0483-A1

An Analysis of International Marketing Strategies Formulation: The Development of a Model and Empirical Evidence for The Brazilian Pulp and Paper Sector

João Carlos Garzel Leodoro da Silva^[1], Rubens da Costa Santos and Gilson Martins

ABSTRACT

This paper is made up of two components: 1) a model for explaining the dynamics of formulation of international marketing of the firms and 2) the application of the model in the pulp and paper sector in Brazil. To make possible the development of this model, a number of previous theoretical propositions had to be analysed in order to build a comprehensive background for this study. The data for the empirical part of this research was gathered from Brazilian exporting paper and pulp firms through questionnaires addressed to the top managers.

1 Objectives

The main objective of this paper is to formulate a theoretical model for explaining the dynamics of formulation of international marketing of the firms. On another hand, this paper aims to demonstrate the applicability of the model with the use of a study case that was developed with the data gathered from the top managers of Brazilian Pulp and Paper Industries.

2 Bibliographical Review

According to AYAL & ZIF (1979), firms can opt among various international strategies; depending on the situational factors it faces, such as those related to the firm itself, its products or marketplace. By the other hand, KOH (1991) considers that the firm’s managers will be more prone to modify the marketing strategy if there is a higher marketing commitment regarding to the export activity, as well as a major knowledge of these and also the foreign market.

To support the proposition of a framework for explaining the events associated with export activity, some models were chosen on the literature, (THORELLI, 1977, cited by KOH, 1991; KOH, 1991; LEE, 1987; SHIPP, 1990; DA ROCHA, 1994).

The export performance is a measure for the administration board desired results (DA ROCHA & CHRISTENSEN, 1994; KAYNAK, 1992).

According to GHOSHAL (1987) the international strategies must be based on competitive advantages. The literature on strategies reveals that the influence of external environment, the influence of the industry, the nature of the competitors and organizational variables must be known (KOTLER, 1993). Other studies focus on the relationship of competitive advantage and the strategy, but fewer empirical studies have studied on separating the effects of the various dimensions of competitive advantage in the international marketing scope (GOMEZ-MEJIA, 1988).

The multinational firm marketing strategy formulation process might embrace a chain of decisions regarding the business itself (SZYMANSKI; BHARADWAJ & VARADARAJAN (1993). Some papers identify the perception of managers and its relationship with some marketing variables and export variables, (DA ROCHA & CHRISTENSEN, 1994).

With regard to the marketing mix, the advantages on products, KOH (1991) came up with the hypotheses that a firm prone to modify its products to satisfy its clients would have a better performance. On another instance, KHAN (1978) and McGUINNES & LITTLE (1981) suggest that new products tend to have greater advantages on foreign markets. When talking about the advantages on prices, KOH (1981) concludes that a firm will better perform when the price of products on foreign marketplaces is relatively higher than its price on national marketplace. CUNNINGHAM & SPIEGEL (1971) consider the special prices as the biggest influence in export performance, while for KOH & ROBICHEAUX (1988) the level of price have a significant relation with profitability.

Exporters can promote their products by means of: a) personal sales; b) Sales promotion; c) Advertising and d) Publicity (SAMIEE, 1982). For TOOKEY (1964), advertising was positively correlated with exports, while the promotional effort had positive influence on export success for KIRPALANI & MACINTOSH (1980).

GRIPSRUD (1990) states that one of the objectives for exporting programs is to increase exports on future time. For identifying firm’s objectives, the foreign market attractiveness and profitability shall be considered, where the exporting behavior must be considered as a process on which the export activity is preceded by some evaluation stage, and this one results from some attitude regarding the foreign marketplace.

Export experience is introduced as an additional variable on the GRIPSRUD (1990) model. The characteristics of firms, product, as well as the perception of obstacles and opportunities on the international marketplace influence this variable. Ideally, changes on the perception level have to be analyzed on a longitudinal research framework. Unfortunately, this is not possible, as shown on the pertinent literature. Several authors have been inferred about the perception after the export experience had been acquired.

3 Materials and Methods

The first part was the development of a consistent model for explaining export performance. The development of this model is demonstrated in a stepwise manner along the first part of the results section of this paper.

