Factors influencing the degree of international pricing strategy standardization of multinational corporations Marios Theodosiou, Constantine S Katsikeas.

Journal of International Marketing. Chicago: 2001. Vol. 9, Iss. 3; pg. 1, 18 pgs Abstract (Summary) In response to certain important gaps identified in the global mar eting literat!re, a st!d" in#estigates the pricing strategies follo$ed b" man!fact!ring s!bsidiaries of m!ltinational corporations. %pecificall", it attempts to identif" the factors that pla" an important role in determining the degree of international pricing strateg" standardi&ation. 'he findings s!ggest that the e(tent to $hich m!ltinationals standardi&e their international pricing strategies depends on the le#el of similarit" bet$een home and host co!ntries in terms of c!stomer characteristics, legal en#ironment, economic conditions, and stage of the prod!ct life c"cle. 'he st!d" highlights implications of the findings for b!siness practitioners and disc!ss f!t!re research directions along $ith the limitations. )!mp to inde(ing *doc!ment details+ Full Te t *,--. $ords+ Cop"right /merican 0ar eting /ssociation 2001

!"eadnote# /1%'2/C' !"eadnote# In response to certain important gaps identified in the global mar eting literat!re, the foc!s of this in3!ir" is an in#estigation of the pricing strategies follo$ed b" man!fact!ring s!bsidiaries of m!ltinational corporations. %pecificall", the a!thors attempt to identif" the factors that pla" an important role in determining the degree of international pricing strateg" standardi&ation. 'he findings s!ggest that the e(tent to $hich m!ltinationals standardi&e their international pricing strategies depends on the le#el of similarit" bet$een home and host co!ntries in terms of c!stomer characteristics, legal en#ironment, economic conditions, and stage of the prod!ct life c"cle. 'he a!thors highlight implications of the findings for b!siness practitioners and disc!ss f!t!re research directions along $ith the limitations of the st!d". Increasing liberali&ation, interdependence, and competition in $orld economies ha#e accelerated the need for m!ltinational corporations *04Cs+ to de#elop effecti#e global strategies in their endea#or to achie#e s!stainable competiti#e ad#antage in international mar ets *%amiee and 2oth 1992+. 0ar eting has pla"ed a significant role in the ad#ancement of the field of international b!siness; mar eting strateg" constit!tes a critical component of a firm5s global strateg" *6o! and Ca#!sgil 199,+. 'he de#elopment of optimal programs for global mar ets is of #ital interest to b!siness managers $ho #ie$ international operations as a means of boosting corporate gro$th, impro#ing competiti#e

position, strengthening financial performance, and ens!ring compan" s!r#i#al and long7 term #iabilit" in a highl" globali&ed mar etplace. In this conte(t, the e(tent to $hich elements of the mar eting program sho!ld be standardi&ed across mar ets or adapted in order to accommodate different foreign mar et conditions, re3!irements, and preferences has recei#ed focal research attention at both the concept!al and the empirical le#el. 'he approach an 04C adopts has important implications beca!se *1+ it infl!ences the 04C5s abilit" to match its offerings effecti#el" $ith the o#erseas mar et en#ironments in $hich it operates, *2+ it affects its long7term direction $ith respect to international operations, and *3+ it determines the areas that sho!ld be prioriti&ed in global reso!rce allocation decisions *)ain 1989+. 4ot$ithstanding the long7standing interest in and man" articles p!blished on the topic, a re#ie$ of the pertinent literat!re ill!strates that scant attention has been de#oted to in#estigating dri#ers of international pricing strateg" standardi&ation *%amli and )acobs 199-+. 'he #ast ma8orit" of st!dies ha#e foc!sed on promotion *e.g., 9arris 199-; 9ar#e" 1993+, prod!ct *e.g., 9ill and %till 198-; :alters and 'o"ne 1989+, and to a lesser e(tent distrib!tion *e.g., 2osenbloom, ;arsen, and 0ehta 199<+ aspects of the international mar eting program. 9o$e#er, !nderstanding the elements that infl!ence the e(tent of standardi&ation of international pricing strateg" is #ital, beca!se standardi&ation can affect firms5 re#en!e and profitabilit" le#els and determine a prod!ct5s foreign mar et positioning *C&in ota and 2on ainen 1998+. =!rthermore, pre#io!s standardi&ation st!dies ha#e commonl" been cond!cted at the head3!arters le#el, and the perceptions and attit!des of s!bsidiar" managers ha#e largel" been ignored. 4e#ertheless, s!bsidiaries pla" an important role in international mar eting strateg" form!lation and implementation as a res!lt of their closeness to the mar et and better !nderstanding of local conditions. In #ie$ of these limiting empirical considerations, the primar" interests of this in#estigation foc!s on the pricing strategies 04Cs follo$. 1eca!se the e" consideration in international b!siness operations is $hether the mar eting strateg" sho!ld be standardi&ed or adapted, $e consider international pricing strateg" along the standardi&ation7adaptation contin!!m *Ca#!sgil and 6o! 199-+. %pecificall", this empirical in3!ir" aims to in#estigate the factors that pla" an important role in infl!encing the degree of international pricing strateg" standardi&ation from the standpoint of s!bsidiar" managers. 'he st!d" begins $ith an o#er#ie$ of the standardi&ation #ers!s adaptation debate. 'his is follo$ed b" an e(amination of the factors that are potentiall" associated $ith pricing standardi&ation and the de#elopment of specific research h"potheses. 4e(t, $e specif" the research method emplo"ed, and then present and disc!ss the res!lts of the st!d". =inall", $e highlight managerial implications of the findings and limitations of the st!d", along $ith directions for f!rther research. 'he degree to $hich international mar eting programs m!st be standardi&ed or c!stomi&ed has been a contentio!s iss!e for more than three decades no$. / re#ie$ of the pertinent literat!re identifies three schools of tho!ght: the t$o e(treme opposites of

