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
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……….…….353.6 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
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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).
2 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).
3 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 countries as those in the mid-stream of development and refers to an amorphous and heterogeneous group of countries mostly found in Africa, Asia, Latin America, the Middle East, and Oceania. Developing markets are described as growing markets that are transitioning from a pre-market stage to the market stage of the mature Western capitalistic economy, through integrated and successfully structured reforms of markets, companies, and society (Maxfield & Schneider, 2019). One of the downsides of the rapidly developing and emerging markets is that they are notoriously volatile, as they run the risk of economic liberalization and transformation (Hoskisson et al., 2000). The markets present a tremendous opportunity for international corporations, as of their rapid growth. Some of the multinational companies that have managed to expand their operations to emerging markets include luxury car manufacturers BMW, Vodafone (one of the largest communication companies in the world), Volkswagen, the Standard Bank Group, General Electric, newcomers like Jumia among others. The opportunity is however not without the financial risk involved, as the fast pace the markets are moving in also provides structural uncertainty and an increased
4 risk of regulatory interference. For example, Leonidou (2004) states that having the right services and prices does not exempt global companies entering other countries from obstacles beyond their control.
Noteworthy, in a global and technology-driven world, most industries, and in particular the music industry has become more innovative in the manner in which music is relayed and accessed by consumers. From vinyl, cassettes, CDs, digital mp3s and now streaming services, the industry has generally gone through some radical changes that have been largely made possible by technological advancements. Music artists and labels have in turn been forced to follow the changes enabled by technological advancement. Currently, the music industry is in the middle of a cycle where streaming has become commoditized and music listeners expect to have access to all music in the world for free whenever they want and wherever they are (Lindblom, 2015). Compared to the past where a person who bought a record owned that music for as long as the record itself was not broken or damaged, in today's world, the consumer of a streaming service only has access to the music as long as he or she pays for the subscription. (Hiller & Walter 2017).
One entrepreneurial venture in the music streaming business that has been able to recognize the opportunity for growth through globalization, and has grown into a well-functioning company since its founding is Spotify, which is the case study company for the current study. Having grown at a fast pace since its discovery in 2006, Spotify provides streaming services for consumers by enabling them to listen to an extensive library of music with millions of songs without downloading them. The company aims to be a part of the digital ecosystem by providing the best music service in the world and with the most users (Lindblom, 2015). Spotify is currently a thriving firm that has successfully gone through its initial entrepreneurial steps in the business cycle, and just like other more established organizations, is facing the problems
5 of expanding its business to international markets, especially those in developing countries (Lozic, 2020). The company recently announced its plan to continue expanding its already broad market by having its streaming service accessible in at least 80 new markets and reach a total of one billion users. In its expansion efforts, the company launched its platform in Kenya in February 2021 (Spotify Newsroom, 2021). To sum up the changing dynamics in today’s business world, it is important to research how highly standardized multinational corporations like Spotify can adapt and modify their business strategies in developing countries. This study, therefore, aims to investigate how Spotify could successfully market itself in Kenya which is an emerging market and what challenges and adaptations Spotify would encounter.
1.2 Problem Discussion
One debate that has remained dominant in international marketing literature, concerns the globalization of markets and the extent that standardized multinational companies can standardize their marketing strategy and operations across national borders. The broad perspective of standardization insists on the homogenization of all business operations including products, markets, and consumer behavior, as well as the extensive standardization benefits. (Tregear, 2015). This is in comparison to the idea of total adaptation that emphasizes the insistent differences among countries and the competitive regulatory compulsion to customize business operations to fit individual markets. It is worth appreciating the fact that standardized multinational firms like Spotify mostly formulate their business operation strategies at their headquarters before rolling them out to global markets for implementation. (Nair, 2014). In most cases, the parent company leads the multinational corporations depending on the perceived understanding of the parent company to the international markets (Tregear, 2015). Therefore, standardization faces resistance since there are bound to be differences
6 caused by local factors such as local styles of business management, skills, structure, shared values, and systems that may not be consistent with the parent organization.
Furthermore, since standardized companies form their global strategies through the parent company, they normally experience limited participation and input from local operations which can result in behavioral and systematic resistance of implementation (Zellner & Laumann, 2013). For instance, the political, technological, economic, cultural, social, and economic environment of Kenya is turbulent, thus posing a big challenge to the implementation of standardization strategy. Organizations from developing nations play a vital role in global business competition because most of the world’s fastest rising economies can be found in developing countries. Besides, considering that developing nations are usually culturally different compared to the developed ones, they give an excellent context for examining the generalizability of the existing knowledge in the standardization literature (Romero et al., 2015).
Therefore, the research problem lies in the identification of standardization implementation challenges and establishing a wide strategic plan that takes into consideration both the international and local environmental factors that standardized multinational corporations like Spotify are operating. The main research gap is whether current knowledge can be generalized to multinational corporations in other countries, and to a greater degree in the developing world. Besides, standardization is a relatively new field of management, and apart from the lack of consensus about its dimensions, it has not been fully understood in comparison to total adaptation. There is a need to increase the existing knowledge, besides, current literature is more biased towards developed markets, further creating a gap in the rising economies and their distinctive needs (Zellner & Laumann, 2013). Subsequently, it is of great interest to
7 researchers, academia, and practitioners dealing with global marketing to understand the perspective of multinational corporations from developing nations regarding the standardization of marketing strategy. Therefore, this study investigates how a highly standardized company like Spotify can stay standardized but also adapt to a new developing market.
