Overview of international competitiveness

For the past couple of decades, the field of international marketing, along with other internationally oriented fields in business, has focused on multinational enterprises’ (MNEs) international competitiveness. Or, more specifically, the focus has generally been on how firms, in particular MNEs, achieve international competitiveness in the global marketplace. In that spirit, the Journal of the Academy of Marketing Science issued a call for papers that resulted in a special issue with 10 articles on the broad topic of international competitiveness. In fact, the special issue is really about as broad as can be possible in terms of the 10 articles—they cover myriad issues within “striking distance” of the topic, advancing the fields of international marketing (primarily) and international business (as an added benefit), and tackling the notion of “international competitiveness” (in particular).

The call for papers was broadly constructed to allow for this variation in topics and approaches to advancing the notion of international competitiveness. Generally, the idea was to address what makes some organizations more competitive than others in the global marketplace. For example, is the international competitiveness of these organizations driven by structural properties, strategic elements, tactical implementation, opportunistic behavior, or a combination of one or more of these and/or myriad other potential components? The logic for covering this topic in a top marketing journal (as opposed to, for example, covering it in an international business or management journal) is mainly that marketing’s contribution to the scholarly dialogue about what makes some organizations internationally competitive is important and potentially unique. Specifically, my view is that in a global marketplace which is converging in tastes and market segments in some respects and diverging in others, marketing has an opportunity to be in the forefront of scholarship on international competitiveness. Our field can drive the identification of similarities that lend themselves to global strategies that ultimately result in a unique international competitiveness achieved by firms. This approach is often more appealing than looking for differences and designing marketing strategies globally based on differences that may or may not outweigh similarities.

As viewed within the context of this special issue of JAMS, international competitiveness is a measure of an organization’s advantage (or disadvantage) in marketing its products and/or services in global markets. More broadly, “an organization” in this definition can also be replaced by other units of analysis such as a world region (e.g., Rugman et al. 2012), country (e.g., Porter 1990), industry (e.g., Morgeson et al. 2011; Rumelt 1991), or perhaps strategic group (e.g., Short et al. 2007). As such, international competitiveness is a phenomenon that works at multiple levels in the global marketplace (e.g., Kirca et al. 2011) but one where the ultimate objective, as primarily studied in marketing strategy (cf. Buckley and Casson 2011; Johanson and Vahlne 2011), is to achieve superior performance for MNEs (cf. Morgan 2012) and their subsidiaries (e.g., Kirca and Bearden 2011). As a precursor to the 10 research articles in this special issue on international competitiveness, the next section will provide some practical illustrations from four well-known multinational enterprises of industry drivers, strategy levers, and organization factors that drive a firm’s international competitiveness, based on the global strategy framework by Yip and Hult (2012).

Examples of MNEs and their international competitiveness

A multinational enterprise’s international competitiveness can take many forms, be developed and implemented via various mechanisms, and serve the MNE in a positive or even negative way (cf. Kirca et al. 2011). One way to examine a firm’s international competitiveness is via the framework used in the book Total Global Strategy (TGS) (Yip and Hult 2012). As many international business (and marketing) scholars know, the TGS framework has been successfully used and examined in academic (e.g., Johansson and Yip 1994) and practitioner settings for more than two decades (e.g., Yip 1989).

Clearly many other frameworks for international competitiveness exist. However, in the spirit of adding some practical “stories” rooted in academic rigor to this introduction, perhaps to be used as examples in teaching on the topic of global strategy and/or as motivations for future research on international competitiveness, I use the TGS as one practical illustration of the antecedents and consequences of adopting a global strategy to achieve international competitiveness. Given the introductory nature of this article, the customary details on method, methodology, and results are spared (although of course normal academic rigor was applied to each example and determined the ultimate stories told in this section). Specifically, four MNEs are used in this section for illustration purposes: American Express, FedEx, Microsoft, and Nokia.

Figure 1 portrays the broad elements of the TGS framework (see Yip and Hult 2012 for details of the framework and a comprehensive listing of measures). Following the process outlined by Weekley and Gier (1989), a group of 100 “expert raters” was used to assess each of the framework’s four global industry drivers, four global organization factors, five global strategy levers, and four performance outcomes for each MNE. The expert raters closely examined all aspects of the particular MNE and provided ratings for each aspect of the TGS framework, with the idea that the compilation of measures and the interrelationships provide an understanding of what drives international competitiveness within these MNEs. The basic demographics of the expert raters are: average age of 36 years, 11.6 years of work experience, and 6.4 years of management experience.

