International Standardization Strategies

International Standardization Strategies: The Experiences of Australian and New Zealand
Firms Operating in the Greater China Markets

Author(s): Henry F. L. Chung
Source: Journal of International Marketing, Vol. 11, No. 3 (2003), pp. 48-82
Published by: American Marketing Association
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International Standardization Strategies:
The Experiences of Australian and New
Zealand Firms Operating in the Greater
China Markets
ABSTRACT Drawing on the findings of previous theoretical and empirical
studies, this study proposes two frameworks for examining
standardization strategies in home-host and intermarket sce
narios. For the first time, internal and external factors, extent of
standardization, program and process, performance, and
home-host/intermarket scenarios are included in one study. In
its examination of the proposed research frameworks, the study
relies on the experiences of 146 Australian and New Zealand
firms operating in the Greater China markets. Factors identified
as significantly related to the selection of standardized market
ing strategies in the home-host scenario include product type,
consumer behavior, marketing infrastructure, political environ
ment, and firm size. Factors suggested by the multivariate re
gression analysis as significantly related to standardized
strategies in the intermarket scenario are product type, interna
tional business experience, competitive environment, political
and legal aspects, and firm size. For the first time, it is suggested
that the standardization of distribution and product strategies
has an effect on firm performance in the intermarket scenario.
It has been argued that the worldwide marketplace has be

Henry F.L. Chung come so homogenized that multinational enterprises (MNEs)
are able to market standardized products and services all
over the world (Jain 1989; Levitt 1983). Standardization of
marketing strategy refers to offering a common marketing
program and/or process on a national, regional, or worldwide
level (Sorenson and Wiechmann 1975; Terpstra 1967). A
marketing program encompasses the various aspects of the
marketing mix (product, price, distribution, and promotion),
and the marketing management process represents the tools
that are used to develop and implement the marketing pro
gram (Cavusgil, Zou, and Naidu 1993).
Despite its many recognized limitations (Boddewyn, Soehl,

and Picard 1986), the standardization of international mar
keting practices has continued to receive significant research
attention (Baalbaki and Malhotra 1993; Jain 1989), probably
because it is the central managerial issue of international
Submitted August 2002
Accepted March 2003
marketing management (Boddewyn and Grosse 1995). Stan
dardization enables MNEs to gain economies of scale in the
? Journal of International Marketing
Vol. 11, No. 3, 2003, pp. 48-82 areas of production, promotion, distribution, and research
ISSN 1069-03IX
and development (Baalbaki and Malhotra 1995; Jain 2001)
48
and to reduce their use of personnel in international opera
tions (Sorenson and Wiechmann 1975). More important, a
standardization strategy helps firms provide more consistent
offerings to their customers and more uniform marketing
planning and control procedures to their overseas operations
(Quelch and Hoff 1986; Whitelock 1987).
Despite the numerous benefits that can be reaped from stan

dardization, there are many obstacles to the worldwide ap
plication of uniform marketing practices and policies.
Opponents of standardization often suggest that this strategy
is difficult to implement because of cross-market differences
in areas such as consumer needs and preferences, marketing
environments, and infrastructures (Whitelock and Pimblett
1997). These differences are not likely to change much in the
near future.
In general, research on the standardization of marketing strat

egy can be divided into two major categories: home-host and
intermarket. In the home-host scenario, the main research is
sue is exploring the extent to which a standardized program
and process can be transferred from the home market to a
specific foreign market and which factors need to be consid
ered in such a strategic decision (Akaah 1991; Johnson and
Arunthanes 1995). In contrast, the key issue in the intermar
ket scenario is determining whether it is possible to transfer a
standardized set of programs and processes from one foreign
market to another or to apply a uniform marketing strategy in
a regional market and, if possible, under what conditions
(Baalbaki and Malhotra 1995; Sorenson and Wiechmann
1975). Prior studies have focused mainly on the home-host
scenario. These studies reveal that factors such as stage of
economic and industrial development (Buzzell 1968), legal
environment (Cavusgil, Zou, and Naidu 1993), culture
(Whitelock and Pimblett 1997), product life cycle, competi
tive environment (Chung 2002), marketing infrastructure
(Akaah 1991), consumer behavior (Hill and Still 1984), inter
national business experience (IBE; Cavusgil, Zou, and Naidu
1993), and market entry strategy (Grosse and Zinn 1990) are
key to the choice of a standardization strategy. Among these,
the impact of such factors as economic environment, legal
environment, product life cycle, competitive environment,
IBE, and market entry mode on standardization strategy has
been definitively concluded in the literature, so that further
evidence on these factors seems unnecessary. However, the
findings regarding such factors as cultural environment, con
sumer behavior, and marketing infrastructure have yet to be
conclusively agreed on in the empirical literature. These fac
tors, together with those suggested mainly in theoretical
studies as affecting standardization strategy (e.g., political
environment), deserve further attention in this research field.
More important, because the findings of previous studies are
International Standardization Strategies 49
based mainly on the experience of manufacturing firms
(Cavusgil, Zou, and Naidu 1993), the impact of these factors
on nonmanufacturing firms remains unknown. In addition,
most of the existing home-host frameworks have been based
on the experience of U.S. MNEs (e.g., Akaah 1991); therefore,
it would be beneficial to extend the existing investigation
scope of standardization strategy to firms from other regions.
A comparative analysis of standardization strategies used by
U.S. firms and by MNEs from other country markets will ad
vance the understanding of this research field. To that end,
this study analyzes the operation of firms from Australia and
New Zealand.
The second group of existing studies focuses on exploring is

sues of standardization strategy in the intermarket scenario.
These studies examine the similarity/dissimilarity of the
marketing programs used by MNEs in at least two foreign
host markets or economic regions at the same time (Bod
dewyn and Grosse 1995). The term "intermarket" is used
synonymously with "cross-market" in the literature (Baal
baki and Malhotra 1993); both represent firms' operations
across two or more foreign host markets at one time. To be
consistent with prior studies, these two terms are used inter
changeably in the current analysis. Intermarket frameworks
have become important because products now are often mar
keted in multiple international markets at the same time.
Studies based on this scenario are limited by being either
conceptual (Baalbaki and Malhotra 1993) or empirically ori
entated but based on small sample sizes (Baalbaki and Mal
hotra 1995; Sorenson and Wiechmann 1975).
Although they appear comprehensive, the frameworks pro

posed in the conceptual studies await empirical examination.
Jain's (1989) conceptual model suggests that standardization
strategy is more effective when an intermarket segment (i.e.,
segments across markets sharing a similar need) is identified.
Based on the four major marketing environmental bases (geo
graphic, political, economic, and cultural), Baalbaki and Mal
hotra (1993) propose a comprehensive set of propositions for
examining cross-marketing standardization/adaptation strate
gies. Although it is useful, their framework does not consider
elements such as process or firm performance.
Among existing empirical studies on the intermarket sce

nario, the first group of studies tends to focus on examining
the first two major standardization research issues as Picard,
Boddewyn, and Grosse (1998) outline, that is, internal/exter
nal factors and extent of standardization. For example, using
a hypothetical scenario, Baalbaki and Malhotra (1995) exam
ine how various factors have affected 74 U.S. firms' choice of
marketing strategy; they find that factors such as laws, promo
tion and distribution infrastructure, shopping habits and geo
HenryEL. Chung
graphie dispersion, and product life cycle are significantly re
lated to the choice of a cross-marketing strategy. Grosse and
Zinn (1990) examine the extent of standardization of 68 large
U.S. MNEs operating in Latin America. They find that govern
ment regulations, market entry mode, and technological inten
sity are significant factors in the choice of a standardization
strategy. Similarly, findings reported in the second group of
studies also focus on the factors and extent of standardization.
This group of longitudinal empirical studies focuses on U.S.
firms operating in the European Union (EU) (Boddewyn and
Grosse 1995; Boddewyn and Hansen 1977; Boddewyn, Soehl,
and Picard 1986). The studies examine the strategies used by a
group of U.S. MNEs (up to 72 firms) operating in the EU dur
ing three decades (1963-1993). The studies are descriptive
and the respondents were from three industrial sectors: con
sumer nondurables (CNDs), consumer durables (CDs), and in
dustrial goods (IGs). The studies have found that until the
early 1980s, MNEs commonly employed a standardization
strategy. In the early 1990s, the use of an adaptation strategy
increased. In contrast, the final group of empirical studies cov
ers factors (e.g., legal environments), extent of standardization,
and performance. For example, in their pioneer study, Soren
son and Wiechmann (1975) examine 27 U.S. MNEs in the con
sumer packaged-goods sector operating in the EU and confirm
that an intermarket standardization strategy is possible.
Although studies in the intermarket scenario have gener

