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Towards an understanding advertising standardisation in the European Union: a theoretical framework and research propositions. 1. Introduction. 2. Industrial ...
Shintaro Okazaki and Charles R. Taylor

Towards an understanding advertising standardisation in the European Union: a theoretical framework and research propositions

1.

Introduction

2.

Industrial organization theory and environment-strategy coalignment

3.

Antecedents of advertising standardisation 3.1. European economic unification 3.2. Globally integrated marketing communications 3.3. Cross-market segmentation 3.4. Cultural distance 3.5. Global brand image 3.6. Organisational control

4.

Consequences of advertising standardisation 4.1. Advertising effectiveness 4.2. Strategic and financial performance

5.

Research model

6.

Conclusions

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Abstract An accelerating integration of political, economic, and cultural dimensions during the 1990s enabled multinational corporations (MNCs) to operate on a truly global basis, rather than on a multidomestic basis. The standardization of advertising is one of the most researched topics in international advertising, having been formally studied in the academic literature for over 50 years. In recent years, however, researchers have begun to recognize that the "traditional" global-versus-local debate is becoming pointless, because it has been realized that the issue is not the extent to which an ad campaign for a brand can be completely globalise, but to what degree it is possible to standardize a global brand's campaign throughout the world. Thus, this study aims to identify the antecedents and consequences of advertising standardization. Specifically, we attempt to establish a theoretical framework in European markets where, since the seminal work of Harris (1994), little research has been conducted into how advertising standardisation by MNCs operates in this region. 1

Introduction

Over the past four decades, the standardisation versus localisation of advertising in external markets has been extensively debated in the international marketing literature (Agrawal 1996). A standardised approach assumes that advertising content and strategy created at home can be effectively implemented in a host market, in translation where appropriate. A localised approach criticises the standardised assumption for not taking into account the economic, cultural and social aspects of a local environment. Decades of debate have also produced a compromise or contingency approach, which contends that the choice of standardisation or localisation depends on case-specific environmental conditions (Onkvisit and Shaw 1999). Given these arguments, many empirical studies have been conducted to determine the extent to which multinational corporations (MNCs) standardise or localise advertising content in a variety of situations (Table 1). However, little research has addressed the principal factors influencing standardisation decisions, with the two important exceptions of Laroche et al. (1999) and Samiee et al. (2003). Additionally, despite increasing attention to the impact of marketing actions on firm performance (Zou and Cavusgil 1996), prior research has not focused on the impact of standardisation on financial performance. The objective of this study is therefore to contemplate in this light relevant research propositions on the antecedents and consequences of advertising standardisation. We also attempt to establish a framework in Europe where, since the seminal work of Harris (1994), little research has been conducted into how advertising standardisation by MNCs operates in this region.

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Industrial organization theory and environment-strategy coalignment

In proposing a theoretical framework explaining the antecedents and consequences of advertising standardisation in Europe, we adopt industrial organisation (IO) theory. This theory has been often used in management literature in terms of a connection between the external environment and company strategy. Fundamentally, the IO theory suggests that market or industry performance is determined by various market structure variables, in particular, environmental variables (Venkatraman and Prescott, 1990; Wirth and Bloch, 1995). Many firms tend to choose their strategies which would best fit the external market characteristics (Özsomer and Simonin, 2004). This coalignment or consistency between the market environment and company strategy is an important organizing concept in organization research (Venkatraman and Prescott, 1990). Cavusgil and Zou (1994) and Zou and Cavusgil (2002) applied the IO theory in examining the relationship between marketing standardization and performance. Zou and Cavusgil (2002) proposed global marketing strategy (GMS) theory which posits that global marketing strategy is composed of eight dimensions: product standardization, promotion standardization, distribution standardization, pricing standardization, and other dimensions related to coordinating value-adding activities. In their model, the notion of "fit" is emphasized. Here, fit refers to how closely a company’s global marketing strategy matches its external environment and internal organizational resources. Zou and Cavusgil (2002) found that strategic and financial performance were maximized when the fit between external market factors and internal organizational characteristics was conducive to a global marketing strategy. On the other hand, little attention has been paid to the influence of environment-strategy coalignment on MNCs’ advertising strategy. Given that Zou and Cavusgil (2002) defined promotion standardization as one of the GMS dimensions, the principle of “fit” between a firm’s strategy and its environment may well be applicable to advertising management. In the context of Europe, the acceleration of EU convergence may provide a clearer example of how environmental change may affect strategy formulation. In the following sections, we attempt to propose key environmental variables as antecedents of advertising standardization in the European Union.

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Table 1: Recent findings in international advertising research Authors (year)

Findings

Duncan and Ramaprasad (1995)

Practitioners consider “single brand image” the most important reason to standardise, while “saving money” is one of the least important. Low use of standardisation in executions in necessitated by cultural preferences and taboos, while low use of standardisation by nonwestern agencies may be due to the fact that standardisation is largely a western concept.

