Is Standardization Below the Standard? A study of a highly standardized company adapting to the developing market of Kenya LINDQVIST, KASPER OTIENO, RACHEL School of Business, Society & Engineering Course: Master Thesis in Business Administration Supervisor: Edward Gillmore Course code: FOA403 Date: 2021-06-02 15 cr ABSTRACT Date: 2021-06-02 Level: Master Thesis in Business Administration, 15 cr Institution: School of Business, Society and Engineering, Mälardalen University Authors: Kasper Lindqvist Rachel Otieno (96/04/13) (89/08/28) Title: Is Standardization Below The Standard? Tutor: Edward Gillmore Keywords: Standardization, Adaptation, Emerging Markets, Spotify, Kenya Research What challenges could Spotify encounter when marketing its questions: services in the developing market of Kenya? How can Spotify adapt to the Kenyan market? Purpose: Investigate how Spotify, a highly standardized company joining an emerging market could make adaptations while penetrating the market and what kind of challenges Spotify could face. Method: A mixed method approach has been used in this study. A survey and interview was conducted following an abductive study approach. Conclusion: Highly standardized companies need to adapt in volatile emerging markets and the challenges they will face beyond their control. As for Spotify, some adaptations required were how they reach their consumers, adapting to the preferences of these consumers and understanding the culture of the Kenyan market. Abstract The goal of this study is to increase the knowledge surrounding the adaptation of highly standardized companies when it comes to entering developing markets from an already developed market. This study uses Spotify as an example when researching this topic. The research has been conducted using a mixed method where a case story about Spotify in Sweden has been built based on an interview with Spotify. This case was then compared with responses from Kenyan consumers about their perceptions of Spotify, generated through a survey. Furthermore, the current actions taken by Spotify in Kenya were also taken into consideration when analyzing the gathered data. The analysis showed that there are several opportunities for Spotify to adapt in regard to the Kenyan market. The analysis also shows that Spotify already made some changes since entering the new market in regard to how they operate. These suggested and implemented adaptations have also been compared to relevant theories in which they were supported. Table of Contents 1. Introduction……………………………………….………………………………….……1 1.1 Background……………………………….………………………………….……1 1.2 Problem Discussion………………………………………………...….……….…5 1.3 Purpose………………………………………………………...….………….…...7 1.4 Research Questions………………….…………………………….….……….….8 2. Theories………………………………………………………………………...…………9 2.1 Marketing Styles………………………….……………………….………………9 2.2 Brand Communication……………………………………………………...……10 2.2.1 Brand legitimacy……………………………………………………....13 2.2.2 Brand perception…………………………………………………...….14 2.3 Country Characteristics………………………………….………………….……15 2.3.1 Institutions…………………………………………...………....……...15 2.3.2 Hofstede…………………………………………………………...…...20 3. Methodology…………………………………………………………………………...…23 3.1 Research design………………………………………………………………….23 3.2 Research philosophy……………………………………………………………..26 3.3 Data collection…………………………………………………………………...27 3.3.1 Primary data…………………………………………………………....27 3.3.2 Secondary data………………………………………………………....33 3.4 Data analysis……………………………………………………………………..35 3.5 Triangulation……………………………………………………………….…….35 3.6 Validity & Reliability…………………………………………...………………..36 3.7 Ethical Considerations………………………………….………………………...37 3.8 Limitations…………………………………….………………………………….38 3.9 Method criticism…………………………….…………………………………....39 4. Findings……………………………………………………………………...…………40 4.1 History and Evolution of Spotify………….………………………...……...……40 4.2 Contemporary views of Spotify…………….……………………………...…….41 4.3 Spotify in the Kenyan Market……………………………………………...…….43 4.3 Survey Findings……………………………………………………....………….47 4.3.1 Control Question……………………………………………………….47 4.3.2 Country Characteristics………….…………………………….……….47 4.3.3 Marketing Styles…………………………………………....………….49 4.3.4 Brand Legitimacy…………………………………………….………...52 4.3.5 Brand Perception………………………………………….……………53 5. Analysis…………………………………………………………………………….…….55 5.1 Marketing Styles………………………………………………….……....……...55 5.2 Brand Communication…………………………………………………...………56 5.3 Country Characteristics………………………………….………………….……58 6. Theoretical Discussion………………………………………………………………...…60 6.1 Marketing Styles…………………………………………………………...…….60 6.2 Brand Communication……………………………………………………...……61 6.3 Country Characteristics………………………………….……………….………64 7. Conclusion…………………………………………………………………………...……66 7.1 Management Implications………………….