complete standardi&ation #ers!s complete adaptation and the >middle7of7the7road,> or contingenc" perspecti#e. 'hese perspecti#es are e(amined ne(t. 'he arg!ments in fa#or of mar eting program standardi&ation emphasi&e t$o main aspects. 'he first in#ol#es the dri#ers of standardi&ation, defined as the de#elopments in the international b!siness en#ironment that ma e standardi&ation a feasible, or e#en inescapable strateg". 'he second aspect refers to the potential ad#antages that ma" res!lt for a compan" that p!rs!es a strateg" of international mar eting program standardi&ation, ad#antages that ma e standardi&ation a desirable alternati#e. 'echnological de#elopments in the areas of comm!nication and transportation, as $ell as increasing international tra#el b" to!rists and b!sinesspeople, are considered dri#ing forces behind the creation of a global #illage and th!s a global mar etplace *e.g., ?linder 19,.+. In a contro#ersial article, ;e#itt *1983, p. 9.+ claims that in this ne$ commercial realit", people aro!nd the $orld ha#e the same needs and desires and that >almost e#er"one, e#er"$here, $ants the things the" ha#e heard abo!t, seen or e(perienced thro!gh the ne$ technologies.> %imilarl", @hmae *198.+ refers to the emergence of the 'ridians: the residents of )apan, the Anited %tates, and the ?!ropean Anion. 'hese people ha#e similar academic bac gro!nds, income le#els, lifest"les, !ses of leis!re time, and aspirations; as a res!lt, ,00 million cons!mers in all parts of the 'riad ha#e stri ingl" similar needs and preferences. @ther dri#ers of standardi&ation disc!ssed in the literat!re incl!de the need of international firms to ser#e their m!ltinational c!stomers *1!&&ell 19,8; Bo!glas and :ind 198<+, regional economic integration *e.g., 4orth /merica and the ?!ropean Anion+ *:alters and 'o"ne 1989+, and the gro$th of international mar et segments $ith similar needs and preferences *Ca#as, Verhage, and Dreen 1992+. Eroponents of standardi&ation also emphasi&e se#eral important benefits associated $ith the p!rs!it of this strateg". 'he most significant ad#antage of standardi&ation is its contrib!tion to the achie#ement of economies of scale and cost sa#ings in prod!ction, research and de#elopment, and mar eting *e.g., Feegan 19,9+. 1" f!ll" e(ploiting the potential for economies of scale in all #al!e7adding acti#ities thro!gh mar eting program standardi&ation, international firms $ill be in a position to gain a significant ad#antage o#er their competitors b" selling high 3!alit" prod!cts at lo$er prices *;e#itt 1983+. @ther ad#antages of standardi&ation proposed in the literat!re incl!de the potential for rapid introd!ction of ne$ prod!cts in international mar ets *%amiee and 2oth 1992; :alters and 'o"ne 1989+, the presentation of a consistent image across mar ets *9ar#e" 1993+, the abilit" for $orld$ide e(ploitation of ne$ and inno#ati#e ideas *1!&&ell 19,8; G!elch and 9off 198,+, and better coordination and control of international operations *Bo!glas and Craig 198,+. 'he adaptation school of tho!ght emerged essentiall" as a reaction to the arg!ments p!t for$ard in fa#or of standardi&ation. =irst of all, man" academics e(pressed their disagreement $ith ;e#itt5s *1983+ arg!ment abo!t a $orld$ide homogeni&ation in needs and preferences, #ie$ing it as o#erl" simplistic, m"opic, and contrar" to the mar eting concept *e.g., 1odde$"n, %oehl, and Eicard 198,; Bo!glas and :ind 198<+. /ccording to these a!thors, no hard e#idence can be prod!ced in s!pport of ;e#itt5s thesis *Bo!glas

