider the cultural differences, but it is also important to

consider if the Russians have the transportation means to actually transport the goods

from the store to their homes. In Russia it is projected that 300 out of 1000 will own a

car by 2013, which is roughly a car per 3,33 inhabitants (free-press-release.com30). In

Denmark we have a significant higher inhabitant/car ratio with roughly 2,57

(5.560.628/2.164.000) (dst.dk). Obviously cars are not the only mean of

transportation however the Russian infrastructure is in need of heavy investment and

bus and train networks are not as developed and reliable as in Denmark (Volkov, V.

2011)). Consequently cars per inhabitant is a factor worth taking into consideration

when deciding on store location.

5.1.3EconomicFutureThe Russian economy relies heavily on export of natural resources. In 2009 Russia

was the largest exporter of natural gas, second largest exporter of oil and the third

largest exporter of steel and primary aluminium (cia.gov31). Until the global financial

crisis Russia was a country with rapid economical growth. Early economical growth

reached 7% in the years after the 1998 Russian financial crisis and up to the global

financial crisis in 2008/09. But in the wake of the global financial crisis Russia was

severely hit as prices of one of their primary export commodities, oil, swan-dived

(cia.gov32). However, oil prices are now again increasing and in general the Russian

economy is now again on an up rise. Nevertheless, Russia is still facing some serious

economical obstacles as inflation and government expenditures has increased which

29https://www.cia.gov/library/publications/the‐world‐factbook/geos/da.html30http://www.free‐press‐release.com/news/200902/1233914050.html31https://www.cia.gov/library/publications/the‐world‐factbook/geos/rs.html32https://www.cia.gov/library/publications/the‐world‐factbook/geos/rs.html

45

may eventually hinder the positive impact the increased oil prices have on the Russian

economy (cia.gov33).

As mentioned Russia has prior to the global financial crisis experienced high growth

rates which has resulted in the emergence of a middle class (cia.gov34). Annual

growth rates are now again increasing, though not as fast as other major emerging

economies, most recent number show a GDP increase of 4,5%

(tradingeconomics.com35). When we look at GDP per capita numbers prove that

Russia has $15.900 (cia.gov36), which is significantly lower than that of Denmark

($36.700) (cia.gov37). It should however be mentioned that the slightly disappointing

Russian GDP is highly influenced by the severe summer drought and fires that hit

Russia in 2010 (tradingeconomics.com38).

Russians have a very high disposable income. Compared to other BRIC countries the

disposable income is as much as three times higher (appendix 2). This can partly be

ascribed the Russian housing system. After the fall of communism housing was

distributed freely to the population meaning that mortgage repayments do not burden

the population. And since most Russians today live in a debt free house larger parts of

their nominal income is disposable (Boumphrey, S). On top of that the purchasing

power of the Russian population shows stark disparities. The urban areas are in

general wealthier than the rural parts of Russia with Moscow scoring significantly

higher than any other Russian cities and St. Petersburg listed as number 5 on the

purchasing power index (appendix 3)

5.1.4TechnologicalFutureAccording to CIA the Russian government initiated in 2007 an ambitious programme

to reduce dependency on domestic commodities as the main mean of export. By

investing heavily in the technological sectors the goal was for Russia to be able to

withstand fluctuations in the highly volatile commodity market by spreading export

33https://www.cia.gov/library/publications/the‐world‐factbook/geos/rs.html34https://www.cia.gov/library/publications/the‐world‐factbook/geos/rs.html35http://www.tradingeconomics.com/russia/gdp‐growth36https://www.cia.gov/library/publications/the‐world‐factbook/geos/rs.html37https://www.cia.gov/library/publications/the‐world‐factbook/geos/da.html38http://www.tradingeconomics.com/russia/gdp‐growth

46

income out on other sectors, such as the technological. However, things have not gone

according to plan and Russia is still lacking in the technological sector (cia.gov39).