ated some useful findings and models, most of them suffer
from several weaknesses. First, most of the existing findings
are descriptive (e.g., Sorenson and Wiechmann 1975). Sec
ond, most studies have focused on uncovering the experi
ence of producers of CNDs, CDs, and IGs but have ignored
the experience of service providers (Boddewyn and Grosse
1995). Third, with the exception of Sorenson and Wiech
mann (1975), it is notable that no other studies have consid
ered process and performance in their research frameworks;
these last two elements are considered critical to standard
ization decisions because of their importance to the success
of an international business venture (Shoham 1996; Walters
1986). Fourth, the focus of most existing intermarket stud
ies is limited to U.S. MNEs' operations in a particular re
gional market, such as the EU (Boddewyn and Grosse 1995)
or Latin America (Grosse and Zinn 1990). The sample size
of these studies also tends to be small. Fifth, with the ex
ception of Sorenson and Wiechmann (1975), no previous
studies have explicitly compared marketing factors such as
marketing legislation and the extent of standardization of
program and process on a pairwise basis. The similarity of
the marketing environments among the various national
markets under investigation is often unreported; therefore,
it is often unknown whether the subject markets are similar
or dissimilar.
International Standardization Strategies
The analysis presented herein is designed to fill these re
search gaps. First, it comprehensively examines the relation
ships between internal (firm and product) and external
(marketing and consumer) factors as well as the extent of stan
dardization (program and process) and performance in the
intermarket scenario. For the first time, these major standard
ization research issues are included in one study. Second, this
study broadens the existing research scope by investigating
the experience of MNEs from two Organization for Economic
Cooperation and Development (OECD) member countries
(Australia and New Zealand) operating in the Greater China
markets, that is, China (People's Republic of China), Taiwan
(Republic of China), and Hong Kong. Both Australia and New
Zealand have been selected because of their OECD member
ship and their strong trading relationships with the Greater
China markets.1 On the one hand, the Greater China markets
offer a good base for foreign firms to implement a cross-border
standardized marketing strategy because consumers in the
markets are likely to share similar cultural values, traditions,
and linguistic backgrounds (Kao 1993; Kenna and Lacy 1994;
Kraar 1992). On the other hand, the political, legal, economic,
and infrastructure marketing environments in these markets
are likely to be varied as a result of their dissimilar political
systems and various stages of economic development (Chung
1999; Mahoney et al. 2001). It is expected that China's com
petitive environment is greater than that of Hong Kong and
Taiwan because of the sheer size of its market potential.
China's economy is the second largest in the world (Jain
2001). These market differences are likely barriers to the em
ployment of cross-market standardization strategies (Buzzell
1968; Sorenson and Wiechmann 1975). By adopting the pair
comparison practice that Sorenson and Wiechmann (1975)
suggest, this study first examines the similarity/dissimilarity
of various external factors among these markets and then
studies their relationship to the extent of standardization.
Thus, the findings generated in this analysis further not only
existing knowledge of intermarket standardization strategy
but also the conclusions that can be drawn about the Greater
China markets. Unlike previous research, the findings of this
study are based on the experience of firms from four major in
dustries (services [SVs], CNDs, CDs, and IGs), and this study
has a larger sample size than those of previous studies.
To achieve these research objectives, the study uses the expe

rience of firms concurrently operating in both a home-host
and an intermarket scenario. For the home-host scenario, us
ing the experience of 72 Australian and 74 New Zealand
firms operating in their home markets and in the Greater
China markets, this study examines selected factors that af
fect the choice of standardization marketing strategies. For
the intermarket scenario, this study investigates the impact
of a comprehensive set of factors on the decision of a cross
HenryEL. Chung
marketing standardization strategy. The relationship between
the extent of standardization and performance also is high
lighted, and this study examines the same group of firms
whose products are marketed simultaneously in at least two
Greater China markets.
In light of the results of previous studies, the hypotheses pre

sented examine the marketing strategies used by firms oper
ating in the Greater China markets under both home-host
and intermarket scenarios. Unless specified, the standardiza
tion strategy stated in the hypotheses is in terms of both pro
gram and process.
Political Environment. Jain (2001) suggests that the politi

cal environment of a host country forces foreign firms to Research Hypotheses
change their operations, policies, and strategies in the
country. Political intervention from the host country often Marketing Environmental
makes standardization difficult (Vernon 1971). Although it Factors
is important, this factor has not received much attention in
empirical studies of either home-host or intermarket sce
narios. One possible explanation for this lack of attention
is that the countries investigated in previous studies have
similar political systems (Boddewyn and Grosse 1995;
Sorenson and Wiechmann 1975).
Although there has been a lack of attention paid to political

environment, marketers should not underestimate the in
fluence of this factor on their operations, especially when
doing business in a less developed country or in a develop
ing country such as China (Cateora 1996). It is expected
that the operations of foreign firms in the Greater China
markets are influenced by the similarity/dissimilarity of
the political system in both the home-host and the inter
market scenarios.
Hla: The extent of standardization in the home-host sce

nario is positively related to the degree of political
system similarity between the home and host coun
tries.
HlD: The extent of standardization in the intermarket

scenario is positively related to the degree of politi
cal environment similarity among the host markets.
Government Regulations. Prior studies have identified that the

disparity of government regulations between the home and
host countries is a barrier to a standardization strategy (Wal
ters 1986). It has been revealed that firms are often required to
amend their marketing strategy for a host country because of
different regulations imposed by the host government on prod
uct standards, patents, tariffs and taxes, and resale price main
tenance (Cavusgil, Zou, and Naidu 1993; Jain 1989).
Little research attention has been paid to the intermarket sce
nario, and few results have been produced to date. By com
paring the marketing environment in two European markets
at one time, Sorenson and Wiechmann (1975) find that firms
operating in countries that have a high degree of similarity in
marketing legislation tend to standardize their marketing
programs more. Similarly, the longitudinal studies of Bod
dewyn and Grosse (1995), Boddewyn, Soehl, and Picard
(1986), and Boddewyn and Hansen (1977) confirm that dif
ferences in legal regulations are a key barrier to cross-market
standardization. Thus, although significant results have been
produced in the home-host scenario (Cavusgil, Zou, and
Naidu 1993; Chung 2002), it is unclear how firms would re
act to cross-market similarity/dissimilarity in regulatory en
vironments when designing their marketing program and
process for intermarket operation.
H2: The extent of standardization in the intermarket

scenario is positively related to the degree of legal
environment similarity among the host markets.
Economic Development. Most of the existing findings on the

impact of economic and industrial development involve the
home-host scenario. Prior studies have suggested that varia
tions in the stages of economic and industrial development
between the home and host countries affect the selection of
marketing strategies (Buzzell 1968; Chung 2002; Hill and
Still 1984).
For the intermarket scenario, Jain (1989) proposes that a

standardization strategy is more practical for markets that
are at a similar stage of economic development (e.g., OECD
member nations [Jain 1989], the industrial triad of North
America, Europe, and Japan [Ohmae 1985]). Although a sim
ilar economic environment is widely cited as a factor for
standardization in the home-host scenario, its impact on the
selection of a marketing strategy in the intermarket scenario
has yet to be uncovered.

scenario is positively related to the degree of eco
nomic environment similarity among the host
markets.
Cultural Environment. Cultural factors are widely cited as a

factor in the choice of a marketing strategy in the
home-host scenario (Hill and Still 1984; Whitelock and
Pimblett 1997). Hill and Still (1984) identify such factors as
consumer literacy, education level, and sociocultural cus
toms and taboos, which often force firms operating in less
developed countries to modify their product offerings for
the host markets.
Henry EL. Chung
Differences in cultural factors also have been identified as a
barrier to cross-marketing standardization strategies. For ex
ample, Boddewyn and Hansen (1977) find that language dif
ferences among the European Common Market are a major
obstacle to standardized marketing strategies. Quelch and
Hoff (1986) report that low-culture-bound products are
more easily marketed through a standardized program be
cause they often are less affected by variances in cross
market cultural environment. Quelch and Hoff classify con
sumer products used in the home (e.g., packaged food) as
high-culture-bound products and those used outside the
home (e.g., automobiles) as low-culture-bound products.
Because this factor has not been fully explored in both
home-host and intermarket scenarios, the hypotheses are
proposed at both levels.
H4a: The extent of standardization in the home-host sce

nario is positively related to the degree of cultural
environment similarity between the home and host
countries.
H4d: The extent of standardization in the intermarket

scenario is positively related to the degree of cul
tural environment similarity among the host
markets.
Competitive Environment. Many studies have noted the dis

parity of competitive environments as a barrier to the em
ployment of a standardization strategy (Jain 1989; Walters
1986). Because this factor has been examined and relevant
studies have been reviewed extensively in home-host stud
ies (Chung 2002), the review of this factor is limited to results
generated in the intermarket scenario. The following re
search hypothesis is also examined only at this level. The
longitudinal studies of Boddewyn, Soehl, and Picard (1986)
and Boddewyn and Grosse (1995) conclude that competition
from European firms is a key barrier to U.S. firms' choice of
standardization.