and Craig 198,; @n #isit and %ha$ 1990; :ind 198,+. Cross7c!lt!ral empirical research has fo!nd significant differences in c!stomer characteristics, preferences, and p!rchasing beha#ior among different co!ntries *e.g., Biamantopo!los, %chlegelmilch, and B! Eree& 199.+. %econd, critics of standardi&ation ha#e 3!estioned the significance of economies of scale and the cost sa#ings !nderl"ing this approach. @n the one hand, technological de#elopments in fle(ible man!fact!ring s"stems and comp!ter7aided design and man!fact!ring facilitate prod!ction of c!stomi&ed prod!cts $itho!t ma8or cost implications and red!ction in the minim!m efficient scale of prod!ction *Bo!glas and :ind 198<; :alters and 'o"ne 1989+. @n the other hand, it has been s!ggested that certain ind!stries *e.g., pac aged cons!mer goods+ are less s!sceptible to man!fact!ring and research and de#elopment economies *G!elch and 9off 198,+. 0oreo#er, se#eral a!thors ha#e claimed that e#en $hen cost sa#ings can be made, their effect ma" not be significant if a large proportion of the total cost is determined b" factors on $hich standardi&ation has no impact *e.g., cost of ra$ materials and labor+ *Bo!glas and Craig 198,+. 'hird, according to critics of standardi&ation, there is no e#idence to s!ggest that c!stomers ha#e become more price conscio!s or that the" are $illing to trade off specific prod!ct feat!res for lo$er prices. It has been arg!ed that lo$ price positioning is a #!lnerable strateg" that ma" not lead to the achie#ement of s!stainable competiti#e ad#antage *Bo!glas and :ind 198<; :ind 198,+. =o!rth, the decision $hether to standardi&e does not depend on managerial discretion alone. Certain e(ternal *e.g., en#ironmental, mar et, ind!str"+ and internal *e.g., organi&ational str!ct!re and processes+ factors ma" limit the degree of standardi&ation that a firm is able to appl" *1odde$"n, %oehl, and Eicard 198,+. %!ch factors are responsible for mandator" adaptations, defined as the adaptations a compan" is obliged to ma e, beca!se of either legislation and allied go#ernmental reg!lations or inescapable and !ncontrollable mar etplace realities *9ill and %till 198-+. =!rthermore, some a!thors ha#e indicated se#eral important benefits that are li el" to res!lt from adapting international mar eting programs to local mar et conditions. 'hese incl!de deeper penetration of foreign mar ets and th!s increased mar et share and sales #ol!me for the firm *Ca#!sgil, 6o!, and 4aid! 1993+; enhanced moti#ation and morale of local managers *Bo!glas and :ind 198<; G!elch and 9off 198,+; and a!gmentation of firms5 capabilities in anal"&ing and !nderstanding foreign mar ets, monitoring mar et de#elopments o#erseas, and 3!ic l" responding to shifts in c!stomer preferences *Craig and Bo!glas 199,+. 2ecent standardi&ation literat!re has follo$ed a more fr!itf!l research a#en!e b" s!pporting the contingenc" perspecti#e of international mar eting *e.g., Ca#!sgil, 6o!, and 4aid! 1993+. /ccording to this perspecti#e, the difference bet$een standardi&ation and adaptation is in degree rather than in ind, and the t$o perspecti#es are #ie$ed as occ!rring along a contin!!m on a bipolar scale *@n #isit and %ha$ 198<+. 'herefore, the

challenge facing international mar eting managers is to decide $hich mar eting7mi( elements the" sho!ld standardi&e or adapt, !nder $hat conditions, and to $hat degree *1!&&ell 19,8; )ain 1989+. 'he critical iss!e in designing international mar eting strategies in the frame$or of contingenc" theor" is to identif" conte(t!al factors that determine the appropriate degree of mar eting program standardi&ation and determine $hich indi#id!al mar eting7mi( elements are infl!enced b" each factor and to $hat e(tent. In response to this challenge, academic researchers ha#e e(amined the factors that pla" an important role in the determination of mar eting program standardi&ation, and se#eral classificator" schemes ha#e been proposed *e.g., Ca#!sgil, 6o!, and 4aid! 1993; )ain 1989; )ohnson and /r!thanes 199.+. / re#ie$ of the e(tant literat!re s!ggests that these factors can be organi&ed into fo!r broad categories: *1+ macroen#ironmental factors, incl!ding economic, legal, c!lt!ral, ph"sical, and demographic elements *Bo!glas and :ind 198<; )ain 1989+; *2+ microen#ironmental factors, s!ch as c!stomer characteristics, attit!des, and beha#ior *)ain 1989+; the str!ct!re and nat!re of competition *Ca#!sgil, 6o!, and 4aid! 1993; @&somer, 1od!r, and Ca#!sgil 1991+; and the a#ailabilit", cost, and competencies of mar eting intermediaries *9ar#e" 1993; :ind and Bo!glas 198,+; *3+ firm7specific factors, incl!ding the degree of centrali&ation in decision ma ing *G!elch and 9off 198,; @&somer, 1od!r, and Ca#!sgil 1991+, the relationship bet$een head3!arters and local s!bsidiaries *)ain 1989+, corporate orientation *Eerlm!tter 19,9+, the firm5s e(perience in international operations *Ca#!sgil, 6o!, and 4aid! 1993; Craig and Bo!glas 199,+, and the s!bsidiar"5s o$nership str!ct!re *2a! and Ereble 198<+; and *-+ prod!ct andHor ind!str" factors, s!ch as the nat!re of prod!ct *Ca#!sgil, 6o!, and 4aid! 1993+, stage of prod!ct life c"cle *E;C+ *1aalba i and 0alhotra 199.; 2a! and Ereble 198<+, c!lt!ral specificit" of the prod!ct *Ca#!sgil and 6o! 199-; G!elch and 9off 198,+, prod!ct !ni3!eness *Ca#!sgil, 6o!, and 4aid! 1993+, conditions and patterns of prod!ct !se *9ill and %till 198-+, prod!ct familiarit" of foreign c!stomers *Ca#!sgil, 6o!, and 4aid! 1993+, and ind!str" technolog" orientation *G!elch and 9off 198,; %amiee and 2oth 1992+. In in#estigating the factors infl!encing the degree of international pricing strateg" standardi&ation, $e attempted to incl!de the largest possible n!mber of rele#ant contingenc" #ariables. 9o$e#er, that the present st!d" represents the first s"stematic endea#or to e(amine this iss!e !sing a descripti#e, h"pothetico7ded!cti#e research approach $as a serio!s obstacle to this end. /ltho!gh a large n!mber of potentiall" important #ariables ha#e been proposed b" #ario!s a!thors at the concept!al le#el *as disc!ssed in the pre#io!s section+, onl" a limited n!mber of these ha#e been empiricall" tested. :e therefore deemed it appropriate, from a methodological point of #ie$, to limit o!r effort to the e(amination of contingenc" #ariables $hose rele#ance had been established in pre#io!s standardi&ation st!dies and that co!ld be lin ed specificall" to the degree of international pricing strateg" standardi&ation p!rs!ed b" 04Cs.

