International Business
Exporting to Foreign Countries: To Adapt or to Standardise?

1.0   Introduction

To adapt or not to adapt a product when a firm trying to export the product to a foreign country can be a challenging decision to made, as there are many factors to consider if changes shall be made to the marketing strategy of the firm. In this essay, the different factors that should be considered in determining the adaptation versus standardisation decision during exporting will be critically investigated, discussed and presented. In the subsequent sections, the theories and relevant information on this issue will be discussed, before a conclusion is drawn to answer the problem stated above.

2.0   Differences of National Settings

One of the main reasons for product adaptation to the foreign national setting is that the business environment in the domestic versus foreign country differs. Empirical evidences suggest that adaptation to foreign markets will lead to better exporting performance (Sohail and Alashban, 2009). For that, one of the common academic models used to analyse the business environment is the PESTLE framework. This model can too be used herein, with some adjustment. As such, the differences of domestic versus foreign national settings that demand product adaptation will be discussed from these perspectives, as below: political-legal, socio-cultural, economic, and technological-institutional perspective.

2.1     Political and Legal Differences

The political situation in host country can be a significant reason requiring adjustment to the product, marketing or business practices of a firm (Petison and Johri, 2008). One good example is that when there is a political conflict between China and Japan, exporters from Japan shall be very careful not to include any Japanese words on its products (as that may be seen as offensive among some of the Chinese consumers). That is also true as different countries have different legal requirement, regulations or legislation that a product may need to adhered to. For example, one common issue is the need to adjust the product packaging, when trying to export to a foreign country, as the legislation in foreign country does demand availability of certain product information – that is deemed important in a local setting (Henry, 2003).

2.2     Socio-Cultural Differences

Perhaps the most commonly discussed issues, barriers or reasons for adaptation or adjustment of product offering is due to socio-cultural issues. For that, scholars believe that the greater the cultural distance, the greater likelihood that an existing marketing strategy in a firm cannot be employed in the target foreign country (Ojala and Tyrväinen, 2008). Besides, scholars also argued that it is necessary to adapt to local culture for a firm to build a strong brand name in the foreign nation (Melewar, Meadows, Zheng and Rickards, 2004). That is not surprising as differences of cultures lead to differences of consumer lifestyles and purchase behaviours (Sun, Horn and Merritt, 2004).

One famous theory on studying cultural differences is about the Hofstede national cultural dimensions (Qamar, Muneer, Jusoh and Idris, 2013). Academic studies under this theory found that there are indeed cultural differences between eastern versus western countries (Mingxia, Rose and Xuan, 2006; Tang and Koveos, 2008). Given such finding, it would be valid to argue that product adaptation is likely required, when an exporter from the west trying to sell to consumers in eastern countries, and vice versa.

Then, there is also issues such as race differences may demand product adaptation. For example, the famous Barbie doll adjust its products, by offering black dolls in African with domestic clothing, to appeal to the consumers in that region.

Other than that, issues such as social norms, traditions, languages differences and religion issues will also demand exporter to adjust its products (Kotler and Keller, 2006). For example, an exporter might need to change its logo or product label to Chinese, Korean or Japanese, when trying to export to these respective countries. Then, food exporters will need to obtain Halal certification when exporting to Islamic countries (Damirchi and Shafai, 2011). In a similar manner, food exporters might need to be aware that the products sold to India should be free from beef, as most of the Hindustan in the country never consumer beef.

2.3     Economic Differences

The economic situation that leads to differences of market characteristics of countries will demand a firm to adjust its product offerings as well (Petison and Johri, 2008). For example, the functions of a product (example: hand phone) might need to be reduced, when selling to consumers from emerging or poor countries (as the disposable income of the consumers in such countries may not permit them to buy highly advance smart phone easily).

2.4     Institutional and Technological Differences

Institutional or technological difference may also demand exporters to adjust its product. For example, the driver seat is on the left in some countries, while it is on the right on the other countries. This is something that should be paid serious attention by car exporters.

3.0   Firm Specific Factors

The decision to adapt or not will not only be affected by the circumstances in the external environment, but also will be dependent upon the internal environment (i.e., firm specific factors) of a firm (Petison and Johri, 2008). One theory that is relevant in this context is about the theory of resource-based view (Racela and Thoumrungroje, 2014). Specifically, a firm must manage and pay attention to the resources available to the firm in shaping competitive advantage (in this context, to achieve better export performance). Some issues, as under resource-based view that must be considered in determine adaptation versus standardisation decision include: the firm’s size, experience, firm structure and so on (Ruzo, Losada, Navarro and Díez, 2011).

3.1     Firm Size

The size of a firm coupled with resource commitment will affect the ability of a firm to actually truly adapt the product or any other marketing practices when exporting to foreign countries (Adu-Gyamfi and Korneliussen, 2013). Specifically, financial resources constraints may hinder a firm to adjust the product. For this, firm of smaller size tend to be lack of the financial strengths to adapt the products – as adaptation may be costly (Sui and Baum, 2014). In such as case, a company might better choose to export products to countries of close cultural proximity.

