Esic Market Economics and Business Journal
Vol. 44, Issue 3, September-December 2013, 9-31
The importance of market intelligence
in spanish firms’ exporting activity1, 2
Antonio Navarro-García*, Ramón Barrera-Barrera
and Ángel Francisco Villarejo-Ramos
Universidad de Sevilla
Marta Peris-Ortiz
Universitat Politècnica de València
Abstract
This research aims to respond to a research gap in the literature concerning the role of
market intelligence in export activity. In particular, we examine the effects of market intelligence on the interrelationships between market distances (domestic vs. foreign) perceived
by export managers, strategic marketing mix decisions (standardisation vs. adaptation)
and export performance (growth in foreign sales and satisfaction). The results of an empirical study using data from a sample of 212 Spanish exporters reveal that: (a) strategic decisions aimed at adapting the marketing mix to foreign markets have a positive effect on
export performance, (b) market distances associated with economic, legal, social, and cultural differences between Spain and overseas markets encourage conservative decision
making, embodied in a standardised international marketing mix (similar to that used in
Spain), (c) however, when export managers have relevant foreign market information and
analyses, market intelligence processes reduce perceived market distances and encourage
more proactive strategic behaviour (adaptation of the marketing mix), resulting in
improved export performance.
Keywords: Market Intelligence, Perceived Market Distances, Marketing Mix Adaptation,
Export Performance.
JEL codes: F20, M16, M31.
1
This paper was presented at the AEDEM Congress held in Islantilla –Huelva– (June, 2013) receiving
the award Esic Marketing Research.
2
This work was funded by the Excellence Project of Andalusia’s Government P11-SEJ-7042 “Orientación y Gestión de los Mercados Exteriores Por las Pymes Andaluzas. Análisis Estratégico y Propuestas de Mejora”.
* Corresponding author. Email: [email protected]
ISSN 0212-1867 / e-ISSN 1989-3558
© ESIC Editorial, ESIC Business & Marketing School
DOI: 10.7200/esicm.146.0443.1i
http://www.esic.edu/esicmarket
10
Antonio Navarro-García et al.
1. Introduction
Market globalisation and the interrelation of economies have significantly accelerated internationalisation processes throughout the world. In this context, exporting is a traditional channel for entry into foreign markets and a fundamental strategic option for ensuring the survival and growth of companies that have chosen to
internationalise (Cavusgil and Zou, 1994). Many companies consider exporting as a
way to counteract growing competition from abroad in domestic markets, broadening their market coverage and improving profitability. Exporting is not an end in
itself, however, as the ultimate objective of all exporting companies is to achieve
competitive advantages in the country-markets where they compete (Morgan et al.,
2004). Effective and efficient marketing strategies must be designed so that companies can adapt to the needs of foreign markets in order to achieve ongoing improvements in export performance with their available resources and capacities (Shoham,
1999; Navarro et al., 2010a). Any adaptation must be based on knowledge of the
economic and cultural differences and distances between domestic and foreign markets. Companies therefore have to generate market intelligence to process relevant
information on customers, competitors and suppliers and make that information
available throughout the organisation to enable strategic decision-making in the
export activity. However, studies on these interrelations are lacking, leading to a significant research gap (Haverila and Ashill, 2011). This present study aims to cover
that gap by analysing the role of market intelligence in the interrelationships between
export managers’ perceived market distance, strategic behaviours (adaptation versus
standardisation of the marketing mix) and export performance.
The work is divided into four parts. Firstly, based on the literature review, we
define the study variables, the theoretical framework for the research, the proposed
conceptual model and the hypotheses. Secondly, we describe the research methodology and define the sample, the information obtained and the analytical tools used to
test the hypotheses. Thirdly, we report the results and interpret them to provide the
main conclusions and managerial implications. And finally, we present the main limitations of the study and future lines of research.
2. Theoretical framework and research hypotheses
2.1. Export performance
Export performance is an essential aspect of international decision-making (Madsen, 1998). Cavugil and Zou (1994) define export performance as the extension by
which firms achieve their objectives by exporting their products and brands to foreign markets. It includes economic aspects (e.g. profit and sales) and strategic aspects
(e.g. international positioning, increased market share due to exports and achievement of objectives), involved in planning and executing export marketing strategies.
The importance of market inteligence in spanish firms’ exporting activity
11
The reviewed literature (Zou et al., 1998; Rose and Shoham, 2002; Sousa, 2004)
suggests three basic aspects of export performance: (1) it is a multidimensional concept that requires quantitative measurement (e.g. sales, profitability and growth) and
qualitative measurement (e.g. perceived success, satisfaction and achievement of
objectives); (2) assessment must address a given time horizon rather than the short
term (Lages and Montgomery, 2004); (3) measures of performance should reflect
managerial perceptions of achievement of the exporting objectives (i.e. managerial
satisfaction with export performance) (Lages et al., 2008).