Despite its phenomenal size and increasing wealth Russia is still lacking in

infrastructural quality. Russia is the worlds largest country in terms of square

kilometres however transport is not something that comes easy. Severe lack of

investment on roads, bridges, railways and power grid is a hindrance and prevents

Russia fulfilling its huge potential. According to Frank Holmes the lack of up to date

infrastructure the annual GDP is reduced by 6% (Holmes, F. 2009). It cannot come as

a surprise that the Russian infrastructure is crumbling as most of the Russian

infrastructure dates back to the cold war era and it is estimated that more than 60%

needs to be replaced (Holmes, F. 2009). The lack of infrastructural improvement in

light of the economical growth seems odd. However, it can largely be ascribed an

incompetent government and high levels of corruption. The high corruption levels

means that the price of producing one kilometre of highway in Russia is

approximately four times as high as in other BRIC countries (Holmes, F. 2009). The

general lack of functional infrastructure imposes immense implications for Jysk and

other companies wishing to enter the Russian market. As mentioned in chapter two

one of Jysk’s key attributed was reliability. This can be hard to obtain if the

infrastructure does not allow for timely delivery of goods to the stores. Furthermore

reaching parts of Russia placed east of Moscow may prove difficult and costly.

Especially the lack of trustworthy power grids in Russia implicates the setup of a

storehouse. Consequently Jysk will have to rely on its storehouse in Poland to supply

the huge Russian market.

Despite the current state of the Russian infrastructure there is light at the end of the

tunnel. Russia is hoping to copy China in terms of infrastructural improvement that

China underwent prior to the Olympic games in 2008. Since the announcement of

Sochi as the host city of the 2014 winter Olympic games and Moscow as the host for

the 2018 World Cup Russia can expect thoroughly investment in infrastructure. This

investment can hopefully be a catalyst for foreign investors and eventually benefit the

Russian economy.

39https://www.cia.gov/library/publications/the‐world‐factbook/geos/rs.html

47

Due to the fact that Jysk relies heavily on their marketing a profound media network

is essential for their success on the Russian market. As of today a total of 6 national

TV stations exist. Among these only 1 is not in some way affiliated with the state

(cia.gov40). In general the public opinion towards television advertising is very

negative. Surveys have proven that two-thirds of Russian TV viewers react negatively

towards TV advertising, and 51% even switch channel or turn of their TV during

commercial breaks (Russia-agency.eligne.com41). Despite the seemingly resistance

towards TV advertising it is still a huge sector with significant revenues. According to

CTC Media, Russia’s leading commercial broadcaster, 90% of advertising space for

2010 is already allocated (Holdsworth, N. 2010). It has proven impossible to find

statistics regarding the percentage of Russians with TV access however according to

BBC the Russian government is currently working on getting digital TV to every

Russian home (news.bbc.co.uk42).

Another important media to Jysk is the Internet. Jysk use the Internet as a marketing

tool where latest offers are presented and product details are thoroughly explained.

According to numbers from ITU 42,8% of the Russian population had Internet access

in 2010 (internetworldstats.com43). This is not much compared to Denmark where

roughly 86% of the population has Internet access (cia.gov44). However there seem to

be a strong deviation of Internet users when urban areas are compared to more rural

areas. Numbers suggest that the Internet is more commonly used in cities such as

Moscow and Saint Petersburg. Combined these two major cities of Russia is

accountable for 36,2% (Moscow 26,1% Saint Petersburg 10,1%) of all page views on

the global search engine google.com on April 19th 2011 (liveinternet.ru45). The

number is relatively high due to the fact that only 15,1 million people, corresponding

to 11% of the total population, live in these two major cities (cia.gov46). This suggests

that Internet access or usage is not evenly distributed across the country and is

particularly centred around the major cities of Russia. Another fact to support the idea

40https://www.cia.gov/library/publications/the‐world‐factbook/geos/rs.html41http://russia‐agency.eligne.com/2‐tv‐advertising‐commercials‐russia.html42http://news.bbc.co.uk/2/hi/europe/country_profiles/1102275.stm43http://www.internetworldstats.com/euro/ru.htm44https://www.cia.gov/library/publications/the‐world‐factbook/geos/da.html45http://www.liveinternet.ru/stat/ru/regions_hits.html?slice=Google;date=2011‐04‐1946https://www.cia.gov/library/publications/the‐world‐factbook/geos/rs.html

48

that Internet development is progressing faster in major cities is the fact that 87% of

Internet users in Moscow use broadband compared to only 67% in other cities with

populations beyond 100.000 (infact.ru47). While only 42,8% of the Russian population

had Internet access in 2010 it is still a remarkable increase from 32,3% in 2009 and

twice as many as in 2007 (appendix 4).

Previous section ends the PESTEL analysis on Russia but there are still other factors

influencing Jysk’s entrance on the Russian market. Subsequent section will

investigate factors such as; climate, corruption and business networks.