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Yip and Hult (2012) global strategy framework

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American Express

American Express (Amex) operates in an industry that traditionally is among the most global of all industries. However, this “globalness” is largely inherent in the market industry driver and is less so in the cost, government, and competitive drivers. The company itself thrives globally based on its market participation, services, and marketing but is hindered by its location of value-adding activities and competitive moves. Like Microsoft (described later), Amex’s organization is far less global than the strategy that the company develops and implements, an indication of long-term questionable global operations. In particular, Amex’s people appear to be a relatively weak global link. Amex lets the industry dictate its global strategy as opposed to its organization factors (by more than 3 to 1), and the organization itself has an effect only on the input side of developing the global strategy but has no such effect on implementing it. In fact, Amex represents one of the most complex MNEs we have studied based on the TGS model, with lots of offsetting and moderating relationships that render clear-cut strategy-making difficult. The effect of the “market” industry drivers on Amex’s “market participation” is the most important link for American Express on the inbound side of the TGS model. The effect of “marketing” on Amex’s “market share” is the most important link for Amex on the outbound side of the TGS model. Finally, the negative moderating effect of “structure” on “market participation” to “cost reduction” link is the most important implementation influencer for American Express.

FedEx

FedEx operates in a relatively global industry, particularly as it pertains to the market and competitive drivers (but with some barriers in cost and government drivers). In comparison to other MNEs across industries, FedEx is modestly global in its strategy development, but the organization is less global in its infrastructure. FedEx’s global strategy depends more on the industry drivers than it does on its own organization for resource input into developing global strategy (about 1.5 to 1). And, in fact, at the implementation stage of global strategy, FedEx’s organization infrastructure typically hinders strategy implementation. The effect of the “market” industry driver on FedEx’s “market participation” is the most important link for FedEx on the inbound side of the TGS model. The effect of “market participation” on its “market share” is the most important link for FedEx on the outbound side of the TGS model. The negative moderating effect of “people” on the “competitive moves” to “cost reduction” link is the most important implementation influencer for FedEx. The two variables that are the most critical, and complex, for FedEx in the global marketplace are its organization structure and people—those two elements of the organization have both negative and positive effects and largely offset each other, rendering the structure and people rather ineffective from the standpoint of running a global strategy–oriented multinational corporation.

Microsoft

Microsoft operates in a relatively global industry, particularly as it pertains to the market driver but with a clear limitation in “globalness” as it relates to the role of local governments’ influence on MNEs (which is also indicated by the fact that Microsoft continually appears to have legal and regulatory issues in various countries). Microsoft has a unique ability to assess and develop its market participation throughout the world but lacks in figuring out exactly where/when to locate its most value-adding (supply chain) activities. Interestingly, Microsoft’s people, culture, and organization structure are far less global in nature than its development of global strategy. Perhaps that is why Microsoft lets the industry as opposed to its organization factors almost dictate its strategy (by more than 2 to 1). More interestingly, Microsoft’s organization has very little effect on the ultimate implementation of its global strategy, and somewhat limited effect on the input side of the TGS framework. The effect of the “market” industry driver on Microsoft’s development of software “products” is the most important link for Microsoft on the inbound side of the TGS model. The effect of “location of value-adding activities” on Microsoft’s “cost reduction” is the most important link for Microsoft on the outbound side of the TGS model (which is also troublesome given Microsoft’s weakness in location of value-adding activities). The moderating effect of organizational “culture” on the “locating activities” to “profit” link is the most important implementation influencer for Microsoft. Broadly, that raises questions such as what is wrong with Microsoft’s culture for the long-term operations of the company, and what would Microsoft be without the strategic possibility of making competitive moves globally?

Nokia

Nokia operates in a relatively global industry, particularly as it pertains to the market and competitive drivers (but with some barriers in cost and government drivers). Albeit different industries, the degree of globalization in Nokia’s industry is very similar to the degree of globalization in FedEx’s industry. Nokia is modestly global in its strategy development, especially in the areas of market participation, products, and marketing (and less so on location of their activities and making competitive moves). Nokia’s organization is rather global in its structure and processes but relatively weak in terms of the globalness of its people and culture. Nokia’s global strategy depends almost equally on the industry drivers and the organization factors. The effect of the “competitive” industry driver on Nokia’s “market participation” is the most important link for Nokia on the inbound side of the TGS model. The effect of “location of value-adding activities” on its “cost reduction” is the most important link for Nokia on the outbound side of the TGS model. The negative moderating effect of “people” on the “location of value-adding activities” to “profit” link is the most important implementation influencer for Nokia. Overall, unfortunately, at the implementation stage of the TGS model, Nokia’s processes really hinder the effect of strategy on performance. However, Nokia’s culture generally has a positive moderating influence of global strategy on performance. In some sense, the (currently) somewhat “bad” processes at Nokia are offset by the “good” culture in the organization.