This present study takes into account the above three aspects (1) it examines two
dimensions of export performance, a quantitative one - growth in export sales, and
a qualitative one - managerial satisfaction; (2) export performance is evaluated over
a period of time, the last three years; (3) managerial perceptions are taken into
account (managerial satisfaction) in various measures of company success in foreign
markets (e.g. reputation and image, international expansion and market share).
2.2. Exporting Company Marketing Mix Strategic Decisions: Adaptation versus
Standardisation
Standardisation of the marketing programme consists in offering identical product lines at equivalent prices using similar distribution systems supported by identical communication programmes (e.g. advertising and promotion) in a variety of different countries (Theodosiou and Leonidou, 2003). Several authors recommend a
standardisation strategy when target markets show similar characteristics and
behaviours (Kustin, 2004; Özsomer and Simonin, 2004). However, critics of standardised marketing strategies in the international sphere point out that despite convergence in the socio-economic trends in some market segments, there are still significant inter-country differences generated by different national cultures, local
market conditions, the application of very diverse public policies and legal regulations, and different consumer reactions to similar marketing stimuli mean that standardised strategies can be counter-productive (Navarro et al., 2010a). For that reason, Albaum and Tse (2001) point out that adaptation is inevitable for exporting
companies to achieve success in foreign markets. Such adaptation involves modifying product attributes (e.g. label or brand), price, distribution and communication
programme to suit the particular features and demands of each country-market (culture, per capita income, consumer tastes and preferences).
In any case, strict application of the extreme positions of standardisation or adaptation is impossible because, as the contingent approach indicates, the degree of
adaptation (versus standardisation) is a function of the characteristics of the products, the industry, the market, the company and the environment where the company operates (Calantone et al., 2006). In this context, researchers prefer to speak of
different degrees of adaptation (standardisation) of the marketing strategy associated with the exporting activity (Lages and Montgomery, 2004). Bearing in mind these
12
Antonio Navarro-García et al.
premises, this research evaluates export marketing strategy along the standardisation-adaptation continuum, focusing on the degree of adaptation of the marketing
mix (product, price, distribution and promotion) to demands in different countrymarkets arising out of the environment, consumer behaviour, use patterns and competitors (Cavusgil and Zou, 1994).
The literature suggests that a company’s ability to achieve and maintain competitive advantages in foreign markets is closely linked to the execution of a differentiated marketing strategy which requires it to adapt to the needs and desires of the target markets (Morgan et al., 2004; O’Cass and Julian, 2003; Sousa et al., 2008). In
particular, when an exporting company adapts its marketing mix to each countrymarket’s idiosyncrasy, its products are more likely to be perceived as being higher
value than those of local competitors and therefore it can expect a good result from
the exporting activity (Theodosiou and Leonidou, 2003). Thus, various benefits are
associated with adaptation of export marketing tactics: (1) it enables the exporting
company to adjust its supply to the particular characteristics of each market, reducing uncertainty among foreign consumers (Madsen, 1998), (2) relationships with
local intermediaries-distributors improve (Shoham, 1999), and (3) the company can
achieve greater profitability by offering products perceived as different and adapted
to customer demand and can therefore apply a surcharge in relation to its direct
competitors (Leonidou et al., 2002). Thus exporting companies can improve export
performance by adapting their marketing mix strategy (Zou and Cavugil, 2002;
Navarro et al., 2010a). Therefore, we establish the following research hypothesis:
H1: A marketing mix strategy adapted to foreign market needs has a positive impact
on export performance.
2.3. Market distances and their effect on export companies’ strategic marketing
mix decisions
Management perceptions have a fundamental impact on decision-making and management behaviour (Griffith and Lusch, 2007). For example, in their study White et al.
(2003) show that marketing managers’ cognitive styles affect their interpretation of
market information and their response to it. In the case of exports, export managers’
perceived advantages or obstacles condition business behaviour (Leonidou, et al.,
1998). One of the major obstacles to a company’s progress in foreign trade operations
is management’s perception of how difficult it is to enter and expand in new countrymarkets (Dow, 2000). These perceptions are usually associated to economic, legal and
sociocultural differences between the domestic market and the target market, and are
known as market distances. The literature refers to market differences as a focal point
during the process of international expansion (Ellis, 2007).
