Going green across borders

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Going green across borders

A study on the impact of green marketing on the internationalization of SMEs

Authors: Raphael Brunner and Soraya Norouzi Supervisor: Dr. Susanne Sandberg

Examiner: Dr. Richard A. Owusu Date: 31th May 2021

Master Thesis

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Abstract

In recent years, the aspects of sustainability and environmental friendliness have taken on an increasingly large role in our society and due to climate change and scarcity of resources, green technologies are growing. As the consequence, this ongoing trend has affected the business environment. Companies need to adapt their strategies to a sustainable manner and take advantage of the potential opportunities generated by this change.

Considering the impact and importance of Small and medium-sized enterprises (SMEs) in the global business environment and economic development, this paper has therefore addressed the question of how SMEs can a gain competitive advantage by implementing a green marketing strategy and how far possible advantages can be used for the internationalization of these companies. For this purpose, semi-structured interviews were conducted with five German and Swe- dish case companies to investigate to what extent they are implementing a green marketing strategy, if they have reached any competitive advantages generated by this strategy, and whether these competitive advantages have contributed to a smoother internationalization process. To answer these questions, the case companies are positioned on the green marketing matrix proposed by Ginsberg and Bloom (2004) which is the basic concept for analyzing the respective strategy, then case studies’ attitudes regarding the aspect of sustainability, competitive advantages raised from implementing a green marketing strategy and their potential impacts on internationalization process are analyzed.

According to the empirical findings, the case studies have registered a tremendous change in customers' behavior regarding green behaviors in society, which emphasizes the need to implement a green business strategy. Particularly, applying a green marketing strategy enables companies to achieve several competitive advantages which help them develop an optimal position against competitors and even exploit them in their internationalization process.

Keywords

Green Marketing, Green Marketing Matrix, internationalization, SME, competitive advantage

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Acknowledgements

The process of developing and writing a master thesis is one the one hand a challenging task, but on the other hand also a very instructive process that will help us in our future careers. We would therefore like to thank all people that helped us by accomplishing that task from our deepest heart. Firstly, we would like to thank our families and friends that helped, motivated, and supported us during the thesis and our whole studies.

We would also like to thank our supervisor Dr. Susanne Sandberg. Starting from supporting us to find the suitable topic, over several meetings with constructive criticism, valuable ideas, feedback and new angles. Furthermore, we would also thank our examiner Dr. Richard Afriyie Owusu, who was responsible for this course and also presented new ideas and aspects for our thesis. We would also thank the fellow students for presenting us critical feedback during these seminars and their oppositions.

Finally, we would like to express our gratitude to our interview partners. Especially under the aspect and the associated tense situation due to the global pandemic, the pressure for companies is even greater and a support of a master thesis is not self-evident. Therefore, we would like to thank you again for your support, without which we would not have been able to formulate this thesis and wish you all the best for a successful future.

Thank you everybody! Tack så mycket! Vielen Dank! Sepās-gozāram!

Raphael Brunner Soraya Norouzi

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“The future will be green, or not at all.”

- Jonathon Porritt

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Figures and Tables

Figure 1. Thesis Outline 8

Figure 2. The Green Marketing Matrix 16

Figure 3. The Uppsala internationalization model 21

Figure 4. Conceptual Framework 23

Figure 5. The Green Marketing Matrix with case companies 51

Figure 6 Revisited Conceptual Framework 57

Table 1. Marketing Mix in Green Strategy 17

Table 2. SMEs definition by European Commission 27

Table 3. Case studies companies 27

Table4. Operationalization of the Interviews 30

Table 5. Overview about Empirical Findings of case companies 46

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1 Introduction

The following chapter contains the introduction to this thesis and serves as an initial entry into the subject matter to be dealt with and its topics. It starts with a background on the development of the topics of sustainability, going green, and their effects on the business environment. At the same time, some of the resulting consequences for companies are highlighted and the aspect of internationalization is addressed. This is followed by a problem discussion, which deals with the need to protect the environment at the same time as economic development. Based on this, a research gap is presented, from which the research questions and the purpose of this thesis are derived. Finally, the chapter is complemented with the delimitations and the outline of this paper.

1.1 Background

The 22nd August of 2020 was an important date last year as it marked the world's Earth Over- shoot Day (Earth Overshoot Day, 2021a). This term determines the point in time when the global demand for ecological resources and services surpasses the number of resources that our planet can recreate in one year. This leads to a shortfall which is compensated by building up waste in the form of CO2 (Earth Overshoot Day, 2021b). It also shows that the economic growth in recent decades has been closely linked to increased fossil fuel consumption and the resulting emissions (Lotfalipour et al., 2010). According to the UN (2019), the world population is esti- mated to increase by 2 billion people to 9.7 billion by 2050. In parallel, the middle class is growing, especially in countries with a rising economy such as China, India, and Brazil (Guillén

& Ontiveros, 2016). These two developments additionally promote greater demand for raw materials and thus a further increase in greenhouse gas emissions and climate change.