1.3 Purpose
Research has noted that standardized companies face a lot of resistance and challenges in an attempt to penetrate and successfully operate in new markets especially in developing markets. Such resistance has been attributed to local business operating factors. Besides, owing to the fact that standardized companies develop their global strategies through their parent company, they are bound to face limited input and participation resulting in behavioral and systematic resistance of implementation. Since the business operation styles vary appreciably in different regions, an understanding of the political, cultural, legal systems, and linguistic barriers among other complexities related to global trade is vital for commercial success. (Birnik & Bowman, 2007). The research gap thus arises where the existing knowledge on the standardization of global markets may not be effective for countries in the developing world.
Studies on this topic were mainly conducted from the perspective of developed nations, and while a few studies tackled this issue in the context of developing markets, the issues tackled were viewed from the perspective of firms in the United States who were operating in those markets (Birnik & Bowman, 2007). The purpose of this study is therefore to determine how a highly standardized multinational corporation, in particular Spotify, can adapt in Kenya, a key developing country in the African market, as well as identify the potential challenges faced by
8 such a corporation in implementing global strategies and the strategies of responding to arising global strategy implementation challenges. The study will be performed by utilizing a mixed-method approach. Firstly, by gathering data via an interview from a Spotify employee that will be used to build a case story about Spotify as a company in Sweden. A survey will then be sent out to Kenyan consumers, asking about their perceptions of Spotify. As a minor extension, additional data will be gathered about Spotify’s marketing practices in Kenya.
All the data gathered will then be discussed and analyzed to reach a conclusion of how Spotify has adapted to this new market. Considering the current shortage of studies on standardization in developing economies, the findings from this study will hopefully add to the literature and increase the understanding of the conflict between standardized multinational corporations’ decisions and difficulties experienced at the local company implementation level. Such insight will enable Spotify and similar organizations to formulate implementable global strategies by acquiring a better understanding of the business operating environment in Kenya and other developing markets. Besides, governments will benefit from the study by gaining more insight into local business environmental challenges for improvements of policy framework to improve foreign direct investment.
1.4 Research Questions
What challenges could Spotify encounter when marketing its services in the developing market of Kenya?
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2. Theories
2.1 Marketing Styles
According to Kotler (1972), marketing is a customer orientation aimed at generating customer satisfaction and long run consumer welfare as the key to satisfying organizational goals. Competitive pricing in marketing is part of the value a brand can offer, however, the existing market price is a determinant of what consumers think is a competitive and attractive price (Janiszewski & Lichtenstein 1999). In such a global environment, multinational corporations have been forced to develop their marketing strategy around the different global marketing dimensions, mainly standardization or adaptation of marketing strategy across regions (Laroche, et al., 2001).
Considering the current digital age, companies and in particular multinational corporations in the music streaming industry have adopted more digital marketing strategies including email marketing, analytics, and reporting, paid advertising, social media, blogs, website design, and search engine optimization. (Charlesworth, 2014). Email marketing is one of the most effective digital marketing strategies for sending emails to consumers and prospects. (Charlesworth, 2014). Charlesworth (2014) notes that this method is effective in converting one-time buyers into loyal customers and prospects into customers. Social media marketing is another common marketing strategy where brands utilize social media and social networks to market themselves. This method enables companies to reach and engage existing customers and new ones while enabling them to promote their mission and culture. (Charlesworth, 2014). Social media pages have proven to be successful in creating a desirable relationship between the consumer and the company. This could for example be seen in the brand awareness of the consumers who choose to interact with the company’s social media pages. (Hutter et al. 2013).
10 Social media influencers have become an impactful force in the marketing field, brands are collaborating to utilize the influencers online audience and credibility to communicate to bigger markets and attract consumers. (Chang, Wang & Kuo, 2020). Website marketing is another marketing strategy used by companies and involves the strategic promotion of a website to attract relevant traffic. Another popular marketing strategy is paid advertising which refers to any strategy used by a brand to target potential consumers based on their interest, intention to buy, or previous interactions with the brand. Brands also utilize search engine optimization marketing strategies. This method involves the planning, outlining, and implementation of processes designed to improve search engine rankings in order to get more organic traffic. Finally, analytics and reporting in digital marketing involve the translation of consumer traits into actionable business data. With the increased tendency of digital marketing among consumers, companies utilized digital analytics tools to examine the numerous channels that their consumers interact with and identify more revenue opportunities for the business. (Chaffey & Ellis-Chadwick, 2019).
2.2 Brand Communication
A company’s brand is a vital part of its marketing strategy. However, the premise of brand communication in business standardization has not received its deserved attention in the early literature. The main goal of a standardized brand is to give the potential global consumer an idea of the products or services that the company offers. Companies aim to ensure the distinctiveness of their brand to make it easily recognizable to the global market. As such, brand communication refers to how a company communicates to or with the end customer. On one hand, brand communication is indirect communication and, on the other hand, is either one-on-one or direct communication. The latter description of brand communication mainly
11 focuses on the direct impact that brand communication has on the prevailing buying habits of consumers and is mainly focused on transactions. (Low & Lamb, 2000; Sahin, Zehir, & Kitapci., 2011).