/ccordingl", a re#ie$ of the limited empirical e#idence, combined $ith rele#ant concept!al $or , re#ealed fi#e factors that are potentiall" important in infl!encing the e(tent to $hich 04Cs standardi&e their international pricing strateg": economic en#ironment, legal en#ironment, distrib!tion infrastr!ct!re, c!stomer characteristics and beha#ior, and stage of E;C. 'he rele#ance of each factor is considered ne(t. 'he economic conditions pre#ailing in a host co!ntr" can infl!ence pricing decisions in se#eral $a"s, beca!se the" determine demand potential for a partic!lar prod!ct and ha#e a significant impact on a firm5s cost str!ct!re. @n the demand side, the o#erall le#el of economic and ind!strial de#elopment of a co!ntr" determines c!stomers5 priorities in terms of the prod!cts the" consider essential, in addition to the prices the" are able and $illing to pa" for certain prod!cts *)ain 1989+. =or e(ample, a prod!ct considered essential in a de#eloped co!ntr" ma" be #ie$ed as less necessar" or e#en as a l!(!r" item in a less de#eloped co!ntr" *9ill and %till 198-+. 0oreo#er, demand for a prod!ct at different price le#els is a f!nction of the p!rchasing po$er of targeted c!stomers, $hich is determined b" the le#el of economic de#elopment of the co!ntr" *)ain 1989+. @n the cost side, the economic en#ironment of the host co!ntr" determines the cost of ra$ materials, labor, energ", and other reso!rces a firm needs to p!rchase or hire in order to carr" o!t its e#er"da" operations *Bo!glas and :ind 198<; %amli and )acobs 199-+. 'he le#el of s!ch costs has a direct impact on the o#erall cost str!ct!re of local s!bsidiaries. 'h!s, the pricing polic" p!rs!ed b" an international firm in a partic!lar foreign mar et sho!ld reflect these factors. :e therefore ad#ance the follo$ing: 91: 'he greater the similarit" in the economic en#ironment bet$een an 04C5s home and host co!ntries, the higher is the degree of pricing standardi&ation. ?mpirical research has sho$n that differences in go#ernment la$s and reg!lations across mar ets are among the ma8or obstacles to standardi&ation *1aalba i and 0alhotra 199.; Ca#!sgil, 6o!, and 4aid! 1993+. / common la$ fo!nd in man" co!ntries that directl" infl!ences pricing is retail price maintenance, $hich re3!ires firms to sell certain prod!cts at specified prices. 'he p!rpose of s!ch la$s is either to protect c!stomers from !nfair e(ploitation or to ens!re that certain sensiti#e prod!cts *e.g., pharmace!ticals+ are easil" accessible to almost e#er"bod" in the pop!lation. Do#ernments ma" also impose price controls on certain prod!cts to protect local prod!cers from international competition that is deemed !nfair. =!rthermore, pricing is infl!enced indirectl" b" la$s and reg!lations that necessitate prod!ct modifications in compliance $ith different technical specifications; health and safet" standards; en#ironmental protection acts; electric, $eight, and meas!rement s"stems; and the li e that ma" pre#ail in foreign mar ets *1!&&ell 19,8; Ca#!sgil, 6o!, and 4aid! 1993; Bo!glas and :ind 198<+. 'o ma e the re3!ired modifications, firms inc!r e(tra costs, $hich forces them either to charge higher prices or to compress their profit margins. :e therefore e(pect the follo$ing: 92: 'he greater the similarit" in go#ernment la$s and reg!lations bet$een an 04C5s home and host co!ntries, the higher is the degree of pricing standardi&ation.