5.2 Climate A number of Jysk’s core products are related to climate. Duvets are made for certain

temperatures, outdoor furniture is mostly used during the summer period etc. As the

worlds largest geographical country Russia has a vide variety of climates. Due to its

sheer size it would be irrelevant for Jysk to adapt their products to climatic

characteristics throughout the whole country. Instead the densely populated areas are

of more relevance. Average temperatures are in Moscow ranging from -10 in the

winter to 19 degree Celsius during the summer (climatetemp.info48). Compared to

Denmark the Russian climate has tremendous fluctuations and especially winters are

extremely harsh around Moscow. The climate in St. Petersburg does not vary greatly

compared to Moscow. Historically winters are slightly warmer and summers slightly

colder (climatetemp.info49). When moving east to Novosibirsk the climate really starts

to bite back. Winters are extremely cold with an average temperature of -19 degrees

Celsius (climatetemp.info50).

5.3 Business Networks Back in the communist era strong relationship networks were established, an

important aspect of these networks was “blat”. Blat is very intangible and difficult for

foreigners to fully grasp the meaning of. Blat does not have any monetary expression

however it works in practically the same way by the means of informal exchange of

favours. (Butler, B. & Purchase, S, 2004)(Jansson, H. 2007, p 117). Back in the

Soviet era blat networks were mainly based on personal features such as friendship

and trust. The Soviet population used these relationships to overcome shortage of

47http://infact.ru/48http://www.climatetemp.info/russia/#imperial49http://www.climatetemp.info/russia/saint‐petersburg.html50http://www.climatetemp.info/russia/novosibirsk.html

49

various goods by trading favours or goods with other favours and goods from people

within their network (Jansson, H. 2007, p. 117). Post the Soviet era these networks

have continued to play a prominent role. That is especially because members of a

group within the “blat” network called “nomenklatura”, which consisted of elite

members from the communist party, are today playing a very influential role by

owning enterprises and participating in the network from a more industrial

perspective (Jansson, H. 2007, p. 119). Consequently “blat” has changed from being a

way of obtaining goods and favours for personal consumption into a more pragmatic

entity and a tool for gaining materialistic or financial advantages at a higher level,

(Jansson, H. 2007, p. 119) so to speak ”blat oils the wheels of Russian business”

(Butler, B. & Purchase, S, 2004). Blat works in various areas and is quite essential for

companies wishing to do business in Russia. For example blat is necessary to gain

access to distribution channels, blat gives business persons access to resources and

opportunities impossible to obtain otherwise, blat eases governmental related issues,

blat helps to gain access to influential customers, blat helps reach beneficial

agreements with custom offices etc. (Jansson, H. 2007, p. 119)(Butler, B. & Purchase,

S, 2004). Blat is in its nature very relationship based and therefore takes time to

establish. Consequently foreign businesses often have to rely on help from highly

respected Russians with a profound network to “oil the wheels”.

5.4CorruptionIt is the general opinion that doing business in Russia can be a very different practice

than in many other European countries. Strong business networks exist and personal

favours and relationships with influential people help a company gain access to

resources and opportunities not accessible otherwise. Another phenomenon in Russia

is the widespread corruption that cast its dark shadow over a market with seemingly

great potential. Corruption has become the norm rather than the exception in Russia,

and it is an accepted mechanism that has become essential for many firms to maintain

and survive in the modern Russia (Kouznetsov, A. & Dass, M. 2010, p. 52).

Corruption is one of the main reasons why relative few companies have forced their

way into the Russian market. Larger multinational companies often refrain from using

such unethical methods and because corruption has become the norm and is widely

accepted, companies refusing to indulge in corruption face a competitive situation

where local competitors have a number of advantages (Kouznetsov, A. & Dass, M.

2010). However it is interesting to look at how the size of a company affects its

50

general ability to avoid or at least withstand corruption in Russia. Kouznetsov and

Dass have performed a qualitative study of how large and SME’s deal with and are

affected by corruption. They suggest that SME’s are strongly affected by corruption

and only one third of newly established companies survived during the 90’s. This was

mainly because the SME’s did simply not have the financial capability to pay the

bribes necessary to continue business, bribes accounting for over 20 – 30 percent of

their capital reserves (Kouznetsov, A. & Dass, M. 2010, p. 53). Contrary to SME’s

larger companies have more financial flexibility thus they are able to withstand

various cost associated with taxes and other compulsory financial obligations.