scenario is positively related to the degree of com
petitive environment similarity among the host
markets.
Marketing Infrastructure. It has been suggested that interna

tional marketing decisions are influenced by the marketing
infrastructure of a host country, including media availability
and distribution infrastructure (Akaah 1991). Jain (1989)
posits that a standardization strategy is more likely to suc
ceed if the basic marketing infrastructure is similar in the
home and host countries. The impact of marketing infrastruc
ture is also evident in the cross-market scenario. Several
studies have suggested that the degree of standardized strat
egy is affected by the availability and coverage of promo
tional infrastructure across markets (Baalbaki and Malhotra
1993; Sorenson and Wiechmann 1975). Because this factor
has not been conclusively agreed on for both home-host and
intermarket scenarios (e.g., Akaah 1991), this study examines
the impact of marketing infrastructure at both levels.

nario is positively related to the degree of market
ing infrastructure similarity between the home and
host countries.
H6b: The extent of standardization in the intermarket

scenario is positively related to the degree of mar
keting infrastructure similarity among the host mar
kets.
Jain (1989) suggests that foreign markets can be segmented on

Consumer Behavior Factor the basis of occupation, needs, or shopping traits of a partic
ular consumer group. Jain believes that a standardization
strategy is more effective if customers, not countries, are used
to identify which segments to serve; other studies also sup
port this view (e.g., Akaah 1991).
For the intermarket scenario, Sorenson and Wiechmann

(1975) find that cross-border similarity of market conditions
concurs with high standardization of marketing programs.
Likewise, Boddewyn and Hansen (1977), Boddewyn, Soehl,
and Picard (1986), and Boddewyn and Grosse (1995) all have
found that differences in consumer tastes and habits among
EU markets are major obstacles to standardized marketing
strategies. Because insufficient findings have been produced
to date on this factor, research hypotheses are proposed for
both scenarios.

nario is positively related to the degree of consumer
behavior similarity between the home and host
countries.
H7b: The extent of standardization in the intermarket

scenario is positively affected by cross-market sim
ilarity in consumer behavior.
Firm-related factors such as firm size, market entry mode se

Firm-Related Factors lection, and IBE are also likely to affect the choice of market
ing strategies. Existing findings on the effect of firm size are
well documented in the international management literature.
Terpstra and Yu (1988) reveal that large firms are more likely
to employ a high-resource-commitment entry mode such as
foreign direct investment. Agarwal and Ramaswami (1992)
56 Henry F.L. Chung
conclude that larger U.S. equipment-leasing companies have
a greater tendency to enter foreign markets. Because an adap
tation strategy often requires a greater financial resource
commitment from the firm (Whitelock and Pimblett 1997),
these findings imply that larger firms invest more resources
in the host markets because they have more abundant finan
cial and management resources. In the intermarket scenario,
this resource superiority also enables large firms to design a
more customized marketing program in accordance with the
needs of each market. However, Sorenson and Wiechmann
(1975) suggest that large firms are more likely to adopt a uni
versal marketing planning and process procedure because
this strategy helps them keep their competitive advantages
over other MNEs and local market competitors.
Similarly, it has been suggested that firms that market prod

ucts overseas principally through exporting modes are more
likely to adopt a standardization strategy. Because of the high
cost of adaptation, such firms tend to choose export markets
that are more likely to accept standardized products (Kacker
1975; Root 1994; Terpstra and Sarathy 2000). Thus, in light of
the previous findings, this study proposes that cross-market
standardization likely is implemented if a similar market en
try mode is selected.
It also has been suggested that when a firm has accumulated

more IBE it has a greater appreciation for the differences
among markets and is more capable of responding to the
uniqueness of each host market with a modified marketing
program (Cateora 1990). Although it could be argued that
firms with high IBE are more inclined to choose a standard
ization strategy (e.g., standardized marketing programs of
fered by MNEs with high IBE; Cateora 1996), the majority of
the existing empirical literature supports a positive relation
ship between IBE and the extent of an adaptation strategy
(Cavusgil, Zou, and Naidu 1993).
Because no specific findings about firm size are revealed in

either the home-host or the intermarket scenario, the hy
potheses for this factor are proposed for both scenarios. In the
area of market entry mode selection, because many findings
have already been produced in the home-host scenario, this
factor is examined only at the intermarket level. Likewise,
because the results related to the IBE factor have been pro
duced in the home-host scenario previously, this factor is ex
amined only in the intermarket scenario.
H8: In the home-host and intermarket scenarios, the ex

tent of standardization of the marketing program is
negatively related to a firm's size, and the degree of
standardization of the marketing process is posi
tively related to a firm's size.
H9: In the intermarket scenario, firms that serve the
host markets with the same type of entry mode are
more likely to adopt a high standardization strategy
across the markets in which they operate.
H10: The extent of standardization is negatively related

to a firm's IBE in the intermarket scenario. When
operating in the intermarket scenario, firms with
low IBE are more likely to adopt a high standard
ization strategy, and vice versa.
Research has indicated that international marketing strategy

Product Factor selection is also relevant to the nature of the product (Jain
2001). It has been shown that consumer products are more
likely to be adapted and that industrial products are more
likely to be standardized (Boddewyn, Soehl, and Picard
1986). Among consumer goods, CNDs often require greater
customization than CDs do because they conform more to lo
cal tastes, habits, and customs (Whitelock 1987; Whitelock
and Pimblett 1997).
The literature suggests that because of their unique character

istics, SVs are more likely than tangible goods to be adapted.
Among the four often-cited characteristics of SVs (intangibil
ity, perishability, inseparability, and heterogeneity; Kotier
2003; Terpstra and Sarathy 2000), it has been suggested that
inseparability has a critical impact on marketing services in
ternationally (Cateora 1996; Patterson and Cicic 1995). Prior
studies suggest that SVs that require close supplier-client
contact (e.g., consulting) are often performed by market entry
modes such as foreign direct investment and joint ventures.
These entry modes provide face-to-face interaction between
the provider and customers and often facilitate a good basis
for an adaptation strategy (Terpstra and Sarathy 2000).
Hn: The spectrum of the extent of standardization of the

four industrial sectors is IGs -> CDs ?> CNDs ?>
SVs. This proposition holds in both the home-host
and the intermarket scenario.
Existing findings on performance have mainly been generated

Performance: Marketing on the home-host basis (Cavusgil and Zou 1994; Johnson and
Program and Process Arunthanes 1995). In this scenario, performance has been
measured by a firm's performance in a particular foreign host
market (Johnson and Arunthanes 1995); performance is often
measured by sales growth, profitability, and market share
(Johnson and Arunthanes 1995; Samiee and Roth 1992). In
general, it is agreed that the adaptation of product, price, pro
motion, and channel management strategies enhances firm
performance (Shoham 1995, 1996). However, existing re
search suggests that the standardization of process is likely re
lated to a firm's performance (Kotabe 1990; Walters 1986). No
58 Henry EL. Chung
specific findings on performance have been reported for the
intermarket scenario. Studies by Sorenson and Wiechmann
(1975) and Walters (1986) might provide marginal direction
by suggesting that standardized marketing processes are posi
tively related to a firm's performance in the intermarket sce
nario. Even with this suggestion, it is still unclear which
element of the marketing program is more likely to enhance a
firm's performance when products are transferred from one
foreign host market to another. This study empirically exam
ines performance in the cross-market scenario.
H12a'. The level of performance is negatively related to

the degree of the standardization of marketing pro
grams in the intermarket scenario.
H12b*. The level of performance is positively related to

the degree of the standardization of marketing
processes in the intermarket scenario.
To achieve the research objectives, two studies were con

ducted of Australian and New Zealand firms operating in the Research Measurement
Greater China markets. There were 318 firms in the New
Zealand sampling frame; in total, 824 Australian firms were Sampling Frame
identified as having business experience in the Greater China and Postal Survey
markets. The mail surveys were conducted in April 2001
(New Zealand) and September 2001 (Australia). Initially, the
number of usable returned responses from the two studies
was 99 from New Zealand and 134 from Australia. Among the
responses, 25 New Zealand and 62 Australian firms indicated
that they marketed their products in only one Greater China
market; 74 New Zealand and 72 Australian firms operated in
at least two Greater China markets at the time of the study. In
addition, 33 New Zealand firms and 108 Australian firms re
turned questionnaires and indicated that their firms did not
conduct business in Greater China at the time of the survey.
Consequently, the sampling frame for New Zealand was ad
justed to 260 firms and that for Australia to 654 firms. The
subsequent statistical analysis was based on the experience of
the 146 firms, because the study was designed to examine is
sues that pertained to both home-host and intermarket sce
narios. The modified sampling frames yielded a 28.4%
response rate for New Zealand and an 11% response rate for
Australia. The total response rate was approximately 16%,
which is not high but is comparable to other studies in the
same field (e.g., Boddewyn and Grosse 1995). The low re
sponse rates are probably due to the lengthy questionnaire
adopted in the study; previous studies share a similar prob
lem (Baalbaki and Malhotra 1995).
To assess nonresponse bias, this study adopted Armstrong

and Overton's (1977) extrapolation method. This approach
has been widely used in studies of international business or
international marketing (Akaah 1991). The method is based
on the assumption that respondents who respond less readily
are similar to nonrespondents; "less readily" refers to those
who respond later or require more prodding to answer. Aus
tralian and New Zealand firms were placed into three groups
based on the sequence of their response time (first, second,
and third wave). The comparison for the three groups was
based on firm size (small versus large), product category,
profit, sales growth, and market share. In total, eight chi
square tests were conducted. The results showed that compa
nies in the three groups did not differ significantly in these
comparison criteria (p > .1), which suggests that the study's
empirical results were not influenced to a significant extent
by nonresponse bias.
In comparison with other studies (Boddewyn and Grosse