Currently, study of the effect of market distances on export activity is a growing
area, and is particularly important in the debate over standardisation versus adapta-
The importance of market inteligence in spanish firms’ exporting activity
13
tion of marketing mix strategies (contingent perspective) (Chung, 2003, 2005, 2009,
2010; Sousa and Lages, 2011; Chung et al., 2012). Some authors claim that differences between domestic and foreign markets generate psychological barriers for
export managers, thereby promoting non-proactive attitudes towards exporting
(Özsomer and Simonin, 2004). These conservative attitudes usually result in a reluctance to change product attributes, vary prices or use different types of promotional
and advertising strategies according to each market idiosyncrasy (Sousa and Lengler,
2009). These psychological barriers associated to market distances usually lead to a
lack of commitment to exporting and a tendency to adopt standardised strategic
marketing mix decisions, similar to those used in the domestic market (Albaum et
al., 2003; Leonidou et al., 2002), not because there is a belief that these strategies
are more appropriate, but because managers are unable to overcome their mental
barriers to take proactive decisions (e.g. adapt the marketing mix according to the
needs of each country-market) (Theodosiou and Katsikeas, 2001; Theodosiou and
Leonidou, 2003). Therefore we posit:
H2. Export managers’ perceived market distance has a negative impact on the development of a strategy to adapt the marketing mix to foreign market needs.
2.4. Market intelligence in export activity
One of the main reasons for product failure in a new country-market is lack of
adaptation to local consumers’ needs (Osborne, 2002). This situation usually occurs
because companies fail to generate market intelligence or use it where needed to
respond to foreign consumer expectations, desires and preferences. In this context,
market intelligence is a recognised strategic resource which facilitates decision-making and promotes the achievement of competitive advantages in markets where the
company is active (Day, 1994). Market intelligence can be defined as an organisation’s ability to process, interpret and disseminate information from the market/environment, facilitating interfunctional coordination that permits an agile response to
change (Hughes et al., 2008). This view of market intelligence suggests it extends
throughout the organisation and is the responsibility of all functional departments
which have some role in generating the knowledge and skills associated with the triad products-customers-competition (Kahn, 2001; Moorman and Rust, 1999). The
generation of market intelligence for exporting includes acquiring knowledge about
foreign consumers’ needs and competitors’ practices in international markets (Wren
et al., 2000). It also requires transfer of the knowledge to the functional areas of the
exporting company for decision making purposes and such transfer requires functional coordination (Gresham et al., 2006).
The development of market intelligence systems is usually a clear indication of a
market oriented culture. Thus Kohli and Jaworski (1990) state that market intelligence and the ability to respond to the environment are critical elements in market
14
Antonio Navarro-García et al.
orientation crucial for improving business performance. Companies therefore need
to develop marketing information systems for the ongoing capture and processing of
information on local competitors’ capabilities, strategies and actions and on foreign
customers’ tastes, preferences and desires. The appropriate dissemination of this
information facilitates interfunctional coordination and decision-making, promoting
the development of a supply of products and services with higher perceived value
than those of competitors over time (Slater and Narver, 2000; Calantone et al.,
2002). Market intelligence should be seen therefore as a dynamic capacity associated to organisational learning, which consists in developing processes and activities
associated with the acquisition, storage, interpretation and distribution of relevant
market information (Sinkula, 1994; Pentina and Strutton, 2007).
Companies that want to penetrate foreign markets must develop market intelligence abilities because effective and efficient exporting requires detailed knowledge
of each country-market’s commercial practice, culture, and competitors. Appropriate marketing decisions are only possible after capturing and processing relevant
information on each country-market and they have a decisive influence on export
performance (Hughes et al., 2008). Thus market intelligence is a key factor for
reducing uncertainty associated to foreign market environments, overcoming the
psychological barriers to export and facilitating strategic marketing management of
the exporting company (Belich and Dubinsky, 1999; Cadogan et al., 2012). In fact,
some studies have found that scarcity of information on a country is one of the most
serious problems for exporting companies when entering new country-markets
because it generates significant psychological barriers in export managers (Pentina
and Strutton, 2007). These psychological distances are the sum of factors affecting
the flow of information from and to foreign markets (Johanson and Vahlne, 1977),
including cultural, economic, political, legal and social aspects that influence managerial attitudes, motivations and perceptions associated to volatility in the external
environment, promoting conservative behaviour (e.g. standardisation) when making
marketing decisions (Gray et al., 2007). However, specific knowledge about conditions in each country-market reduces export managers’ uncertainty and the psychological barriers associated with the development of foreign trade operations (Hennart, 1988; Osborne, 2002). Market intelligence provides export managers with
knowledge that influences the effect of perceived market distances on strategic marketing management by reducing the uncertainty associated with decision-making
and making companies less reluctant to adapt the marketing mix to foreign markets
(Veldhuizen et al., 2006). Therefore:
H3: Market intelligence reduces the negative effects of market distance on the development of a marketing mix strategy adapted to country-market needs.
