Sunday, May 6, 2012

Should MNCs standardise or adapt their marketing strategy in Chinese Asian markets?

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Introduction


“Multinational Corporations (MNCs) which offer their products or services worldwide, are faced with the complex problem of deciding whether or not they should standardise their advertising operations across different countries.” (Laroche et. al. 001) The issue of whether international advertisers should standardise or adapt their commercial messages is indeed complex and has been the subject of much debate among both practitioners and academics for a number of years (Agrawal, 14). This debate necessarily centres upon issues relating to whether consumption is a cultural phenomenon and the extent to which attitudes toward a brand or a product are influenced by cultural variables (Huang 18). Contemporary business developments including trends toward integration within industries and the dissemination of global influences through the world-wide adoption of the internet have brought about a resurgence of interest in the standardisation issue. Moreover, questions as to the desirability or, indeed, morality, of MNCs adopting a standardised approach to their advertising strategy in Asia have been voiced, similarly focusing attention on the issue (Klein, 000, Yu, 00).


This paper will critically examine the standardisation/adaptation issue as it relates to the Taiwanese market, specifically to the luxury goods market. The marketing activities of S.T. Dupont, Taipei will be used to illustrate the contention that in Taiwan and, arguably, by extension the “Asian Chinese” market, MNCs will be most successful in putting across their commercial messages by using a standardised approach, particularly with regard to strategic marketing decisions. In examining the marketing activities of S.T. Dupont Taipei this study uses the hypotheses recently presented by Laroche et. al. as a framework by which to assess the efficacy of the company adopting a standardised marketing strategy in the Asian Chinese market. This study will also propose that the uniqueness of the Asian Chinese market necessitates a reworking of the above-mentioned model of advertising standardisation if it is to be of relevance to marketers operating in the region.


Chapter One


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1.1 The Work Placement


The author had lived and worked in Mainland China for three years from 18 to 001 and, therefore, made the decision that a placement outside mainland China would afford the best opportunity to expand upon existing knowledge of the region. The author had worked as P.A. to Joseph Wan, the Managing Director of Harvey Nichols in London in 001 and, during this time, had obtained a good basic understanding of that retail organisation and its parent (Dickson Concepts International Ltd) and sister companies (S.T. Dupont).


1. Background to the Study


This study is based upon a work placement conducted in partial fulfilment of the M.A in Chinese and Business at Leeds University. In June and July 00 the author spent six weeks working as Assistant to the Marketing Director at the S.T. Dupont offices in Taipei, Taiwan. The main duties of this role included;


i) assisting the Marketing Director with the translation of marketing and promotional information from the company Head Office in Paris


ii) Liaison with both the Marketing Director and the Managing Director to help plan the execution of marketing events for the launch of the Limited Edition, “Taj Mahal” product (planned for mid-August).


1. Research Methods and Data Used


This placement provided an excellent opportunity to observe, first hand, the way in which the subsidiary office functioned, particularly in relation to the company headquarters in Paris. The author had access to a wide range of primary data, primarily internal company data, including S.T. Dupont’s “Marketing Board”, detailing the company’s marketing strategy. The author had daily meetings and conducted interviews with both the Managing Director and the Marketing Director of the subsidiary office and worked daily alongside all members of clerical and accounting staff in an open-plan office. This ensured that, in addition to Company data the author also had a wealth of anecdotal information resulting from this participative research.


The subject of advertising standardisation has been written about extensively by academicians. The author, therefore, was able to draw upon the large number of journal articles on the subject, ultimately deciding to base the main argument of this paper on the framework presented by Laroche et. al. (000).


The Internet has also been an invaluable source of secondary data, particularly as it contains contributions from practitioners as well as academics.


1.4 Limitations


This study is based upon the author’s participative research. Although this has been a positive factor in developing the author’s understanding of the operations from the Taiwanese perspective, research conducted has undoubtedly been more influenced by the Taiwanese subsidiary office than by the company headquarters in Paris.


The six weeks the author spent living and working at the subsidiary office in Taipei were invaluable but such a short period of time is clearly insufficient to obtain a deep understanding of an organisation.


The author is able to speak and write Mandarin Chinese but not to a sufficiently high level to have understood everything that occurred in the subsidiary office during the work placement, this is clearly a major limiting factor.


For reasons of commercial confidentiality some financial data (for example, the precise amount of turnover generated by the company’s Taiwanese subsidiary in a calendar year) was unavailable to the author. This report undoubtedly would have benefited from this quantitative information but the author is of the view that qualitative data used has sufficiently illustrated the main contentions of this paper.





Chapter Two


.1 Background to the Company


S.T. Dupont is principally engaged in the manufacture and distribution of luxury lighters, writing instruments, leather goods, accessories, ready-to-wear clothing, watches and fragrances. Simon Tissot Dupont, a leather craftsman, founded the Company in 187 in France. In 17 the formerly family owned company was bought by the U.S. group, Gillette under whose ownership the first S.T. Dupont shop was opened in Paris in 180. In 187 Gillette sold S.T. Dupont to a Chinese group based in Hong Kong, Dickson Concepts Limited, a group founded in 180 by Dickson Poon, the group executive chairman. Through a family trust, Dickson Poon is the majority shareholder of both S.T. Dupont and Harvey Nichols group plc (a company Dickson Concepts bought in 11). Dickson Concepts restructured S.T. Dupont and introduced the brand to China with lucrative results (Berfield and Seno, 17). In 16 S.T. Dupont was floated on the second market of the Paris Bourse, a listing which earned Dickson Concepts $50 million, and the Company initiated its policy of opening stores around the world (the Company now has points of sale in thirty-nine countries). In 000 the Company created a second brand, X-tend S.T Dupont, a range of products that offer a new, more contemporary design at more affordable prices. This is part of a strategy similar to that undertaken by major fashion designers, nearly all of whom have launched second brands in the past few years (for example CK for Calvin Klein, Prada Sport for Prada, Versus for Versace and Bazaar for Christian Lacroix) covering more affordable products and thus preserving the character of the parent brand. This second brand is intended to reinforce the modern positioning of these products through its name and visual image and is a part of one of the Company’s core objectives of the past three years, to lower the age of the brand image.