3.2     Costs

Generally, standardisation of product can save the exporting costs, while adaptation consumes financial costs. As such, there is actually trade-off if to adapt product or not (Morrison, 2009; Griffin and Pustay, 2007).  It might be possible that the cost of adaptation outweigh the benefits of adaptation. Therefore, cost-benefit analysis will be another crucial factor to be considered.

3.3     Management Experiences

To adapt accordingly to suit local settings in a host country demand managerial experience in the business environment or situations in the host country (Ruzo, Losada, Navarro and Díez, 2011; Adu-Gyamfi and Korneliussen, 2013). For that, a firm without experience may not know how to adapt accordingly. In that way, incremental adaptation (i.e., continuous improvement from time to time) may be required. As such, information available to the management on how to adapt product offerings is yet another factor that will affect the final adaptation or standardisation decision.

4.0   Other Factors

There are other specific factors that shall also be considered in the context of adaptation versus standardisation. One of the issue is that the existence of country-of-origin effects. This is crucial as there are evidences that certain groups of consumers may prefer the products from foreign countries (Hsiu-Li, 2009; Agbonifoh and Elimimian, 1999). In such a case, the export from a western developed country may not need to incur extra cost for adaptation to local settings, when trying to sell to consumers from developing countries, as certain group of these consumers actually perceive favourably on products originated from the developed countries.

Another issue that may demand attention from marketers is about climate issues (Kotler and Keller, 2006). For this and as example, an exporter of fashionable product from Brazil obviously needs to adapt its products when trying to export and sell to consumers in Russia. Due to climates differences, the needs of people on clothes differ as well.

5.0   Critical Discussions

Overall, there are many factors that will affect a firm to adapt. Indeed, from a review of the literature, evidences suggest that exports that adapt tend to achieve better performance. Such evidences include exporters from Europe (Sørensen and Madsen, 2012), Hong Kong (Albaum and Tse, 2001), Pakistan (Batavia and Kolachi, 2012), China (Cadogan and Cui, 2004), and but not limited to Turkey (Akyol and Akehurst, 2003). Other than that, evidences also suggest that adaptation will lead to lowering of risks as well (Seth, 2010).

Nevertheless, it is truly crucial to aware that there might be certain cases whereby adaptation may not be necessary, such as when country of origin effect favour the product offering by an exporter, or when the costs incurred for adaptation seriously outweigh the benefits to be reaped from the adaptation decision. Indeed, scholars such as O’Cass and Craig (2003) also found that performance of firm that adapt versus those that don’t actually never differ much. While such finding is contradicting with the majority of evidences provided above, it however point to the notion that an exporter can still perform well if the situation doesn’t demand it to do so.

Anyway, the various factors outlined above suggest that an exporter shall consider both the external and internal environment (i.e., the business landscape versus the firm specific factors), when trying to make a decision if to adapt or not to adapt product offerings to suit the local settings. For that, the SWOT analysis can be useful in this context as well, as a firm will need to consider both the internal versus external environment, before making a decision for adaptation or standardisation.

In the case that a firm might not have the required resources (example: financial capability, experiences or knowledge) to adapt, when the situations require certain degree of adaptation for the company to be successful, it is possible to export firstly to countries of cultural proximities or geographical proximities, as such foreign countries would have lesser differences of national settings – and thereby requiring minimal adaptation (from behalf the exporter), if any.

Anyway, the issues of adaptation versus standardisation are actually the trade-off of effectiveness versus efficiencies. To adapt to local settings, will definitely be more effective in selling to the local consumers, as adaptation ensure that product design is tailored specifically to meet the needs, wants and preferences of the local consumers. However, adaptation will undeniably incur costs. Contrary to that, the standardisation is the lean or cost efficient approach to exporting. However, that may not be effective. In a nutshell, an exporter will need to consider all of the factors stated above seriously, and from a cost-benefit analysis – to make a better decision on how to adjust its products offering before exporting it.

6.0   Conclusion

Overall, there are various factors that a firm shall consider, in determining the adaptation versus standardisation decision during exporting. This essay had categorised the factors mainly into those external and internal factors. In the context of external factors, issues such as political, legal, societal, cultural, economic, institutional and technological differences will likely demand adaptation. Then, the firm specific or internal factor is also something that must never be neglected. Issues such as firm size, management experiences, resources commitment are all that should also be considered, as these factors can be serious constraints hindering adaptation. A critical review on the issues conclude that the problem if to adapt or not is actually a trade-off, that must be determined through a detailed cost benefit analysis. There is no simple shortcut or decision rule here; only through comprehensive review on both the internal as well as external environment, that a firm can understand the various issues in totality, thereby enabling a firm to make better decision.

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