Marketing research and international competitiveness

The collection of 10 articles in this special issue covers a breadth of topics, all dealing with issues of international competitiveness. Some offer competing frameworks and/or competing linkages to the Yip and Hult (2012) framework illustrated previously in this introduction article. Several offer logical connections to the TGS framework as well. Overall, I believe these 10 articles, composed by a total of 26 scholars, will set the tone for much of the research on international competitiveness in the field of marketing (and beyond) for years to come.

In the spirit of JAMS’ breadth of coverage as a journal, the articles broadly cover issues related to the scope of the field of international marketing (Cavusgil and Cavusgil 2012; Samiee and Chabowski 2012), multinational firms (Rugman et al. 2012), small-medium enterprises (Kamakura et al. 2012), culture (Steenkamp and Geyskens 2012), exporting (Morgan et al. 2012), foreign market subsidiaries (Homburg et al. 2012), and offshoring and outsourcing (Jensen and Pedersen 2012; Kotabe et al. 2012; Kalaignanam and Varadarajan 2012). Naturally, some of the articles span multiple areas as well and, as such, make unique advances to the topic of international competitiveness and international marketing.

Each article is a research article, theoretical and/or empirical, where the editorial guidance was intended to point the authors to provide cutting-edge and innovative advances on international competitiveness within the field of international marketing. Or, as suggested by the title of the Achrol and Kotler (2012) article in the 40th Anniversary Issue of JAMS, the special issue on international competitiveness was intended to advance the “frontiers of the marketing paradigm in the third millennium” with a specific focus on aspects that relate to international competiveness. I think it does, and I am happy to bring it to the marketing professorate for reading, evaluation, and use. Each article is described below, largely using text taken directly from the authors’ article abstracts, to serve as an accurate account of the intended contribution.

The lead article by Cavusgil and Cavusgil (2012) provides research-based reflections on international marketing. They suggest that the constant in the evolution of the business enterprise has been its relentless search for competitive advantage. What has been different about this quest is that it is, increasingly, a global landscape that defines the firm’s opportunities and challenges. The global marketplace has always been dynamic and complex in terms of the changes it brings, but the last two decades have been exceptionally transformational. In terms of opportunities, firms pursuing international customers have never before faced such open markets, rise in discretionary income, and modern tools for accessing global markets. In terms of challenges, intense competition, complexity of managing multiple markets and coordinating marketing strategy, a host of risk elements, and the sheer difficulty of managing geographic, cultural, and political barriers are among the factors which impede the firm’s success in global markets. Often, these changes come in the form of radical, transformative disruptions. The article by Cavusgil and Cavusgil (2012) draws attention to major disruptions impacting international marketers and provides insights for appropriate firm responses.

Rugman et al. (2012) conduct a fascinating study on Porter’s (1990) so-called “diamond model.” They say that international competitiveness ultimately depends upon the linkages between a firm’s unique, idiosyncratic capabilities (firm-specific advantages, FSAs) and its home country assets (country-specific advantages, CSAs). In their article, they relate the FSA/CSA matrix to the diamond framework for national competitiveness (Porter 1990) as well as the double diamond model (Rugman and D’Cruz 1993). Rugman et al. (2012) examine the FSAs based on the geographic scope of sales and CSAs that can lead to national, home region, and global competitiveness. The empirical analysis suggests that the world’s largest 500 firms have increased their firm-level international competitiveness. However, much of this is still being achieved within their home region. In other words, international competitiveness is a regional not a global phenomenon, the authors suggest. Future research in international marketing should take into account the multi-faceted nature of FSAs and CSAs across different levels.

Kamakura et al. (2012) argue that despite the fact that the dominant theories of the internationalization of small-medium enterprises (SMEs) prescribe a dynamic and evolutionary process for the firm, most of the empirical research on this topic has been based on in-depth studies of a few cases, or cross-sectional surveys, which cannot capture the dynamic nature of exporting decisions that occur over many years. In their study, Kamakura et al. (2012) propose an empirical framework for studying the internationalization of SMEs that: (1) identifies latent internationalization stages based on multiple indicators of the firms’ engagement and strategies in foreign markets over multiple years, and (2) analyzes the firms’ movements among these latent states over time, as a function of main characteristics of the firms and their markets at each point in time.