Furthermore due to larger companies size they consequently have larger shipments of

goods that results in lower per unit costs (Kouznetsov, A. & Dass, M. 2010, p. 63).

5.5EntryMode

History has taught us that Jysk has been leaning towards franchising in eastern

European markets including the likes of Ukraine, Bulgaria, Romania, Kazakhstan and

the Baltic states. Franchising is a term ascribed the projection of a business concept to

a franchisee who then undertake the concept and pays management fees to the

franchisor. In return the franchisee receives a full business concept including know-

how, intellectual rights, goodwill, trademarks and business contacts (Hollensen, S.

2008, p. 235). When Jysk preciously was present on the Russian market it was

through the franchise concept. The most recent entrance on the Russian market the

franchisee was Jens Veino, former director of Larsen Rejser (business.dk). However

the entrance was unsuccessful.

According to Meyer and Tran the appropriate strategy for an exporting company

depends on the resources of the company (Meyer, K & Tran, Y, 2006, p. 3). Whit that

in mind the thesis will now look at three entry modes presented by Hollensen and

include Meyer and Tran’s views on entry modes. Hollensen outlines three different

entry modes; export, intermediate and hierarchical. These three modes differ in how

many of the business functions are carried out by the exporting company itself. When

a company opts for export modes it chooses to pass certain business functions to an

independent intermediary who is then in control of typically marketing and sales.

When opting for export modes the exporting company has very little control over the

product and how it is positioned on the export market. However, the risk is also

minimum as possible deficits and losses will be covered by the independent

51

intermediate (Hollensen, S. 2008, p. 235). Another entry alternative is intermediate

mode. Characteristic for intermediate entry modes is that the exporting company has

some kind of competitive advantage but are unable to utilise this advantage on the

export market. Thus the exporting company engage in a contractual agreement with a

company or person, typically in the host country (Hollensen, S. 2007, p 228).

Franchise is a branch of the intermediate entry mode. As the case with all

intermediate entry modes, franchising aims to establish a relationship with a host

country entity, this would in the case of franchising typically be a person willing to

undertake the current business model to a large extent. The contract will be of mutual

interest as the franchisee receives a well-proven business concept and assistance from

the franchisor in various areas. The franchisor in return gets instant market knowledge

through a motivated businessman with market knowledge (Hollensen, S. 2007, p.

233). The franchise concept has its disadvantages to. Despite the franchisor decides

who gets the franchise contract and provide thorough guidance there are no

guarantees that the franchisee meets expectations of the franchisor. The franchisor

runs the risk of appointing the wrong franchisee who is not able to carry out the

guidelines set by the franchisor. This could in turn hurt the brand and impair future

entrants and other franchisees on the market (Hollensen, S. 2007, p. 233). The third

entry mode mentioned by Hollensen is hierarchical modes. The hierarchical modes

are especially applicable to companies that want high level of control. Since all

business entities and functions are controlled from within the company the

hierarchical modes does not depend on independent or external foreign subsidiaries or

other investors such as in the franchise concept. The different hierarchical modes

differ in how many business functions are domestically or foreign based. A company

can choose to maintain all business functions domestically which is one extreme or

choose to transfer all business functions to the foreign market which is the other

extreme on the hierarchical entry mode spectra (Hollensen, S. 2007, p. 242).

As mentioned the appropriate strategy for an exporting company depends on the

resources of the company. In chapter 2 the thesis identified four main strength of

Jysk; Streamlined supply chain. Centralised storehouses reduce costs and increase

efficiency and reliability. Highly educated and motivated staff. Aggressive marketing

supported by a large marketing budget. To utilize these resources Jysk would need

control to some degree. This leaves out export modes. Intermediate modes allow

companies to transfer certain business functions to the export market. Through

52

franchising, strategic alliances or joint ventures Jysk could maintain some control and

transfer their main resources to the export market with a relative low financial risk. If

Jysk opts for the hierarchical export mode they would maintain total control of all

business functions and thereby utilize their key resources in the export market.

However, this also means significant investments in an unknown market with

possibilities of massive financial consequences.

Meyer and Tran argues that the multi-tier entry strategy is the most ambitious but also

the strategy that may lead to long-term success (Meyer, K & Tran, Y, 2006, p. 21).