Furthermore, a company’s ability to adapt to conditions in a given country-market depends largely on its skill at processing and interpreting relevant market information. Market intelligence helps export managers to make appropriate marketing
The importance of market inteligence in spanish firms’ exporting activity
15
decisions at all times, encouraging them to proactively seek and exploit foreign market opportunities (Gray et al., 2007). Thus the accumulation of relevant foreign market information and knowledge is crucial for enabling exporting companies to know
what, how, when and where to adapt their marketing mix according to each countrymarket, helping them to gain market shares in foreign countries by improving their
positioning and international competitiveness (Menon and Varadarajan, 1992; Zou
and Cavusgil, 2002). By promoting export-associated interfunctional coordination,
market intelligence also increases the speed of response to foreign consumer needs
according to the country-market. Thus adaptations of the marketing elements will be
the ones that are needed, thereby promoting differentiated marketing and contributing to the achievement of improved export performance (Calantone et al., 2002).
Market intelligence provides export companies with a weighty tool, the ability to
decide under what conditions and exactly what attributes of the marketing mix need
standardising or adapting to conditions in each country-market, thereby increasing
the efficiency and effectiveness of the export activity and considerably increasing the
likelihood of success in foreign markets (Cadogan et al., 2012). Therefore:
H4: Market intelligence positively moderates the relationship between marketing
mix adaptations to foreign markets and export performance.
Figure 1. Graphic Description of the Model
Foreign Market
Intelligence
H4
H3
Perceived Market
Distances
H2
Strategic Behaviour
Adaptations of the
Marketing Mix
H1
Export
Performance
3. Methodology
3.1. Measurement scales
The use of latent variables evaluated through different indicators requires a definition of the type of relationship between the construct and the observed variables
that define it. There are two possible perspectives: (1) reflective scales; (2) formative
scales. The most traditional perspective in marketing is to consider measurement
scales as reflective (Diamantopoulos, 2008), assuming that indicators fluctuate in
accordance with variations in the latent variables (Edwards and Bagozzi, 2000).
16
Antonio Navarro-García et al.
However, the latent construct is often formed by indicators which, although they
measure the same concept, are different in nature. In this context (Diamantopoulos
and Winklhofer, 2001; Jarvis et al., 2003; MacKenzie et al., 2005; Diamantopoulos
and Siguaw, 2006), the use of formative scales is increasing as they imply that
changes in indicators generate variations in the latent concept. That is, the construct
is formed by a normally linear combination of its indicators plus an error term
(Bollen, 1989; Bollen and Lennox, 1991). In this direction, Diamantopoulos (1999)
indicates that a formative approach can be very attractive for evaluating very complex constructs. We believe this approach applies to this study of export performance, as a second-order formative construct with two very different dimensions
(growth in sales and satisfaction). From this perspective, following Cadogan et al.
(2002), the study evaluates export performance qualitatively through export managers’ perceived satisfaction at the achievement of five objectives in the last three
years (growth in international sales, image and notoriety in foreign markets, profitability of the export business, market share and international expansion) and quantitatively through export sales growth in the last three years (Cavusgil and Zou,
1994; Navarro et al., 2010b). The rest of the scales are reflective. Following several
authors’ recommendations (Lages and Montgomery, 2004; Leonidou et al., 2002;
Theodosiou and Leonidou, 2003), the study measures adaptation of the marketing
mix strategy by the degree to which the exporting company adapts (or standardises)
its marketing mix to foreign market demands or requirements; it is a second order
reflective construct, defined by four dimensions: product, price, communication and
distribution. Perceived market distances, following Sousa and Lages (2011), are a
second order reflective construct based on differences associated to the country (e.g.
legal and economic environment) and the people (e.g. culture, uses and custom).
Finally, the study adapts export market intelligence to Naver and Slater’s (1990) proposed scale, but takes into account the necessary foreign market adaptations
(Williams and Chaston, 2004). Thus, foreign market intelligence is considered a second order reflective construct, defined by three dimensions: intelligence on foreign
market consumers and competitors and interfunctional coordination associated with
the exporting activity. See Annex 1 for the different measurement scales
3.2. Sample and field work
This study uses a multi-industry sample to increase observed variance and
strengthen generalisation of the results (Morgan et al., 2004). After consulting the
Spanish Foreign Trade Institute (ICEX) website, 1250 export managers at Spanish
exporting companies were sent e-mail questionnaires. They returned 212 valid questionnaires for a 17% response rate, which is between the 15 and 20% considered as
an adequate response rate (Menon et al., 1996).
Most exporting companies in the sample are small (61% or 130 companies with
under 50 employees) and they allocate scanty human resources to exporting (86%
The importance of market inteligence in spanish firms’ exporting activity
17
with fewer than 5 employees associated with exporting). Most companies (81%)
have an export manager, although a minority (33% - 70 companies) have created an
export department. Most companies have considerable experience in the industry
(86% have been active for over 15 years) and in international business (61% have
been exporting to foreign markets for over 15 years). Finally, most companies in the
sample concentrate their sales strongly in very few markets (71% export to ≤ 5 countries).