1995; Johnson and Arunthanes 1995), the scope of geo
graphic coverage of the present study is limited; however
several methods to remedy such weakness were adopted.
First, to improve the extent to which the findings can be gen
eralized, the study includes samples from a wider rage of in
dustrial sectors (CNDs, CDs, IGs, and SVs) and two OECD
countries. Second, the sample size is larger than that of pre
vious studies (e.g., Boddewyn and Grosse 1995). Third, be
cause of the dissimilarity between the home and host
markets, most of the firms included in this research had high
IBE before they commenced operations in the Greater China
markets. This indicates that their experience is likely similar
to that of MNEs from other Western industrialized countries
(e.g., the United States).
To achieve the research objectives, respondents were in

Measurement structed to answer the survey questions for their most impor
tant product (good/service) in the subject markets. In the
home-host section, respondents were asked to answer ques
tions about their operations in the most important Greater
China market. In this section, the respondent firms compared
the similarity/dissimilarity of their marketing program and
process used in the home and host countries. They then com
pared the similarity/dissimilarity of the marketing/consumer
factors they faced in the home and host countries. Last, re
spondents were asked to provide background information
about their firms (e.g., experience in international markets). If
the product was also marketed in another Greater China mar
ket, respondents were asked to answer the questions in the
second section about intermarket scenario. In this section, re
spondents compared the similarity/dissimilarity of their mar
keting program and process in the most important and second
most important host markets. They then compared the simi
larity/dissimilarity of a group of marketing/consumer factors
they had faced in both markets. Finally, they were asked to
provide other relevant information, such as choice of market
60 Henry EL. Chung
entry modes, and to identify their product's performance in
the second most important market.
The items used to form the five marketing program/process

constructs were culled from past empirical studies (e.g., Hill
and Still 1984; Sorenson and Wiechmann 1975; Walters
1986). All the items applied to both the home-host and the
intermarket scenario. The items were measured with a five
point Likert scale (1 = "very similar"; 5 = "very different").
Details of the five constructs are listed in Appendix A.
Items used to form the constructs of marketing, consumer,

firm, and product were based mainly on those items sug
gested in previous empirical studies (e.g., Akaah 1991;
Cavusgil, Zou, and Naidu 1993; Hill and Still 1984). Details
of these constructs are listed in Appendix A. In the
home-host scenario, three constructs were directly measured
by a single-item indicator (i.e., political environment, prod
uct type, and firm size), and the rest of the constructs were
measured by multiple-item indicators (i.e., marketing infra
structure, cultural environment, and consumer behavior;
e.g., Akaah 1991). As shown in the following section, the
items used to measure the multiple-item constructs were
summed by means of a factor analysis to form a composite
scale to represent each construct. In total, three single-item
constructs (e.g., product type) and seven multiple-item con
structs (e.g., marketing infrastructure) were proposed in the
intermarket scenario. Two items measured IBE: number of
years a firm has operated in international business and num
ber of countries in which it operates. Firm size was measured
by a single item: number of full-time employees. Product
type was also a single-item construct. Initially, three coding
systems were adopted for the effect of product type (CND ver
sus CD and IG, consumer versus industrial, and SV versus
others). Each coding system was used alternately in the sub
sequent statistical analysis. The effect of market entry mode
was determined by one item: whether a respondent firm used
the same type of entry mode to service the most important
and second most important markets. Both IBE and firm size
are continuous variables, whereas product type and market
entry mode constructs are indicator variables (SPSS 1999).
The remaining constructs were measured with a five-point
Likert scale (1 = "very similar"; 5 = "very different").
Performance was measured in three ways: market share, sales

growth, and profit (Cavusgil and Zou 1994; Johnson and
Arunthanes 1995; Kotabe 1990). Performance was measured
in the intermarket scenario only and was determined by ask
ing respondents to identify their firms' performance in the
second most important Greater China market. Market share
and sales growth were measured by the average performance
of a firm's product over the previous three financial years in
the market. Profit was measured by the product's performance
in the previous financial year. Market share was measured
with a ten-point scale (1 = "0%-10%"; 10 = "91%-100%";
Johnson and Arunthanes 1995). Sales growth was measured
with a seven-point scale (1 = "negative return"; 2 = "0%-5%";
3 = "6%-10%"; 4 = "11%-15%"; 5 = "16%-20%"; 6 =
"21%-25%"; 7 = "greater than 25%"; Cavusgil and Zou 1994).
Profit was measured with a seven-point Likert scale (1 = "high
levels of loss"; 7 = "high levels of profit"; Kotabe 1990). Perfor
mance measurement is also listed in Appendix A.
The two key statistical analysis tools adopted in this study

Statistical Tests were factor analysis and linear regression analysis. Factor
analysis, often used in conjunction with a reliability test
(Cronbach's alpha), is employed to identify the underlying
constructs in a study. It is widely adopted as a method to re
duce the number of dimensions or to assess the psychomet
ric properties of the research constructs in studies that
examine globalization issues (Cavusgil and Zou 1994). Lin
ear regression analysis is often used to predict the occur
rence of a dependent variable (e.g., product) from a set of
independent variables (e.g., firm size). Multiple linear re
gression is used when the nature of the dependent variable
is continuous or metric (Hair et al. 1995). This method is
often chosen in studies that pertain to the selection of mar
keting strategies to establish research conceptual models
(e.g., Johnson and Arunthanes 1995). Because this study em
ployed several items to form its constructs and because its
dependent variables were continuous, both analysis meth
ods were adopted in the study.
SPSS version 10.0 was used for statistical analysis (SPSS

1999). In the home-host scenario, items that formed the five
program/process constructs were separately tested by a factor
analysis and then a reliability test. Items designed to form the
three multi-item constructs (culture, consumer behavior, and
marketing infrastructure) in this scenario also followed the
same procedure. As shown in Appendix A, the reliability of
the five program/process and three marketing/consumer con
structs was acceptable (a > .60). The multi-item constructs
also demonstrated a high level of convergent validity (item
factor correlation coefficient >.70; Churchill 1996). The three
multi-item marketing/consumer constructs and the three sin
gle-item constructs (political environment, product type, and
firm size) were then examined by means of a bivariate corre
lation coefficient test (Spearman's rho). Except for the cul
tural construct, which was highly associated with other
constructs, the correlation coefficients among the remaining
constructs were acceptable (Table 1). Among the three coding
systems initially proposed for the product type, the experi
mental tests showed that only the final coding system (SVs
versus others) had generated a significant result on the selec
62 Henry F.L. Chung
Political Marketing Consumer Product
Firm Size Environment Infrastructure Behavior Type Table 1.
Firm size 1.00 Correlation Matrix of
Political environment .094 1.00 Independent Variables:
Home-Host Scenario
Marketing infrastructure .148 .506 1.00
Consumer behavior .101 .357 .398 1.00
Product type .064 .184 .123 .194 1.00
tion of five marketing program/process constructs. Thus, this

coding system was chosen in the final round of statistical
analysis: the multivariate regression analysis.
In light of the previous analysis, only the five constructs