. Financial Information


The financial information below details S.T.Dupont’s financial performance during the past three years.





Source www.st-dupont.com


S.T.Dupont reported a 7% increase in turnover between the 000 and 00 financial years, however, operating profit decreased by approximately % during the same period. Accordingly, S.T.Dupont’s operating margin has decreased by around 1% from 7.% to 6.%. The operating margin measures a companies operating profit relative to turnover and is a widely recognised profit level indicator, especially for companies involved in the wholesale or retail or goods. S.T.Dupont’s poor financial performance is reflected in its share price shown in the chart below.





Source www.multexinvestor.reuters.co.uk


S.T.Dupont’s share price decreased by 5% between 000 and 00; however, the top 40 companies listed on the French stock exchange, fell by 5% during the same period. Given the performance of the CAC 40 during the same period, it is likely the poor financial results reported by S.T.Dupont were primarily as a result of macro-economic factors, such as interest rates, inflation or consumer confidence, which affected the whole market. However, other factors which could result in poor performance, such as mismanagement and long term strategic decision making can not be discounted on the basis of the information outlined above.


. S.T. Dupont in Taiwan � History and Future Prospects


S.T. Dupont’s presence in Taiwan is part of the parent company’s overall strategy of establishing a strong, global presence for all its luxury retail outlets. The company’s confidence in the Taiwanese market is attested to by its’ most recent acquisitions in the country.


On December 1th 001, Dickson Poon announced that Dickson Concepts had spent HK$100 million acquiring and expanding Italian clothing brand, Benetton’s distribution operation in Taiwan, obtaining exclusive rights for the Benetton brand. The company had taken over management of seventy-five shops, bringing its total number of shops on the island to one hundred and sixty. Dickson Poon said at the time of the announcement that the Company hoped to generate some NT$500 million from the deal with Benetton (Siam Future, 001).


.4 The Asian Chinese Market


This study concerns itself with the Taiwanese luxury goods market and, accordingly, all primary data has been obtained primarily from or in relation to Taiwan. Some secondary data, however, has been cited in this study which does not concern Taiwan alone (or, in some cases, which does not concern Taiwan at all) but which focuses upon other countries in the region. Tai (17) argued that mainland China, Taiwan, Singapore and Hong Kong may form a regionalised Asian Chinese market. This assertion is based not only upon the geographical proximity of these countries but upon the ethnic similarity of their populations. Historical events have ensured that these countries’ economic and cultural circumstances are not homogenous. That notwithstanding, in the light of arguments made, most notably by Tai (17) and Hofstede (180) relating to the cultural similarities between these countries, it seems cogent to assume that arguments made in relation to Taiwan may have a wider application, beyond the Taiwanese context, to other Asian Chinese countries. In the same way, arguments made and hypotheses formed regarding other countries in Chinese Asia may have a bearing upon the Taiwanese context, hence their inclusion in this paper.


.5 Luxury Goods


Luxury


1. Something inessential but conducive to pleasure and comfort


. Something expensive or hard to obtain.


. Sumptuous living or surroundings lives in luxury (Source The American Heritage Dictionary of the English Language, 4th Ed.)


Defining the concept of luxury is somewhat difficult, primarily because it is a highly subjective term. What is “inessential” to one person can be an essential requirement to another. Similarly, how one defines “expensive”, “sumptuous” and “conducive to pleasure” is largely dependant upon circumstances and perception.


Marketers frequently use the concepts of luxury and prestige interchangeably but, recent research has indicated that it may be a mistake to do so (Dubois and Czellar, 00). The terms luxury and prestigious when used as brand attributes have recently been defined as;


Consumers judge a brand prestigious when it represents an outstanding accomplishment. Although prestige and luxury can coexist when the product is viewed as representing “inherent, unique know-how”, the two do not necessarily go together. (For example, the U.S. Marines symbolises accomplishment, but clearly not a self-indulgence)


Luxury, unlike prestige, represents “self-indulgence…comfort, beauty, a sumptuous lifestyle…” everything more than what one needs. A narrower range of products and services fall into the luxury category, because they “are all related to comfort, beauty and refinement.”. Typically, respondents associated luxury brands with very specific industries hotels; restaurants; cosmetics; clothing; and jewellery. A brand can be luxurious but not prestigious � extraordinary accomplishment is not a prerequisite for self-indulgence. (Ibid.)


.5.1 Luxury Goods and Income Elasticity of Demand


In economic terms it is useful to make a distinction between luxury goods and normal goods in terms of their income elasticities of demand.


