Arie Y. Lewin, a leading modern researcher of management, editor-in-chief at Organization Science and Journal of International Business Studies (JIBS) journals, and Professor at the Duke University Furqua School of Business, spoke on May 14, 2013 at the HSE Faculty of Management. His presentation was dedicated to an analysis of the behaviour of multinational companies when entering new markets.
Professor Lewin said that most papers dedicated to the problems of international business administration are aimed at studying transnational companies from developed countries. However, these studies cannot track the role of conditions where the company has been created, taking into account its internationalization, and that’s why it is necessary to cover developing countries as well. Arie Lewin understands ‘internationalization’ as including techniques of development which make it easier to adapt products to the cultural specifics of the country if they differ from those where the product was developed.
His approach uses a cross-cultural comparison of cases from developing countries. The study currently includes Japan, Korea, Brazil, and India.
The professor posed the following question: ‘Why is Unilever’s production in Brazil positioned as local-made goods, while Procter&Gamble adds international reputation to its brands?’ Some studies explain this through the companies’ organizational structure. But Arie Lewin founds a simpler interpretation: the heart of the matter is in understanding the consumer preferences in each country.
His studies show that the conditions of the company’s creation, as well as the institutional factors in the country the transnational corporation is entering are the key factors in explaining the differences in solutions for different economies. And these solutions are the basis of a competitive strategy which reflects the longer-term challenges facing a company.
A company entering a new market faces the problems of understanding the institutional environment, often including a different legal system, a different state structure, different lifestyles, and different people. History can show us many examples when companies attempted to enter new national markets unprepared.
Procter&Gamble in Japan learned a serious lesson about the necessity of carrying out marketing studies into consumer behaviour and habits. An advertising video, which had been successful in developed countries, caused problems when used in Japan. The reason was a cultural taboo involving the privacy of Japanese woman in the bathroom.
Arie Lewin gave one more example from Japan. Shampoo and conditioner in one, a product especially popular in America, where it’s seen as a useful timesaver, turned out to be unpopular in Japan. It appeared that Japanese women see conditioner as an artificial treatment, and its instant effect seemed suspicious. The consumer behaviour of different nations is unique and unpredictable, and focus groups cannot give the full picture in understanding cultural habits and specifics, the Professor concluded.
Professor Lewin finished by saying that most companies in the early stages of entering a new market prefer strategies of mimicry and imitation. In addition to this, he believes that a company’s specifics and organizational structure are vitally important, and he believes that the reason for unsuccessful adaptation in developing markets is limited rationality and low-level solutions by the management of transnational companies.