Movements like 'Fridays for Future' are bringing these issues to the foreground of our society and pushing policymakers to act (Fridays for Future, 2021). This is reflected, for example, by resolutions such as the Paris Agreement from 2012 or the UN Sustainable Development Goals (UNFCCC, 2021; United Nations, 2021). Also, the European Union priorities the fight against climate change as one of the main targets and has set ambitious goals to combat it. Therefore, the European Commission launched the European Green Deal, with this agenda it aims to make the EU climate neutral by 2050. To reach this goal the EU pushes green technologies and sup- ports the development of a sustainable industry (European Commission, 2021a). However, companies are also recognizing that climate change will have negative consequences for their business. For example, Ackermann and Stanton (2007) have already shown that in a worst-case

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scenario, climate change will cost the U.S. economy 1.8 of GDP per year in 2100, which is equal to the amount of $1.9 trillion.

To reach the climate goals countries like Germany or Sweden for example are already trying to make a shift from fossil fuel energy sources to renewable energy (Federal Ministry for Eco- nomic Affairs and Energy, 2021; Swedish Institute, 2021). But also, companies that operate outside of the energy industry are facing change due to stricter regulations (Ristovska, 2010).

For example, the entire automotive industry is undergoing a fundamental change in the pre- dominant form of propulsion from combustion drive to electric drive (Hannappel, 2017). But also due to stricter CO2 restrictions, for example, through CO2-certificates, changes are ex- pected for all companies that produce CO2 (European Commission, 2021b). Furthermore, all sustainable aspects such as the reduction of waste, the reduction of water consumption, and a better use rate of products should play an important role in the role of a sustainable company.

It is important to point out that a change to a greener and more sustainable corporate strategy does not necessarily mean additional costs and disadvantages and can even help the company to become more successful. For example, using green technologies can reduce production costs by lowering energy consumption, producing more efficiently, or cost reduction through tax benefits and governmental subsidies (Parletta, 2019). In addition, companies also have the opportunity to market these changes in a beneficial way which can be referred to the term Green Marketing. Dangelico and Vocalelli (2017, p. 1264) define it as the “integration of environmental sustainability into marketing”. Furthermore, the implementation of green marketing can even help companies to gain a competitive advantage over other competitors (Papadas et al., 2017).

Large multinational corporations (MNCs) have already recognized the advantages that arise from applying a green approach and the marketing of such. For example, Adidas has a cooper- ation with Parley for the Oceans, in which they promote and apply the sustainable technology of the Circular Economy (CE) by collecting plastic from the oceans and aim at 100 percent recycled polyester for their products by 2024 (Adidas, 2021). In this context, CE represents a sustainable economic concept of closed cycles, which is thus defined by a reduction in the resources, energy, waste and emissions deployed (Geissdoerfer et al., 2017). Another example is the Swedish retail giant IKEA, which attaches great importance to the aspect of sustainability

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and emphasize these efforts among others also on its website. To fight climate change and become greener the company is pursuing the goal of becoming circular and climate positive by the year 2030 (IKEA, 2020).

In addition to technical developments, one of the central aspects which benefited the economic growth of the past decades was globalization. It helped to intensify the interactions between countries and simplified access to international markets for companies (Steger, 2020). Particu- larly for small and medium-sized enterprises (SMEs) growth is an essential variable that can be benefited by a good internationalization strategy (Lu & Beamish, 2001). Sapienza et al. (2006) go even further and indicate that an early internationalization approach is fundamental for the survival and growth of a young company. Nevertheless, the previous information has shown that the aspects of sustainability and environmental friendliness must also be integrated into the corporate strategy. Furthermore, Gómez‐Bolaños et al. (2020) presented a correlation between the level of a firm’s internationalization and its effects on environmental management.

This chapter began with the explanation of the Earth Overshoot Day and the resulting consequences from overconsumption. Already in 2001, Chad Holliday, himself CEO of the chemical giant DuPont, made it clear in the Harvard Business Review that “we will not be able to sustain our businesses over the long haul because they are based on two assumptions that no longer hold” (Holliday, 2001, p. 130). On the one hand, there is only a certain number of finite resources and on the other hand, the ecosystem of the world can only take up a limited amount of waste and emissions generated by consumption. Therefore, it needs a path of sustainable growth, which allows growth for the shareholders while reducing the ecological footprint simultaneously (ibid). Thus, for the future success of companies, it is more important than ever to be able to include aspects of environmental-friendliness, and to use them as a tool to separate itself from competitors in all markets.

1.2 Problem Discussion

Dealing with serious environmental disasters like polar ice melting, mankind has faced contro- versial dilemmas: environment or industry? People or nature? Answering these significantly important questions seems not to be easy with regards to nowadays economic structures which are affected by the economic dimension of globalization (Nulkar, 2014). Considering the ecological aspect of globalization, which according to Steger (2020), has been mentioned as a life-

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threatening for the planet, sustainable approaches in business such as using environmentally friendly and resource-saving techniques in various parts of enterprises’ operations has received a great deal of attention in the contemporary era. The quest for sustainability has become one of the most notable turning points in this century since economic growth is at the top of priority of human activities has led to strong global concerns about environmental damage (Guillén &

Ontiveros, 2016). Thus, the concept of sustainability and sustainable development covers a vast range of practices and efforts from energy considerations to saving the resources needed for future generations (ibid).