According to Begg et. al. (17), a luxury good has an income elasticity that is larger than one. A normal good has an income elasticity that is less than one. This definition indicates what will happen to the sales of luxury goods when incomes alter but prices remain unchanged. The budget shares of luxuries must rise when income rises. Because the income elasticity of demand for luxuries is greater than one, a 1 per cent rise in income increases quantity demanded (and hence total spending on luxury goods) by more than one per cent. Luxury goods tend to be high-quality goods for which there exist lower-quality, but quite adequate substitutes. It would, therefore, appear cogent to assume that in a time of economic downturn sales of luxury products would fall commensurate with market elasticity for the product. However, this assumption may be overly simplistic and, therefore, flawed as it is not merely economic theory which comes into play in this fickle category but complex demographic and psychological factors. We will now address these factors as we look at luxury goods in the Taiwanese market.


.6 Luxury Goods in Taiwan


The purchase of luxury goods is arguably a manifestation of consumer aspirations to live a lifestyle which enjoys the fruits of a social class ahead of them. Advertisers frequently employ aspirational marketing techniques when promoting the purchase of luxury products, the basic premise of which is “…reaching consumers and helping them deal with, ameliorate and understand issues of social place and personal identity.”(Koehn 00) Essentially, such advertisements communicate a message to consumers that ownership of a certain item will ensure that they are associated with the type of people or group depicted in the advertisement. In newly industrialised Chinese Asian societies the commercial messages projected by aspirational commercials are particularly potent as the brands create a world and depict a lifestyle that until recently had been beyond the means of local consumers;


“As China and most of Asia develops emerging middle classes striving to rise above their ancestor’s poverty, they are easy prey to media messages of rank and validation through consumer goods.” (Yu, 00)


It has been widely reported that prior to the Asian financial crisis of 17 the purchase of luxury brands in Chinese Asia was rife, even obsessive. The Amsterdam-based luxury retailer, Gucci, reported that, in the years leading up to the Asian financial crisis, Asia accounted for forty-five per cent of their total sales (Flagg, 000). More recent research has indicated that the popularity of branded goods in Asia (particularly Chinese Asia) shows no sign of diminishing. Beck et. al. (001) concluded from their own research that individuals in Asia greatly enjoy shopping and have a strong demand for branded products, stronger than Europe or North America.


The popularity of luxury goods in the Asian-Chinese market, primarily over the decade prior to the Asian financial crisis, has meant that goods which would have previously been considered as luxuries have become necessities for many Chinese Asian consumers. This revised relationship with luxury goods has, in turn, meant that consumers are more demanding of the quality of such goods, because when a good is considered an essential requirement it becomes important that the quality of that good is high.


Academic research indicates that consumers may increase reliance on relevant material symbols as a means to construct and preserve self-image (Soloman, 18; Braun and Wickland, 18) Implicit within advertisements for luxury goods is the message that attainment of the affluent lifestyle depicted can only be obtained by the ownership of status props as a somewhat crude signifier of wealth. Arguably, as more and more of the Chinese Asian population consider themselves to be middle-class, and feel confident in their new social status, the need for them to purchase products exclusively on the basis of the coded symbols of affluence that they project will diminish. A luxury brand name alone may no longer drive purchases (Lloyd, 000).


Asia’s romance with Porsches and Prada is maturing because the new wealthy class that emerged during Asia’s boom years is growing more discerning with age. (Flagg, Ibid.)


The increase in the number of middle-class consumers as a factor influencing the purchase of luxury goods is especially relevant when one assesses the Taiwanese market as most Taiwanese would describe themselves as middle class. Yet, even today, Taiwan is one of the most consumerist societies on earth where conspicuous consumption is enthusiastically celebrated. (World Desk Reference, 00)


Having now looked, in a general sense, at the luxury goods market in Taiwan we will now turn our attention to the specific marketing activities of one such multinational luxury goods company, S.T. Dupont. The next section will look at whether S. T. Dupont’s Taiwanese subsidiary office uses the same marketing strategy as the home market and whether key advertising decisions are made by the headquarters, the subsidiaries or both parties.


Chapter Three


.1 Strategic versus Tactical Marketing Decisions


In looking at the issues surrounding S.T. Dupont’s marketing strategy, it is important to first distinguish between strategic and tactical marketing decisions. Research indicates that control exerted by MNCs upon the marketing strategies of their subsidiaries is not uniform for both kinds of decisions. Analysis of MNC’s marketing strategies, therefore, must look at both decisions separately.


Tai (17) defines strategic marketing decisions as those which concern the primary objectives of the advertising campaign, the determination of the target segment, positioning, and the main style whereas tactical decisions concern how the company puts those decisions into action and focuses on execution style and media buying, for example.


. S.T. Dupont’s Advertising Strategy in Taiwan


S.T. Dupont’s marketing strategy in Taiwan is summarised by their Marketing Executive, Sunny Chen;


…over ninety per cent of our marketing strategy is devised in Paris and is not changed by us at all. We will, of course, translate some of the material we are sent from Paris and will, very occasionally, add and adapt material if we think it necessary. We, in Taiwan, decide in which publications the advertisements are placed. All our visual material comes from Paris and is not adapted at all to the Taiwanese market. We advertise on television in Taiwan and these advertisements come direct from Paris, are in English (We do not translate the slogan; “Cool, Calm, Confident” into Chinese) and feature exclusively Caucasian models. (See appendix )


From the above interview it seems clear that the S.T. Dupont Company favours a standardised approach to their strategic marketing strategy. Strategic advertising decisions are made at the board level in Paris. In an interview with the author, the director of S.T. Dupont, Taiwan, Kin Shin Cheng, explained that all the Company’s visual marketing material comes from Paris (see appendix ).