International firms often m!st rel" on e(isting distrib!tion channels to distrib!te their prod!cts in foreign mar ets. 'herefore, the n!mber, t"pe, competencies, costs, and margins of the intermediaries in#ol#ed in the process of transferring the prod!ct from the point of prod!ction to the end !ser ha#e a significant effect on a firm5s cost str!ct!re7 partic!larl" if the distrib!tion cost constit!tes a significant proportion of the total cost. 'his, in t!rn, ma" infl!ence price le#els, profit margins, and allied international pricing polic" elements *1!&&ell 19,8+. =or e(ample, if the distrib!tion channel !sed in a partic!lar foreign mar et in#ol#es a greater n!mber of intermediaries or channel members are less competent and efficient than those in the domestic mar et, a significantl" higher cost $ill be added to the prod!ct b" the time it reaches the end !ser. 'he additional cost inc!rred is li el" to res!lt in higher final selling prices andHor red!ced profit margins for the firm. Ander s!ch circ!mstances, a firm ma" also decide to modif" other elements of its international pricing polic", incl!ding sales and credit terms and disco!nts offered. It is therefore possible to h"pothesi&e the follo$ing: 93: 'he greater the similarit" in the distrib!tion infrastr!ct!re bet$een an 04C5s home and host co!ntries, the higher is the degree of pricing standardi&ation. 'he e(tent to $hich an 04C $ill achie#e its ob8ecti#es in a partic!lar foreign mar et $ill depend largel" on its abilit" to satisf" the needs and preferences of target c!stomers. 'herefore, a caref!l e(amination of o#erseas c!stomer characteristics and p!rchasing beha#ior is essential in selecting an appropriate pricing strateg" for a specific foreign mar et. Erice le#el is among the most important criteria !sed b" c!stomers in e#al!ating competing prod!cts *;e#itt 1983+. 9o$e#er, not all c!stomers are price sensiti#e; other criteria *e.g., prod!ct 3!alit" and performance+ ma" be e3!all" or e#en more important to certain c!stomers *Bo!glas and :ind 198<+. 'herefore, in de#eloping its pricing polic", an 04C m!st be a$are of foreign c!stomers5 preferences, perceptions, and p!rchasing beha#iors $ith respect to #ario!s price le#els. / standardi&ed pricing polic" is more appropriate if domestic and foreign c!stomers place an e3!al emphasis on and ha#e similar perceptions of price. 'his is more li el" to happen $hen a compan" is targeting similar c!stomer segments in domestic and foreign mar ets *)ain 1989+. 'herefore, $e s!ggest the follo$ing: 9-: 'he greater the similarit" in c!stomer characteristics and p!rchasing beha#ior bet$een an 04C5s home and host co!ntries, the higher is the degree of pricing standardi&ation. 'he stage of E;C is a f!ndamental #ariable affecting b!siness strateg" */nderson and 6eithaml 198-+. 'he life c"cle of a prod!ct consists of fo!r ma8or stages77 introd!ction, gro$th, mat!rit", and decline77and mar eting strateg" programs differentiate across the #ario!s stages. %e#eral empirical st!dies demonstrate the important role E;C pla"s in determining the degree of international mar eting strateg" standardi&ation *1aalba i and 0alhotra 199.; )ohnson and /r!thanes 199.+. 1eca!se of possible differences in economic and mar et de#elopment le#els among co!ntries, some prod!cts ma" be at different stages of their life c"cles in different co!ntries *1!&&ell 19,8+. /s a res!lt, 04Cs ma" need to modif" their pricing programs to ta e acco!nt of partic!lar local mar et conditions *2a! and Ereble 198<+. 'he significance of s!ch an approach diminishes in circ!mstances in $hich there is no difference in a prod!ct5s life

c"cle stage bet$een the domestic and international mar ets *%orenson and :iechmann 19<.+. :e therefore h"pothesi&e the follo$ing: 9.: 'he greater the degree of similarit" in the stage of E;C bet$een an 04C5s home and host co!ntries, the higher is the degree of pricing standardi&ation. :e gathered data for this st!d" from a mail s!r#e" of man!fact!ring s!bsidiaries of 04Cs operating in the Anited Fingdom. :e de#eloped the sampling frame for this st!d" !sing the =inancial /nal"sis 0ade ?as" electronic database of A.F. firms. :e identified <0, man!fact!ring s!bsidiaries of 04Cs, $hich originated mostl" from the Anited %tates, Derman", and )apan. :e then contacted each of these firms b" telephone to ens!re that the correct address of each compan" $as a#ailable, disco#er $hether there $as a prod!ct or prod!ct line that both the parent firm and its A.F. s!bsidiar" prod!ced and mar eted in their home mar ets, identif" the person in each compan" $ho $as the most 3!alified to pro#ide the re3!ired information *i.e., the e" informant+, and enco!rage respondent participation in the s!r#e". Apon completion of the telephone contacts, $e e(cl!ded 201 firms for a #ariet" of reasons, incl!ding an absence of common prod!cts in the portfolios of the parent firm and its A.F. man!fact!ring s!bsidiar", a compan" polic" of not ta ing part in e(ternal research st!dies, a change in the firm5s stat!s as a res!lt of a merger or ac3!isition, or the !na#ailabilit" of correct contact details. In .0. of the <0, *<2I+ firms, $e identified indi#id!als $ho met the no$ledgeabilit" criterion for e" informants and $ere $illing to participate and $hose companies had a prod!ct or prod!ct line that the parent firm also man!fact!red and mar eted in its o$n domestic mar et. /ll these firms $ere targeted in this research. :e de#eloped the 3!estionnaire !sed in this research in se#eral steps. :e initiall" re#ie$ed the rele#ant literat!re and sim!ltaneo!sl" cond!cted e(plorator" inter#ie$s $ith e(ec!ti#es in s!bsidiaries of 04Cs to identif" items for operationali&ing the constr!cts !nder in#estigation. :e designed a preliminar" 3!estionnaire, $hich $e then as ed se#eral academic researchers in the field of international mar eting to e#al!ate; the" ser#ed as e(pert 8!dges to appraise the face #alidit" of the items selected. =inall", $e e(tensi#el" pretested and refined the re#ised 3!estionnaire in personal inter#ie$s $ith managers in s!bsidiaries of 04Cs, $hich th!s ass!red content #alidit". Ca#!sgil and 6o! *199-+ arg!e that an" st!d" on international mar eting strateg" standardi&ation cond!cted at the o#erall compan" le#el is li el" to res!lt in confo!nded and th!s !nreliable findings. 'his is beca!se international firms often emplo" different mar eting strategies across co!ntries and prod!ct7mar ets. 'herefore, in addressing this problem in the st!d" of pricing strateg" standardi&ation of 04Cs, $e adopt the prod!ct or prod!ct line as the !nit of anal"sis. %pecificall", $e as respondents to ans$er the 3!estions of the research instr!ment $ith reference to a partic!lar prod!ct or prod!ct line their compan" *i.e., the s!bsidiar"+ is man!fact!ring and mar eting in the Anited Fingdom b!t that is also man!fact!red and mar eted b" the parent firm in its home mar et.