Even though social pressures and new regulations have led to magnificent advances in the field of sustainable development, global efforts are needed to compensate for past environmental damage and to improve and prevent the spread of existing damage. Thus, green strategies which are identified as a supportive and complementing component for an enterprise have emerged in the field of business and strategic management (Olson, 2008). In essence, a green strategy, according to Olson (2008), refers to any approach which enables companies to consider environmental benefits in their decision-making process during their operation. By increasing the level of public awareness and culture of environmental protection, according to Mirosh- nychenko, Barontini and Testa (2017), many companies in recent decades have implemented various means to become greener and these efforts are not limited to a specific type of practices.

Applying appropriate environmentally friendly and resource-saving techniques prompts innovations that not only augment products’ value or reduce the final cost of the product but also enhance companies’ productivity. All these results provide companies the chance to achieve a competitive advantage over competitors (Porter & Van der Linde, 1995). Furthermore, according to Tsai et al. (2012), despite the fact that the final price of green products might be less than ordinary-produces ones, new customers who tend to pay more for green-based goods are acces- sible to companies using environmentally friendly operation techniques. Moreover, the use of green techniques in different departments of companies leads to improved financial performance and brings abundant economic benefits to firms including cost and risk reduction, developing environmental know-hows, and green and worthwhile collaboration in the value chain (Miroshnychenko, Barontini & Testa, 2017). Additionally, as companies are generally blamed by various shareholders for environmental disasters, the use of green techniques enables com-

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panies to be endorsed by them and gain legitimacy which raises mostly from society and external stakeholders (Bansal & Clelland, 2004; Zheng, Luo & Maksimov, 2015; Jansson, 2020). To sum up, implementing these techniques in the daily operation of the firms, not only enables them to escalate their profitability but also will result in a more sustainable environment for current and future generations. However, despite the emergence and consideration of the concept of green marketing, there is still a long way to develop sustainable marketing studies. For instance, there is no general sustainable marketing theory and even though many companies produce green products, as they do not implement the proper strategy, they usually do not re- ceive all the benefits of a commitment to sustainable development; more scientific studies are required to examine the cultural differences and stakeholder's behavior regarding green marketing in various countries (Lunde, 2018; Morales et al., 2020).

On the other hand, the importance of SMEs’ activities in economic growth and development is not hidden from anyone. Relying on capabilities such as high pliability and adjustment with new conditions (Agostini & Filippini, 2019) and quick decision-making and lack of time-consuming bureaucratic processes to implement new ways of providing services or producing products (Damanpour & Gopalakrishnan, 2001), these companies grow effectively and efficiently and facilitate the economic growth of the countries. Contributing to job creation, poverty alle- viation, and living standards improvement, these businesses are considered as one of the most important and significantly effective driving forces of economic development (Obi et al., 2018).

In particular, SMEs make up 99% of EU businesses and have a huge impact on Europe's GDP, added value in important sectors of the economy, and Europe’s competitiveness and development (European Commission, n.D. a). In other words, these companies are the foundation of the European economy and a vital factor in European economic prosperity.

The development of communication technologies and the movement of the world towards integration in various directions, such as production and distribution on the one hand, and economic globalization which points out the high expansion of global financial interrelations, on the other hand, have persuaded enterprises to seek new markets throughout the world and be part of the worldwide economy (Steger, 2020; Guillén & Ontiveros, 2016). Therefore, growing internationally has been considered as a significantly pivotal strategic choice for both small and medium-sized and large companies (Lu & Beamish, 2001). SMEs’ internationalization occurs due to various motivations which can be categorized into proactive and reactive motivations as

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two main streams. Proactive motives refer to the process of using internal strength (firm-based) in a foreign market whereas reactive stimuli are firms’ replies to external stimuli (environment- based) such as organizational or environmental pressure (Pett & Wolff, 2004). However, it is widely accepted that SMEs usually tackle internal and external barriers during their internationalization process since they typically suffer from financial limitations, shortage of sufficient time and information, weak management system and experience, environmental restrictions, etc. in comparison to large firms. Hence, it is strongly accepted that the internationalization process of SMEs differs from multinational and large corporations (Rialp & Rialp, 2001).

There has been a vast range of research about the internationalization process of SMEs, influ- ential factors in this process, approaches, and examining various case studies in different countries which will be discussed in the following chapter. Moreover, concerns about sustainability and environmental issues have been turned into a pervasive problem considered by scientists all over the world. However, a knowledge gap can be observed regarding the integration of these subjects, the potential influence of implementing green marketing on the internationalization process of the firms, and the way how SMEs can take advantage of applying green marketing strategies. The combination of all these crucial issues including the expansion of the global economy, the unbridled desire of SMEs to engage in international activities, the need for environmental protection and sustainable development, brought the authors to the research questions which are discussed in the following sub-chapter.

