The Cases Of Mcdonalds And Ikea Marketing Essay

Introduction

When operating with international marketing, a central issue to consider is whether the marketing mix or the product should be standardised or adapted to local markets. This question is largely debated and discussed in the academic marketing literature with contributors like Levitt, Usunier and Kotler. This paper starts out with an introduction to Theordore Levitt – the most radical of the proponents of standardization thinking – and his argumentation for standardization based on his 1983 article “The globalization of markets” (Levitt 1983). Subsequently a discussion of standardization versus adaption is made followed by examples of business cases, where the issue of standardization and adaption has significant relevance. From these examples it is substantiated that neither extreme of standardization nor adaption is recommendable.

Levitt – Standardization versus adaption

In

1983 Theodore Levitt wrote his controversial article “The Globalization of Markets” and with this article he formed the basis of the ongoing discussion of standardisation versus adaption in production and market communication. Few agree on Levitts radical views; however he is often used as reference by theorists (Mooij 2004 & 2005, Kotler / Keller 2009, Usunier 2000, Quelsch & Deshpande 2004).

Since Levitt is one of the few who speaks in favour of standardisation, the following views mainly stem from his 1983 article. Levitt’s arguments of why companies should standardize are that (Levitt,1983):

in line with the increasing influence of technology, a global demand pattern will emerge, whereby consumer preferences will become more homogeneous.

the company will experience a cost reduction and thereby be able to achieve economies of scale, and as a result – lower prices for consumers. Consumers are willing to compromise on quality, assuming that the price is low, since purchasing behaviour of consumers is rational.

it gives the opportunity to create a global image, whereby value of recognition is increased.

The Levitt suggests that there is a homogenisation of consumer preferences by the influence of technology. The durability of this view is debatable. Mooij argues against that technology makes our preferences even more homogeneous. Technology reinforces the differences and together with increased wealth leads to divergent behaviour instead of convergence” (Mooij 2004:2-3). Therefore it would be inappropriate to make a standardised campaign because it will be received differently depending on the recipient’s cultural background and preferences. The argument about economies of scale by reduction in expenses can also be discussed. Of cause there would be money to safe on campaign translations, but as people in different cultures adopt messages in different ways there would be a risk that the message would be perceived different than intended or simply misunderstood. There would be additional costs in these correcting misunderstandings (Sorenson, R.Z. and Weichmann, U.E.,1975) The third standpoint, which revolves round the global image, can also be discussed. It may well be that standardised marketing communications will boost global recognition of the product. But consumers in different countries have different needs and preferences because of their cultural background (Mooij 2005: 17) Thus, recipients from different cultures interpret an advertisement (brand) from the values prevailing in their culture – and maybe not be as the culture it was created in. Value of recognition depends on each market.

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Common to the authors, highlighting the limitations of standardization strategy is that they point to the cultural differences as one of the key barriers to a standardization strategy. One of the key concepts in Usuniers theoretical universe is the fact that consumer behaviour cannot be regarded as following one universal standard. (Usunier, J.C, Lee, J. 2005).

Although there are similarities globally, there will always be locally determined variations that make the concept of a global consumer unsuitable. This should, according Usunier, result in taking cultural considerations when communicating marketing purposes across cultures. Usunier outlines that there will be some common components of behavior, but that there will always be cultural variations (Usunier, J.C 1993). Usunier mention that it’s hard to imagine a seamless, global “world, consumers as cultural awareness is so deeply in people, and cultural values are difficult to change, so even if the world globalization in economics and other core areas, it’s hard to imagine a single, global cultural value is different. Furthermore, many symbolic connotations are connected to the meaning of certain colours, (Usunier 1993 p. 170 – 171) so it would be difficult or even impossible to apply a uniform global standard. As a result, it is also important to take these cultural differences into account.

Kotler also mentions the problem in how much marketing should be adapted to different markets and the characteristics they possess, or whether there should be a pure global, standardised marketing. Many markets have very large differences both culturally, demographically and economically, so it can be a disadvantage to market standardised (Kotler, Keller.:”Marketing management 2009″, pp. 649). The standardised marketing has several advantages in that the marketing budget can be kept down, power of scope, consistency in brand image and uniformity in marketing practices. Kotler mentions that marketers can make a global strategy, but that it has to be adapted to the individual markets in order to best communicate accurately and understandably in local markets.

Kotler also cites Hofstede for his concept of cultural dimensions that differentiate countries.