'he e(tent of international pricing strateg" standardi&ation $as meas!red on the basis of fi#e items *see 'able 1+. 2espondents $ere as ed to compare the pricing polic" follo$ed b" the s!bsidiar" $ith that p!rs!ed b" the parent compan" in its home mar et. / se#en7 point rating scale, anchored b" >#er" different> *1+ and >#er" similar> *<+, $as !sed to capt!re indi#id!al responses. 2egarding the factors that potentiall" infl!ence pricing strateg" standardi&ation, a set of items $as !sed to meas!re the degree of similarit" in economic and legal en#ironments, c!stomer characteristics and beha#ior, and distrib!tion infrastr!ct!re bet$een the A.F. mar et and that in $hich the parent firm $as based *see 'able 2+. /gain, responses $ere capt!red on a se#en7point scale ranging from >#er" different> *1+ to >#er" similar> *<+. =ollo$ing Fotabe and @m!ra *1989+ and )ohnson and /r!thanes *199.+, a single item $as emplo"ed to assess the e(tent to $hich the focal prod!ct or prod!ct line is in the same life c"cle stage in both the Anited Fingdom and the parent firm5s home mar et. / se#en7point scale, anchored b" >strongl" disagree> *1+ and >strongl" agree> *<+, $as !sed to meas!re participant responses. 'he g!idelines of the total design method *Billman 19<8+ $ere follo$ed to enhance respondent participation in this mail s!r#e". / cop" of the 3!estionnaire, together $ith a self7addressed, postage7paid en#elope and a co#er letter, $as personall" mailed to the e" informant in each target firm $ho had been identified d!ring the telephone contacts. 2eminderHthan 7"o! postcards to all managers and t$o additional follo$7!p mailings, follo$ed b" t$o f!rther reminders, prod!ced 129 !sable responses. 'herefore, a satisfactor" response rate of 2,I $as achie#ed. 'able 1. 'able 2. 'o assess possible nonresponse bias, $e follo$ed /rmstrong and @#erton5s *19<<+ formal e(trapolation proced!re, $hich is based on the contention that, as contrasted $ith earl" respondents, late respondents are more li el" to be similar to nonrespondents. Asing a t7test !nder the ass!mptions of both e3!al and !ne3!al gro!p #ariances, $e fo!nd no significant bet$een7gro!p mean differences bet$een the earl" and late respondent gro!ps $ith regard to an" of the #ariables e(amined in the st!d". :e therefore concl!de that nonresponse bias is not li el" to be a problem in this research. %catter diagrams and bi#ariate correlation anal"ses pertaining to *1+ the international pricing strateg" standardi&ation indicators and *2+ the e(ternal elements that potentiall" infl!ence the degree of pricing standardi&ation indicated that certain items $ere highl" correlated. Erincipal components anal"sis $as th!s emplo"ed in each set of items to e(plore the presence of an !nderl"ing str!ct!re in the data. 'able 1 e(hibits the res!lts of principal components anal"sis for the international pricing strateg" standardi&ation items. :hen $e !sed an eigen#al!e of one or greater as the

factor selection criterion along $ith the screen test, a single7factor sol!tion emerged that e(plained nearl" <0I of the total #ariance. 'able 2 sho$s the principal components anal"sis res!lts $ith respect to the en#ironmental elements that potentiall" infl!ence the degree of pricing standardi&ation. / fo!r7factor sol!tion emerged that acco!nted for appro(imatel" ,<I of the total #ariance. 'he sol!tion feat!red strong indi#id!al loadings on each factor, enabling straightfor$ard interpretation. 'he fo!r factors ha#e been labeled legal en#ironment, c!stomer characteristics, economic conditions, and distrib!tion infrastr!ct!re. =actor scores $ere then comp!ted for all fi#e factors that emerged for !se in s!bse3!ent anal"sis. 0!ltiple regression anal"sis $as !sed to estimate the relationships of economic conditions, legal en#ironment, distrib!tion infrastr!ct!re, c!stomer characteristics, and stage of E;C *independent #ariables+ $ith s!bsidiar" performance *dependent #ariable+, th!s testing 9179.. /s sho$n in 'able 3, both the goodness7of7fit and e(planator" po$er of the estimated regression model $ere acceptable. 'he anal"sis re#ealed fo!r significant, positi#e relationships in the e3!ation, pertaining to c!stomer characteristics, legal en#ironment, economic conditions, and E;C stage. 'hese res!lts s!ggest that the degree of international pricing strateg" standardi&ation of 04Cs is infl!enced b" the le#el of similarit" bet$een home and host co!ntries in terms of c!stomer characteristics, legal en#ironment, economic conditions, and E;C stage. 4o relationship $as established bet$een similarit" in distrib!tion infrastr!ct!re and pricing standardi&ation. 'herefore, it can be concl!ded that 91, 92, 9-, and 9. are #alidated and 93 is re8ected. Bespite the s!bstantial amo!nt of research attention de#oted to the s!b8ect of mar eting program standardi&ation in international mar ets, little empirical $or has been !nderta en e(amining the iss!e of standardi&ation $ithin the conte(t of 04Cs5 pricing strateg". 'o contrib!te to$ard filling this #oid in the global mar eting literat!re, the foc!s of the present st!d" is the nat!re of pricing strategies follo$ed b" 04C man!fact!ring s!bsidiaries and the identification of the factors that dri#e the e(tent of international pricing strateg" standardi&ation. 'he st!d" fo!nd that the ma8orit" of the participant 04C s!bsidiaries adopt a relati#el" high degree of pricing strateg" standardi&ation. 'his is signified b" the mean scores, standard de#iations, and one7sample t7test res!lts for the items !sed to meas!re the pricing standardi&ation constr!ct *see the /ppendi(+. 'his e#idence ma" be attrib!ted to the fact that the #ast ma8orit" of the sample firms originate in the Anited %tates, Derman", )apan, or another de#eloped nation. 'hese co!ntries ha#e considerable resemblance to the Anited Fingdom in their le#els of economic, ind!strial, and mar et de#elopment, and this similarit" is cond!ci#e to the p!rs!it of international pricing standardi&ation. 9o$e#er, pre#io!s research sho$s that a high le#el of pricing standardi&ation is !ncommon among 04Cs that operate in less de#eloped host mar et conte(ts compared $ith their home mar et bases *e.g., @&somer, 1od!r, and Ca#!sgil 1991+. 4otabl", o!r findings appear to s!ggest that the opposite is tr!e for 04Cs domiciled in a de#eloped co!ntr" and operating in another de#eloped co!ntr".