The multi-tier strategy advocates exporting companies to acknowledge the diversity

in the foreign market. Meyer and Tran found that emerging markets are highly

segmented in terms of income and regional challenges (partly supported by the

findings of this thesis). Because middle income families are more price sensitive than

upper class they would prefer cheaper products, while upper lass would prefer

premium products. This enhances the need for a product portfolio reflecting such

differences especially noticeable in emergent country markets. Consequently a

company is advised to adapt its product portfolio to the local context, hence a

products line of cheaper products especially directed the middle class companied with

a global product line directed at the upper class. This allows Jysk to maintain its

global brands thus enabling Jysk to capitalize on the global brand value (Meyer, K &

Tran, Y, 2006, p. 9). Furthermore, the multi-tier strategy has to be supported with a

combination of global and local resources (Meyer, K & Tran, Y, 2006, p. 2).

Consequently the appropriate entry mode has to capture local resources while

maintaining the exporting companies key value creating resources (Meyer, K & Tran,

Y, 2006, p. 22). This perfectly aligns with previous findings concluding that products

and marketing will most likely need adjustment to a certain degree, while exporting

companies in Russia would have to rely on local resources to “oil the wheels” and

understand the context in which the company operates.

5.6SummaryAfter analysing key attributes of the Russian environment, and how these attributes

stimulate various precautions and affects the entry mode, the thesis will now answer

sub question d.

Was Russia the wrong entry market or was the entry mode not suited the

Russian market?

53

At a first glance Russia seems a very lucrative and exciting export market. With its

blossoming economy and increasing welfare the living standards are on an upsurge.

The positive economical tendencies have resulted in an increasing middle class where

disposable income is significantly higher than in other emerging economies.

Furthermore investigation showed a clearly division of wealth according to

geographical position. The urbanized areas of Russia are significantly wealthier than

rural parts. Overall there are many positive factors that would open the eyes of

companies wishing to expand their market portfolio. However, companies wishing to

export to Russia needs to be aware that precautions have to taken in order to comply

with Russian business methods and other factors highlighted by the PESTEL analysis.

First and foremost rather unethical business methods are widely recognised as the

norm in Russia. This implies that foreign companies have unfavourable terms

compared to domestic companies if they do not to a certain degree comply with the

Russian business culture and its norms. The substantial importance of networks

complicates entrance and in order to reach favourable conditions in various important

areas companies need to involve themselves somehow in these business networks.

These business networks are to a high degree relationship based and is a closed

environment for exogenous’. Consequently the importance of establishing a

relationship with a highly respected member of an existing business network to

“smooth” business could prove vital.

Corruption is a well-known phenomenon in Russia and it defiles the Russian business

environment and is inevitable. It was however suggested that larger companies were

less affected by corruption as the necessary bribes ads a lower per unit cost. The fact

that corruption is deeply rooted in the Russian business environment is another

incentive to establish relationships with highly respected people in an existing

business network.

Investigation proved that Russian infrastructure leaves much to be desired. The

extensively lack of functional road systems and power grid reliability is two

contrasting factors. The lack of reliable roads may provide some logistic implications

while the lack of reliable power grids implicates the setup of a storehouse.

Russia has a vide variety of TV channels and television marketing is a well-known

marketing tool in Russia. However, the overall perception of TV commercials is very

negative and Russians tend to either switch channel or ignore commercials when they

54

appear on TV. Internet access in Russia is statistically lower than in Denmark.

However, Internet access was largely centred around urban areas such as Moscow and

St. Petersburg.

The climate in Russia is very diverse. The densely populated areas east of the Ural

Mountains had a climate not so different from the Danish. However, winters are

significantly colder compared to Denmark.

Lastly chapter 5 considered the importance of entry mode. Here it was suggested that

Jysk should not completely abandon control but instead engage in cooperation with a

local entity to capture local resources while maintaining key value creating resources.

This point in the direction of an intermediate entry mode where a local businessman

could provide the market knowledge and business networks while Jysk’s values and

resources are still utilized.

55

6 Conclusion

The conclusion will summarize the findings from the previous chapters and answer

the main problem statement of the thesis.

