Piggybacking Your Way to

Internationaiization
iggybacking, a marketing collabora-
tion between two firms, is not only a con-
venient form of strategic alliance, but for
small and middle-sized businesses it may
also be the swiftest way to internationali-
zation.
Vem Terpstra (University of Michigan)
and Chwo-Ming J. Yu (University of Il-
linois at Urbana-Champaign) undertake
an impressive investigation of this business
transaction, claiming that it is an early
form of strategic partnering. In their arti-
cle "Piggybacking: A Quick Road to Inter-
nationalization" (Intemational Marketing
Review, 7, No.4, 1990), the authors de-
scribe piggybacking as a method by which
two firms team up to reach an objective
that they otherwise could not achieve. Two
roles are involved, a carrier and a rider.
The carrier uses its overseas distribution
facilities to market, along with its own
wares, the products of the rider. Both
benefit from this arrangement. The rider's
gain is obvious. The carrier gains by ex-
panding its line, thanks to the rider's load.
According to the authors, piggyback-
ing-usually a non-equity arrangement-
is not as difficult to negotiate as a joint
venture or merger. Depending on the agree-
ment, the carrier may or may not label the
goods with its or the rider's name. This
valuable arrangement is usually maintained
as long as both parties feel that they are
benefiting. It can be terminated if changes
experienced by either party make it neces-
sary to do so. The most obvious advantage
of piggybacking is that it is a cheap way
out: It costs less to ride and carry than to
develop new channels or products.
Kinds of Market Coverage
Terpstra and Yu point out that while pig-
gybacking may be used in domestic situa-
tions, its market coverage can be extended
to include foreign markets on a one-
country or a global level. Piggybacking is
particularly convenient when the rider is
feced with a market that has a high entry
barrier. A case example that the authors
provide is Uniflow. In spite of its envious
track record in global marketing, Uniflow
found it impossible to hurdle Japan's mar-
ket until Panasonic offered this stymied,
but determined firm a piggyback ride.
As they explore a host of successful pig-
gyback arrangements, the authors present
an impressive list of rider-carrier agree-
ments that have proven themselves to be
advantageous: Whirlpool being carried by
Sony in Japan; Lindt chocolate riding on
Perrier for entry in the U.S. market;
Toshiba carrying AT&T for the Japanese
market.
In reciprocal piggybacking, both par-
Summarized from Intemational Marketing Review, Volume 7, No.l, 1990; MCB University Press,
102 Toller Lane. Bradford. West Yorkshire. England. BDB 9BY.
1991. March-April / 45
ties can be carrier as well as rider. Terpstra
and Yu point out that this variant arrange-
ment has shown itself to be especially
efTective in Europe, the U.S., and Japan
(the triad countries), where trade barriers
are sufficiently high as to seem insur-
mountable. By way of example, the au-
thors focus on AT&T and Olivetti, whose
reciprocal piggyback arrangement has
given them U.S. and European coverage.
In product coverageyet another kind
of piggybackinga rider may elect to have
only some of its products carried or its en-
tire line. An illustration of this type of ar-
rangement is Dupont in Thailand which is
marketing its own industrial chemicals
while piggybacking its agrochemicals with
Shell and Union Carbide.
Piggbacking, the Rider's
Perspective
Terpstra and Yu, in comparing direct ex-
porting and piggybackingtwo ways of
serving foreign markets-from the rider's
point of view, note that the costs of the
former can be dramatically higher than the
latter. Further, they state, for direct ex-
porting to be viable, it is necessary for the
firm to have a sizeable volume of interna-
tional business, resources (capital and per-
sonnel), knowledge of and experience with
the host country, and a capacity to manage
foreign distribution.
In pursuing their argument that pig-
gybacking can be infinitely more desirable
and effective than direct exporting, the
authors refer again to the Whirlpool-Sony
arrangement. When Whirlpool switched
from a Japanese trading firm to Sony as its
distributor, they found good cause to re-
joice: Their sales soared.
The Carrier's Advantage
For the carrier, the authors maintain, pig-
gybacking is, by fer, a better way to ac-
quire new products; it certainly is less
costiy than developing new products. The
costs of R&D, the time that has to be in-
vested, and the risks concomitant with
new product introduction are avoided. The
rider's product usually already has a good
reputation domestically, and so the rider's
product is more likely to succeed in a for-
eign market.
O O O
46 / The Intemational Executive