…………………………………….68 7.2 Future Research…………………………….…………………………………….69 References………………………………………….…………………………....….….……70 Appendix…………………………………………………………………………………….76 1. Introduction 1.1 Background The term globalization basically refers to homogenizing on a global scale (Robertson & White, 2007). With the increasing globalization trend, the difference from one country to the other is increasingly getting smaller but still exists. Business globalization and internationalization trends have had major impacts on the business strategies employed by different companies. In order to survive and thrive, multinational corporations have had to adapt to the dramatic dynamics and heightened complexity in the global competitive landscape over the past decades (Robertson & White, 2007). Globalization has not only heightened the competition between countries and their economies but has further led to an increase in their dependency on each other, especially in the trading of goods and services (Hartungi, 2006). Besides, it comes into play when looking at the movement of capital, environment, labor, and thus also employment. Globalization has further contributed to a lot of improvements to countries, especially in developing countries in terms of acceleration of technological development as well as improved productivity and efficiency in many areas of life. Besides, most developing nations have been experiencing changes where they are now witnessing an effect based on global policies, rather than only being affected by domestic ones, as they traditionally were (Hartungi, 2006). Companies have increasingly pursued global strategies to standardize their business operations in order to improve coordination, reduce operating costs and enhance better control. However, given the diverse environment that multinational firms operate in, there have been some challenges in the implementation of global strategies that the current study seeks to identify. (He, Eden & Hitt, 2016). 1 Furthermore, due to the increased globalization and the worldwide business competition, multinational corporations have been faced with a very important business marketing decision between standardization and adaptation, which are the two different perspectives on the international business marketing issue (Dimitrova & Rosenbloom, 2010). On the one hand, followers of the idea of standardization argue that businesses should use a single and standardized marketing strategy in the global market to minimize their total operating costs and promote their global corporate image. On the other hand, those who support the adaptation process contend that it is vital for a business to adapt to different markets in order to fit the unique dimension of each local market (Dimitrova & Rosenbloom, 2010). Morgan (2009) posits that the market is increasingly becoming more similar and universal in terms of preferences, tastes, and price-mindedness, and thus the key to surviving in the current highly competitive business arena is by globalizing. However, multinational corporations that have pursued global strategies are normally frustrated in their implementation strategies and usually do not get the results they desire. Owing to the complex and diverse context of enacting global strategy, it has become synonymous with big challenges. Different countries have diverse cultures, languages, infrastructures, economic situations, rules, and regulations, which have remained potent challenges. Such challenges have brought forth high uncertainty levels for firms forcing them to modify their global strategy implementation challenges to help them make informed strategic plans for international business (McCann & Acs, 2011). Therefore, considering the increased globalization, global competition, and their significance on international business marketing strategy, a business needs to choose the right strategy to expand their operations to other territories in terms of the standardization versus the adaptation issue (McCann & Acs, 2011). 2 Research and development have always been a focus for corporations in their effort to drive growth. What happened in the last decade or so is that international companies have chosen to be more geographically diverse in these efforts as an effect of the globalization that's been happening. The decision between standardization and adaptation of international business operating strategy is also vital in doing business in developing countries. The developing countries of the world look to have a bright future ahead, as the global economy continues to grow (Dunning & Lundan, 2009). The high growth rate usually witnessed in the markets of emerging countries makes them very lucrative markets for multinational corporations (Jones, 2017). Jansson (2007) defines developing