There is, however, a process of adaptation in place for the company’s tactical marketing decisions. Sunny Chen explains the adaptive process that the subsidiary office goes through


We work with a Taiwanese advertising agency which advises us about which publications we should advertise in…and how we can best execute our advertising campaigns. We work with a freelance graphic designer on an ad-hoc basis and she helps with the practical issues we need to organise when we launch an advertising campaign. For example, for the launch of our Limited Edition Taj Mahal product, she has negotiated with photo libraries and sorted out copyright issues to provide us with high quality photographs of the Taj Mahal which we are able to use at our press launch and in our store.


The author has had first hand experience of the subsidiary office’s adaptive process and is aware that the control the subsidiary has over tactical marketing decision-making is severely curtailed by the company headquarters. All marketing activities are planned by the marketing executive in accordance with objectives which have been agreed on by both the subsidiary and the headquarters. This plan is thoroughly checked and must be approved by the head office before it is implemented.


An example of this process, viewed by the author, was the planning of the launch event for the Limited Edition “Taj Mahal” product in July 00. The marketing executive, in consultation with the subsidiary director and, to a lesser extent, the author, devised a plan for the launch event for “Taj Mahal”. This plan had to be approved by a senior representative of the Head Quarters before it could go ahead. In this particular instance a member of the Head Quarters came over to Taipei as part of a regular, scheduled visit and gave his approval. Only then could the event go ahead.


. S.T. Dupont’s Advertising - A Primarily Standardised Strategy


We can, therefore, conclude that S.T. Dupont uses a largely standardised advertising strategy in Taiwan. Almost all of the company’s strategic marketing decisions are taken at the company headquarters in Paris, with visual advertising materials being produced only with the authority of the head quarters in Europe. Tactical decisions which are made by the subsidiary office are made to fulfil objectives which have been set and have to be approved by headquarters.


The extent of this marketing standardisation, particularly the way in which visual material and television commercials are not adapted in any way for the Taiwanese market is surprising when one considers that many commercials get their messages across through language, and both advertising practitioners and academics acknowledge that localising language is of great importance in increasing the efficacy of commercials across markets. S.T. Dupont’s decision to broadcast a television commercial in Taiwan without translating it first into Chinese, therefore, seems to go against most marketing theory.


There are, of course, tangible economic benefits for companies who chose to adopt a standardised strategy throughout global markets. These benefits include the creation of a stronger international identity through consistent positioning over time and cost reduction through economies of scale in advertising production. (Tai, 17). These economic factors alone however do not of themselves necessitate a standardised marketing strategy as a badly executed and ineffective marketing plan could potentially negate any financial savings made. There, clearly must be other reasons behind S.T. Dupont’s decision to standardise their marketing strategy and it is these reasons that will be looked at later in this paper. In the next chapter we will use academic research to identify whether S.T. Dupont’s company profile indicates a propensity towards the adoption of a standardised advertising approach.


Chapter Four


Analysis of S.T. Dupont’s Marketing Strategy Using an Academic Paradigm


If one accepts that S.T. Dupont use a standardised advertising strategy, it becomes useful to use an academic framework as a means of assessing whether decisions S.T. Dupont have made concerning their marketing tactics adhere to research conducted on the standardisation/localisation debate. Laroche et. al. (001) set out to formulate both an integrated framework of the advertising standardisation decision as it effects MNCs and a clear measurement and relational model of the role played by the degree of control MNCs have over their subsidairies in the advertising standardisation decision. They presented five hypotheses


Hypothesis 1 The degree of control of MNCs over their subsidiaries positively influences the degree of advertising standardisation


Hypothesis The similarities in market positions positively influence the degree of control of MNCs over their subsidiaries


Hypothesis The similarities in country environmental conditions positively influence the degree of control of MNCs over their subsidiaries.


Hypothesis 4 The level of decision power of a subsidiary negatively influences the degree of control of MNC over this subsidiary.


Hypothesis 5 The level of MNC’s manager’s familiarity with the foreign context positively influences the degree of control of the MNC over this subsidiary.


The following section will examine each of these five hypotheses to analyse S.T. Dupont. For ease of presentation of the authors main contentions, the hypotheses will not be examined chronologically. Hypothesis three will be looked-at last and will be assessed in a separate chapter as the main contentions of this paper concern hypothesis three more than any others.


4.1


Hypothesis 1 The degree of control of MNCs over their subsidiaries positively influences the degree of advertising standardisation.


A repeated focus of many studies concerning the standardisation/adaptation issue is the concept of control MNCs have over their subsidiaries in determining the level of advertising standardisation. This degree of control is described as “the major driving force behind the formulation of a standardised advertising strategy” (Tai and Wong 18)


S.T. Dupont is an organisation which tightly controls the activities of its subsidiaries. In addition to the company’s annual general meetings, regular meetings are held between senior staff from both the subsidiary office and the company headquarters. Kin Shin Cheng, the manager of S.T Dupont, Taipei explained to the author that on average, in every twelve month period he will travel to Paris for meetings at company headquarters around six times and a representative from headquarters will visit the subsidiary office on a further six occasions. In this way, close contact is maintained between the headquarters and the subsidiary office on roughly a monthly basis.


During the eight weeks that the author spent in Taipei, Kin Shin Cheng spent one of those weeks in Paris. In preparation for that week-long round of meetings all departments of the subsidiary office prepared extensive, in-depth reports on every business activity of the office including the office accounts, the performance of all points of sale both wholesale and retail and planned and previous marketing activities. These reports were analysed and discussed in Paris and allowed the company headquarters to better formulate the future strategy of their Taiwanese operations.