Steenkamp and Geyskens (2012) focus on transaction cost economics (TCE; e.g., Williamson and Ghani 2012) in the context of culture. They study the cultural boundedness of TCE using two seminal cultural theories: the political science/sociology framework of Inglehart and the management science framework of Hofstede. They use these theories to develop (main-effect) hypotheses about the cultural contexts in which TCE has higher predictive power as well as (interaction) hypotheses regarding particular cultural contexts that may inherently be more inclined than others to adopt certain non-market governance modes if the market “fails.” The hypotheses are tested using a meta-analysis on data collected from 128 studies from 12 countries on three continents, representing governance decisions of 60,926 companies. Importantly, they find that TCE is a universal theory across all cultural contexts. They also find that in societies low on power distance and in societies characterized by a strong emphasis on secular-rational and self-expression values, companies are more strongly guided in their governance decisions by economic, transaction-cost considerations than companies in societies high on power distance and in countries that are characterized by traditional and survival values. In addition, TCE’s power to predict the specific type of non-market governance employed by the firm is systematically moderated by the national culture in which the firm operates. In sum, the meta-analysis by Steenkamp and Geyskens (2012) provides support for the notion that to fully understand governance choices made by firms, there is a need to integrate TCE and cultural theory. While managers around the world are guided by economic considerations, the cultural context in which they operate exerts a substantial—and predictable—contingent effect on their governance choices.

Morgan et al. (2012) conducted a study covering a variety of export-related issues from a marketing strategy perspective. They state that since exporting is the most popular mechanism by which firms engage with international markets, understanding the drivers of export market performance is the key to explaining firms’ international competitiveness. The literature posits that the effective implementation of planned export marketing strategy is a key determinant of the performance of firms operating in international markets. Yet little is known about the specific nature and drivers of export marketing strategy implementation effectiveness. In this study, Morgan et al. (2012) build on the implementation literature in marketing and strategic management to develop a new conceptualization of export marketing strategy implementation effectiveness. Drawing on dynamic capabilities theory, they empirically examine the export marketing capability antecedents and performance consequences of export marketing strategy implementation effectiveness in the context of manufacturing firms that are exporting to international markets. Results indicate that effective implementation of planned export marketing strategy contributes to export market and financial performance, and that marketing capabilities play an important role in enabling effective marketing strategy implementation in export venture operations.

Homburg et al. (2012) state that multinational companies (MNCs) increasingly operate their global marketing activities through foreign marketing subsidiaries. However, this practice presents MNCs with the challenge of efficiently and effectively managing a portfolio of subsidiaries with numerous diverging characteristics. To reduce the complexity of managing such a portfolio and to increase MNCs’ and subsidiaries’ performance, Homburg et al. (2012) provide MNCs with a marketing subsidiary taxonomy that enables them to understand and manage different subsidiary types. In their study, an analysis of a cross-sectional, multi-country, multiple-informant dataset generated five marketing subsidiary clusters, which are distinct in the structural characteristics of size, age, and value-added scope and the strategic characteristics of strategic influence, strategic competence, and strategic importance. Subsidiary performance outcomes, subsidiary environmental conditions including important marketing aspects (e.g., customer characteristics), and headquarters’ coordination and communication mechanisms enrich the study’s cluster description and yield a holistic picture of the marketing subsidiary taxonomy.

Jensen and Pedersen (2012) lead off a series of three articles in this issue on the topic of offshoring and outsourcing. They state that during the past decade, offshoring has become an established business practice. Yet it is still more common to offshore less advanced tasks compared with offshoring more advanced tasks, i.e., tasks closer to the core activities of the firm. The latter is a new phenomenon which raises many new issues on the boundaries of the firm (e.g., Hult 2011). More or less advanced tasks can be found within all activities, e.g., in sales and marketing where telesales is on the less advanced end of the scale while branding and identity building are on the advanced end of the scale. The Jensen and Pedersen (2012) article focuses on the antecedents of advanced offshoring, exploring what causes firms to offshore some of their more advanced tasks. The study’s findings indicate that while the lower cost of unskilled, labor-intensive processes is the main driver for firms that offshore less advanced tasks, the offshoring of advanced tasks is part of firms’ strategy to achieve international competitiveness through access to cross-border knowledge flows and foreign knowledge resources. Furthermore, offshoring of advanced manufacturing tasks seems to be more widespread and experience based than the offshoring of advanced service tasks.