Since branding is to a large extent based on value, the purpose of brand communication is to influence the consumer’s perception of value (Holm, 2006). This means that brand communication plays a significant function in creating brand awareness and positive brand perception, which is a precondition of brand loyalty, and thus a vital factor in developing brand strategy for standardized companies. Apart from creating brand recognition, the goal of such tools is also to communicate the values and standards that the company strives to live by. (Sahin et al. 2011) The success of this type of communication and its ability to influence consumer brand satisfaction has been portrayed by a number of past studies (Zehir Sahin, & Kitapci., Özşahin., 2011; Sahin et al., 2011).
According to Alashban et al. (2002), communication standardization means that a service or product is communicated using a universal advertising approach: for instance, having a similar brand message communicated across international markets. Furthermore, when using a standardized communication approach, a company can employ a similar communications approach across borders, eventually cutting costs. However, it might be necessary to have language alterations in order to reach a wider audience. In turn, Alashban et al. (2002), point out that international advertising adaptation refers to the extent to which a given communication program varies across global markets. This approach would instead employ different campaigns across global markets and a contingency approach shows that there are different adaptation levels where adaptation is adjusted according to a given situation (Alashban et al., 2002).
12 According to Melin's (1999) argument, the quantity of communication standardization is vital in creating worthy attention, a position in the minds of consumers, and increasing the market share globally. However, when it comes to brand development through communication, quality is also important. Communication quality in this context is the ability of a standardized company to develop a unique and distinctive brand communication strategy. (Melin, 1999). Brand communication strategies aimed at developing global brands need to enhance the competitive advantage of the brand, and the brand message should be consistent in every region to create a synergy effect. All the thematic, verbal, audio, and visual elements employed in brand communication should be connected to create an integrated unit, which if correctly handled can create a competitive advantage for standardized companies against the local ones. While a single element of brand communication might be prominent as compared to the others, all the elements provide the brand with an added value (Melin, 1999).
Brand communication consists of a myriad of channels including advertisements, visual merchandising, and public relations (Aaker & Joachimsthaler, 2000). For instance, the internet has proved to be a powerful promotional tool to directly reach consumers around the globe and is therefore a powerful brand-building tool for standardized companies (Aaker & Joachimsthaler, 2000). Besides, standardized companies are provided with the chance to supply their consumers with current brand information through the internet. Advertising is also another strong tool of communication where ad campaigns are created to portray and communicate the brand personality (Jackson & Shaw, 2009). Social media pages have also been effective in creating a desirable relationship between the company and its consumers (Zehir et al., 2011). The goal of such types of communication is diverse. In particular, they are vital for enhancing brand legitimacy and brand perception, which are vital to brand communication as discussed below (Hutter et al., 2013).
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2.2.1 Brand Legitimacy
Brand communication has been widely reported as a great enhancer of brand legitimacy (Kates, 2004). Despite globalization making it flexible for more multinational organizations to solve business standardization and adaptation issues, their long-term capacity to deliver is conditioned on their legitimacy in the eyes of their potential consumers (Buchanan & Keohane, 2006). Brand legitimacy refers to the generalized assumption or perception that the actions of a given business brand are desirable, appropriate or proper within some socially constructed system of values, norms, beliefs, and definitions (Zehir et al., 2011). In a general context, the process of brand legitimacy occurs when an organization is faced with problems of credibility (Zehir et al., 2011).
Brand legitimacy influences whether a brand remains relevant at the focal stages for the states’ efforts to coordinate policies and solve issues. In a global market characterized by forum shopping and turf battles between organizations, legitimacy has become a crucial resource for multinational firms intending to fend off unilateral action and multilateral competitors (Zelli, 2018). Besides, legitimacy impacts the capacity of standardized multinational organizations to integrate their rules and norms in new markets. When such organizations suffer from poor legitimacies among consumers and elites, it becomes more difficult to gain support from governments and relevant business entities to secure the ratification of new agreements (Sommerer & Agne, 2018). Furthermore, brand legitimacy impacts the ability of multinational organizations to secure compliance with global business norms and rules. As such brand legitimacy presents a better and much cheaper option for securing compliance than coercion. The legitimacy of multinational brands further speaks to vital normative concerns regarding its global operations and governance. Brands that lack legitimacy in the global market suffer a major democratic deficit in their global operations and governance (Sommerer & Agne, 2018).
14 Brand legitimacy is based on the brand’s core values, and which are a part of the product attributes and brand identity that a company communicated to its consumers. Therefore, it is vital for multinational corporations to communicate core values to their consumers: failure to do so might lead to the loss of benefits that a company holds on the consumers.
2.2.2 Brand Perception
Literature has consistently placed positive brand perception as the most important goals of brand communication for standardized companies (Keller & Lehmann, 2006). As such, developing a strong brand communication has been widely associated with the development of a good brand relationship with consumers thus contributing to strong brand perception and attitude that is positive and that the consumers associate with satisfaction and trust (Runyan & Droge, 2008; Sahin et al., 2011). Smudde and Courtright (2011), contend that brand communication is vital to companies and their stakeholders. What a company communicates and the manner in which the communication is handled is vital since stakeholders’ perceptions are interconnected. Stakeholders learn from the narratives being told by the company. This is not only limited to what is said from the performance reports but also how as demonstrated in the style, the tone, the values of the company, and its stakeholders' interactions. (Smudde & Courtright, 2011).