1.3 Research Questions

Based on the background and the previous problem discussion, the authors were able to identify a research gap, which this thesis wants to address. From these the following research questions were derived:

1. How does implementing a green marketing strategy help SMEs gain a competitive ad- vantage over their competitors?

2. How do SMEs use the outcomes of applying a green marketing strategy in their inter- nationalization process?

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1.4 Purpose

The main purpose of this thesis is devoted to the aspect of green marketing and its effects on a company and its internationalization. In detail, the work tries to identify possible competitive advantages resulting from a Green Marketing strategy which SMEs can benefit from. Further- more, the thesis elaborates the possible outcomes of a green marketing strategy that can be included in the internationalization process. Since the two concepts of green marketing and the internationalization of SMEs show profound research individually, this paper, therefore, at- tempts to combine the insights revealed by the existing literature of both theories under one umbrella. In detail, the researchers will examine the aspect and influence of sustainability for firms and research different approaches companies can take to follow a green marketing strategy. Additionally, several theoretical, managerial, and policy implications will be delivered based on the empirical findings and analysis.

1.5 Delimitations

Companies can implement a variety of green actions, which consider the environmental aspect of sustainability. However, the thesis will set a focus on the marketing aspect of a green approach that companies can undertake and not highlight the individual green techniques that can be implemented in detail. Moreover, the study does only focus on companies that can be deter- mined as SMEs and the countries of Sweden and Germany.

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1.6 Thesis Outline

In the third chapter the methodology of this thesis will be explained. The research approach, method, strategy and the data collection process are described here. The aim is to provide the reader with a better understanding of the planning, execution and evaluation of the research as well as to guarantee the credibility of the work.

The fourth chapter of this thesis contains the empirical data collected for this thesis. For this purpose, Swedish and German SMEs were interviewed regarding their internationalization process and green technologies in their corporate strategy.

Chapter five discusses and analyses the empirical findings of chapter 4 on the basis of the theories present previously in the theoretical framework.

This thesis is concluded with the sixth chapter, in which the conclusion is drawn. Based on the findings of the previous chapter, the research question is answered. In addition, possible theoretical, managerial implications, limitations and possible future research are presented.

Chapter two is dedicated to the literature review, which examines the existing academic literature. Here, fundamental concepts such as green marketing, generic competitive strategies or internationalization process are defined and a basis for the later analysis of the empirical data is build.

This chapter is devoted to the background of this study; this is supple- mented with a problem discussion and the research question and purpose of this thesis. Lastly, the section is closed with the delimitations and the outline of this work.

6 Conclusion 1 Introduction

2 Literature Review

3 Methodology

5 Analysis 4 Empirical Findings

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2 Literature Review

The following chapter is dedicated to the fundamental theories and models that are needed for a deeper analysis and answering of the research issue. In the process, the theories are defined, critically discussed, and classified in relation to the research question. For better clarity, the chapter is therefore divided into 9 subchapters. Firstly, sustainable growth and the term green in the business environment will be explained. Next, the term green marketing is described with a focus on the marketing strategy and mix. Followed by presenting the aspects of recourse- based view and competitive advantage. Then, the aspect of internationalization, especially con- cepts such as the Uppsala Model and network theories are presented. This chapter is closed by illustrating the research’s conceptual framework.

2.1 Sustainability of businesses

The aspect of sustainability has become more and more important in our society in the last decades. Also, for companies, this topic got a higher relevance, amplified by the effects of global warming and finite resources, and forced them to adapt their business strategies accord- ingly (Iannuzzi, 2017; Weybrecht, 2013). Today mostly every big company is trying to become more sustainable (Windsor, 2010). The reason for businesses adapting the concept of sustainability can be broad and ranges from customer requirements, cost-saving opportunities to match governmental requirements (Weybrecht, 2013). In addition, the general understanding in society and the business world with regard to sustainability is no longer a question of whether one acts sustainably but rather to what extent (Iannuzzi, 2017). However, this requires innovations and changes that make this transition possible (Charter & Polonsky, 2017). To understand how they can achieve the goal of sustainability, it is needed to define what sustainability means for firms. According to Weybrecht (2013), sustainable development is defined by a company strategy that aligns the interest of the firm and its stakeholders but is also protecting the ecosystem and humans that are affected by it at the same time. Moreover, a change has also taken place at the management level and the potential growth of a strategy that focuses on the aspect of sustainability is being recognized (Iannuzzi, 2017). One theory that tries to present a formula for sustainable growth is the Green Golden Rule developed by Chichilnisky et al. (1995). It is based on the Golden Rule of Economic Growth which is adjusted to explain on the basis of consumption, how to maximize a long-term sustainable utility (Chichilnisky et al., 1995; Bella, 2006).

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2.2 The term ‘green’ in the business environment

The use of the term green in society and business has increased over the last decade and is very common in today's world (Windsor, 2010). Also, the title of the thesis includes this buzzword with going green and an elementary theory for this thesis is Green Marketing. However, before defining all these theories and aspects, a general classification of the term ‘green’ in the business context should take place, because first of all, it has to be clarified what is meant by this term.

The problem can be shown very well by the example of the term green product. Windsor (2010, p. 11) explains: “Saying you have a green product is a lot like saying you have a quality product;

both depend on your definition”. However, the term still needs to be specified, because otherwise, it is difficult to determine if something is and also got greener (Windsor, 2010).