Kin Shin Cheng explained that, in addition to the close contact he has with the head quarters in Paris, he also has close personal links with France. He owns an apartment in Paris as well as Taipei, lived in France for eight years prior to working for S.T. Dupont and has family in France. He also speaks fluent French, an essential skill for the execution of his duties, much of which involves liaison between company head quarters and the subsidiary office which occurs on a daily basis.


The way in which these close links between the director of S.T. Dupont, Taiwan and the company headquarters are disseminated to all areas of the subsidiary organisation is illustrated by the fact that most of the training for all members of staff in stores across Taiwan is undertaken personally by the director of the subsidiary office. (appendix ) As the S.T. Dupont subsidiary office in Taiwan employs a total of just twenty nine individuals throughout the island, the director of the subsidiary is able to personally communicate the company’s policy and style of working to all members of staff with comparative ease.


4.


Hypothesis a The similarities between MNCs and their subsidiaries in terms of the image of a brand or a product as perceived by executives at MNC headquarters, the level of market development and the competitive context form a single factor called similarities in market positions.


Hypothesis b The similarities in market positions positively influence the degree of control of MNCs over their subsidiaries


Laroche et. al further justify this hypothesis by explaining the three categories by which existing research has defined Market position. For ease of explanation we will look at each category in turn to investigate whether or not S.T. Dupont adheres to the contentions of each category.


4..1


Perception of the Brand Across Markets


MNCs with a well known global image will understandably have a strong desire to control and maintain that image and will, therefore, tend to apply more control over their subsidiaries. Specifically, if consumers’ perceptions of the brands they buy are similar across countries, MNCs headquarters will have a higher degree of control over the subsidiary to ensure advertising standardisation.


S.T. Dupont is, indeed, a company that has a uniform image across global markets. Dow Jones Reuters Business Interactive describe the company as “…one of the world’s top makers of luxury lighters and high-end pens.” and goes on to explain that the company distributes through more than six thousand retailers worldwide as well as about a dozen company-owned stores, twenty six franchises and one hundred and sixty store-within-a-store outlets. The company is, clearly, very much a global operation.


According to Walter Wuest, President of S.T Dupont’s Supervisory Board and Dickson Poon’s business partner since 18, the rationale for Dickson Concepts buying S.T. Dupont in the first place was the desire for the company to be, on a global scale, “Number one in any business.” (Berfield and Seno, 17)


4..


The Level of Market Development in the Subsidiary and Home Country


This point proposes that similar levels of market development (by this we mean the development of the MNC’s products within respective markets), achieved by the MNCs both in their home country and in the subsidiary’s country would positively affect advertising standardisation across countries. It is axiomatic that an unfavourable condition for standardisation would be whereby similar products were in different stages of their life cycle in different countries. Laroche et. al. go on to assert that this could ultimately lead to the failure of the company’s marketing strategy.


Tai and Pae (00) have also stressed the importance of having a very similar level of brand familiarity in all markets in which the company trades its products. They contend that;


Global advertising standardisation makes sense only when a firm’s international marketing strategy centres on the development of brands that are similarly positioned in every market.


The company’s strategy of opening points of sale globally has occurred rapidly. The company’s policy of opening stores worldwide was only initiated in 16. In the six intervening years the company has opened stores in thirty eight countries (the country already had a store in France). The fact that many of these stores were built concurrently, and all were built within a short time of each other has meant that consumer perception of the brand is uniform across markets.


S.T. Dupont is a company which has focused aggressively upon promoting its products in a completely uniform manner throughout the thirty-nine countries in which it operates. This has ensured that it can claim to have very similar levels of market development in the majority of those thirty nine countries.


All the company’s new products, including limited edition products, are launched at exactly the same time in all countries in which the company trades. This has been particularly significant in recent years as, since 000, the company has launched a greater number of products than ever before. This increase in new product launches is part of the company’s strategy of lowering the age of S.T. Dupont’s target customers. This strategy has seen the company initiate the diffusion brand X-tend S.T. Dupont. A move which further strengthens the brand’s global identity.


Finally, the fact that all subsidiary offices base their retail operations upon the company’s “International Training Manual” which sets down in extremely unambiguous terms the way in which retail operations should be managed from country to country has ensured uniformity of retail practices across markets. All stores in all the subsidiary countries need to adhere to the company’s precise instructions regarding the display of products in stores, how gifts should be packaged etc. Uniformity of retail operations will necessarily go some way to securing uniformity of consumer perceptions across markets.


4..


Levels of Competition in the Subsidiary Country and the MNC Country


Similar competitive positions in MNC and subsidiary countries may lead to higher degrees of advertising standardisation. This similarity, in turn, facilitates headquarters decision-making regarding the competition, improves the level of control over the subsidiary and promotes a standardised company strategy.


The luxury goods market is one in which competition is fairly standard across markets. Tai (17) points out that the need for self-expression is a factor which drives consumers to purchase luxury and fashion brands and that this need is universal. This can create similar perceptions towards a luxury brand being marketed in different countries and means that marketers of fashion brands are more likely to use a standardised theme. In the Asian context, Tai contends that the same commercial for a fashion brand can be used across different Asian markets.


In the opinion of S. T. Dupont, Taipei’s director, Kin Shin Cheng, the company’s main competitors in Taiwan are other multinational European luxury goods brands, exactly as are the company’s main competitors in all the other markets in which they trade. The company’s biggest competitors are those whose product ranges are most similar to S.T. Dupont’s, namely Dunhill, whose product range is largely the same as S.T. Dupont’s, Montblanc for luxury pens and Cartier for lighters. (see appendix )


4.