Laroche et al. (1999)

For all countries, the degree of control is higher for strategic than for operational decisions. Advertising decisions are made by headquarters in France, by a combination of headquarters and multinational agencies in Germany, and by local agencies in the UK.

Sirisagul (2000)

There are no significant differences in either use or degree of standardisation by MNCs from the U.S.A., Japan and Europe. The global advertising practices of the leading MNCs tend to have variations so similar that the results could not establish differences.

Turnbull et al. (2000)

The most valued advantage of standardisation is to provide a consistent brand image across markets. Companies rated highly the benefit of facilitating the coordination of advertising agency activities in the region. The highest rated disadvantage of standardisation was government regulations and constraints on advertising.

Kanso and Nelson (2002)

Government regulations are impeding broadcast media selection for standardised campaigns. The worldwide expansion of satellite TV creates greater demand for standardised advertising.

Chandra et al. (2002)

The nature of the product was found to be a significant factor, but durable goods were negatively related to advertising standardisation. The more diverse the environments of markets, the more likely the firm is to standardise.

Samiee et al. (2003)

The extent of advertising program standardisation of U.S. firms is positively influenced by “organisational control”, “consumer similarity”, “advertising infrastructure”, and “competitive position”.

3 3.1

Antecedents of advertising standardisation European economic unification

More and more scholars argue that there is clear evidence of the development of a single European market as a result of the political and economic unification process (Leefland and van Raaij 1995). Much attention has been paid to

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the possibility of “pan-European” marketing, and advertising has been one of the most studied elements of the marketing mix. However, individual EU countries still maintain their own rules and regulations for the advertising industry, and marketing executives tend to believe that such regulations would probably be an obstacle to the development of “true” pan-European advertising (Kanso and Nelson 2002). In addition, a meta-analysis identified substantial differences between EU member states in terms of distribution structures, media shares, and direct marketing and market research expenditures (Leefland and van Raaij 1995). Prior research indicates that, before the unification process, MNCs operating in Europe tended to allow their subsidiaries to decide whether to adapt the headquarters’ basic advertising idea to varying degrees, according to market conditions (Harris 1994; Rijkens 1992; Seitz and Johar 1993). Nevertheless, recent industry reactions seem to support the proponents of “pan-European marketing”, especially since the introduction of the euro. In particular, non-European MNCs, such as Microsoft, Dell Computer, Electronic Arts, Mitsubishi and Kawasaki Europe, have restructured their pan-European business to develop a consistent brand strategy across the continent (Kaplan 2003; Sweney 2003a, 2003b; Weernink 2002). Thus, we posit the following proposition: Proposition 1: The advancement of European economic unification directly and positively influences the degree of advertising standardisation in Europe. 3.2

Globally integrated marketing communications

The growth of “mega-agencies” has changed the structure and operational practices of globally integrated marketing communications (Global IMC). Most MNCs now seek “one- stop access” for global planning and implementation abilities (Tharp and Jeong 2001). Agencies also believe that services (Griffin et al. 1998). The future use of standardisation is more likely to be increased by such internal and external pressures than by economic benefits or the emergence of global consumers (Duncan and Ramaprasad 1995). However, Gould et al. (1999) point out that large US-based advertising agencies are likely to assume that “the main issue of global communications is not thought to be standardisation versus adaptation per se but rather organisational coordination which recognises and encourages global strategies while working with local managers and markets” (13). Such integration seems possible only for those “mega-agencies” that hold the majority of international advertising accounts in diverse regions (Moriarty and Duncan 1990). In addition, the proliferation of the Inter/Intranet, the digitalisation of traditional media, and

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mergers and acquisitions among media companies have enabled agencies to practice media planning on a global basis (Tharp and Jeong 2001). Hence, it is reasonable to posit the following proposition: Proposition 2: The practice of global IMC directly and positively influences the degree of advertising standardisation in Europe. 3.3

Cross-market segmentation

Conventional segmentation classifies a market into segments on a countryby-country basis, with consumers likely to be classified into segments based on clusters of similar characteristics. In this case, standardisation decisions depend upon the existence of such clusters of countries, which MNCs perceive as having common characteristics in terms of products and brand perceptions. However, an important drawback of this “macro-level” approach is that it overlooks cross-national market similarities, particularly in consumer orientation towards the product and its appeal (ter Hofstede et al. 1999; Smit and Neijens 2000). This micro-level approach has become increasingly popular, because it overcomes the limitations of the macro-level approach by including “behavioural measures that determine the degree of consumer responsiveness to marketing programs” (Hassan et al. 2003, 449). Clearly, there can be circumstances in which cross-market segmentation based on hybrid variables other than national boundaries is optimal (Hassan and Blackwell 1994). As a result, the extent to which MNCs have been successful in identifying a consumer “who buys brands promoted in global as well as local media throughout the world” (Hassan et al. 2003, 446) is increasingly important. In line with this argument, ter Hofstede et al. (1999) proposed a sophisticated method to establish an effective segmentation of the European yoghurt market. On the basis of product-consumer relations they identified four segments, one of which appears to be pan-European. Although this study involved only one product, it recognises the importance of cross-market segmentation. This argument leads us to posit the following proposition: Proposition 3: The pursuit of cross-market segmentation directly and positively influences the degree of advertising standardisation in Europe.