According to Hoeffler & Keller (2002), brand perception is related to the brand-consumer relationship, therefore, achieving a positive consumer perception is the final step in establishing a brand asset. This is the stage in the branding process where consumers engage in brand loyalty behaviors, brand immersion, active participation and community spirit (Batra, Ahuvia & Bagozzi, 2012). Past studies have shown that a positive brand perception boosts brand loyalty (Park & Maclnnis, 2006). According to an argument posed by Aggarwal (2004), brand
15 perception necessarily impacts the financial exchange and performance of a brand, therefore, differentiating it from interpersonal relationships. Consumers who perceive a brand positively usually form a unilateral effective relationship with the brand (Aggarwal, 2004). Therefore, the consequent goal of any standardized brand is to establish a positive brand perception because of its potential of promoting consumer brand loyalty (Park & Maclnnis, 2006).
Past findings have revealed that the perceived brand quality does not only positively influence brand loyalty but also customer commitment and satisfaction (Pavlou, Liang & Xue, 2007). The perceived brand quality drives consumers to develop trust and identify more with a brand. Besides, it is closely related to consumer satisfaction since people who hold higher quality perceptions about a brand further exhibit greater consumer satisfaction (Pavlou et al., 2007). If consumers have a positive brand perception, for example, that a certain brand he or she has confidence in satisfies his or her desire, they are willing to rely on the brand he or she has confidence in the benefits (Carroll and Ahuvia, 2006). According to Pavlou et al. (2007), positive brand perception can facilitate trust that hence allows consumers to rely on the ability of the brand to perform its stated function. The extant marketing literature reveals that trust is more prominent in situations of uncertainty. Thus, how a brand is perceived has an effect on how certain consumers feel towards the brand (Pavlou et al., 2007).
2.3 Country Characteristics
2.3.1 Institutions
North (1990) described institutions by comparing them to rules of a game in society where they help explain the interactions between people and the incentives that drive their behavior. A more current view describes institutions as shared systems that consist of written and unwritten
16 rules that help structure the behavior, expectations and social interactions within a given community (Hodgson, 2015). Institutions help people within a society by giving them structure and order in which they can act according to the expectations set by the people within this group. This allows them to act in a way that is efficient within the given context since the perception and understanding are implicitly shared among the people, and thus, does not need to be explained. (David, 1994).
Institutions also allow people to act in cooperative ways without needing to be told to do so, since the norms of the institution help guide the appropriate behavior. This structure, created by the institutions, provides a familiar structure for the people that they can rely on with ease and spare them cognitive efforts. (Hall & Taylor, 1996). However, this makes the changing of an institution that much harder to influence. Since institutions are so heavily relied on, the altercation of them is very difficult and occurs slowly under longer periods of time, even if the change is more efficient and more beneficial to the people. (Pierson, 2000). Institutions consist of three different systems, regulative systems, normative systems and cultural-cognitive systems (Scott, 2008). These three elements together contribute to what makes an institution and the social structures that they involve. By examining institutions from the different views of these elements, different interpretations and understanding can be made of how institutions function (Scott, 2008). To fully grasp the concept of institutions each individual element will be examined individually.
The first element, regulative systems, can be explained as formal rules. These rules are set in place in an attempt to shape desired behavior. The behavior is then monitored by an authority with the capabilities of enforcing this behavior, either by rewarding the behavior if it aligns with the rules, or by punishment if the behavior violates the set rules. Through these sanctions, future behavior can be conformed to the established rules. (Scott, 2008). The rules established
17 in regulative systems are generally written such as laws, where the police and courts act as the authority that executes judgment when violated. Therefore, the political structure and jurisdiction of a country are large parts of what is included in the regulative systems. However, there can also occur rules that are unwritten that still underlie and supplement written rules in some way. In the case that these unwritten codes of conduct were to be disrupted, the acting authority would be other people who would then punish the offender in the form of social shaming or shunning. (Scott, 2008). The way that the rules influence behavior can be explained by three different aspects.
The first one is obligation, which explains to what extent people need to follow the rules due to the fact that their behavior is being monitored and can be judged by others. The second one is precision, which explains the extent of how specified the rules are so that the required conduct can be executed without uncertainties. The third and last one is delegation, which explains to what extent the authorities are able to execute accurate punishment in an attempt to uphold the rules. (Scott, 2008). Scott (2008) also states that regulative systems show high values concerning these three aspects of rules compared to the other elements of institutions, normative systems seem to show lower values when it comes to these three aspects of rules. Scott (2008) also mentions how the logic behind regulative systems, and the reason for the creation of laws and rules all comes down to individual gain. People believe that the rules they have created will allow them to reap rewards if they follow them and also avoid unnecessary punishment. Because of this, regulative systems are based upon rational choices made by individuals within the institution. (Scott, 2008).
The second element of institutions is referred to as normative systems and just like regulative systems, it consists of different sets of rules. However, these rules differ from those of the regulative systems in the sense that they are more informal. This means that they act more as
18 codes of which to behave rather than strict rules and laws. (Freil, 2017). Normative systems consist of different forms of values and norms. Values concerning institutions are being described by Scott (2008) as “conceptions of the preferred or the desirable together with the
construction of standards to which existing structures or behaviors can be compared and assessed”. In other words, values are the force that motivates individual behavior towards
something that is desired. Norms on the other hand are defined as the entity that specify the way things should be done and define the rightful means to pursue something of value (Scott, 2008).