Hypothesis 4a The skills or abilities of the subsidiary in terms of advertising strategy implementation and the extent to which decision making is delegated to the subsidiary by the MNC form a single factor called decision power of a subsidiary.


Hypothesis 4b The level of decision power of a subsidiary negatively influences the degree of control of MNC over this subsidiary.


This hypothesis concerns itself with levels of skill and expertise in the subsidiary office. These skills fall under such broad categories as proficiency, expertise, and the reliability of the subsidiary and its employees. Laroche et. al. propose that the degree of decision-making power delegated to the foreign subsidiary is strongly related to the skills component of the subsidiary. The more headquarters’ managers perceive the subsidiary as capable of decision-making, the more headquarters will delegate decisions to the subsidiary.


Tai (17) explains that this is a particularly relevant issue for the Taiwanese market as the shortage of skilled advertising executives in transferring global strategy is considered to be one of the major obstacles for subsidiary offices in the Taiwan market achieving a greater level of autonomy.


Sunny Chen, the subsidiary’s marketing executive explained in an interview with author that she is forced to delegate many of the tactical marketing decisions to third parties because she does not have sufficient experience to organise such activities herself. (see appendix three)


4.4


Hypothesis 5a The level of familiarity of the corporate executive with the foreign culture and with the business organisation of the subsidiary form a single factor called the MNC’s manager’s familiarity with the foreign context.


Hypothesis 5b The level of MNC’s manager’s familiarity with the foreign context positively influences the degree of control of the MNC over this subsidiary


As explained in the Limitations section in Chapter One, research for this paper has been conducted while working within the S.T. Dupont subsidiary office and may, therefore, present a somewhat distorted view of the workings of a multinational company. In contrast, the research conducted by Laroche et. al. focused upon the decision making process from the corporate level and more attention is therefore given to the MNCs managers characteristics. The degree of knowledge which MNC managers have of the country in which the subsidiary office operates has been described as a good predictor of the level of control that the headquarters would apply and of the potential level of advertising standardisation (Tai and Wong 18).


This knowledge from the MNC managers perspective is presented by Laroche et. al. in two different ways. For ease of analysis, we will address each dimension as it affects S.T. Dupont separately.


4.4.1


Corporate Executive’s Familiarity with the Country of the Subsidiary Office


An in-depth understanding of the local culture would better allow the executive in question to understand how the creative aspect of advertising standardisation should be executed to prevent any unfortunate culturally insensitive errors.





The Management structure of S.T. Dupont as outlined above indicates a strong leaning toward the employment of French executives, as one would expect from a French company that has its headquarters in Paris. Every member of the Management Board, which is responsible for the day-to-day decision making process of the company, are French. However, the supervisory board, without whose consent major company decisions cannot be executed, are all senior executives with links to Dickson Concepts Limited. Joseph Wan is the Managing Director of Harvey Nichols and Company Limited, a company also owned by Dickson Concepts, Charles Jayson is the director of Dickson Concepts, North America and Walter Wuest, the president of the Supervisory Board, is an executive director of Dickson Concepts and has been Dickson Poon’s business partner since 18 (source Berfield and Seno, 17). All members of the Supervisory Board are, therefore, high-profile executives who have long-established connections with the parent company and, by extension, with Chinese Asia. Dickson Poon, as majority shareholder of S.T. Dupont, is the company executive who has the final word on the company’s strategy. Dickson Poon, as a Hong Kong Chinese executive, still based in Hong Kong can certainly be said to have an excellent understanding of the cultural issues at work in Taiwan.


4.4. MNC Managers Familiarity with the Business Culture and Market Approach of the Subsidiary


A sound knowledge of the subsidiary would lead the MNC’s manager to a better understanding of the subsidiary organisation and to take a more active part in decision making.


The subsidiary office in Taiwan has been set-up under the directorship of S. T. Dupont as part of the broad, expansionist strategy of the company. Senior members of staff in the subsidiary office have been recruited by headquarters in Paris, with final approval for their employment given by Dickson Poon himself. These factors have ensured that company executives in Paris have a close understanding of the way in which the subsidiary office functions for two main reasons;


i) Headquarters maintain a tight degree of control over the subsidiary office


ii) Senior executives in the Taiwan office have been appointed and trained by headquarters. The way in which they operate is, therefore, well known to senior executives in Paris as they are working in strict accordance with guidelines dictated by headquarters.


Chapter Five


This chapter will assess the cultural differences between Taiwan and France to assess how applicable hypothesis three is to S.T. Dupont’s operation in Taiwan. This will necessitate the usage of two distinct academic frameworks and the discussion of different styles of advertsing.


5.1


Hypothesis The similarities in country environmental conditions positively influence the degree of control of MNCs over their subsidiaries.


Laroche et. al contend that the similarity in environmental conditions between the MNC’s country-of-origin and the subsidiary’s country can also impact upon the degree of control of the MNC over the subsidiary in selecting the level of advertising standardisation. It seems cogent to assume that attitudes toward a brand or a product will be influenced by cultural variables. Consequently, cultural variables in specific countries should be closely examined before assuming how universally applicable an advertisement might be.


We need, therefore, to address the issue of how culturally similar the country in which the subsidiary office is located (Taiwan) is to the country where the headquarters are located (France) to see if this hypothesis is correct for S.T. Dupont.


5.


Comparison of Taiwanese and French Culture Using Hofstede’s Paradigm


Because culture is such a subjective term, it is useful to use a well-researched academic framework by which to assess the extent to which cultural differences exist between France and Taiwan. Hofstede (180) presented a concise table of work-related values for different countries and used a four point criteria by which to assess different factors influencing countries and cultures. The four criteria are;


Power Distance - High power distance cultures are much more accustomed to larger status differentiation between individuals as a result of rank or status than low power distance cultures.