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Cultural distance

In the past, cultural values have received considerable attention in crosscultural advertising studies. Hofstede’s (1983) cultural dimensions (individualism, uncertainty avoidance, power distance, masculinity, and Confucian dynamism) have been widely used as a framework to explain differences in reactions to advertising approaches (Albers-Miller and Gelb 1996). For example, Roth (1995) contends that consumer goods firms are more likely to adopt an image customisation strategy when local markets differ in terms of uncertainty avoidance, individualism, and socio-economic factors; otherwise they use an image standardisation strategy. It has also been suggested that European countries vary substantially on the individualism versus collectivism dimension, which some have described as being analogous to Hall’s (1976) high versus low context communications (Gudykunst and Tim-Toomey 1983). "Individualism versus collectivism" has been a central theme in many cross-cultural studies, because this dimension addresses the degree to which a culture relies on and has allegiance to the self or to the group. In cross-cultural marketing communications, this dyad has been found to involve, on the individual dimension, a strong emphasis on individual determinism (Mueller 1992), and a relationship between individualism and direct speech techniques (Frith and Wesson, 1991), and on the collective dimension a reluctance to use confrontational practice (Ramaprasad and Hasegawa, 1992), amongst others. For example, De Mooij (1998) argue that that in the USA "along with a trust in facts goes a distrust of emotions, advertisers tend to be afraid of emotional advertising", and therefore, "they think the rational appeals for their products and services are much more important than the consumer thinks they are" (149). This is a natural consequence of Westerners’ tendency to think that "information that serves to enhance rational decision making is good information" (Batra et al. 1997, 673). Therefore, hard sell approaches, for example, explicit comparisons and aggressive brand repetition, are often used in the USA. Figure 1 summarises some of the basic cultural characteristics in marketing communications. Here, the context of culture determines the "type" of information to be delivered: verbal or non-verbal. The cultural context does not control the "quantity" of information, but rather the "quality" of information. Second, this preference for verbal or non-verbal information determines the way in which to deliver messages: rational or emotional strategies. Finally, along with the type of information and creative strategy, the "meaning" of the message with be influenced by core cultural values: individualism or collectivism. In the advertising literature, there is abundant empirical support for this conceptualisation, in terms of information content (e.g, Hong et al. 1987; Keown et al. 1993; Lin and Salwen 1995; Madden et al. 1986), creative strategy (e.g., Lin 1993;

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Ramaprasad and Hasegawa 1992), and cultural values (Belk et al. 1985; Belk and Bryce 1986; Belk and Pollay 1985; Mueller 1987, 1992). For example, the USA and Germany are relatively individualist countries, whose consumers tend to demand structured and explicit persuasion with little ambiguity. By contrast, Italy and Spain are relatively collectivist countries, where preference is given to indirect and less conflictive communications.

Figure 1: Culture and marketing communications

Such cultural differences have been summarised as a concept of “cultural distance” between the home and host countries, which can be seen as an important impediment to advertising standardisation. We therefore posit the following proposition: Proposition 4: The cultural distance directly and negatively influences the degree of advertising standardisation in Europe. 3.5

Global brand image

Both academics and practitioners suggest that “the brand’s image be the basis for developing sound product positioning and advertising strategies” (Roth 1995, 55). As European markets consist of socio-economically homogeneous but culturally diverse countries, standardised advertising may not be perceived in the same way across countries, while localised advertising may directly harm the creation of a uniform brand image. In this vein, at least one piece of experimental research examined the effectiveness of standardised visual effects in

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international advertising. Its findings suggest that print ads used crossnationally, employing the same pictures, general layout, advertising topic and language, are likely to be more effective in avoiding image confusion and irritation than a localised approach (Backhaus et al. 2001). Additionally, a series of content analysis studies found that luxury consumer products, such as fragrance or cosmetic brands (Figure 2), are likely to deploy a higher level of standardisation in European magazine ads (Harris and Attour 2003; Seitz and Johar 1993; Whitelock and Chung 1989).