The four cultural dimensions, Hofstede was able to demonstrate was power distance (from small to large), collectivism versus individualism, femininity versus masculinity and uncertainty avoidance (from weak to strong) (Hofstede, 2006:39).- so fundamentally Hofstede underlines once more the cultural differences between nations. The authers Dawar, N. and Parker, P. cites Hofstede on culture: “Hofstede … finds substantial differences in self-reported behaviors across cultures” (Dawar, N. and Parker, P. (1994 p. 85)

The cases of McDonalds and Ikea

In the next section some examples are given on how two multinational companies engaged in the international market. Each of the cases gives an insight into situations that underpins the complexity in an international marketing manoeuvre. The two cases chosen are, respectively, McDonalds and IKEA. These cases are particularly interesting because it is two large companies whose basic concept are tight concept management and standardizing for obtaining economies of scale in marketing, sales and production. These descriptions provide examples of how, despite their overall standardization strategy, they have had to adapt to local markets in order to be successful. Additionally a case from the author’s professional life will be illustrated.

McDonalds is one of the best known brands throughout the world. When looking at their 2009 annual report, most of income comes from activities outside the USA: “70% of the company’s operating income comes from outside the U.S”. (McDonald’s Corporation Annual Report 2009, pp. 9). This is an interesting situation for a company which has built its whole business concept standardisation. The food is exactly the same in every restaurant in terms of size, amount fries or pickles in the burger and tomatoes in the salad. The business model i largely the same whichever country they enter, but McDonalds have been forced to make adaptions for some local markets. The case of McDonald’s is described in the article “McDonalds: “Think international, act local” – the marketing mix (Vignali, 2001). Vignali outlines how McDonald’s expand internationally but adjusting to local communities because of religious laws and culture. In Israel the burger is kosher tradition Big Macs, cheese and meat are served separately. In India they serve vegetable McNuggets and mutton-based Maharaja Mac (Big Mac) as Hindus do not eat meat. Muslims do not eat pork and McDonalds has been rewarded with a halal certificate that advocates total absence of pork in their restaurants. In their 2009 annual report McDonalds Corperation writes: “McDonald’s customer-focused Plan to Win-which is centered around being better, not just bigger-provides a common framework for our international business yet allows for local adaptation (2009, p. 10). This implies that a McDonald’s opening in a foreign country does more than just change its menus. The company adapts its operating manual for the convenience of the local markets.

A company which also has a largely standardised concept is IKEA. In the article by Johansson U. and Thelander Å. (2009), the authors give an insight of the challenges IKEA has had with international marketing illustrated in the case of their introduction and communication in China. IKEA has successfully standardised all marketing and roll out in large parts of the world, but China was a special challenge as the concept of standardisation had some challenges. The article describes the main target group as women, because they are considered those who make decisions at home. IKEA believes its core customer to be around 30 years old. In China IKEA appeals to young people who more easily accept non domestic brands and are independent of their parent generation (Ackerman, D., and Tellis, G., 2001).This target group are the generation born under the one child policy and they are believed to be impulsive, easy to influence, very social and committed to leading international consumer brands. In most countries image of IKEA is a company with low prices. In China the opposite is true. The main strategy has been to reduce prices and make the IKEA in China to the low cost concept as known in the rest of the world. IKEA stores in China are closer to town than stores in other parts of the world where they are usually located well outside city centres. In China, consumers have less access to cars and the shops have to be near public transport routes. Another challenges for IKEA was that in China there is not a “Do It Yourself” culture. While IKEA is often seen as a model for standardization among retailers, it is clear that the company has had to make significant adjustments in China. IKEA has adapted, while remaining true to its business concept.

This writer’s own experience on standardization of marketing communication and products are taken from a position in an international conference company within the international meetings industry. The company has six European divisions and HQ in Helsinki, Finland. It employs approximately 120 people, who are producing and executing 150 events per year. The companies level of standardisation and ambition of having one single business concept can be compared with McDonald’s and Ikea. The company runs its operations in completely standardized concepts. The challenge is that the markets are different. As the case with McDonald’s and Ikea the concept had to be adapted to the local markets. All marketing communications, production methods and conference topics are concepts that are centrally developed and communicated across Europe. But its experience also shows that there are limits to how far a company can go with standardization, and how far along this road consumers are willing to be taken. It has been necessary to obtain several kinds of adaptation in for instance communication. In other countries where the company operates are successfully using a very aggressive tone of communication where stress factor as: “if you miss this event, your company will be losing money”. This style of communication was not successful in Denmark. The Danish audience is a segment where you need to talk more argued and reflective to win the customers’ favour. An additional example was an element that had been implemented internationally but had to be adapted to the local Danish market. The company used “motivational training” to get conference delegates to do gymnastics in conference breaks. This element was abolished in the Danish market as it proved to be far to transcendent to a Danish audience. The physical motivational element was taken out of the programme – but later reintroduced in as a mental exercise.

