Marketing Agility in MNC Subsidiaries

by | Feb 17, 2023

International Marketing Agility

The main challenge of multinational corporations (MNCs) is to balance local opportunity-seeking initiatives with global efficiency-oriented imperatives. Only if a subsidiary develops reliable local insights and a deep understanding of local customers can it effectively manage customers and contribute to the organization’s success. In short, subsidiaries need to be market-oriented to create and maintain superior customer value. Thus, local subsidiaries can be understood as MNCs’ operational backbone and market pulse. At the same time, MNCs desire to gain economies of scale and leverage synergies by standardizing their marketing programs – i.e., their product offering, promotional mix, price, and distribution structures – across markets.

The main challenge of our business is to strike a perfect balance of optimizing global scale while being locally relevant to the customer. We don’t want to be “hopelessly local” or “mindlessly global.”

— Vindi Banga, former Vice President of Marketing, Unilever

The balancing act between generating and responding to local insights and exploiting standardized marketing programs calls for some form of marketing agility. This research proposes that the simultaneous pursuit of local responsiveness and standardized marketing programs reflects the notion of international marketing agility, referring to “an endless and swift movement between global and local, such that international opportunities are seized, and threats are avoided, without losing focus and momentum” (Gomes et al. 2020, p. 270).

Under this lens, this research examines how market orientation (MO) and marketing program standardization (MPS)—two critical yet seemingly incompatible marketing capabilities—are related to each other and to subsidiary performance simultaneously. To do so, we collected data from executives in subsidiaries of major Western MNCs operating in Japan, an advanced market, and Turkey, an emerging market. Both countries are important players in the world economy with a long history of foreign direct investment. Companies like Bayer, Coca-Cola, Ford, Henkel, IBM, Novartis, and Unilever have operated in both countries for decades. Subsidiaries of such companies have built strong local roots and have accumulated a rich repertoire of knowledge, experiences, and successful strategies in local markets. The long history of MNC subsidiaries in Japan and Turkey makes these markets suitable for testing our model. We analyzed this data using multigroup structural equation modeling.

Contrary to the notion that MO and MPS are incompatible, we find a positive relationship between responsiveness and MPS in both countries. In Japan, an advanced market, both responsiveness and MPS are positively related to profitability and market share. MPS also functions as a partial mediator between responsiveness and profitability in this market. In Turkey, an emerging market, MPS is negatively related to profitability, suggesting a need for adapting marketing programs to local specificities. In short, the performance consequences of MPS tend to be positive in advanced markets and negative in emerging markets.

Overall, these results and follow-up discussions with executives from established MNCs support the conceptualization of MO and MPS as reflections of international marketing agility in subsidiaries. We show that MO and MPS are not mutually exclusive but that a subsidiary’s responsiveness is positively associated with its MPS. In addition, we find the performance consequences of MPS to be positive in an advanced market and negative in an emerging market. As a result, MPS operates as a partial mediator that translates the effects of responsiveness into enhanced subsidiary performance only in Japan but not in Turkey. This finding underscores the need for responsiveness in emerging markets.

Full reference: Özsomer, Aysegül, Bernard Simonin, and Timo Mandler (2023), “Marketing Agility in Subsidiaries: Market Orientation and Marketing Program Standardization as the ‘Twin Engines’ of Performance,” Journal of International Marketing, 31 (2), 6–24.

Cite for: Marketing agility, market orientation, local responsiveness, marketing program standardization, multinational corporations, subsidiaries, effectiveness (market share) and efficiency (profitability) measures of performance, advanced vs. emerging markets, managerial survey, follow-up interviews

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