The empirical evidences for the theoretical framework developed on this study was carried out by means of a structured questionnaire answered by the decision makers of a sample of Brazilian pulp and paper firms.

a) Firms’ Characteristics;
b) Perceived Export performance;
c) Perceived Barriers;
d) Perceived Incentives;
e) Perceived Competitive positioning;
f) Firm’s objectives;
g) International marketing Strategies.

Each of these variables was measured by a sum of a number of items, in that Crombach’s Alpha Test measured the statistical significance. The respondent could answer each item by choosing values from 1 to 5 (Lickert’s Scale - 1 - not all important until 5 - totally important), equivalent to the grades of importance given to the variable. As the gain of experience is internally of each person, the answers comprehended two scenarios: a) the past period until the moment on which the questionnaire was been answered and b) the perception for the next five years. The right and left side of Figure 9 represents the scenario respectively.

Using Pearson’s correlation between each variable and the strategies, considering past and future time separately, though tested the model developed on Figure 9. Additionally, the t statistic was also employed on this study to verify if there was a significant difference between past and future time variables.

With these results is shown how the top managers change his perception about the variables of the study.

4 Results

4.1 Developing a Theoretical Framework

The use of the models presented on the bibliographical review makes it possible to formulate the theoretical framework proposed on this study.

The internal dimension is formed by firm related variables, while the external variables are linked to the environment where the firm is inserted. This separation is important for “a posteriori” characterization of variables from these dimensions on formulating international marketing strategies.

The variables defined as part of the firm’s internal dimension are shown on Figure 1.

The characteristics of firms are represented by the following set of variables:

a) Firm’s organizational characteristics - these are structural variables inherent to the firm itself, as its size and age;

b) Management characteristics - these are human factor direct related variables, with decision-making force inside the firm (firm’s chief executive, board of directors, board of managers). The orientation of the high administration staff towards foreign commerce was present on several studies (DOMINGUEZ & SIQUEIRA, 1992; GRIPRUD, 1990; AXINN, 1988 and SAMIEE; WLTERS & DuBOIS, 1993);

c) Firm’s Strategic Orientation - designed to demonstrate if the firm has an internal or external market orientation. Human factors as well as situational factors make up this set of variables.

Internal incentives and barriers for participating on foreign trade - for an enterprise to ingress into international marketplace, or even if it already operates on it, it has to constantly verify the weak and strong points, advantages and disadvantages, i.e. a) incentives towards international marketplace participation; and, b) barriers made through participation on the international marketplace (DA ROCHA & CHRISTENSEN, 1994).

The external dimension (Figure 2, above) is also separated into three factors:

a) Firm’s competitive positioning - This factor is defined mainly by contrasting several marketing components with the same components from principal competitors from the international marketplace.

b) Incentives perceived by high-administrators towards participation on international marketplace - incentives of national and international markets as well as national and importing countries policies are embraced on this factor. These incentives are defined by the executives’ perceptions.

c) Barriers perceived by the high-administrators towards participation on international marketplace - defined by the same methodology demonstrated for the incentives.

The objectives established by the firms are the classic ones, that is: a) Profitability; b) Market share; and c) Share on new markets, (KOTLER, 1993 and WESTWOOD, 1991).

An international marketing strategy is a result of a complex and mindful work, as it is composed by stages that must be accomplished in order to satisfy optimization and achievement of proposed objectives. For achieving the intended objectives, firm and product positioning must be defined. At last, but not less important, these strategies should embrace the strategic procedure via the marketing mix. On figure 4 (above) it is shown the division of components that take part of the marketing strategy.

With the definitions brought to light until we are allowed to start building the model. Figure 5 shows the expected relationship for these structures towards international marketing strategies formulation. As it’s possible to verify, an international marketing strategy is defined as a function of internal and external variables and the firm’s strategic orientation.

As export performance is a variable of large importance, it is important to incorporate it into the model (Figure 6, above). This model is based on the hypotheses that the export performance is a function of strategies.

The trading activity on the foreign marketplace leads a firm to acquire knowledge continuously, while abrupt and significant ruptures don’t affect the marketplace on which they venture. The acquired experience can be named “learning continuum” or, as stated by GRIPSRUD (1990), “gain of experience”. Figure 7. The gain of experience is not so easy to evaluate directly, then is evaluate indirectly as is made in this paper.