Not one or the other

The general attitude in the debate about standardization or adaptation is now, so many years after Levitt´s observations that his radical viewpoint does not cover all aspects of internationalisation. There is consensus that the question about standardization versus adaptation is dependent on the specific situation and that you are not able to determine a definite appropriateness of one or the other strategic alternative. Common to the authors, highlighting the limitations of standardization strategy is that they point to the cultural differences as one of the key barriers to a standardization strategy. Costa L. and Kwon M. (2010, p.17) cites Cateora  P. R., and Graham, J. L. (2003) in arguing that: “The development of successful international strategic marketing process is based on a sound understanding of the similarities and differences that exist in the countries and cultures”. Consumers from different countries will have different preferences and worldviews depending on their cultural background and therefore also decode advertisements differently.

Costa, L., Kwon, M. (2010) cites Jeannet and Hennessey for identifying three major stages through which culture influences consumer’s decision process. Culture is fostered and lies within religion, language, history etc. (Cultural forces). The cultural forces communicate to consumers regarding selection of products (Cultural message).

“Those messages are formed by intrinsic values which are different level with cultural forces. The culture we live in determines the final consumer decision process and behaviours. In order to get consumer’s final choice, it is necessary to figure out the whole buying process in a cultural point of view” (Costa, L., Kwon, M. 2010, p. 19)

The theory of standardisation is an oversimplification of reality as variations occur between different markets in terms of consumer demands, values and in particular culture. (Theodosiou, M. Leonidas C. Leonidou 2002) These factors are still too important and varied from market to market. A company that enters a new market should decide to what extent marketing communication strategy should be tailored to the new market. One extreme may be to choose a standardised marketing mix, where price, product, placement and promotion will be identical in all markets. The other extreme would be if the company chooses to adjust the whole marketing mix to the recipient culture characteristics. In practice, a business often chooses a middle way.

In his article Kellogg’s – internationalisation versus internationalisation of the marketing mix Claudio Vignali (2001, p. 128) concludes: “certain aspects of the marketing mix that can have been standardised due to the fact that Kelloggs have to differentiate certain aspects of price, place, promotion and products in line with the different market requirements. It can be said that Kelloggs must think global but act local in order to remain the market leader, therefore adapting a globalised strategy”.

Usually neither complete standardisation nor complete adaption is used. In the article Standardization versus adaptation of international marketing strategy: an integrative assessment of the research Theodosiou M. and Leonidas C. L. (2003) describe how a third group of researchers offer a contingency perspective on the standardization / adaptation debate. They cite (Quelch & Hoff, 1986; Onkvisit & Shaw, 1987, Jain, 1989; Cavusgil & Zou, 1994) for writing:

(a) standardization or adaptation should not be viewed in isolation from each other, but as two ends of the same continuum, where the degree of corporate marketing strategy standardization / adaptation can vary between them (b) the decision to standardize or adapt marketing strategy is tailored to the specific situation and this should be the result of a thorough analysis and assessment of relevant contingency factors prevailing in a particular market at a given time and (c) the appropriateness of the chosen level of strategy standardization / adaptation shall be assessed on the basis of its impact on company performance in international markets.

The most central point in the above is to have an analytical and sound approach to the market strategies. When choosing between standardisation and adaption the company should analyse the market thoroughly, this would help showing how the product could be integrated into the local cultures and thereby obtain a prodound knowledge base to assess the impact of standardisation or adaption strategy. You will know what effect a potential strategy will have and can adjust the strategy before investment takes place.

The challenge for the international companies is to determine what specific elements of the strategy are possible or desirable to standardize or adapt. A company should market an international concept, while providing room for local adaptations. The way the product is used depending on the recipient’s cultural background. It will therefore be crucial for advertising effectiveness that the instruments used and the communication is consistent with the recipient’s cultural values.

Konklusion

Should marketers attempt to standardize their products and marketing communications so as to minimize the costs of doing business internationally? Or should they adapt their products and messages depending on the market in which they wish to operate?