2egarding the determinants of pricing standardi&ation, the res!lts indicate that the e(tent to $hich 04Cs standardi&e their international pricing strategies depends on certain en#ironmental and mar et conditions7the degree of similarit" bet$een a firm5s home and host mar ets in terms of economic conditions, legal en#ironment, c!stomer characteristics, and stage of E;C. 'hese findings are consistent $ith earlier research efforts that ha#e e(amined determinants of standardi&ation, b!t $ithin the frame$or of an o#erall mar eting strateg" *e.g., Bo!glas and :ind 198<; )ain 1989; )ohnson and /r!thanes 199.; %amiee and 2oth 1992; %amli and )acobs 199-+. 9o$e#er, the le#el of similarit" in the distrib!tion infrastr!ct!re bet$een home and host co!ntries $as fo!nd, contrar" to e(pectations, not to pla" an important role in the determination of the degree of international pricing standardi&ation. @ne possible e(planation for this res!lt is that distrib!tion costs represent a minor component of the prod!ct5s total cost and, in t!rn, ha#e no significant effect on the international pricing strategies of the participant 04Cs. 4e#ertheless, this is an iss!e that $arrants f!rther empirical in#estigation. 0anagerial decision ma ing regarding standardi&ation or c!stomi&ation of pricing strategies in international mar ets sho!ld be based on a thoro!gh anal"sis and assessment of the degree of similarit" *or difference+ bet$een the firm5s home and host mar ets. In this regard, fo!r factors7c!stomer characteristics and beha#ior, economic and legal conditions, and stage of E;C7m!st be ta en into acco!nt; o!r st!d" s!ggests that these elements are significant correlates of standardi&ed pricing programs. =!rthermore, beca!se the standardi&ation #ers!s adaptation decision is sit!ation specific, a separate anal"sis and assessment of the en#ironmental and mar et conditions that pre#ail in each targeted foreign mar et sho!ld be performed. 'hen, appropriate pricing strategies m!st be de#eloped $ith respect to each mar et. /t the same time, ho$e#er, special attention sho!ld be paid to the coordination of b!siness operations across different foreign mar ets and the e(ploitation of potential scale economies and s"nergies $ith the !ltimate ob8ecti#e of enhancing the o#erall compan" efficienc" and effecti#eness. 'he res!lts of the present st!d" s!bstantiate the concl!sion dra$n in pre#io!s empirical research *Ca#!sgil and 6o! 199-+ that s!ccess in international mar ets is $ithin the reach of management. Bespite the e(istence of a large and comple( set of factors that infl!ence international b!siness acti#ities, managers ma" be able to enhance the performance of their firms b" form!lating and implementing mar eting programs that match the en#ironmental and mar et conditions of each foreign mar et targeted *see Ven atraman and Erescott 1990+. It sho!ld be remembered that beca!se pricing affects the re#en!e side of the profitabilit" e3!ation, the !ltimate long7term ob8ecti#e of managers in setting international pricing polic" centers on re#en!e ma(imi&ation. 'his ob8ecti#e can be achie#ed thro!gh either premi!m pricing $hen mar et conditions are fa#orable *i.e., demand is strong and competition is $ea + or competiti#e pricing $hen the" are hostile *i.e., demand is $ea and competition is intense+. %ometimes, ho$e#er, firms ma" be forced to adopt !niform pricing across mar ets as a defensi#e meas!re against the gra"7 mar et imports of !na!thori&ed intermediaries that are completel" o!t of their control *Ca#!sgil 199,+.