In each exporting company a single informant completed the questionnaire,
thereby reducing the errors and bias associated to different perspectives on the same
thing which occurs when there is more than one informant in each company (Huber
and Power, 1985). To ensure a reliable information source, the person responsible
for the exporting activity was asked to complete the questionnaire. In addition, the
questionnaire included a specific section asking the interviewer about various personal characteristics including their type of responsibility for the exporting activity,
to avoid bias associated with any lack of knowledge of the issues raised.
3.3. Data analysis
The data were analysed with structural equation modelling (SEM) using Partial
Least Squares (PLS). PLS is a powerful analytical tool with several interesting characteristics for researchers in relation to other methods, including the following (Diamantopoulos, 1999; Diamantopoulos and Winklhofer, 2001): (1) PLS imposes no
restriction on the type of variable distribution and there is no need for independent
observation (CHin, 2010). PLS is a nonparametric technique and therefore it is not
necessary to assume a normal distribution; (2) in comparison to covariance-based
SEM, PLS avoids two possible problems (Fornell and Bookstein, 1982): inadmissible
solutions (e.g. negative deviations and standardised loads greater than 1) and determination problems (Steiger, 1979), given that PLS uses scores for the latent variables
that can be interpreted immediately from a predictive point of view (Chin, 2010); (3)
demands on the type and nature of measurement scales are minimised in PLS, and
nominal, ordinal and interval scales can be used, even jointly (Wold, 1985). Consequently, PLS does not require uniform metrics (Sosik et al., 2009); (4) PLS does not
require large samples in comparison to other techniques (AMOS, EQS, etc.) to
obtain robust results (Chin and Newsted, 1999; Reinartz et al., 2009), as in this present study (212 cases); (5) PLS can manage complex models (i.e. with numerous latent
variables, indicators and relations) with no estimation problems (Chin and Newsted, 1999), thanks to the limited information procedure (Barclay, et al., 1995); (6)
PLS permits the simultaneous use of formative and reflective scales, avoiding indeterminacy problems (Jarvis et al., 2003). This present study uses the Smart-PLS 2.0
M3 statistical package (Ringle et al., 2005).
18
Antonio Navarro-García et al.
4. Results
4.1. Evaluation of the measurement model
There are two stages in the interpretation and analysis of the proposed model
using PLS (Barclay et al., 1995). (1) evaluation of the measurement model and (2)
evaluation of the structural model. This sequence ensures that the proposed measurement scales are valid and reliable before proceeding to test the hypotheses. Table
1 shows the model evaluation parameters. As Table 1 shows, factor loads for the
reflective scales are above the recommended value of 0.70 (Carmines and Zeller,
1979). Composed reliability and average variance extracted (AVE) also exceed the
recommended thresholds of 0.7 and 0.5 respectively (Nunnally, 1978; Fornell and
Larcker, 1981). These values confirm the convergent validity of the reflective scales
in this study (perceived psychic distance, market intelligence and adaptation of the
marketing mix). Finally, correlations (Table 2) between each pair of constructs do
not exceed the AVE square root value for each construct (Barclay et al., 1995), thereby confirming discriminant validity. Inter-correlations between constructs are significantly different from 1, providing additional evidence of discriminant validity in the
case of the reflective scales.
Validation of the formative scale “Export Performance” takes into account Diamantopoulos’ (2008) recommendations. Bearing in mind that we cannot omit or
eliminate any of indicators from the scale because they are considered to contain relevant information, the absence of multicolinearity was confirmed through the variance inflation factor (VIF) which is below the recommended value of 5 (Diamantopoulos and Winklhofer, 2001).