listed in Table 1 were included in the final round of statisti
cal analysis. These constructs were entered into regression
backward step wise analysis, and their relationships with the
five program/process constructs (the dependent variables)
were separately tested. After examination of the initial re
sults, it was found that the assumptions of normality and lin
earity were not fully met in some regressional models.
Detailed discussion of these assumptions is not presented
here because they are well documented in the literature (Hair
et al. 1995). By adopting the remedy practices that Hair and
colleagues (1995) suggest, several constructs were trans
formed. After transformation, the problems of assumption vi
olations were mostly resolved. The residuals fell roughly
along the regression line. The results of the transformed mod
els are listed in Table 2.
For the intermarket scenario, items used to form the five pro
gram/process constructs were also separately tested by
means of a factor analysis and Cronbach's alpha (Appendix
A). The reliability of these constructs was high (a > .90). Items
used to form the marketing, consumer, firm, and product con
structs were also tested with the same procedures. Initially,
seven constructs representing marketing infrastructure, cul
tural environment, consumer behavior, political and legal en
vironment, economic environment, competitive environment,
and IBE were formed. As shown in Appendix A, except for
the IBE construct, the reliability ratings of the constructs were
high. Lower reliability for the IBE construct suggested that the
formulation of this construct needed to be improved, proba
bly by including more items of measurement. Political and le
gal constructs were grouped as one construct because their
items were found to be highly correlated. All the multi-item
constructs also showed a high level of convergent validity
(item-factor correlation coefficient >.70). The seven multi
item constructs together with the three single-item constructs
(firm size, marketing entry mode, and product type) were
then examined by means of a bivariate correlation coefficient
test (Spearman's rho). As in the home-host scenario, the third
product type coding system (SVs versus others) was adopted
because of its significant impact on the choice of dependent
variables (program/process constructs).
After several rounds of correlation tests, high correlation

was found among political and legal environment, economic
environment, competitive environment, consumer behavior,
and marketing infrastructure. After several experiments,
only seven constructs were included in the final round of
statistical analysis. These constructs are listed in Table 3.
The correlation coefficients among the constructs were all
Coefficients Standard
Table 2. Error
Dependent Variable (Beta) t-Value Significance
Multiple Regression Analysis Product Variable
Results: Home-Host Scenario
Constant .01 .101 .109 .914
Marketing infrastructure .400 .093 4.309 .000
Product type .707 .295 2.396 .019
Firm size -.0000634 .000 -2.111 .038
Rvalue .513 F value 9.397
R2 value .263 F significance .000
Price Variable
Constant -1.194 .276 -4.324 .000
Political environment 2.257 .473 4.770 .000
(log transformed)
R value .473 F value 22.753

Place Variable
Constant .05641 .079 .714 .477

Consumer behavior .334 .088 3.807 .000

Promotion Variable
Constant -.940 .352 -2.674 .009
Political environment .256 .088 2.920 .005
(log transformed)
R2 value .362 F significance 000
Process Variable
Constant .02742 .083 .330 .742
64 Henry F.L. Chung
Competi
Entrv Political/ Cultural tive ?_ . _
Table
Firm Mode Legal Envi- Envi- Envi- Product 3.
Size Effect ronment ronment IBE ronment Type
Firm size 1.00
Correlation Matrix
Entry mode effect .047 1.00 of Independent Variables:
Intermarket Scenario
Political/legal .192 .020 1.00
environment
Cultural .052 -.025 .439 1.00

environment
IBE .397 -.060 -.010 -.104 1.00

Competitive .200 -.038 .493 .424 -.035 1.00
environment
Product type .064 .082 .243 .144 .009 .016 1.00
less than .5, which suggests that no multicollinearity prob

lem existed among them. The constructs were then entered
into regression backward step analysis with the five pro
gram/process constructs (the dependent variables). The ini
tial results suggest that several established models did not
meet the assumptions of normality and linearity. Again, by
adopting Hair and colleagues' (1995) remedy suggestion,
several variables were transformed. After the transforma
tion, the violations of assumptions were mostly removed.
The residuals were located roughly along the regression line.
The goodness of fit of the established model was acceptable.
Details of multivariate regression results are displayed in
Table 4.
The three dependent variables for performance were profit,

sales growth, and market share, and the five program/process
constructs in the intermarket scenario were the independent
variables. The five independent variables were tested by
means of a correlation test (Spearman's rho). After several
rounds of testing, it was decided to include product and
place constructs (coefficient = .49) in the independent vari
able set only, because of high correlation among the other
three constructs (coefficient > .55). In an examination of the
goodness of fit of the proposed models, it was found that
both assumptions of normality and linearity were violated.
Several variables in the model were transformed to fix these
defects. After transformation, the extent of violations was sig
nificantly reduced so that the R2 values increased signifi
cantly. The performance models established using the
transformed variables are also listed in Table 4.
The profiles of respondents are listed in Appendix B. The av

erage firm size of respondents was medium (664 employees). Respondent Profile
The average number of years in international business was
22. The average number of countries that the respondent
firms operated in was 17. The average number of years that
firms had operated in the most important host market was 10.
Coefficients Standard
Table 4. Dependent Variable (Beta) Error t-Value Significance
Multiple Regression Analysis Product Variable
Results: Intermarket Scenario Constant -.04262 .099 -.429 .669
Competitive environment .352 .092 3.812 .000
IBE (log transformed) -.300 .087 -3.461 .001
Product type .740 .292 2.534 .013
R2 value .280 F significance ?0?
Price Variable
Constant .486 .194 2.507 .014
.097 4.094 .396
Competitive environment .000
.095 3.934 .000
Political/legal environment -375
-.220 .093
Firm size (log transformed)
-2.381 .020

R2 value .451 F significance 00?
Place Variable
Constant .423 .177 2.386 .019
.085 6.497 .000
Political/legal environment .555
.088
Competitive environment 2.900 .254
.005
.088 -2.280-.201
Firm size (log transformed) .025
Promotion Variable
Constant .080 .086 .942 .349
Political/legal environment .372 .095
Competitive environment .333_.098_3
R2 value .396 F significance -000
Process Variable
Constant .648 .183 3.543 .001
.086 5.511
Political/legal environment .474 .000
.091
Competitive environment .331 3.652 .000
.321 .089 -3.605 .001
Firm size (log transformed)
.424 .246 1.722 .089
Product type
Sales Growth Variable3

Constant 1.696 .043 39.665 .000
Distribution -.123 .043 -2.882 .005

R2 value .075 .005
F significance
Market Share Variablea

Constant 1.545 .201 7.678 .000
Product3 -.360 .191 -1.882 .070
R2 value .112 .070
F significance
aRoot square transformed variables.
66 Henry F.L. Chung
The differences in profiles between Australian and New
Zealand respondents are also reported in Appendix B. It is
evident that New Zealand respondents tend to be larger and
have more years of business experience than their Australian
counterparts.
The majority of firms studied operated in the CND (34.9%)

and IG (32.2%) sectors. Fewer operated in the SV (16.4%)
and CD (15.8%) sectors. The majority of New Zealand firms
operated in the CND sector, and Australian firms tended to
focus more on the IG sector. Note that though the IG items re
ported in this analysis (Appendix B) are different from those
documented in some studies (e.g., Picard, Boddewyn, and
Grosse 1998), they are consistent with those listed in other
studies (Kotier 2003, p. 216). These products were classified
as IGs because they were purchased by organizations for use
in the production of other products (e.g., raw materials), for
incorporation into other products (e.g., components), or for
carrying out organizations' or governments' daily operations
(e.g., equipment). The most important Greater China market
was China, followed by Hong Kong and Taiwan, respectively.
The most popular market entry modes were direct exporting,
wholly owned marketing subsidiaries, joint ventures, and in
direct exporting. The Internet was used only by a few firms,
highlighting that this method was in its infancy. Firms using
the Internet entry mode mainly operated in the publishing
and accounting businesses. In total, 82.2% of firms employed
the same type of market entry modes to service their most im
portant and second most important host markets. Details of
these aspects are also displayed in Appendix B.
In general, despite the significant differences in marketing

conditions between the home and host countries, with some Discussion
exceptions Australian and New Zealand firms tend to employ
a fairly highly standardized strategy in this scenario. Only 6 of Home-Host Scenario
23 items (26%) used in the marketing program/process con
structs were moderately or highly adapted (mean > 3). These 6
items included 1 pricing item (offer of price discounts), 1 dis
tribution item (role of intermediaries/dealers), and 4 promo
tion mix items (advertising copy, creative expression,
advertising media allocation, and role of sales promotion). The
rest of the items were all highly standardized (mean < 3). The
mean ratings of the three marketing/consumer constructs were
all greater than 3, suggesting that the marketing and consumer
environments were highly different between the home and
host countries.
The results from hypotheses testing suggest that the political

environment is positively related to the selection of price and
promotion strategy (Table 2), which is consistent with initial
expectations and confirms Hla. Jain (2001) suggests that a
host government's political interference often forces firms to
change operations, policies, and strategies in the countries.
Jain notes that the decision about pricing strategies may be
guided more by political factors than by economic ones, for
example, the retail prices foreign firms are allowed to charge
in host markets. When operating in a host country, firms of
ten avoid using promotion mix elements that might have po
litical implications for the host government (e.g., avoid
showing "Taiwan independence" in Chinese media). The
nonsignificant results for product, place, and process strate
gies suggest that the decisions about these constructs more
likely are related to factors such as consumer behavior, mar
keting infrastructure, and firm size.
As indicated in Table 2, marketing infrastructure is positively