There are obvious advantages associated with centralized management and establishment of an international marketing and product strategy for but the trend seems to be a growing realization that the differences of markets are so large – creating a need for local adaptation of communications in marketing. The general attitude in the debate about standardization or adaptation is now, so many years after Levitt´s observations that his radical viewpoint not covers all aspects of internationalisation. There is consensus that the question about standardization versus adaptation is dependent on the specific situation and that you are not able to determine a definite appropriateness of one or the other strategic alternative.

Whether one agrees with Levit about the globalization of markets or not, his article from 1983 roused the whole discussion about globalization and market communication. Despite the fact that the article was written so many years ago, it still help marketers to look at markets in a constructive way. Levitt might have written the article to provoke business people to waking up and looking at the world a new way and to find out how they should look at the standardisation versus adaption issue in relation to the development of marketing communication for foreign markets.

There may be many reasons for choosing standardizing or adapting to local markets, which is obviously linked with the advantages and disadvantages associated with each strategy. The benefits of standardization are in relation to a cost reduction and economies of scale, and as a result – lower prices for consumers and it gives the opportunity to create a global image, whereby value of recognition is increased. The company can create a particular symbolic image or picture of a company and its products and thereby unify the identity of different markets. The benefits of an adaptation strategy are that in the communication you adapt it to local values and cultures. Culture is a decisive element in perception of the product and the communication that supports it. Culture should be considered as a factor of primary strategic importance for a company’s marketing.

The arguments in favor of adapted communications weigh heaviest on the scales, since it was established that consumers from different countries will have different preferences depending on their cultural background and therefore also decode advertisements differently. What this paper concludes as the most central element of this analyses is that companies would have to make thoroughly analyses and gather knowledge on local markets before the deciding whether to standardize or adapt the marketing strategy. The decision should basically depend on the circumstances the company observes within a particular foreign market at a specific period of time.

Referencer til Final

Books

Cateora, P. R., and Graham, J. L., 2003. International marketing. 12th ed., New York: McGraw Hill

Kotler, P. and Keller, K. L., 2009. Marketing management. 13th ed., Upper Saddle River : Pearson Education

Mooij, M. K ., 2004.  Consumer behavior and culture : consequences for global marketing and advertising. London : Sage Publications Ltd 

Mooij, M. K., 2005. Global marketing and advertising : Understanding cultural paradoxes. 2. ed., Thousand Oaks: Sage Publications

Quelch, J. and Deshpande, R., 2004. The global market : Developing a strategy to manage across borders. San Francisco : Jossey-Bass

Usunier, J. C., 2000. Marketing Across Cultures. 3. ed., Essex: Prentice Hall Europe

Usunier, J., C. And Lee, J. A., 2005. Marketing across cultures Harlow. 4th ed., Harlow: Financial Times Prentice Hall

Usunier, J., C., 1993. International marketing : a cultural approach. New York : Prentice Hall

Articles

Ackerman, D., and Tellis, G., 2001. Can culture affect prices? A cross-cultural study of

shopping and retail prices, Journal of Retailing 77 (2001), 57-82

Aurifeille, J.M. and Quester and P.G., Lockshin and L. and Spawton, T. ,2002. Global vs International

involvement-based segmentation A cross-national exploratory study, International Marketing

Review, 19(4), 369-386

Claudio Vignali, (2001) “Kellogg’s – internationalisation versus globalisation of the marketing mix”, British Food Journal, Vol. 103 Iss: 2, pp.112 – 130

Dawar, N. and Parker, P. (1994). Marketing universals: consumer’s use of brand name, price,

physical appearance, and retailer reputation as signals of product quality, Journal of Marketing,

58(2), 81-96

Johansson U. and Thelander Å., 2009. “A standardised approach to the world? IKEA in China”, International Journal of Quality and Service Sciences, Vol. 1 Iss: 2, pp.199 – 219

Levitt, T., 1983. Harvard Business Review, Vol. 61 May/Jun83, Issue 3, p92

Sorenson, R.Z. and Weichmann, U.E., “How multinationals view marketing standardization”, Harvard Business Review,Vol. 55, May/June, 1975, pp. 38-54.

Theodosiou M. and Leonidas C. L., 2003. Standardization versus adaptation of international marketing strategy: an integrative assessment of the empirical research, International Business Review 12 (2003) 141-171

Annual Report

McDonald’s Corporation, 2009. McDonald’s Corporation Annual Report 2009, U.S.A., McDonald’s

Corporation

Dissertation

Costa L. and Kwon M., 2010. International marketing strategy of innovative companies for new markets with cultural differences. – Swedish Companies. Bachelor Thesis. Halmstad University, School of Business and Engineering.