Table 1. Evaluation of the measurement model
Composed
Reliability
(ρc )
Average
Variance
Extracted
(AVE)
PERCEIVED MARKET DISTANCE (Second order reflective construct)
0.952
0.878
Country Distance (First order reflective construct)
NIVELECOIND
INFRACOMUNIC
INFRAMARK
NIVELTECNOL
COMPETMERC
ENTORNOLEGAL
Person Distance (First order reflective construct)
RENTAPERCAPIT
PODERCOMPRA
ESTILOVIDA
PREFCONSUMO
CULTURA
0.895
0.592
0.897
0.623
CONSTRUCT/Dimension/Indicator
Variance
Inflaction
Factor (VIF)
Weight
Factor load
0.936
0.815
0.862
0.846
0.778
0.715
0.612
0.949
0.781
0.763
0.880
0.811
0.680
19
The importance of market inteligence in spanish firms’ exporting activity
Table 1. Continuation
Composed
Reliability
(ρc )
Average
Variance
Extracted
(AVE)
ADAPTATION MARKETING-MIX (Second order reflective construct)
0.865
0.598
Product (First order reflective construct)
PRODUCT1
PRODUCT2
PRODUCT3
PRODUCT4
PRODUCT5
PRODUCT6
Price (First order reflective construct)
PRECIO1
PRECIO2
PRECIO3
PRECIO4
PRECIO5
Distribution (First order reflective construct)
DISTRIB1
DISTRIB2
DISTRIB3
DISTRIB4
Promotion (First order reflective construct)
PROMO1
PROMO2
PROMO3
PROMO4
PROMO5
PROMO6
0.910
0.611
0.884
0.594
0.941
0.782
0.973
0.825
FOREIGN MARKET INTELLIGENCE (Second order reflective construct)
0.882
0.685
Intelligence on Foreign Consumers (First order reflective construct)
INTCUSTOR1
INTCUSTOR2
INTCUSTOR3
INTCUSTOR4
INTCUSTOR5
INTCUSTOR6
INTCUSTOR7
Intelligence on Foreign Market Competition (First order reflective
construct)
INTCOMPET1
INTCOMPET2
INTCOMPET3
Interfunctional coordination (First order reflective construct)
COORDINTER1
COORDINTER2
COORDINTER3
COORDINTER4
0.884
0.559
0.892
0.724
0.881
0.640
n.a.
n.a.
CONSTRUCT/Dimension/Indicator
Variance
Inflaction
Factor (VIF)
Weight
EXPORT PERFORMANCE (Second order reflective construct)
Factor load
0.775
0.723
0.781
0.741
0.823
0.811
0.828
0.756
0.819
0.856
0.822
0.729
0.622
0.782
0.893
0.927
0.859
0.876
0.815
0.915
0.948
0.962
0.912
0.915
0.821
0.889
0.759
0.826
0.822
0.665
0.720
0.744
0.721
0.813
0.887
0.860
0.816
0.829
0.681
0.868
0.840
0.796
20
Antonio Navarro-García et al.
Table 1. Continuation
CONSTRUCT/Dimension/Indicator
Variance
Inflaction
Factor (VIF)
Weight
2.140
0.293
Quantitative export performance
(Reflective construct)
Crev_2009
Crev_2010
Crev_2011
Qualitative export performance
(Reflective construct)
SAT1
SAT2
SAT3
SAT4
SAT5
Factor load
Composed
Reliability
(ρc )
Average
Variance
Extracted
(AVE)
0.863
0.698
0.936
0.725
0.787
0.897
0.834
1.971
0.854
0.885
0.809
0.913
0.823
0.831
n.a.: not applicable
Table 2. Correlations between constructs. Discriminant validity
1
(1) People Distance
2
3
4
5
6
7
8
9
10
11
0.789
(2) Country Distance
0.65
0.769
(3) Customer Intel.
-0.08
-0.16
0.748
(4) Competition Intel.
-0.03
-0.11
0.43
0.851
(5) Interf. Coord.
-0.07
-0.08
0.57
0.49
0.800
(6) Price
0.24
0.28
0.09
0.13
0.03
0.770
(7) Product
0.26
0.25
0.12
0.08
0.23
0.53
0.782
0.908
(8) Communication
0.22
0.26
0.08
0.05
0.09
0.44
0.53
(9) Distribution
0.43
0.38
0.03
0.02
0.12
0.37
0.47
0.37
(10) Sales Growth
0.19
0.17
0.04
0.04
0.08
0.23
0.18
0.26
0.25
0.835
(11) Satisfaction
0.16
0.09
0.17
0.25
0.16
0.13
0.15
0.09
0.19
0.38
0.884
0.851
The main diagonal shows the square root values of the Average Variance Extracted (AVE)
4.2. Structural model analysis
After confirming convergent and discriminant validity, the relationships between
the different variables were tested with the bootstrap method (1000 sub-samples) to
obtain various statistical parameters (Table 3). The hypotheses were tested using the
sign and significance of the t-values in each of the (β) relationships and the direction
of the four hypotheses was verified
21
The importance of market inteligence in spanish firms’ exporting activity
Table 3. Parameters associated to the hypothesis testing
Hypotheses
H1: Adaptation marketing mix- Export performance
H2: Perceived market distance- Adaptation marketing mix
H3: Market intelligence * Perceived market distanceAdaptation mk mix
H4: Market intelligence * Adaptation mk mix-Export performance
t-value
Confirmation
0.298
- 0.291
0.395
2.816***
4.252***
5.091***
Si
Si
Si
0.332
2.658**
Si
β
*** p < 0.001, ** p < 0.01, * p < 0.05 ns = not significant (based on t(999), one-tailed test).
5. Discussion
The results validate and corroborate the proposed conceptual model. This model provides a suitable framework for explaining how, in exporting activity, market
intelligence plays a fundamental role in interrelationships between managerial perceptions, strategic behaviours (adaptation of the marketing mix) and export performance. The relationships between the variables analysed suggest a number of
interesting conclusions.