Uncertainty Avoidance - High uncertainty avoidance cultures prefer formal rules and will experience greater levels of anxiety if exposed to situations in which the outcome is uncertain than those from low uncertainty avoidance cultures.


Individualism - Collectivist cultures, which have low scores for individualism, tend to be group-oriented and impose a large psychological distance between those within ones own group and those outside ones group. Unquestioning loyalty to ones group is expected. Conversely, cultures which have a high score for individualism have fewer ties between the individual and his or her fellows.


Masculinity versus Femininity - In masculine cultures, sex roles are sharply differentiated and values deemed to be traditionally “masculine”, such as achievement and display of power, strongly influence cultural ideals. In feminine cultures, sex roles are less sharply differentiated.


Hofstede created a score for each of these four dimensions ranging from 0 to 100, with 0 being low at 100 being high.


The table below illustrates the difference between Taiwanese and French culture, according to Hofstede’s criteria.


Power Distance Uncertainty Avoidance


Individualism Masculinity


Taiwan 58 6 17 45


France 68 86 71 4


The figures for Power Distance, Uncertainty Avoidance and Masculinity, though different for France and Taiwan, are not so disparate that they merit in-depth analysis to see how those disparities would affect the standardisation of S.T. Dupont’s marketing campaigns.


The difference in scores for Individualism between the two countries, however, is so great that it merits deeper analysis. The fifty-four point differential in scores for the two countries places Taiwan and France in different cultural categories according to Hofstede’s criteria, ranking Taiwan as a collectivist country and France as an individualist one. Hofstede, therefore, proposes that there is a significant difference between the cultures of France and Taiwan, which would imply that Hypothesis three is not supported in the case of S.T. Dupont in Taiwan. It would, of course, be unrealistic to discount a hypothesis on the basis of one theory or piece of evidence alone, however compelling that theory might be. For this reason we will look at another indicator of cultural differences between Taiwan and France.


5. Analysis of Taiwan and France Using the Theory of High and Low Context Cultures


Hall (177) has classified countries as belonging to either high-context or low-context cultures. Hall contended that, in addition to the verbal element of communication, a non-verbal element, or context exists. In high context cultures context is an important element of the communication process. Hall argued that Chinese consumers belong to a high context cultural group that is characterised by the use of symbolism, non-verbal, and indirect verbal expressions (Tai and Pae, 00) Chinese people are involved in close relationships with each other, and therefore, maintain extensive information networks among family, friends, colleagues and clients. High context Chinese culture is intuitive and contemplative and tends to utilise opaque and indirect messages.


In contrast, Europe and in North America tend to be low-context cultures with fewer informational networks to negotiate. This means that people in these low-context cultures will require more detailed information from impersonal sources. People in low context cultures are analytical and action-oriented, and tend to use clearly articulated and spoken messages (De Mooij 18).


According to Hall’s contentions, therefore, there are significant differences between French and Taiwanese culture. Thus, two separate academic theories contend that Hypothesis three is not supported as it relates to S.T. Dupont in Taiwan as this is a company which uses a highly standardised marketing strategy but where significant differences exist between the home country and the subsidiary country’s culture.


We now, therefore, need to look at factors behind this discrepancy. For ease of presentation the following sections will analyse the two primary cultural differences which academic theory has identified exist between Taiwan and France in turn to see how S.T. Dupont’s decision to standardise their marketing strategy can be justified in the Taiwanese context.


5.4 S.T. Dupont’s Standardised Marketing Strategy in Taiwanese Collective Society


Research suggests that the purchasing behaviour and perceptions towards brands of individuals in a collectivist society will differ from those in a more individualist society (Huff and Alden, 18). In collectivist societies social normative factors appear to have a strong influence upon consumer attitudes. These social normative factors primarily stem from an increased awareness of the way in which members of society view individuals. Consumers from collectivist societies are particularly sensitive to how they are perceived by others and have, therefore, been found to be more susceptible to embarrassment than people from individualist societies. Strongly related to this embarrassment is the concept of “saving face”, which is particularly strong in countries with Confucian traditions, such as Taiwan (Hofstede and Bond, 188).


This factor has an impact upon the purchasing behaviour of consumers, as a consumer in a collectivist society would be much less likely than a consumer in an individualist society to make a purchase that would draw attention to their lack of wealth or status or, on a more esoteric level, their taste.


All these factors impact upon the motivation behind Chinese Asian consumers purchasing luxury products It follows, therefore, that commercials for luxury goods would be most effective if they were engineered to appeal to these same desires for social acceptance and status. In this way, advertisements reinforce both the fear of inferiority of members of a collectivist society and the validation of success through material consumption. In simple terms, advertisements for luxury goods in a collectivist society seek to proclaim the deeply unsubtle message; “If you don’t buy this product, people will think you are poor and lacking in taste, if you do buy this product, they will think you wealthy, with impeccable taste.”


Many of the advertisements for luxury brands in Taiwan use models and locations entirely divorced from the reality of the target consumer base. Even clothing stores such as Bossini and Giordiano, which are local brands (both are Hong Kong companies) which market mid-priced clothing, almost exclusively use Caucasian models to advertise their products.