Blake and Davis (1964) describe normative systems as the structures that help define the goals or objectives of the situation. Whether it be winning a game or making a profit for a business. Also, normative systems include how these goals and objectives are to be achieved. For instance, if the goal is to win the game, normative systems define the rules that are necessary to follow concerning this game, and if the objective is to earn a profit through means of business, normative rules define fair business practices. (Blake and Davis, 1964). There are certain values and norms that can be applied to all members within a society, however, there are also certain values and norms that are only applicable to certain individuals with distinct positions. This is referred to as roles, and the people with these roles have different expectations set upon them of what their goals are and the way they should behave when working towards them. These expectations are not mere thoughts of appropriate behavior but rather, the way a role should behave according to the normative expectations within the institution. Some professions for example, are able to act in certain ways that would otherwise be unacceptable, due to the fact that they possess the role connected to that profession. An example of this could be a doctor who is able to ask very private questions about a person that would be deemed as inappropriate, would they not possess their given role. (Blau & Scott, 2003).
19 Casile and Davis-Blake (2002) describe the difference between regulative and normative systems, as normative systems being more guided towards self-interest where the individual is deciding which option is most beneficial to them. While normative systems on the other hand reflect the thought process of how one should behave in regard to the situation and how this is affected by their given role. The third element of institutions is the cultural-cognitive systems. These systems can be explained as the behavior performed by people based on the environment surrounding them. Everyone interprets the world differently and depending on how the world is interpreted will affect how people behave. Cultural-cognitive systems are a structure where people interpret the world similar to each other within the system. (D’Andrade, 1984).
Different stimuli in the environment such as symbols, words, signs and gestures are examples of elements that can be interpreted differently by different individuals and cultures. Languages are a major difference between cultures not only by the words used but also sometimes the letters or symbols they consist of as well. Even the same language can have different meanings for the same word depending on where it is spoken. The same can be said of gestures where the same gesture may have different meanings depending on the culture and the surrounding context. Even the meaning of colors can differ vastly between different cultures. (Sewell, 2005). How these stimuli are interpreted will then affect the outcome of a person’s behavior regarding that stimuli. People will experience a stimulus from their surrounding environment and then process it internally according to the cognitive structures created around it that ultimately cultivates into a behavior that matches the beliefs of the cultural-cognitive system. (Weber, 1968). However, every individual interprets the world subjectively and even if individuals of the same culture often share cognitive processes by being part of the same institution, ultimately every individual is different, actions and beliefs can therefore still differ a lot from individuals in the same institution. (Fiol & O’Connor, 2002). The same can be said
20 of the culture of countries. Every individual is different but from a general perspective there is an overall pattern to the culture that exists within a nation. These national cultures can be broken down into dimensions.
2.3.2 Hofstede’s National Culture Dimensions
Hofstede’s national culture dimensions are a framework which categorizes the culture of a specific country. These dimensions can then be used to better understand the culture of a country as a whole, be it how people within the country behave or how they can be compared to other countries. This can be a useful tool for companies when operating in markets in different countries. There are a total of six different dimensions that are rated on a scale from 0 to 100 where 100 is a very high correspondence of that dimension. The six dimensions are power distance, individualism/collectivism, masculinity/femininity, uncertainty avoidance, long/short term orientation and indulgence/restraint. (De Mooij & Hofstede, 2010). However, for this study, the last two dimensions of long/short term orientation and indulgence/restraint will not be covered nor used due to the fact that they have yet to be measured for Kenya and can therefore not be applied in this study.
Power distance is defined as to what extent the power in organizations and in society is distributed unequally and accepted. Not only by the people in power but also by those who are less powerful accept this inequality in power. This means that both leaders and followers agree upon the distribution of power being uneven. For a country with large power distance, a large inequality would be accepted, while a country with small power distance would want people to have more equal amounts of power. One aspect of large powers distance includes how parents teach their children obedience and children are expected to behave according to what they are told. On the contrary, small power distance cultures differ from these aspects in the
21 sense that children are being treated more like equals by their parents rather than blindly following their demands. (Hofstede, 2011).
Individualism and its opposite, collectivism, is used to describe the state of a society when it comes to the integration of groups. In an individualistic culture, individuals are independent from each other and mainly focus on oneself and the immediate family. In collectivistic cultures on the other hand, people are born and integrated into strong and cohesive in-groups which includes extended families which share a strong bond of conformity and might even oppose other in-groups. Some of the characteristics for individualistic cultures include how people are “I” conscious and value the right of privacy as well as speaking one’s mind when surrounded by other people. These characteristics differ from those of collectivistic cultures. These do instead have a “We” consciousness and put high emphasis on belonging with others as well as constantly maintaining a sense of harmony within the group, free from conflict. (Hofstede, 2011).
Masculinity and its opposite femininity, help explain the difference in values held by the different genders as well as the view of life and what is important. For masculinity, competition is highly valued, and it is important to be successful and be the best at what you do while in a feministic culture there is more emphasis on quality of life and it is more important to enjoy what you do than being the best. In a masculine culture there are large differences in emotional and social roles between the genders. Men should strive for success and some women might as well. Work is seen as more important than family and there is admiration for the strong. Comparing this to a feministic culture, there are small differences in emotional and social roles between the genders and men and women should both be modest and caring people. One should
22 strive to find balance between family and work and there should be sympathy shown for the weak. (Hofstede, 2011).