According to the UN environment programme, a green economy is defined by resource efficiency, low carbon emission and social inclusion (UN environment programme, 2021). Bilo- slavo and Trnavčevič (2009) are highlighting that a green company pursues to match its function and business activities in accordance with the environment, both environmental and cultural (Biloslavo & Trnavčevič, 2009). Windsor sums up that most definitions include the terms

“environment, responsible, social, and sustainable” (Windsor, 2010, p. 11) and adds that a suitable definition should contain the aspect of constant improvement and a measurable variable (ibid). Otherwise, companies could be accused of greenwashing, which describes the attempt of a company trying to appear more environmentally friendly and aware than it is (Ross &

Deck, 2011).

2.3 Green Marketing

The environmental protection movements of the 1970s can be traced back to the emergence of green marketing. However, in the 80s and 90s, academia witnessed complementary theories reacting to global environmental concerns (Peattie & Charter, 2012). Even though the combination of environmental concerns and marketing paradigm sounds paradoxical, green marketing has brought the socio-environmental dimension of marketing to the light and has been described as “We can define it as: The holistic management process responsible for identifying, antici- pating and satisfying the needs of customers and society, in a profitable and sustainable way”

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(ibid, p. 726). Moreover, Papadas et al. (2017) highlight that a company that uses green marketing is trying to fulfill the needs of customers and other stakeholders with a simultaneous consistency of the environment and the embedded ecological system.

Green Marketing has become an important aspect for companies to achieve a sustainable and green business strategy by simultaneously improving their business success (Papadas et al., 2017). Therefore, for success, it is very important for companies to understand how they should build their green marketing strategy (Dangelico & Vocalelliangelico, 2017). Companies that understand Green Marketing are helping the environment by pursuing a greener production process and with products that are more ecologically friendly but are also spreading the awareness for a more sustainable consumption through the marketing of them (Dangelico & Vo- calelliangelico, 2017).

2.4 Green Marketing Strategy

Tanwar (2013) highlights two key aspects which define the term strategy in a business context.

Firstly, it determines in which direction a company wants to move and secondly how it can achieve reaching this goal (Tanwar, 2013). A well-known concept to develop a specific strategy is the generic strategies approach from Michael Porter. This theory presents three strategies that can lead companies to a competitive advantage, which are cost leadership, differentiation and focus strategy (Eldring, 2009). However, it is also possible, to combine aspects of these strategies which is called a hybrid strategy (ibid). However, this opens up the question of how to define a company with a green strategy, as it could aim at gaining cost savings, but also at differentiation potentials or a specific focus.

The environment has turned into an important strategic point since environmental responsive- ness not only has received a great deal of attention from both consumers and other stakeholders, but also it can provide companies the opportunity to innovate and competitive advantage as a consequence (Peattie & Charter, 2012). In order to implement a green strategy, companies can apply either reactive strategy based on which they rectify their socio-environmental performance due to legislation or consumers’ pressure or a proactive strategy according to which companies tend to communicate with stakeholders prior to legislation and consumers’ pressure about environmental and social concerns (ibid). The four steps of marketing strategy will be aligned for green marketing strategy as below.

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An important aspect in the development of a green strategy is also the assessment of the target segment (Ginsberg & Bloom, 2004). Important questions which companies have to find an answer are: How do possible competitors approach this segment? What is my market position in terms of using green technologies? Is there a way to out green a competitor? which describes gaining a competitive advantage over competitors by showing more effort to become greener (Ginsberg & Bloom, 2004; Yenipazarli, 2019). Dangelico & Vocalelli (2017), identified as two main ways of customer segmentation in green marketing strategy including segmenting them based on consumers’ and purchase’ characteristics. Straughan and Roberts’ studies (1999) have brought this fact to the light that customers’ psychographic features like environmental concerns can be utilized as a predictor of environmentally friendly behavior. However, according to Modi and Patel (2013), behavioral variables are the most effective components in consumers’

environmental altruism behavior. Regarding purchase’ characteristics, according to Peattie (2001), firms should concentrate on customers’ needs instead of green customers since studies have shown that a normal customer will select green products in an equal condition (Kardash, 1974). Companies also need to work on consumers’ perception of their product since the more consumer believes in product environmental benefits, the more willing consumers will be to buy green products (D'Souza et al., 2006).

In market segmentation, companies can also be guided by the Green Ocean Strategy. This is a further development of the Blue Ocean Strategy, in which companies target markets with little or no competition (Markopoulos et al., 2019.). The Green Ocean Strategy is characterized by the fact that companies can establish themselves in a market on the basis of a green strategy as the core of their business concept (ibid).

Despite all efforts in the green marketing area, green products’ market share has not yet reached its desired position since companies merely focus on green consumers, who are completely aware of environmental disasters and willing to buy a green product, while they require to expand their target group and seek for new consumers (Rex & Baumann, 2007). Global agree- ments to protect the environment, such as the global ban of using CFCs, indicates the potential consumers who would support environmentally friendly product (Peattie & Charter, 2012).