First, the results show that it is fundamental to adapt to each country-market
environment by making the necessary changes in product, price, distribution and
communication because of the positive impact on export performance, as previous
studies indicate (Lages and Montgomery, 2004; Morgan, et al., 2004; Navarro et al.,
2010b), thereby explaining confirmation of H1 (β1 = 0.298, t-value = 2.816). From
this perspective, organisations committed to their exporting activity will favour
strategic decisions tending to adapt to foreign market demands and needs from the
marketing mix perspective. This approach will have a positive effect on export performance with an explained variance of 15.6% (R2 = 0.156).
Second, exporting companies’ strategic behaviours are conditioned by managerial perceptions of economic, legal and sociocultural differences between the domestic
market (in this case, Spain) and international markets. These market distances generate psychological barriers in export managers so they tend to make conservative
decisions expressed in their reluctance to make the necessary changes in the marketing mix according to each country-market’s idiosyncrasy (Leonidou, et al., 2002;
Shoham, 1999). This finding explains the negative impact of perceived market distances on strategic adaptation of the marketing mix thereby confirming H2 (β2 = 0.291, t-value = 4.252). The variance explained for adaptation of the marketing mix
is 19.1% (R2 = 0.191).
Third, market intelligence plays a fundamental moderating role in export activity. Thus, when exporting companies develop abilities associated to the capture, interpretation and dissemination of relevant foreign market information, export managers are able to overcome the psychological barriers associated to lack of
knowledge about the country-market (perceived market distances) and show positive
22
Antonio Navarro-García et al.
attitudes towards adapting the product, price, communication and distribution
according to foreign consumer needs and preferences. This finding explains the positive relationship between market intelligence-perceived market distances-adaptation
of the marketing mix, thereby confirming H3 (β3 = 0.395, t-value = 5.091). Market
intelligence therefore reduces the negative effect of perceived market distances on
proactive strategic behaviours such as developing an adapted marketing mix for each
country-market (Navarro et al., 2011b; Cadogan et al., 2012).
Fourth, the results also show that market intelligence facilitates decision making
over what, why, where and how to adapt the marketing mix, bearing in mind the different characteristics of each country-market. Therefore, there is more likelihood of
success in foreign markets, associated with an adapted marketing mix, when decisions are taken bearing in mind relevant information on each country-market than
when this market intelligence is avoided. This finding explains the positive moderating role of market intelligence on the interrelationship between adaptation of the
marketing mix-export performance, thereby confirming H4 (β4 = 0.332, t-value =
2.658). The reason for the above is that market intelligence increases managerial
proactivity in adapting the marketing mix to foreign consumer tastes and desires so
that exporting companies’ supply of products and services is perceived as being different from local competitors, with a positive impact on export performance (Cavusgil and Zou, 1994; Morgan et al., 2004).
In short, this study makes a significant contribution to covering an important gap
in export research by showing the significant role of market intelligence in the interrelationships between management perceptions-market distances-strategic behaviours-adaptation of the marketing mix -and export performance-sales growth and
managerial satisfaction. Market intelligence has a dual role: (a) it reduces psychological barriers to the expansion of exporting activity; (b) it increases the proactive
development of strategic behaviours in accordance with each country-market’s
requirements, making a positive contribution to export performance.
6. Limitations and future research lines
Although this study offers important new contributions from the perspective of
international marketing and specifically in relation to the topic of export, there are
some limitations which constitute the starting point for future lines of research. The
first limitation concerns the type of study, based on information obtained at a specific moment in time. A longitudinal study would be interesting to analyse how variations in market intelligence in the exporting company over a period of time influence relationships between managerial perceptions, strategic marketing behaviours
and export performance.
The second limitation concerns the sample, which comes from a single country.
Studies with samples from a wider geographical area are needed in order to generalise the conclusions. The final limitation concerns the effect on the model variables
The importance of market inteligence in spanish firms’ exporting activity
23
of other factors not considered in this study. It would therefore be interesting to take
into account characteristics such as the product, the industry, quality of relations
with international distributors and companies dynamic abilities, among others.
(Leonidou, et al., 2002; Morgan, et al., 2006; Blesa and Ripollés, 2008).