As Yu (00) points out, it seems fair that advertisements for high quality foreign products would use images which depict the original customer base of those products. Although, concealed beneath the aspirational images used lies the morally ambiguous message that “foreign is good” which carries with it the implication that, by extension, “local is bad”. Tai and Pae (00) concluded that Chinese consumers show significantly higher purchase intention rates after viewing foreign commercials than local commercials;


…Chinese students have favourable perceptions of foreign cultures, and consider that “everything foreign is good. (Tai and Pae, 00)


These perceptions of Asian-Chinese consumers goes some way towards explaining S.T. Dupont’s usage of a standardised marketing strategy. The use of Caucasian models seems sensible given that products sold by S.T. Dupont are, in the main, manufactured in France. The favourable attitudes exhibited by Chinese consumers towards all things Western would also justify the use of models who do not resemble the consumers to whom those images are targeted. One could argue that this is just the nature of aspirational marketing, as indeed did Kin Shin Cheng, the director of S.T. Dupont, Taiwan who pointed out that this style of advertising is increasingly common in the luxury goods market. He used the example of another luxury goods brand to illustrate his point;


Gucci, for example has deliberately created a sexy and stylish image by advertising their products using images of young, slim, very attractive women. Of course, not all women who buy Gucci products fall into this narrow category, the point is they want to be perceived as being young, slim and sexy.


Aspirational marketing is not a phenomenon that occurs exclusively in Asian markets, as Kin Shin Cheng argues above. However, there is a great weight of evidence to support the view that luxury brands which advertise in an aspirational way will have great success with this strategy in Chinese Asia. One reason for that degree is access can be attributed to the pressure exerted upon individuals who live in a collectivist society.


Wang (000) has argued that Chinese consumers think that foreign commercials can help increase their knowledge of foreign cultures and products. Such commercials are perceived to be more entertaining and creative, in terms of execution, than their locally produced counterparts.


Wang’s contention goes some way to explaining why the company have chosen to advertise in Taiwan using the English language. If Chinese consumers enjoy exposure to foreign sourced commercials as a means of educating themselves about foreign cultures, it would follow that a three-word advertisement, in English would be viewed with alacrity by Taiwanese consumers as a means of enlarging their English vocabulary. On a purely anecdotal level, the author, in conversation with Taiwanese people in Taipei, found that when S.T. Dupont was mentioned many of them knew the company slogan “Cool, Calm, Confident” even if they spoke no English! By logical extension, if the purchase of luxury goods can be said to be about elevating oneself into a social sphere higher than ones own, it follows that a Taiwanese consumer who views a commercial for a luxury good which appears in the English language and then purchases one of that company’s products is, in a subtle way aggrandising him or herself. This is because ownership of one of that company’s products carries with it yet another desirable subtext; not only can they afford that company’s products but they are sufficiently well-educated to understand the foreign language that the product was advertised in.


The target audience for the company’s advertising strategy is, according to the subsidiary office director;


…male, around thirty years of age, professional, cultivated, self-confident and enjoys life…The essential characteristic of the S.T. Dupont customer in Taiwan is his (or her) affluence and desire to spend money!


Kin Shin Cheng admitted, in conversation with the author that the number of Taiwanese men who really do fit this profile is very small. There, are, however in his opinion, many Taiwanese people who are wealthier now than they have ever been before (he described them as nouveau-riche) and who want to be perceived, not merely as wealthy, but as sophisticated and urbane. An advertisement that is set in Paris, uses Caucasian models and is in the English language emits clear signals of sophistication, culture and wealth which, research suggests would be especially welcome in a collectivist society such as Taiwan.


5.5


S.T Dupont’s Standardised Marketing Strategy in a High Context Culture


Advertisements function to communicate a very specific message to their target audience. For this message to be successfully received the execution styles of advertisements must take the communication modes of different cultures into account. Different cultures have different methods of communication which vary substantially in their use of verbal and visual cues. (Tai and Pae, 00)


Two primary methods marketers use to communicate their commercial messages to their target audiences are informational and transformational styles of advertising. As these distinct advertising styles are thought to be received very differently by people in high and low context cultures they are particularly relevant to the contentions of this paper. It is, therefore, useful to clearly define each style before we can then move on to discussing the different implications for their usage.


5.5.1 Informational versus Transformational Advertising Styles


Informational messages focus upon functional and practical consumer needs by emphasising product features or benefits.


Transformational messages associate the experience of using the advertised brand with a unique set of psychological characteristics. Transformational advertising uses a selling premise based on the pull of associations.


5.6 Informational and Transformational Advertising Styles in High and Low Context Cultures


Put simply, it is thought that transformational advertising styles are better received by high context cultures and informational advertising styles are more successful in low context cultures (Tai and Pae, 00).


As people in low context cultures tend to be more comfortable with data and facts, successful advertising execution styles would be those which present facts


This article contributes to our understanding of the standardisation decision making process by integrating two organisational factors � decision power of subsidiaries and familiarity with foreign markets at HQ, with two cultural related factors, similarity in However, in order to ensure the feasibility of standardisation, the implementation of a common advertising strategy requires more than only cultural similarities. Indeed, MNCs headquarters have to face similar infrastructure (media available, technical equipment, cost) in the subsidiary’s country in order to apply the same advertising program as the one planned in their own country. If this condition were fulfilled, MNC’s headquarters would have more control over their subsidiaries because of their enhanced ability to analyse specific situations.


market position & country environmental conditions. The rationale for the model is that appropriate organisational and cultural situations are likely to facilitate the degree It seems clear from the above contentions that


of co-ordination and control by HQ, which in turn drives the extent to which marketing standardisation should be followed or not. This finding represents an


important step toward a better understanding of advertising standardisation at the level of the MNC’s headquarters.





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