'able 3. Certain limitations e#ident in the e(plication of this st!d" sho!ld be ta en into acco!nt. =irst, the empirical in3!ir" foc!sed on a specific international mar et frame$or *i.e., the Anited Fingdom+, $hich s!ggests that the res!lts ma" s!ffer from limited e(ternal #alidit". 'herefore, readers sho!ld e(ercise ca!tion in attempting to generali&e from this in#estigation, especiall" if ma ing inferences to other significantl" different economic settings s!ch as former ?astern 1loc or ne$l" ind!striali&ed regions. 'esting the e(ternal #alidit" of the present e#idence re3!ires an e(amination of the iss!es addressed in this st!d" $ithin other international b!siness conte(ts. %econd, the st!d" emplo"ed a cross7sectional research design that pre#ents !s from ma ing ca!seHeffect inferences. =!t!re research efforts ma" consider the !se of a longit!dinal methodolog" that, tho!gh costl" and time cons!ming, can help trac d"namic phenomena s!ch as the relationships of e(tent of international pricing strateg" standardi&ation $ith its determinants. 'hird, beca!se of the descripti#e nat!re of the present st!d", combined $ith the limited amo!nt of a#ailable empirical e#idence, a relati#el" limited n!mber of potential independent #ariables ha#e been e(amined. =!rther research sho!ld in#estigate the significance and relati#e importance of other contingenc" factors. =or e(ample, more emphasis sho!ld be placed on in#estigating the infl!ence of #ario!s firm characteristics and prod!ct7 andHor ind!str"7specific factors on the degree of international pricing strateg" standardi&ation. Di#en the absence of pertinent empirical e#idence, there is a need for more e(plorator" research to gain insights into the interrelationships among these #ariables and ho$ the" affect international pricing programs. =o!rth, the present st!d" loo ed onl" into the content aspect of standardi&ation $ith reference to pricing. /nother rele#ant aspect co!ld be process standardi&ation, $hich in#ol#es the !se of !niform str!ct!res and processes for the design, implementation, and control of mar eting programs in o#erseas mar ets *)ain 1989+. =!t!re research efforts co!ld add to the bod" of e(isting no$ledge b" e(ploring the e(tent of standardi&ation of the process 04Cs follo$ in form!lating their pricing strategies across different foreign mar ets. =inall", a nat!ral e(tension of the present st!d" $o!ld be to consider performance o!tcomes of international pricing standardi&ation. 'he p!rs!it of a partic!lar international pricing strateg" ma es sense from a managerial perspecti#e onl" to the e(tent to $hich it has a positi#e effect on the performance of the firm. Concept!al and empirical st!dies foc!sing on the dri#ers and performance conse3!ences of international mar eting pricing standardi&ation $o!ld ha#e important implications for both theor" de#elopment and the ad#ancement of management practice in the field. /CF4@:;?BD0?4'%

'he a!thors recei#ed a 1est Eaper /$ard for this article at the 2000 /merican 0ar eting /ssociation International Conference, 0ar eting %trateg" for Dlobal @rgani&ations, in 1!enos /ires, /rgentina. 'he a!thors than the anon"mo!s )I0 and conference re#ie$ers for their constr!cti#e comments and helpf!l s!ggestions. /ppendi(. J2eferenceK L Vie$ reference page $ith lin s 2?=?2?4C?%

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1odde$"n, )ean )., 2obin %oehl, and )ac3!es Eicard *198,+, >%tandardi&ation in International 0ar eting: Is 'ed ;e#itt in =act 2ightM> 1!siness 9ori&ons, 29 *4o#emberHBecember+, ,97<.. 1!&&ell, 2obert B. *19,8+, >Can Co! %tandardi&e 0!ltinational 0ar etingM> 9ar#ard 1!siness 2e#ie$, -, *4o#emberHBecember+, 102713. Ca#!sgil, 'amer %. *199,+, >Ericing for Dlobal 0ar ets,> Col!mbia )o!rnal of :orld 1!siness, 31 *:inter+, ,<7<8. and %haoming 6o! *199-+, >0ar eting %trateg"7Eerformance 2elationship: /n In#estigation of the ?mpirical ;in in ?(port 0ar et Vent!res,> )o!rnal of 0ar eting, .8 *)an!ar"+, 1721. and D.0. 4aid! *1993+, >Erod!ct and Eromotional /daptation in ?(port Vent!res: /n ?mpirical In#estigation,> )o!rnal of International 1!siness %t!dies, 2- *3+, -<97.0,.

Craig, C. %am!el and %!san E. Bo!glas *199,+, >Be#eloping %trategies for Dlobal 0ar ets: /n ?#ol!tionar" Eerspecti#e,> Col!mbia )o!rnal of :orld 1!siness, 31 *%pring+, <0781. C&in ota, 0ichael 2. and I o /. 2on ainen *1998+, International 0ar eting. =ort :orth, 'N: Br"den Eress. Biamantopo!los, /., 1.1. %chlegelmilch, and ).E. B! Eree& *199.+, >;essons for Ean7 ?!ropean 0ar etingM 'he 2ole of Cons!mer Ereferences in =ine '!ning the Erod!ct7 0ar et =it,> International 0ar eting 2e#ie$, 12 *2+, 387.2.

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and %!san E. Bo!glas *198,+, >'he 0"th of Dlobali&ation,> )o!rnal of Cons!mer 0ar eting, 3 *%pring+, 2372,. Ca#as, Ag!r *199<+, >Eatterns and Beterminants of Dlobal 0ar eting,> )o!rnal of 0ar eting 0anagement, 13 *2+, 1.37,-. 1ronisla$ ). Verhage, and 2obert '. Dreen *1992+, >Dlobal Cons!mer %egmentation Vers!s ;ocal 0ar et @rientation: ?mpirical =indings,> 0anagement International 2e#ie$, 32 *3+, 2,.7<2. 6o!, %haoming and %. 'amer Ca#!sgil *199,+, >Dlobal %trateg": / 2e#ie$ and an Integrated Concept!al =rame$or ,> ?!ropean )o!rnal of 0ar eting, 30 *1+, .27,9 !Author Affiliation# 0arios 'heodosio! and Constantine %. Fatsi eas !Author Affiliation# *c+ )o!rnal of International 0ar eting Vol. 9, 4o. 3, 2001, pp. 1718 I%%4 10,97031N

!Author Affiliation# '9? /A'9@2% !Author Affiliation# 0arios 'heodosio! is ;ect!rer in 0ar eting, %chool of ?conomics =" 0anagement, Ani#ersit" of C"pr!s. !Author Affiliation# Constantine %. Fatsi eas is %ir )!lian 9odge Chair in 0ar eting =r International 1!siness, Cardiff 1!siness %chool, Cardiff Ani#ersit".