related to the selection of four program/process constructs:
product, place, promotion, and process. These findings sug
gest that H6a is mostly supported, which is not difficult to ex
plain. As indicated in the literature (Buzzell 1968; Jain 1989),
when a host country's marketing infrastructure is similar to
that of the home country, it is easier for a firm to employ a
standardization strategy. It has been suggested that adapta
tion of a promotion strategy likely is affected by the availabil
ity of different communication channels (Baalbaki and
Malhotra 1993). Several studies have also confirmed that a
host country's distribution system infrastructure is likely to
affect the selection of distribution and process strategies
(Buzzell 1968; Sorenson and Wiechmann 1975). The non
significant relationship of marketing infrastructure with pric
ing suggests that this strategy is more likely related to a host
market's economic environment or consumption behavior (to
be discussed subsequently).
Results suggest that consumer behavior is positively related to

the adaptation of place, promotion, and process strategy (Table
2). H7a is partially supported. This result is consistent with
that of Hill and Still (1984), who conclude that the variances of
consumer preferences and consumer purchasing habits be
tween the home and host markets are important factors in an
adaptation strategy. The nonsignificant outcomes on product
and price standardization are inconsistent with the findings of
previous studies (e.g., Akaah 1991). A possible explanation for
the nonsignificant results is that the firms tended to market
low-culture-bound products in the Greater China markets be
cause of high discrepancies in marketing environments and
consumer behavior between the home and host countries (as
discussed previously). The decision to select an appropriate
product and price strategy for these products is less likely to
be affected by the variance of consumer behavior between the
home and host markets (Quelch and Hoff 1986).
As shown in Table 2, firm size is negatively related only to

the adaptation of product strategy, suggesting that when a
Henry EL. Chung
firm is small, it is more likely to choose an adaptation strat
egy. In contrast, large firms are more likely to select a stan
dardized product strategy. These outcomes are notable, but
they contradict the initial expectation. H8 is reversely con
firmed; a possible explanation is that large firms are better
able to compete directly with their competitors, whereas
small firms are more likely to be niche marketers. It is there
fore worthwhile for small firms to modify their products for a
host market to avoid competition. The nonsignificant results
for price, place, promotion, and process might signify that
strategy selection for these constructs is more likely related
to other factors, such as consumer behavior, political envi
ronment, or marketing infrastructure.
Last, the results suggest that SVs are more likely to be

adapted than are CNDs, CDs, or IGs. As discussed previously,
this result is likely related to a special characteristic associ
ated with SVs (inseparability). A close supplier-client rela
tionship often requires services such as consulting and
design to be modified for host markets (Patterson and Cicic
1995). Most of the SV items reported in this-analysis require
a moderate to high supplier-client contact (Appendix B). Af
ter an examination of the mean ratings of the four sectors, Hn
is confirmed but requires an adjustment. The revised spec
trum of the extent of standardization of the four industries is
IGs ?> CNDs ?> CDs ?> SVs. Products in the CDs segment are
adapted more than are products in the CNDs segment; this
finding contradicts those of previous studies (Whitelock and
Pimblett 1997), but is probably related to the differences in
marketing infrastructure between the home and host coun
tries (e.g., electricity voltage). These inevitable factors often
force CD products, such as whiteware, to be modified for the
local market conditions. In contrast, marketers of CNDs (e.g.,
fruit) probably use a more uniform approach, such as coun
try-of-origin effect, when operating in the Greater China mar
kets (see Chung 2002).
The results of this study confirm that all five program/

process constructs are highly standardized (mean < 3); how Intermarket Scenario
ever, considerable variation in the degree of standardization
exists among the constructs. Consistent with the findings of
previous studies (Boddewyn, Soehl, and Picard 1986; Soren
son and Wiechmann 1975), product-related items (Appendix
A) are the most likely standardized items. The findings also
indicate that process and promotion constructs are second
most likely to be standardized. The two least likely standard
ized constructs are distribution and price. The findings from
this study on program and process support the idea that a
highly standardized strategy can be used in an intermarket
scenario. Unlike the findings of many other researchers (e.g.,
Boddewyn, Soehl, and Picard 1986), this study supports
Levitt's (1983) proposition that MNEs should standardize.
The overall comparison findings also confirm that most ele
ments of marketing environments and consumer behavior in
the Greater China markets are similar. Specifically, the mar
kets share cultural environment, consumer behavior, com
petitive environment, marketing infrastructure, and legal
regulations (mean < 3) but do not share political or eco
nomic environments (mean > 3). The finding on cultural en
vironment is consistent with that of previous studies. It has
been suggested that consumers in all three markets are of
Chinese origin and share a similar pattern of cultural tradi
tions and values (Kao 1993). Although various languages are
spoken in all three markets, Mandarin Chinese is becoming
commonly spoken across the markets. Consumers in these
markets also share the same written system (Chung 1999).
Similar cultural background also might contribute to the
similarity of consumer behavior in the three markets. For ex
ample, it has been suggested that food consumption behav
ior is similar in the three markets; because of this similarity,
several food and beverage manufacturers from Taiwan and
China have successfully marketed their products (e.g., in
stant noodles, beer) in each other's markets (Hong Kong
Trade Development Council 2002a; Taipei Times 2002). In
2001, China was the largest export market for Hong Kong
firms' processed food and beverages (Hong Kong Trade De
velopment Council 2002b).
The findings on the similarity in competitive environment,

marketing infrastructure, and legal environment are unex
pected. Contradicting initial expectations (Chung 1999; Jain
2001; Mahoney et al. 2001), the results imply that competi
tive environment and marketing infrastructure might not be
directly related to a country's market potential or its stage of
economic development (Cateora 1996). The similarity of reg
ulations imposed by the three governments on foreign
oriented products is probably related to their entry into the
World Trade Organization; all three markets are now mem
bers of the organization.
The results for the political and economic environments are

consistent with findings of other studies (Chung 1999; Ma
honey et al. 2001). Both environments were rated as dissimi
lar. The dissimilarity of the political environment is likely
caused by the various political systems in the three markets.
Prior research has suggested that though all three areas are
influenced by Chinese culture, their political systems are dif
ferent: China is governed by the social communist party,
Hong Kong is a special administrative region of China but has
strong British influence, and Taiwan has adopted a Western
style democratic system (Chung 1999). As expected, at pre
sent the stages of economic development among the markets
are different, though the gaps among them will likely narrow
in the near future (Mahoney et al. 2001).
Henry RL. Chung
Regarding the extent of similarity of the three markets on a pair
comparison basis, it was found that the Taiwan-Hong Kong pair
was most similar, followed by China-Taiwan and China-Hong
Kong, respectively. These results suggest that the differences of
environment in China and Hong Kong were the highest, and
those between Taiwan and Hong Kong were the lowest.
Results for the intermarket scenario, as shown in Table 4,

suggest that the political/legal construct has a positive im
pact on four constructs: price, distribution, promotion, and
process. These results suggest that H^ and H2 are mostly con
firmed. The findings suggest that when operating in an inter
market scenario, firms often need to consider both political
and legal factors, because the impacts of these two factors are
often inseparable. It is a common practice that governments
of the Greater China markets use legal systems to institute
their political interference. For example, Jain (2001) reports
the case of Taiwan endeavoring to use its legal system to pro
tect a key industry from alleged dumping by imposing tariffs.
The findings on political/legal factors are consistent with
those of other studies. Sorenson and Wiechmann (1975) and
Baalbaki and Malhotra (1995) confirm that inevitable factors,
such as legislation differences among country markets, often
prohibit the employment of standardization of price, distrib
ution, and promotion strategy. However, the nonsignificant
result between the political/legal factor and product strategy
is notable because it contradicts the findings of previous
studies (e.g., Cavusgil, Zou, and Naidu 1993). This nonsignif
icant result might be related to the high costs involved in
adapting product strategy.
Results suggest that the competitive environment has a posi

tive impact on all five program/process constructs (Table 4).
The findings indicate that when transferring marketing pro
gram and process from one country market to another, simi
larity of the competitive environment in the country markets
is a key factor. The findings for competition are consistent
with those of other studies (e.g., Boddewyn, Soehl, and Picard
1986; Sorenson and Wiechmann 1975), which have found
that cross-border competition is a key factor for standardiza
tion strategy. In light of these findings, H5 is supported.
As demonstrated in Table 4, results suggest that firm size is