The future is unknown and uncertain, some cultures feel more threatened by this than others. This dimension helps to explain to what extent the people of the culture feel either comfortable or threatened by the future and how they prepare for unknown occurrences. Cultures with strong uncertainty avoidance build their societies around strict rules and norms in order to try and control the future. Weak uncertainty avoidance cultures do not worry to the same extent and take every day as it comes and live more lax and stress free lives. Strong uncertainty avoidance cultures can be characterized by the constant feeling that the future is threatening and brings with it higher levels of stress and anxiety which leads to lower scores in mental well-being and overall health. Weak uncertainty avoidance cultures on the other hand have a different outlook on life and accept the uncertainties of the future and embrace everyday as it comes which leads to lower levels of stress and less anxiety, which has a positive impact on their mental health and overall well-being. (Hofstede, 2011).
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3. Methodology
3.1 Research Design
The motivation behind this study is to investigate and get a better understanding of how highly standardized companies can adapt when entering a developing market from a previously developed market. The knowledge surrounding adaptation into developing markets is lacking and mostly comes from an American business perspective. There are many aspects of culture and infrastructure that vastly differ from developing markets, making it difficult to predict how a company may need to adapt when entering such markets. Therefore, it is of high interest to add to the knowledge concerning this topic and make the approach to adaptation clearer. This research paper seeks to pursue this goal of which the following research design has been applied.
The working design for this thesis is a mixed method. First an interview was conducted qualitatively to investigate the general operations of Spotify. Later on, a survey was conducted to find descriptives on Kenyan consumers and the Kenyan consumer environment. These two methods were then used to build a case story about Spotify as a company and the new market of Kenya. Secondly an abductive study was conducted to find out the research gap and allow the researcher to freely alternate between theory and empirical data. The approach followed Denzin’s (2017) multiple triangulation approach that encourages the use of more than one method to collect data from participants with varied expertise. This triangulation model in research is vital in mitigating weaknesses that are prone to single methodology research designs.
24 First, it is important to consider the methodological facet of deductive inductive and abductive studies. In brief, deductive studies present general ideas on the correlation between practice and theory. Depending on existing facts on a given field of theory, different hypotheses can be developed and examined through a systematic empirical study (Bell, Bryman, & Harley, 2018). Contrarily, inductive studies relate empirical results with a given theory and findings from the given field. In recap, while a deductive design exploits an existing theory to direct and develop results and observations, an inductive research creates a new theory using findings and observations. Most inductive studies do not create new theories but instead use them to develop a study background. In most cases, the researcher is forced to gather more data through interviews and surveys in order to determine the significance of a given theory. (Bell et al., 2018). According to (Blaikie, 2009; Bryman, 2012; Dubois & Gadde, 2002; Saunders, Lewis, & Thornhill 2012), an abductive approach is the middle ground between the polarizing deductive and inductive studies since it enables researchers to contribute to theory as it entails comparing existing theory to data. Aliseda (2007) furthermore describes abduction as the logical judgement from how an observation has been explained.
Secondly, it is vital to discuss the different strategies involved in conducting a quantitative or qualitative study. According to Bell et al. (2018), it is vital to make this distinction because it relates to the varied approaches or methods used to classify business research. To explain this succinctly but clearly, quantitative study involves a research method that concentrates on quantifying collected and analyzed data. Qualitative study, on the other hand, concentrates on the words and behaviors in the collection and analysis of data, as opposed to quantification (Bell et al, 2018). Notably, both methods focus on creating further understanding and knowledge about the society and peoples’ behavior. However, qualitative research is in particular concerned with how the researcher interprets given information according to
25 motives, frames of reference, context and social processes. Gog (2015) points out that qualitative data cannot be relayed in numbers or figures.
Bell et al. (2018) posit that the most important aspect to consider when choosing between a qualitative or quantitative study is the purpose of the study. In the case of the current study, the purpose is to investigate how highly standardized companies can adapt when transitioning from a developed market to a developing market, using Spotify in Kenya as an example. Therefore, it is impractical to carry out the current study using a quantitative method because the study topic touches on an intangible subject. For this reason, the study utilized qualitative research since the data was interpreted using a theoretical approach to aid in identifying the motive, context and social process. A quantitative tool in the form of a survey has however been utilized as well as a method of finding descriptives of the Kenyan consumers and the Kenyan market environment.
According to Pluye & Hong (2014), mixed methods research is a distinctive research approach that has been used by researchers as a way to integrate different research methods. The reason for taking a mixed method approach in this study, is because it was necessary to gain the understanding of both Spotify as a company and the Kenyan market. Since these sources of information are different in many regards, it was necessary to apply different method approaches when gathering data from the two sources. The choice was then made to utilize an interview with an employee from Spotify, to gain a deep and thorough understanding of the inner workings of the company which was ultimately achieved through this interview. Additionally, in order to understand the new consumer environment of Kenya and gain knowledge of the potential consumer perceptions of Spotify in Kenya, a method was required where a large number of consumers from far away could be reached. This led to the conclusion
26 of using an online survey to investigate the preferences and perceptions towards Spotify and their actions in Kenya. This is the reasoning for this study being a mixed method between an interview and an online survey.