Considering the increasing environmental awareness, various approaches enable companies to apply a better customer targeting strategy such as tactical advertising on media and the internet

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Positioning, from a marketing point of view, has been described as generating a clear precious outlook in the target consumers’ minds (Du Plessis et al., 2001). Hence, regarding green brands, brand positioning refers to a set of effective communication and brand differentiation from its rivals relying on its environmentally friendly features (Hartmann et al., 2005). It is asserted that a brand can be positioned based on functional features and/or emotional benefits (Aaker, 1996).

Thus, according to Hartmann et al. (2005), through a functional characteristic strategy in green brand positioning, companies tend to create a connection to customers’ mind by announcing products’ environmentally-friendly attributes while through an emotional benefits strategy firms mostly rely on emotional benefits raised from consuming a green product. These emotional benefits can be divided in three categories including a feeling of well-being that is emerged from consumer’s personal satisfaction of using a green product (Ritov & Kahnemann, 1997), auto expression benefits that are obtained by displaying environmentally friendly behaviors in the community (Belz & Dyllik, 1996) and nature-related benefits that are associated with experiences earned by being connected with nature (Kals et al., 1999). However, companies are suggested to implement these two strategies simultaneously since relying on product features alone may not affect customer choice, and applying an emotional benefit strategy can appear as a complementary factor (Belz & Dyllik, 1996; Hartmann et al., 2005; Dangelico & Vocalelli 2017).

Producers are always looking for competitive distinction through various tangible or intangible elements of their products that differentiate them from other competitors’ productions (Dickson

& Ginter, 1987). Rising environmental concerns have influenced the desire of using products that have a green replacement. Therefore, it can be said that there would be a product differentiation associated with a positive share market for companies who care about environmental concerns (Conrad, 2005). Additionally, product differentiation becomes vital when the number of green customer increases. In this case, the difference between green products and dirty products will be clearly visible (ibid). Moreover, it has been claimed that a victorious implementation of green brand positioning can play a vital role in brand differentiation from other oppo- nents (Dangelico & Vocalelli 2017).

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2.5 The Marketing Mix

One of the fundamental and highly discussed concepts in the field of marketing is the Marketing Mix and the associated 4Ps developed by McCarthy (1964). The four Ps stand as acronyms for the four core aspects product, price, promotion, and place, with which one can influence the marketing strategy (Goldsmith, 1999). However, critics such as Constantinides accuse the model of being out of date and point to weaknesses such as a lack of strategic dimensions and a failure to consider the human factor (Constantinides, 2006). As a solution, it is suggested to extend the model by further aspects (ibid). For example, there are more modern approaches in which the concept is extended to 7 Ps by the three additional Ps of people, physical facilities, and process (Ivy, 2008).

2.5.1 The Green Marketing Mix

As mentioned previously, environmental issues have been considered as a strategic point by many companies so that they are driven to consider the costs and benefits of making their marketing mix green and environmentally friendly. Therefore, a green marketing mix has been described including green product programs, green pricing programs, green distribution programs and green promotion programs (Leonidou, Katsikeas & Morgan, 2013).

“Green product program” concerns product-related decisions and activities that tend to preserve or profit the environment by reasonable use of energy and/or resource and minimizing squan- dering and contaminations (Dangelico & Pujari, 2010; Ottman et al., 2006). Menon et al., (1999) have proposed strategic and technical approaches through which companies can work on their green product program. While through a technical approach the firm mainly focuses on packaging and labeling its commodities in a green and eco-friendly way, by applying a strategic approach based on Baumann et al. (2002), companies tend to find a green technique to design and produce products which often leads to production refinement (Fuller, 1999).

“Green pricing program” refers to the pricing system that covers economic and environmental costs of production and marketing in a fair manner that presents value for both companies and customers (Martin & Schouten, 2012). Firms can either consider price reduction for eco- friendly actions (Menon et al., 1999) or can charge consumers for their environmentally un-

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friendly behavior (Polonsky & Rosenberger, 2001). Moreover, more technical pricing techniques like life-cycle costing and higher pricing are available for companies to implement a green pricing strategy in their marketing mix (Menon et al., 1999).

“Green distribution program” concerns observing and enhancing the company's environmental function regarding its demand chain (Godfrey, 1998). Providing customers, the opportunity to return the recyclable substance can be mentioned as one of the companies’ technical actions regarding this component (Leonidou, Katsikeas & Morgan, 2013). However, by implementing strategic approaches, companies may set environmentally-friendly policies and requirements for their distributor or suppliers (Zhu & Sarkis, 2004). Furthermore, in order to be more effective regarding environmental issues, firms are able to establish “eco-alliances” with their partners (Leonidou, Katsikeas & Morgan, 2013).

“Green promotion program” refers to companies’ activities regarding informing various stakeholders about their environmentally-friendly performance during their operation (Godfrey, 1998). Tactical efforts involve the way how companies could diminish their marketing negative influence on the natural environment (Belz & Peattie 2009; Dahlstrom, 2011) while green strategic approach includes companies’ communication regarding their benefits toward environment such as firms’ environmental claims on designing product or packaging (Banerjee 2002;

Menon et al., 1999).