negatively related to adaptation of price, place, and process
strategy. These results suggest that large firms are more likely
to standardize marketing programs and processes across the
markets in which they operate. The findings on marketing
program elements contradict the original proposed relation
ships (H8): that large firms tend to adapt their programs be
cause of more abundant resources. This contradiction means
that the existing understanding between firm size and stan
dardization strategy needs to be revised. However, the signif
icant relationship between process and firm size confirms
that a standardized marketing process more likely is em
ployed by large firms, in support of Sorenson and Wiech
mann's (1975) proposition.
Likewise, results suggest that IBE has a reverse impact on

product adaptation (Table 4). This result is contrary to the
initial proposed relationship that IBE is negatively related to
standardization strategy (H10). The result suggests that firms
with high IBE are more likely to adopt a high product stan
dardization strategy, which contradicts existing empirical
findings (e.g., Cavusgil, Zou, and Naidu 1993). The mixed re
sults of this study and others suggest that the effect of IBE on
standardization strategy could be explored further.
Last, results suggest that product type is positively associated

with product and process adaptation. As pointed out previ
ously, these results are most likely due to the requirement of
close contact between customers and marketers. Close
buyer-seller interaction often makes completely uniform ser
vice difficult to implement and might contribute to service
providers' modifying their product offerings and the plan
ning and control process. Although it has been widely cited
in the literature, the regression results cannot validate that
CNDs are more likely to be adapted than IGs or CDs in the in
termarket scenario (e.g., Boddewyn and Grosse 1995). These
nonsignificant results imply that existing findings about
these three product sectors might only apply to certain in
dustries. The product items reported in this study are differ
ent from those in the previous studies (e.g., Picard,
Boddewyn, and Grosse 1998). The results for the extent of
standardization of the four product sectors are investigated
by their mean ratings and suggest that Hla is supported but
requires revision as follows: IGs ?> CNDs ?> CDs ?? SVs.
For the performance testing results, as displayed in Table 4,

only adaptation of distribution and product strategies were
negatively associated with sales growth [p < .05) and market
share [p < .1). H12a is partially supported but in a reverse rela
tionship. These results highlight the importance of employing
an adequate distribution channel and product strategy in a
cross-market scenario, yet they contradict the findings of ex
isting studies, which support a positive relationship between
adaptation and performance (Shoham 1995). The findings of
this study imply that when a firm has successfully used a dis
tribution and product strategy in one foreign market, it is bet
ter for the firm to continue with the same type of strategy in
other markets that share a similar marketing environment.
The findings suggest that a standardized distribution channel
and product strategy help firms achieve their marketing ob
jectives in sales growth and market share, likely because a
standardized distribution channel and product strategy are
Henry F.L. Chung
less expensive and easier to implement (Sorenson and Wiech
mann 1975). Notable is that if a strategy has proved successful
in a market, the strategy might have greater success in other
markets that often have similar market conditions. The non
significant results for the relationship between other pro
gram/process constructs and the performance indicators
suggest that firms should be wary of standardizing these
strategies to achieve greater intermarket performance.
The results for several hypotheses were unexpected. First,

the effect of economic factors (H3) cannot be confirmed. This Nonsignificant Results
is inconsistent with those studies that suggest that economic
disparity among country markets often makes it difficult to
implement an intermarket standardization strategy (Jain
1989). The nonsignificant result is likely related to the type
of products marketed by the respondent firms (Appendix B).
Australian and New Zealand firms tend to market products
to a higher-income segment (e.g., KiwiGold kiwifruit), which
is less likely affected by general economic differences among
country markets (Whitelock and Pimblett 1997). Second, the
nonsignificant impact of cultural (H4b) and consumption be
havior (H7b) factors on the choice of standardization is also
striking. Although the findings confirm that cultural environ
ment and consumption behavior in the three Greater China
markets are similar, their impact on the choice of standard
ization in the statistical analysis was not significant. The
nonsignificant results are probably due to the factors' role in
the statistical analysis process. The respondents might have
treated the two factors as "constant" variables when formu
lating their marketing decisions (i.e., considered prerequi
sites for cross-market standardization strategies). Another
possible reason is that because of the similarity of these fac
tors among the three markets, study respondents tended to
market products that are less sensitive to cultural environ
ment and consumption behavior. Marketing a culture-free
product (e.g., medicines) in host markets is likely a key rea
son for the nonsignificant result for cultural environment in
the home-host scenario (H4a). Third, this study cannot con
firm the effect of market entry mode (H9). This nonsignificant
result suggests that selection of a similar market entry mode
is not essential for cross-marketing standardization strategy.
Last, the lack of impact of process on performance (H12b) is
notable. In the literature (e.g., Sorenson and Wiechmann
1975), process strategy is suggested as having a profound
impact on cross-market performance. This nonsignificant
result means that research on the impact of process strategy
is far from definite. The same disappointment also can be
expressed for the nonsignificant outcomes between the
strategies of price and promotion and that of performance.
This study cannot confirm most of Shoham's (1995, 1996)
findings that adaptation of these strategies often leads to
higher performance.
Consistent with the findings of other studies (Jain 1989; Kil
Implications lough 1978), the results of this study confirm the proposition
that an across-the-board standardization strategy is not real
istic in the home-host scenario. Managers should under
stand that some elements of their program and process (e.g.,
product) are more likely than others (e.g., promotion) to be
standardized. In contrast with most of the findings generated
in other studies (Grosse and Zinn 1990), the results of this
study reveal that the spectrum of degree of standardization of
marketing program/process constructs is product ?> process
?> price ?> distribution -> promotion. However, the findings
indicate that it is possible to employ a highly standardized
marketing program and process in the intermarket scenario if
a careful analysis and evaluation of the cross-market similar
ity/dissimilarity is conducted. Given the spectrum of the ex
tent of standardization in this scenario, marketing managers
should be aware that product is most likely standardized, fol
lowed by process, promotion, place, and price. In the area of
cross-market segmentation, this study indirectly confirms the
practicality of the intermarket segment concept as outlined
in the conceptual research (e.g., Jain 1989).
When operating in a host market that has a less developed

marketing infrastructure than that of the home country, man
agers should be prepared to adapt product, distribution, pro
motion, and process to be in line with local infrastructure.
Inadequate infrastructure often forces foreign firms to modify
product offerings, distribution channels, and promotion
methods for the local market. In this situation, a customized
set of processes for developing and implementing these mar
keting program elements is often required.
Similarly, the findings suggest that managers should consider

modifying their strategy for place, promotion, and marketing
process procedures when consumer behavior in the host
countries is different from that of the home markets. The
findings imply that managers could consider targeting a new
segment for products in such foreign host markets. To reach
this new target segment successfully, an adapted distribution
channel, promotion strategy, and implementation and con
trol process is often needed.
Furthermore, managers of large firms should consider the

benefits of a standardization strategy. Standardization of
product strategy likely provides large firms with an opportu
nity to establish a consistent positioning and image in the
host countries. In contrast, because of their niche marketing
strategy, small firms should be willing to modify product
strategy to stay competitive in host markets. Similarly, when
formulating cross-marketing strategies in the intermarket sce
nario, managers should evaluate their firm's resources, busi
ness objectives, and IBE. If the firm is large or has high IBE,
74 Henry F.L. Chung
managers should consider a standardization strategy for
price, place, process, and product. Standardization of these
marketing program and process elements often enables firms
to maintain consistent positioning, image, and quality and to
gain economies of scale (Whitelock 1987).
In addition, managers should carefully evaluate the extent of

the influence of political interference in the host countries.
This effect often influences the selection of price and promo
tion strategy. If the impact is greater in the host countries
than it is in the home countries, a customized strategy for the
host markets is often more sensible. In an intermarket sce
nario, managers often need to consider the effects of the po
litical and legal environment together. Firms should consider
a highly standardized strategy (price, place, promotion, and
process) only if they are sure that the country markets share a
similar political and legal environment.
Similarly, managers should prepare to adapt product offer

ings if the products are services, especially those that require
high supplier-client contact. The product-type effect applies
to both the intermarket and the home-host scenario. The re
sults of this study suggest that services can be marketed more
successfully if they are adapted to a local host market. The
intermarket scenario findings also identify that service
providers often need to amend product offerings and market
ing planning processes even in country markets that have
similar marketing environments or conditions. Furthermore,
managers should consider transferring a standardized set of
programs and processes only if their products are in a similar
competitive position in the foreign markets or if the foreign
markets demonstrate a similar competitive pattern.
Managers should also understand that cross-market perfor

mance is best enhanced by a uniform distribution and prod
uct strategy across markets. This study is among the first in
the intermarket standardization literature to reveal empiri
cally that place and product strategies enhance a firm's per
formance. The implication of this result is that before rushing
into an adaptation strategy, managers should evaluate mar
keting environmental similarities and differences to deter
mine whether it is possible to transfer their distribution and
product strategies from one foreign market to another.
Last, there is also an implication for firms operating in the