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The importance of market inteligence in spanish firms’ exporting activity
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ANNEX 1: MEASUREMENT SCALES
Export Performance
- Quantitative Dimension: Export sales growth in the last three years (2009; 2010;
2011): (1) negative; (2) zero; (3) 1-10%; (4) 11-20%; (5) > 20%
- Qualitative Dimension: Managerial satisfaction with the achievement of the following objectives (1=very dissatisfied; 5= very satisfied)
SAT1
SAT2
SAT3
SAT4
SAT5
Export sales growth
Notoriety and image in foreign markets
Export profitability
Market share
International expansion
Perceived Market Distance: Indicate to what extent (1.- Very similar….5.- Very different), the foreign markets where your company is active are similar or different to
the Spanish market:
Associated to the country
NIVELECOIND: Level of economic and industrial
development
INFRACOMUNIC: Communication infrastructure
INFRAMARK: Marketing infrastructure
NIVELTECNOL: Level of technological development
COMPETMERC: Market competitiveness
Associated to the people
RENTAPERCAPIT: Per capita income
PODERCOMPRA: Customers’ purchasing
power
ESTILOVIDA: Peoples’ lifestyle
PREFCONSUMO: Consumer preferences
CULTURA: Cultural values, beliefs attitudes
and traditions
ENTORNOLEGAL: Legislation
Adaptation of the Marketing-Mix: Answer the following questions on a scale of 1-5
(1=None; 5=Considerable). Adaptations to…
PRODUCT
PRODUCT1:
PRODUCT2:
PRODUCT3:
PRODUCT4:
PRODUCT5:
PRODUCT6:
PRICE
PRECIO1:
PRECIO2:
PRECIO3:
PRECIO4:
PRECIO5:
Product quality
Product design and style
Product guarantee
Product labelling
Commercial brand of product
Packaging/labelling
Price strategy
Discount policy
Margins
Credit assignment
Collection security
COMMUNICATION
PROMO1: Idea/advertising theme
PROMO2: Advertising and promotional content
PROMO3: Advertising media strategy
PROMO4: Sales promotion tools
PROMO5: Promotional approach
PROMO6: Communication budget
DISTRIBUTION
DISTRIB1: Distribution channels
DISTRIB2: Control over distribution channels
DISTRIB3: Strategy / Transport policy
DISTRIB4: Distribution budget
Foreign Market Intelligence
The following block of questions evaluates the level of foreign market intelligence in
your company on a scale of 1-5 (1= Totally agree; 5=Totally disagree)
30
Antonio Navarro-García et al.
Intelligence on foreign consumers
INTCUSTOR1: Our firm captures
INTCUSTOR2: Our firm captures
INTCUSTOR3: Our firm captures
INTCUSTOR4: Our firm captures
INTCUSTOR5: Our firm captures
INTCUSTOR6: Our firm captures
INTCUSTOR7: Our firm captures
information
information
information
information
information
information
information
on
on
on
on
on
on
on
foreign
foreign
foreign
foreign
foreign
foreign
foreign
consumers’
consumers’
consumers’
consumers’
consumers’
consumers’
consumers’
needs
tastes and preferences
cultural values
lifestyles
purchasing power
purchasing behaviour
customs and habits
Intelligence on foreign market competitors
INTCOMPET1: Our company obtains information on foreign competitors’ products and prices
INTCOMPET2: Our company obtains information on foreign competitors’ communication actions
INTCOMPET3: Our company obtains information on foreign competitors’ distribution channels
Interfunctional coordination
COORDINTER1: In my company, all the functional areas are involved in export activity decisions
COORDINTER2: In my company, relevant information on foreign consumers is disseminated to all functional areas
COORDINTER3: In my company, relevant information on foreign competitors is disseminated to all
functional areas
COORDINTER4: In my company, the different functions are integrated to serve the needs of our foreign
consumers
The importance of market inteligence in spanish firms’ exporting activity
Notes on Contributors
Name: Antonio Navarro-García
Position: Profesor Titular de Universidad (Área de Marketing)
School / Faculty: Facultad de Ciencias Económicas y Empresariales
University: Universidad de Sevilla
Address: Avda. Ramón y Cajal nº 1. 41018 Sevilla
Telephone: 34 954554436
Email: [email protected]
Name: Ramón Barrera-Barrera
Position: Profesor Colaborador (Área de Marketing)
School / Faculty: Facultad de Ciencias Económicas y Empresariales
University: Universidad de Sevilla
Address: Avda. Ramón y Cajal nº 1. 41018 Sevilla
Telephone: 34 954554436
Email: [email protected]
Name: Ángel Francisco Villarejo-Ramos
Position: Profesor Titular de Universidad (Área de Marketing)
School / Faculty: Facultad de Ciencias Económicas y Empresariales
University: Universidad de Sevilla
Address: Avda. Ramón y Cajal nº 1. 41018 Sevilla
Telephone: 34 954554436
Email: [email protected]
Name: Marta Peris-Ortiz
Position: Profesora Titular de Universidad (Área de Organización de Empresas)
School / Faculty: Departamento de Organización de Empresas y Marketing
University: Universitat Politècnica de València
Address: Camino de Vera s/n, 46022 Valencia
Telephone: 34 963877680
Email: [email protected]
31