2.5.2 The Green Marketing Matrix

The Green Marketing Matrix is a concept presented by Ginsberg and Bloom (2004). They highlight the two main aspects which have to determine to develop a green marketing strategy.

Firstly, how important and how valuable the green segment is for the company, and secondly, how strong the company can separate itself from competitors in consideration of their greenness (ibid). It has to be highlighted that this concept does not present itself as a guideline on how much money a company has to spend on green technologies and developments, instead it is a tool for evaluating how strong a firm should use its environmental friendliness as a differenti- ating aspect for their marketing approach (ibid).

In the following illustration, the concept is explained. The horizontal axis determines how strong a company can differentiate from competitors by using environmentally friendly techniques. The vertical axis presents the differentiation of the segment in terms of its sustainability.

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Figure 2: The Green Marketing Matrix (adapted illustration from Ginsberg & Bloom, 2004)

Lean Green

The Lean Green approach describes companies that aim to become greener but do not try to spread public awareness for their effort or use it as a marketing tool (Ginsberg & Bloom, 2004).

One reason for that is that they fear the fact that they could be held accountable for higher environmental standards. They focus more strongly on the opportunities that arise from the implementation and application of environmentally friendly activities, such as cost-saving potential or efficiency optimization, and resulting cost advantage. In doing so, they aim for long- term optimization, also in consideration of environmental requirements. However, these companies do not see any profit potential from green market segments (ibid).

Defensive Green

Firms that follow the Defensive Green approach use it as an adaptation due to changing market environments for example caused by a crisis, a changed strategy of a competitor, or as a pre- ventive measure (Ginsber & Bloom, 2004). In contrast to the Lean Green approach, these companies see the green market segments as important sales markets and try to develop them by improving their ecological footprint and an improved perception of the company. So, the efforts are advertised, but this is done rather selectively and usually only in a limited time frame since

Defensive Green

Lean Green Shaded Green Extreme Green

High

High Low

Low

DIFFERENTIABILITY ON GREENNESS SUBSTANTIALITY OF

GREEN MARKET SEG- MENTS

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no great differentiation from the competitors is possible with regard to environmental friendliness. In this context, too intensive marketing would not be effective, as it would raise expecta- tions that would not be met (ibid).

Shaded Green

The Shaded Green approach aims at an overall and long-lasting green process, which requires investments in the form of money as well as time (Ginsberg & Bloom, 2004). They aim at products at innovative and customer-orientated products that help them achieve a competitive advantage. The products can be marketed on the basis of their environmental friendliness, but there is greater marketing potential on the basis of other characteristics. For example, products like hybrid cars or energy-saving lamps, that fall under this kind of approach often highlighted in the past primarily the cost savings for customers due to the better efficiency, the environmental benefits are a nice side effect that is promoted as a subsidiary factor (ibid).

Extreme Green

Companies that follow an Extreme Green approach are valuing sustainability and environmental friendliness right from their inception and see it as a fundamental aspect of their business concept (Ginsberg & Bloom, 2004). These companies try to align their overall strategy and their product life-cycle process as well as possible to greenness. Core concepts at these companies may include, for example, a life-cycle pricing approach, total-quality environmental management, and manufacturing for the environment (ibid). Most times these companies aim at a niche market and use specific distribution channels for their products (ibid).

Initially, the concept of the 4Ps of the marketing mix was described. In this context, it can be seen that the green marketing theories presented can also be differentiated on the basis of the individual variables of the marketing mix (Ginsberg & Bloom, 2004). The following illustration shows to what extend each green approach uses the different elements of the marketing mix.

Product Price Place Promotion

Lean X

Defensive X X

Shaded X X X

Extreme X X X X

Table 1: Marketing Mix in Green Strategy (Ginsberg & Bloom, 2004)

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As described previously the Lean Green approach focus mostly on the development of the product and processes (Ginsberg & Bloom, 2004). The Defensive Green approach also follows a greener approach for their products and processes. However, in contrast to the Lean approach, these developments are also promoted. The Shaded Green approach also promotes the development of their products and process. However, the promotion of its green aspects is more complementary and an additional argument if cost benefits occur due to better efficiency.

Lastly, the Extreme Green approach uses all four aspects of the marketing mix as environmental friendliness is the core concept of these companies (ibid). In conclusion, it should be empha- sized that the concept of Ginsberg and Bloom (2004) forms an essential basis for green marketing. For example, Dangelico and Vocalelliangelico, who have done an in-depth analysis on studies related to green marketing, emphasize that “no further study was found which could provide robustness to or disconfirm these results” (Dangelico & Vocalelliangelico, 2017, p.

1271).

2.6 Resource Based View

Another important theory for the theoretical background of this thesis is the resource-based view (RBV) that can help to research competitive advantages connected to a green marketing approach. The theory has its roots in the area of strategic management and explains companies' strategic behaviors and how they operate (Priem & Butler, 2001; Lockett et al., 2009). RBV was influenced by the game theory (cooperating or not cooperating) and the detection that companies differ from another (Wernerfelt, 2014). On its basic level, the theory helps by the explanation of profits in an equilibrium environment of companies that are dissimilar (Lockett et al., 2009).