Greater China markets. The differences among the three mar
kets are not as great as initially was expected, especially be
tween China and Taiwan. As shown in the study, the
differences between China and Hong Kong are the greatest,
and the differences between Taiwan and Hong Kong are the
least. On the basis of these findings, MNEs might initially
consider grouping Taiwan and Hong Kong or Taiwan and
China as one regional market and servicing these markets
with similar marketing programs and processes. This could
be extended to include the third Greater China market at a
later stage of operations in the region.
This study has attempted to capture several key issues in its

Further Research and analysis. It has examined the three key elements of standard
Research Limitations ization research: internal and external factors, extent of stan
dardization, and performance. All three items were
examined thoroughly, and considerable findings were gener
ated. The findings have enhanced existing knowledge of
standardization strategies. In contrast with findings of previ
ous empirical research (e.g., Boddewyn, Soehl, and Picard
1986), most of the findings in this study concur with Levitt's
(1983) proposition that MNEs should standardize. By adopt
ing the pair-comparison practice, this study has successfully
expanded the use of this unique practice, as Sorenson and
Wiechmann (1975) suggest, to a larger sample size. It has suc
cessfully explored the similarities and differences among the
three host markets under examination. Thus, the findings
generated through these comparisons not only are helpful in
understanding standardization strategy but also extend exist
ing knowledge of the Greater China markets. This study has
included both home-host and intermarket scenarios in its
analysis, a practice that is not common in the existing litera
ture. Thus, the findings generated in this study provide guid
ance not only to firms that intend to operate in a specific host
country but also to those that plan to operate in multiple host
markets at the same time.
However, even though several significant findings have been

generated in the analysis, as in many other studies, this study
also suffers several drawbacks that provide directions for fur
ther research. For example, the findings could have been
refined by including other important factors, such as technol
ogy and organization, in the research framework (Jain 1989;
Levitt 1983; Picard, Boddewyn, and Grosse 1998). In addi
tion, a main weakness of this study is its limited geographical
coverage. Unlike most previous studies in which findings are
established on the basis of firms' operations in a broad geo
graphic area (e.g., 53 markets in Johnson and Arunthanes's
[1995] study, 23 markets in Akaah's [1991] study), the current
research outcomes are based on firms' experience in only
three host markets. Broad geographic coverage is compro
mised with the chosen pair-comparison analysis methodol
ogy; with this method, it would be difficult to analyze and
interpret the comparison results if more country markets than
those reported in previous research were included, because
too many pair scenarios could have occurred. It would also be
difficult to draw a sensible conclusion in that situation. Nev
ertheless, although several steps were adopted to counter
such weakness, the validity of this study could be improved if
76 Henry F.L. Chung
its findings are verified by further studies. Further research
could build on the frameworks established in this study and
expand the research scope to other countries and industries.
Researchers could also consider employing other data collec
tion methods, such as personal interviews. The findings
could then be compared with those generated in this study.
1. For example, in 2001, China, Hong Kong, and Taiwan were

New Zealand's sixth-, seventh-, and ninth-largest export Notes
trading partners, respectively. Export volumes to these
countries were $NZ 1.11 billion (China), $NZ 840 million
(.84 billion; Hong Kong), and $NZ 720 million (.72 billion;
Taiwan) (Trading Partners 2002). In 2001 and 2002, Aus
tralian export sales to the three countries were $A 8.7 bil
lion (China, fifth largest), $A 5.4 billion (Hong Kong, eighth
largest), and $A 5.2 billion (Taiwan, ninth largest) (Aus
tralian Bureau of Statistics 2002). Together, these three mar
kets constitute one of the top trading markets for Australian
and New Zealand MNEs.
Agarwal, Sanjeev and Sridhar N. Ramaswami (1992), "Choice of

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Cronbach's Cronbach's
Appendix A. Alpha Alpha
Constructs and Factor Constructs Items (Home-Host) (Intermarket)
Analysis Results
Program/Process
Product Characteristics of product, brand name,

packaging, product design, and product
positioning (5) .91 .94
Price Wholesale price, retail price, pricing

method, and offer of price discounts (4) .89 .93
Place Type of retail outlets, channel of distri

bution, roles of sales force, managing
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aries/dealers (5) .87 .92
Promotion Role of advertising, basic theme, copy,

creative expression, media allocation,
and role of sales promotion (6) .94 .97
Process Marketing planning process, budgeting

and control system, and marketing phi
losophy/orientation (3) .90 .94
Internal/External Factors
Marketing Distribution infrastructure and media

infrastructure availability (2) .62 .68
Cultural Understanding and interpretation of

environment advertisement, consumer literacy and
education level, linguistic and connota
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customs and taboos (4) .85 .90
Consumer Consumer purchasing habits, condi
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erences, and product consumption
patterns (4) .86 .94
Political Political interference of host govern

environment ment (1) N.A.
Political/legal Political interference of host govern

environment ment, legal regulations on price and
sales conditions, product content, per
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Economic Gross national product per capita, cost of

environment labor, stage of economic development,
and consumer purchasing power (4) .94
Competitive Competitive nature of the market and

environment market share product position (2) .79
IBE Number of years in international business

and number of countries operating (2) .55
Product type Type of product (SV versus others) (1) N.A. N.A.
Firm size Number of full-time employees (1) N.A. N.A.
Entry mode Commitment to the market (identical

effect versus different) (1) N.A.
Performance Sales growth, profitability, and market

share (all three are treated as dependent
variables in the statistical analysis) N.A.
Notes: N.A. = not applicable. Figures in parentheses represent number of items used to form
the construct.
78 Henry F.L. Chung
New
Size and Experience Overall Australia Zealand Appendix B.
Firm size: number of full-time
Profiles of Respondents
employees (average) 664.9 544.87
783.21 (N = 146)
IBE (years in international
business, at the time of survey)
(average) 22.9 21.59 24.21
IBE (other country operations in

addition to Greater China
markets) (average) 17.6 14.24 21.0
Years in the most important

market (average) 10.4 10.56 10.22
Product Categories (%)a

CNDs 34.9 34.7 35.1
9.7
CDs 15.8 21.6
48.6
IGs 32.2 16.2
SVs 16.4
5.6 27.1
Missing .7 1.4
Total 100.0 100.0 100.0
Most Important Overall Second Most Important Overall

(Australia, New Zealand)b (Australia, New Zealand)
Country Markets
China 51.4% (43.1%, 59.5%) 20.4% (22.2%, 17.6%)
Taiwan 21.9% (23.6%, 20.3%) 45.8% (41.7%, 47.3%)
Hong Kong 26.7% (33.3%, 20.3%) 33.8% (30.6%, 35.1%)
Market Entry Mode Selection

Exporting: domestic
marketing intermediary
(e.g., export management
companies, piggybacking) 4.8% (9.7%, nil) 6.2% (9.7%, 2.7%)
Exporting: overseas
marketing intermediary
(e.g., agents, distributors) 65.1% (65.3%, 64.9%) 65.8% (61.1%, 70.3%)
Licensing/franchising 2.7% (4.2%, 1.4%) 2.1% (1.4%, 2.7%)
Joint ventures 7.5% (11.1%, 4.1%) 5.5% (8.3%, 2.7%)
Wholly owned marketing
subsidiary 13.0% (6.9%, 18.9%) 9.6% (8.3%, 10.8%)
Wholly owned production
subsidiary 1.4% (2.8%, nil) nil (nil, nil)
Internet .7% (nil, 1.4%) 1.4% (1.4%, 1.4%)
Other (e.g., sales/marketing
representative, direct marketing) 4.1% (nil, 8.1?/c 2.7% (nil, 5.4%)
Missing values .7% (nil, 1.4%) 6.8% (9.7%, 4.1%)

Market Entry Mode Selection
(Most Important and Second-Most
Overall
Important Host Markets) (Australia, New Zealand)
Identical 82.2% (83.3%, 81.1%)

Different 10.3% (6.9%, 13.5%)
Missing values 7.5% (9.7%, 5.4%)
aCNDs include food, meat, fruit, flowers, medicines, beverages, bedding, and wine; CDs include
carpet, computers, whiteware, and houses; IGs include coal, logs, wool, cotton, fish, metal, gas,
ingredients, auto components, carpet, timber, and speed cameras; and SVs include accounting, fi
nancial and immigration consulting, engineering, law, golf course design, education, and freight.
bThe first percentages in parentheses represent Australian firms and the second percentages
represent New Zealand firms.
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82 Henry F.L. Chung

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International Standardization Strategies

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International Standardization Strategies: The Experiences of Australian and New Zealand

Firms Operating in the Greater China Markets

It has been argued that the worldwide marketplace has be

Despite its many recognized limitations (Boddewyn, Soehl,

Despite the numerous benefits that can be reaped from stan

In general, research on the standardization of marketing strat