3.2 Research Philosophy
The research philosophy behind this research follows the epistemological position of interpretivism. Interpretivism stands in contrast to positivism and can be explained simply as the belief that research findings' meaningfulness depends on the researcher’s interpretation of the findings (Levy, 2006). Positivism on the other hand, claims that the findings should be something that can be experienced directly and is objective in nature, through the use of a scientific method (Comte, 1880). In addition to these philosophies, there is also critical realism and constructivism. Critical realism is the belief that the world consists of the real world and the observable world, where only the observable world can be understood by human perception and theories (Archer, 1998). As for constructionism, it is the theory that states that people learn by taking in information that then gets constructed into knowledge based on that person’s previous experience which leads to people possessing different knowledge and therefore different representations of the world (Burr, 2015).
The reason for using interpretivism in this study is due to the fact that this study investigates several social aspects regarding people and their intuitions, and according to Bryman & Bell (2017), interpretivism is better suited for social sciences since they cannot be explained through natural science methods. This study also uses an abductive research approach. This type of approach is described by Bryman & Bell (2017) as a way of finding the most suitable explanation to the occurrence of something puzzling or surprising. In this study, that would be the research gap of how a highly standardized company could adapt when entering a developing
27 market from a developed market. Therefore, this approach is fitting for this study since this research paper is trying to find suitable explanations to this research gap where different aspects are being investigated, such as perceptions of consumers and adaptations already made by Spotify in Kenya.
3.3 Data Collection
This study is conducted through a mixed method approach. The data collected consists of primary data in the form of an interview to get a deep understanding of the company. In addition, a survey approach was also utilized to understand the context of the consumer environment in Kenya. Various secondary data was also collected to further expand the knowledge regarding the subject of the study.
3.3.1 Primary Data
Primary data is used to collect information about a specific topic that is connected to the research question or where secondary data is not enough or does not cover the specific research area. (Hox & Boeije, 2005). In this study, both an interview and a survey were used as means of gathering primary data. An interview was conducted with an employee of the company Spotify which became the foundation of the case story presented in findings where Spotify as a company is explained. According to Rosenthal (2016), in-depth interviews are conducted to get a rich understanding of the participants' experiences, feelings, opinions, perceptions, and overall knowledge of the given research topic, through the use of open-ended questions. The reason for conducting an interview was so that a case story could be built, based on detailed and broad information, provided by the company itself.
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When creating the questions used in the interview thought was put into making them exploratory and open ended. The reason for this is according to Bryman & Bell (2017), a way to ask questions without any bias and allow the person in the interview to fully explain their response without interference from the interviewer. Also, since the interviewee is not limited by the question being too narrow, this allows them to share information that might be of use that the interviewer had not thought to ask about previously.
There was a total of 12 questions created for the interview based on the three theory sections used in this study. The questions were created to try and build a picture of Spotify as a company and are therefore quite general and asks about the perspective of Spotify. The first set of questions were based on brand communication and asks about the self-perceived image of the company as well as their product and adaptation to different consumers. The second set of questions focuses on country characteristics and different ways Spotify might need to adapt when entering foreign markets. The third set of questions are based on the theory of marketing styles and focuses on which channels Spotify use when communicating with their consumers and which ones they believe are the most effective ones.
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Table 1
The questions were sent to the interviewee one day before the interview, to give them time to go through all of the questions and organize their thoughts, so that they would be better prepared for the interview the coming day (Kara, 2015). The interview was held in Zoom with two interviewers and one interviewee. Video cameras were on to make it possible for the involved parties to see each other when communicating. The Zoom call was recorded with permission by the interviewee and the interviewers took turns asking questions and follow up
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questions to the interviewee. The time it took to conduct the interview is approximately one hour which then got transcribed into text (see appendix).
The second source of primary data gathered in this study comes from a survey. Surveys are used in order to get a large number of answers from respondents compared to the use of interviews and will lead to an understanding of a group of people rather than a more detailed understanding from one person (Bryman & Bell, 2017). This survey was sent to Kenyan consumers in order to gather their perceptions about music streaming services and Spotify specifically. The survey is made up of 23 questions (see appendix) divided into different sections.
The first question in the survey is a control question, which is the question about whether the respondent lives in Kenya or not. This is used to measure if the respondent is a Kenyan consumer or not. Even if a respondent might come from Kenya, if they no longer live in Kenya, they are no longer Kenyan consumers. The same can be said for the people who are not Kenyan but still live in Kenya, they will be seen as Kenyan consumers. If the respondent answers no to this question, they will be asked to send in their survey without answering any further questions. This way the survey is only answered by Kenyan consumers. This meant that there were a lot of respondents that got taken out of the survey since they were not seen as Kenyan consumers. The reason for non-Kenyan consumers being sent the survey is that the survey was distributed through social media where respondents were also encouraged to keep spreading the survey. This in turn led to the survey being spread to people not living in Kenya which is the reason for the large loss of respondents after the first question in the survey.