Kotabe et al. (2012) continue the series of offshoring and outsourcing articles in the issue. Their focus is on outsourcing specifically. Clearly, outsourcing has become a widely used and researched means for firms to change their performance. In their article, Kotabe et al. (2012) link outsourcing to the market success of firms, specifically their market share. They argue that although firms may be able to increase their market share through outsourcing, this is only true up to a point, beyond which market share actually decreases as a consequence of further outsourcing. There is, in other words, a negatively curvilinear (inverted U-shape) relationship between outsourcing and market share. Kotabe et al. (2012) also hypothesize that the outsourcing–market share relationship is moderated negatively by both the strength of firm resources and the extent of competition in a firm’s market. They empirically confirm these arguments through a panel data analysis containing over 19,000 observations on manufacturing firms and offer some case examples to illustrate the mechanisms driving these results.

Kalaignanam and Varadarajan (2012) conclude the three-article series on offshoring and outsourcing by examining a conceptual combination of the two and customer relationship management (CRM). They state that the emergence of a low cost, high speed, global communication network and information processing network has enabled an increasing number of firms based in more industrialized market economies to outsource specific elements of their CRM to offshore vendors located in countries with significantly lower labor costs. Kalaignanam and Varadarajan (2012) present a conceptual model delineating the antecedents and consequences of CRM offshore outsourcing intensity. They also provide a literature overview of the determinants of location choice decision for offshore outsourcing, an issue that is closely linked to the offshore outsourcing decision. The growing trend toward offshore outsourcing of CRM serves to highlight a number of issues that merit careful managerial consideration. In this context, Kalaignanam and Varadarajan (2012) highlight supply-side versus demand-side effects of CRM offshore outsourcing, the economics of CRM offshore outsourcing versus CRM automation, CRM offshore outsourcing versus CRM offshoring, the evolution of hierarchical CRM organizations toward market based CRM business systems, and other issues.

Rounding out the special issue on international competitiveness is the paper by Samiee and Chabowski (2012). While Cavusgil and Cavusgil (2012) started out with a research-based thought piece on international marketing (IM), the Samiee and Chabowski (2012) article concludes the special issue with an empirically-based analysis of the knowledge structure in international marketing. Samiee and Chabowski (2012) examine the underlying forces that shape the IM field using three common bibliometric methods: exploratory factor analysis (EFA), hierarchical cluster analysis (HCA), and metric multidimensional scaling (MDS). They apply these techniques to evaluate the knowledge structure of IM publications for 1999–2008. Overall, the database put together by Samiee and Chabowski (2012) contains 228,929 citations used in 3,632 IM articles from 34 academic journals in which marketing publications appear. Initially, they focus the analysis on the published works between 1999 and 2008 for all influential publications. Subsequently, they refine the analysis and examine marketing-centered scholarly influences on the IM literature (IML), and they validate the analysis by comparing the findings with the IML’s marketing-centric knowledge base for 2009–2010. The results indicate that the IM field is expanding and is considerably more inclusive and sophisticated than in earlier time periods. The results also demonstrate that other disciplines (principally management) have had a profound influence on the development of the IML during the 12-year period under investigation.

Conclusion

I appreciate the inspiration provided, unbeknownst to her, by Susanna Easton’s half-a-century of work on and dedication to the topic of international competitiveness, mainly in the administrative roles she has held in the U.S. Department of Education. In that respect, Ms. Easton’s dedication to the topic partly served as the motivation for this special issue of the Journal of the Academy of Marketing Science. Clearly, the topic of international competitiveness is increasing in importance to the field of international marketing (and others). However, Ms. Easton’s dedication to the topic for such a long time helped crystalize the idea to allocate an issue of JAMS to “international competitiveness” with an anchoring in the field of (international) marketing.

Among many accolades, Susanna Easton received the “Educator of the Year” award from the Academy of International Business (AIB) in 2009 and is an Honorary Fellow of AIB—one of only 17 people in the world bestowed with this honor in the Educator of the Year category (as of the publication of this issue). Another positive effect of Ms. Easton’s work on international competitiveness is its influence on several other parts of the world adopting and thinking about adopting the infrastructure of the U.S. Federal Government’s grant program titled “Center for International Business Education and Research.” Ms. Easton both started this CIBER program and has served as its administrator since its inception in 1989; prior to that, and also during her CIBER time, she administered several other programs in the U.S. Department of Education dealing with international competitiveness.

I hope you enjoy these articles, written by a fantastic set of authors, that resulted from the special issue call for papers.