Figure 7: The learning continuum approach

On Figure 8 it was included the future marketing strategies as influenced by export performance, as well as the situational factors the exporting firm faces. Although of a extreme importance, this is a relation poorly studied on international marketing literature, therefore, hypothetically, the performance is a consequence of the strategies, and by studying future strategies it’s possible to execute possible interventions whenever unnecessary.

The acquisition of experience, as shown on figure 8, is specified on the model as the perception of barriers and incentives that will redefine the strategic objective altogether with export performance. This set will redefine the firm’s international marketing strategies. As verified in the model, some variables are presented with mutual dependency.

The model of this study was divided into five areas: 1) Firm’s characteristics; b) Administration’s perceived past factors as well as past objectives; c) Undertaken marketing strategies and export performance; d) Acquisition of experience; and, e) Future international marketing strategies.

Figure 8: Model used on this study

The acquisition of experience is defined by an existing learning process comprehending all past marketing strategies formulation, and mainly when there is a response to this strategy, that is, when export performance is measured and evaluated. That means that the responses to marketing strategies were successful or unsuccessful, in such way that this knowledge will be employed of future marketing strategies.

So, the system incorporate a dynamic direction, as one may be able to analyze the difference on the strategic formulation on two distinct stages, as well as the difference among the variables influencing on these two stages. The organizational and administrative characteristics, along with the strategic orientation, are defined as constants.

Figure 9: The Model for explaining new International Marketing Strategies

4.2 Empirical Evidences for the Brazilian Pulp and Paper Sector

The Pearson’s Correlation Matrix for the strategies and the variables used on this study is shown on Chart 1. The strategy presented a significant correlation with almost all dimension considered: 1) Firm characteristics; 2) Export performance compared with internal and sector’s performance; 3) Export performance; 4) Perception of past opportunities; 5) Past objectives; 6) Perception of competitive positioning. Interesting enough, the past barriers didn’t present a significant correlation with the strategies adopted by firms. In a general manner, these results corroborate for proving the hypothesis posed on the left side of Figure 9, where the variables above mentioned influence the strategies put to use.

Chart 1: Pearson’s Correlation Matrix for the strategy (Past).

On Chart 2 we note that six variables presented significant correlation with future strategies: a) Firm characteristics; b) Perception of past barriers c) Perception of past opportunities; d) Past objectives; e) Perception of competitive positioning. In a similar manner as mentioned for the past strategies, this result strengthens the hypothesis presented on Figure 9.

Chart 2: Pearson Correlation Matrix for the strategy (Future).

Chart 3 shows that there is a significant difference between past performance and the desired performance. That is, firms will try to improve their relative performance in the sector in an overall as well as in the National marketplace.

When the barriers are analyzed, we note that there isn’t a statistical significant difference between perceived past barriers and future barriers.

Differently from the last variable, the group opportunities showed a significant difference. The objectives haven’t shown statistical significant difference between firms’ past and future objectives. That means that the expansion models that the firms use will continue to be the same, with changes only on the strategies for carry out these objectives.

The positioning adopted by the firms is one of the determinants for the formulation of international marketing strategies. Expanding this analysis, considering this variable Firms intend to have a better competitive position in comparison to its competitors. Finally, past and future strategies presented significant statistic difference, with a p level of 99%.

Chart 3: Changes on variables perception

* Significant at 90% probability level

5 Conclusions

Taking into consideration the model developed for this study and considering that “learning continuum approach” is internally of the each top manager, it’s utilization for explaining how was the change in the perception of each variable used in this paper, the following conclusion can be made:

• In general manner, the variables selected for the model explain the performance of firms in a appropriate way;

• In a general manner, firms demonstrated to have different perception for the perceptional factors for past and future time period;

• When the difference between past and future strategies are considered, we note that there is not difference between perceived past and future barriers as well as past and future objectives;

• The Strategies adopted in past time showed to present significant correlation with almost the totality of variables;

• The Strategies intended for future time showed to have significant correlation with almost the totality of variables;

• The difference between past and intended future strategies is statistically significant.

• The results showed how the gain of experience influenced the change of perception of the variables and the desire of strategies, that is important to help both the firm’s policy and the sector’s policy to improve the competitively.

6 References

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