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The following six questions, question 2-7, are all questions that are in some form connected to the theories of country characteristics. Question 2 asks the respondent of their age which can be related to institutions of different age groups and how they might behave differently. The next question, question 3, asks about their gender which can also be connected to different institutions around different gender groups but also to the level of masculinity in Kenya. The following question is number 4 and asks the consumer where in Kenya they live, which can, among others, be connected to the level of power distance in Kenya where the location in which they live can have an impact on their role in society. Question 5 asks if they at all use online streaming services which can be connected to institutional theory and how it affects behaviors such as the use of streaming services. The next two questions, 6 and 7, ask about different preferences in payment options and which kind of devices they use. These questions were asked to see what the norms for these aspects which are based on institutional theory.
The next six questions in the survey, 8-13, are questions about marketing styles and how these affect the consumers. The first question in this section, question 8, asks the consumer through which channels they receive information from companies which links back to the theory of different marketing styles. Question 9 to 12 then asks which channels they use the most, which one they believe to be the most effective on them and which channel they trust the most and least. All of which are also connected to the theory of marketing styles. The last question in this section, question 13, asks the consumers if influencers play a helping role in conveying information from companies towards the consumers. This question is meant to find out the effect of influencers specifically, since they can influence in several different channels. This is based on the theory of using influencers as a way of marketing.
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After the section about marketing styles comes the section about brand communication which includes question 14 to 17. These questions cover aspects about brand communication and are based on said theory. Question 14 and 15 are both questions about brand trust which relates back to the theory of brand legitimacy. Question 14 asks about the importance of brand trust while 15 asks about the trust for international brands entering Kenya, which is a category Spotify falls under. The next question is question 16 which asks about which aspects make consumers listen to a brand. This question is based on different aspects of brand communication theory where every answer is a different form of communicating and strengthening the brand. Question 17 is the last question in this specific section and asks the consumers if the brand takes responsibility in society. This question is asked to confirm if this aspect is of importance for the brand to build a relationship with the consumers, based on the theory of brand consumer relationships.
Finally, the last six questions, 18 to 23, are questions that are Spotify specific. These questions ask about the consumers’ perception of Spotify which is why they are connected to the theory
of brand perception. The first question of this section, question 18, is more of a general question where the respondents are asked if they stream music online. This is used to see if they are a potential consumer for Spotify. The next two questions, 19 and 20, ask if they first, have heard about Spotify being in Kenya, and secondly if they at all know about Spotify. If they answered No on question 20, do you know what Spotify is, they get asked to send in the survey without answering the remaining questions. The reason for this is that they would not have been able to answer the last three questions if they did not know about Spotify. The last three questions of the survey, 21, 22 and 23, asked the consumers if they use Spotify, trust Spotify and if they have seen any advertisements from Spotify. These questions are used to measure their overall perception of Spotify in regard to the theory of brand perception.
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The survey was shared on one of the author’s social media platforms since they have a large gathering of Kenyan followers. One platform was Facebook where to survey had the potential to reach 1467 respondents. How many the survey reached is however not possible to measure. The second platform was Instagram with 14 400 potential respondents, where 6 300 were reached by the survey. Out of all of these there were 267 responses to the survey where 153 were Kenyan consumers.
3.3.2 Secondary Data
Secondary data are the opposite of primary data in the sense that it is data that is not gathered by the researchers themselves. According to Vartanian (2010) secondary data is a good way to be economical with one's resources, since there is no need to research topics and collect information which has already been researched. By utilizing secondary data, a larger scope of data can be accessed compared to sticking with strictly primary data. In this study secondary data was used to build the theory section of this research paper and also to add information about the people in Kenya as well as Spotify’s actions in Kenya. The first part of the collected secondary data is a literature review where existing theories were examined and then added to this research paper. Bryman & Bell (2017) states that a literature review is necessary to conduct in order to get the understanding of what has already been discovered and reduce unnecessary data gathering. The method used to find this data was to utilize different databases and search for relevant research.
Electronic databases are the primary source for the collection of secondary data in this study since the amount of information that can be accessed through the internet is invaluable when it comes to academic journals and articles (Bryman & Bell, 2017). The specific databases used
34 were ABI/INFORM Global, Emerald Insights and Google Scholar. The first two aforementioned databases were used since they provide a large selection of peer reviewed articles published in business journals while Google Scholar was used to find a wider array of different articles. The databases were accessed through Mälardalen University which granted permission to most articles which would otherwise have had limited access. Different search words were used to narrow down the number of articles and find the most relevant ones. The search words most used were “Brand communication”, “Brand legitimacy”, “Brand perception”, “Marketing styles”, “Market communication”, “Institutions” and “Hofstede”. These search terms allowed for adequate findings in regard to the theory section in this study.
Secondary data was also used to build the case story of the history and evolution of Spotify, as well as the section of Spotify in the Kenyan market. When creating the case story of the history and evolution of Spotify, the main source of information comes from the official Spotify website itself as well as different press releases. Different academic articles were also used when writing about the history of Spotify as it was used to explain past environments in which Spotify operated within as well as some of Spotify’s own strategic actions. Additional secondary data was also collected when describing the Kenyan environment and some of Spotify’s activities there. Several different websites were used to gain information, such as news articles, blog posts, governmental websites and the Kenyan website for Spotify. All these sources contributed to building the case story of the Kenyan environment and Spotify’s place within it. Lastly, the website of Hofstede insights was used as a tool to measure the scores of Kenya in regard to its cultural dimensions and how this can describe the people of Kenya.