Figure 2: Examples of highly standardised ads

Further, American MNCs use such standardisation in print advertising more than Japanese MNCs (Mueller 1991). Hence, we posit the following proposition: Proposition 5: The intention to develop a global brand image directly and positively influences with the degree of advertising standardisation in Europe. 3.6

Organisational control

In the 1990s, there was extensive research into organisational control, which is considered particularly important in advertising decisions (Samiee and Roth 1992). An MNC’s market knowledge and international experience, whether at headquarters or a subsidiary, influence its advertising standardisation decisions. Most studies of advertising standardisation focus almost exclusively on culture

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and economies of scale, but Martenson (1987) introduced internal factors, such as corporate culture and the locus of decision power. Similarly, information exchange, persuasion, coordination, approval and controls have been suggested as factors influencing headquarters’ control over subsidiary managers (Quelch and Hoff 1986). Recently, Laroche et al. (1999) examined headquarters’ degree of control over subsidiaries’ advertising strategies, and identified four basic determinants: the competitive situation in the target country, the level of communications in the target country, the international involvement of the firm, and the marketing autonomy of the subsidiary. They concluded that “the more local resources such as the services of advertising agencies are munificent, the more responsibility is delegated to the subsidiaries in the field of advertising, either to adapt the campaign to local conditions (strong control) or to develop a new campaign (weak control)” (287). In line with this argument, the following proposition is made: Proposition 6: The strength of headquarters’ control over subsidiaries directly and positively influences the degree of advertising standardisation in Europe.

4

Consequences of advertising standardisation

Given the importance of advertising, and its contribution to the marketing mix, it seems reasonable to conceptualise the consequences of advertising standardisation in terms of firm performance. In this vein, the literature suggests that three types of consequences are important measures of the effectiveness of marketing strategy: advertising effectiveness, strategic performance, and financial performance (Zou and Cavusgil 1996). 4.1

Advertising effectiveness

The impact of standardised advertising would be first reflected in advertising effectiveness. Advertising effectiveness is defined as the degree to which the company's advertising is effective in getting the consumer to like the brand, improve its image and/or purchase the brand. With regard to the international marketing literature, it is well documented that a primary purpose of the use of a global strategy is to improve the image of a product on a global basis as well as increasing sales (Yip 1995). We hypothesise that the level of standardisation strongly influences advertising effectiveness, because the execution and strategies associated with advertising decisions would directly affect consumers' preference on the brand. Hence we posit the following proposition:

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Proposition 7: The degree of advertising standardisation directly and positively influences advertising effectiveness. 4.2

Strategic and financial performance

In studies of MNC performance, both Samiee and Roth (1992) and Cavusgil and Zou (1994) have stressed the need to consider both the firm's strategic performance and its financial performance. As used here, strategic performance refers to success in implementing a successful global strategy. While financial performance often represents the most important long-term goal for firms, the achievement of strategic objectives is likely to be related to future financial performance (Zou and Cavusgil 2002). Proposition 8: The advertising effectiveness directly and positively influences strategic performance. Financial performance is a "bottom line" measure that refers to the firm's success in increasing its sales and profitability. We predict that firm's running more effective advertising will see enhanced measures of performance. Therefore, we predict the following relationship would exist: Proposition 9: The advertising effectiveness directly and positively influences financial performance.

5

Research model

Given both the antecedents and consequences of advertising standardisation, we propose the conceptual model in Figure 3, which will be empirically tested by our future survey. This model predicts that key environmental factors affect the level of advertising standardization in a European context, which in turn affects the firm’s advertising effectiveness and its financial and strategic performance. Both sides of the model warrant attention, as it is important to examine both the factors that make firms more prone to standardize their advertising, and whether standardized advertising is associated with higher performance. Essentially, our model contends that standardization is effective in improving performance when it fits external environmental factors (e.g., market similarity, competition conditions) and internal organizational characteristics.

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EU Unification

Global IMC

+

Strategic Performance

+ Cross-Market Segmentation

+ Level of Standardisation

+ Global Brand Image

+ +

Advertising Effectiveness

+

_ +

Financial Performance

Cultural Distance

Organisational Control

Figure 3: A conceptual model for advertising standardisation

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Conclusions

The primary purpose of this study is to provide a new insight into the “cause-effect” chain that “traditional” research on international advertising standardisation has neglected (Taylor 2002). The industrial organisation theory was used as a conceptual base to formulate our research framework, by identifying key environmental variables as antecedents of MNCs advertising standardisation decision making. We believe that this framework will serve as a theoretical base for our empirical study, which will examine advertising standardisation practices in the European Union. The present study contributes to the literature in two ways. First, it serves as a warning signal for “traditional” international advertising research. In the past, too much research has focused on whether a firm should standardise in a given environment. However, since the arrival of the compromise approach, there have been few attempts to explore the principal factors influencing advertising standardisation. Second, our theoretical framework proposes a series of research propositions that can be tested by an empirical survey of MNCs’ subsidiaries operating in European markets. This future survey will substantially update and

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