This thesis has investigated how companies wishing to engage on export, need to

adapt their marketing mix to the local context. Special emphasis has been on the

Russian market as the thesis used Jysk’s export failure as a case on which to project

marketing theories. The overall goal has been to identify possible international

marketing pitfalls and locate where companies might be tempted to cut corners in

order to simplify market transition from their safe home market to a more unknown

foreign export market. By including theories pro and con adaption to the local

environment, investigating Russia and Denmark’s cultural dimensions comparatively

and how the state of the Russian environment currently allows for export and the

precautions that have to be taken a thorough insight into what determines the

composition of the marketing mix on an export market has been gained. Based on the

gained knowledge the thesis will now answer following problem statement:

How should Jysk compose their marketing mix in order to penetrate the

Russian market?

Jysk is a multinational company and has been widely successful expanding their

business model to especially a number European markets. While Jysk are reaping the

rewards in most of their export markets they have until now been unable to establish a

foothold on the Russian market. This thesis put forward a number of factors that may

hold the key to a successful market entrance in Russia.

The degree of adaption was discussed in chapter 3 and was shown to depend on a

combination of internal and external factors and the product itself. The centre of

discussion was whether globalization was erasing cultural differences and external

factors in the exporting country environment influencing consumer behaviour and the

way we decode messages. Investigation in chapter 4 suggested that Russia and

Denmark were culturally diverse and market communication would need adoption.

It was proven that Jysk does not need to change the overall marketing appeal, instead

they should change the way it is communicated. This can to some extent be described

by the respectively score on Hofstede’s four cultural dimensions. As a former

56

communistic country the cultural gap between Russia and Denmark is immense. It

was especially noticeable on the power distance and uncertainty avoidance index

where Denmark and Russia were positioned at two extremes. It was suggested that

due to Russia’s high power distance interaction between people from different social

layers and people with different status should be avoided. Furthermore the high power

distance implies that using people with great authority in advertising is a strong

marketing tool to increase awareness and sales. The second cultural dimension with

profound divergence between Russia and Denmark was uncertainty avoidance. Here it

was advised that Jysk used examples, details, expert statements, test reports and well-

groomed people as a persuasive tool in their market communication. The last two

cultural dimensions, individualistic versus collectivistic and masculinity versus

femininity showed less divergence. However, Russia proved to be more masculine

than Denmark and consequently market communication should be addressed “harder”

values. Russia is also more collectivistic than Denmark, which implies a more group

oriented marketing approach. The final aspect of culture this thesis touched upon was

the level of context used in communication. Here Russia was describes as being a

high context culture, which implies that Jysk should adjust their market

communication and give it a more implicit appearance, which enforces the use of

symbols and metaphors instead of written text.

Chapter 5 investigated how through an extended PESTEL analysis how external

factors affected the export possibilities and what precautions would have to be taken.

Most importantly was the extensive business network that was inevitable for

businesses to ease the entrance to the Russian market. Business networks would

benefit Jysk in various areas but perhaps most importantly they would help Jysk find

and gain access to a suited store location that was important considering the poor

infrastructure and low car/inhabitant ratio. Also the climate in Russia distinguish from

the Danish by having significantly colder winters which indicates that product

modification is necessary in terms of warmer duvets.

The technological and infrastructural conditions in Russia’s urban areas suggested

that Jysk should focus their attention at these densely populated areas. These areas

were also proven to have significantly higher income than other parts of Russia and

their geographical location was closer to Jysk nearest storehouse in Poland decreasing

logistic time and costs.

57

Regarding entry mode it was suggested that Jysk should establish a relationship with a

Russian entity to capture local resources while still maintaining control to a certain

degree to utilize their in-house resources such as marketing. This Russian entity

should preferably be in form of a businessman with contacts in important business

networks.

58

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Appendix1.

http://www.tradingeconomics.com/russia/gdp‐per‐capita

http://www.tradingeconomics.com/russia/imports

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Appendix2

http://static.seekingalpha.com/uploads/2010/8/25/saupload_briics_disp_income.png

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Appendix3

http://www.gfk-geomarketing.com/en/press/press_releases/retail_in_russia_2008.html

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Appendix4YEAR Users Population % Pop. Usage Source

2000 3,100,000 145,149,035 2.1 % ITU

2007 29,400,000 141,377,752 20.8 % POF

2008 38,000,000 140,702,094 27.0 % POF

2009 45,250,000 140,041,247 32.3 % ITU

2010 59,700,000 139,390,205 42.8 % ITU

http://www.internetworldstats.com/euro/ru.htm