One of the main contributors to this theory was Barney (1991a), by stating that a sustainable competitive advantage from companies is based on the rare, valuable, imperfectly imitable and not sustainable resources and capabilities (Barney et al., 2001). To clarify the meaning of these attributes, they are shortly defined. Valuable resources can help the companies by the avoidance of treats or utilization of opportunities in the environment the firm is active, while rare resources are defined by the lack of availability due to their scarcity (Lockett et al., 2009). Resources that are inimitable are characterized by the fact that they cannot be imitated by competitors at all or

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only with difficulty. Lastly, non-substitutable resources cannot be replaced by an alternative resource (ibid).

2.7 Competitive advantage

A revision of Barney in 2001, showed that other case studies adopted the concept of RBV and applied it to other fields of business research as for example human resources, marketing, fi- nance, or international business (Barney et al., 2001). However, there was also some critique on the theory, as for example Priem and Buttler (2001), argue for example that the “role of product markets is underdeveloped” (Barney et al., 2001, p. 41). Besides the critique, the authors of this paper still value the RBV as a good approach for companies to develop a competitive advantage, and the main take which according to Wernerfelt (2014, p.22) is “that a firm should focus on what it can do better than others”.

It’s been claimed that a competitive advantage is the most used and least-understood phrase in strategic management (Flint, 2000; Ma, 2000). Even though the concept of competitive advantage has not been clearly defined (Klein, 2002), based on Porter (1985), it can be interpreted that competitive advantage will be reached through cost leadership and differentiation. How- ever, the fundamental opinion of Resource-based views argues Porters’ claim and asserts that firms’ special and unique resources lead to achieving competitive advantages (Barney, 1991b;

Ma, 2000). Therefore, according to Barney (1991b, p. 102) a company has a competitive advantage “when it is implementing a value-creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to dupli- cate the benefits of this strategy”. He also states that companies’ valuable, scarce and inimitable resources will result in a higher-level performance. It should be noted that despite the lack of consensus in providing an accurate definition of the concept of competitive advantage, researchers believe that benefiting from this feature will lead to superior performance and profitability over the competitors (Barney, 1997; Roberts, 1999; Grant, 2005). In other words, the reasons for better performance are rooted in the concept of competitive advantage (Powell, 2001).

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2.8 Internationalization process of SMEs

Over the last decades, globalization opened up new markets around the world, increased the connection of economies, and helped countries and branches to economic growth (Korsakienė

& Tvaronavičienė, 2011). Hereby SMEs take an important role in the growth and development of countries and industries (Javalgi & Todd, 2011; Korsakienė & Tvaronavičienė, 2011). In addition to multinational companies, young, small companies are also targeting international markets in order to achieve greater sales (Knight & Liesch, 2016). However, this has also led to companies having to deal with global competitors (Korsakienė & Tvaronavičienė, 2011).

According to Welch and Luostarinen (1988, p. 36), Internationalization can be defined as “the process of increasing involvement in international operations”. However, Chandra et al. (2009) put a focus on the detection on the usage of opportunities that cause an entry to new international markets and Chetty and Stangl (2010) highlight the adaption to the global markets. Be- sides these differences, there are also different models and theories which try to explain the internationalization process of the firms, for example, the network model and the Uppsala model (Chandra et al., 2009). These models should present a path, that explains how managers can successfully plan and execute the internationalization process and what do need to take into account for their strategy (Weerawardena et al., 2007). For this work, the authors decided to focus on some of the most important theories concerning the internationalization process of the firms including the Uppsala Model and Network theories. In the following, these concepts will be elaborated on in detail.

2.8.1 The Uppsala Internationalization Process Model

The Uppsala internationalization process model has been evolved over the years by the business environment changing and the emergence of different theories. Considering change and state variables in the presented model, the initial Uppsala internationalization process model mainly focuses on the gradual involvement and integration of companies in foreign markets relying on the use of knowledge about the cross-border markets and thereby their commitments to those markets (Johanson & Vahlne, 1977). However, as the business environment becomes more complex, the impacts of networks and relationships in the internationalization of the firms be- came more important than before. Therefore, in 2009, the Uppsala internationalization model was proposed by Johanson and Vahlne, according to which being in a well-established relevant

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circumstance for learning, knowledge creation, trust-building and opportunity detection and exploitation. In other words, while being in a proper network helps the firm to be identified as an “insider” which enables it to learn, create trust and expand commitment, being an “outsider”

causes a lot of difficulties for companies who tend to enter a foreign market (Johanson &

Vahlne, 2009). Considering the literature, economic, institutional, cultural differences, and a few to name, can be mentioned as some of the internationalization barriers which companies need to overcome (Rugman, Verbeke & Nguyen, 2011).

Taken into account the resource-based view, dynamic capability turned into an essential component in the internationalization process of the firm. It seems logical to express that a dynamic capability refers to firms’ ability to generate, expand or revise their resource (Helfat et al., 2007). Therefore, by defining dynamic capability as a firm’s capacity to adapt itself to its environment, Johanson and Vahlne (2013), claimed that dynamic capabilities play a key role in companies’ development and if these capabilities in a firm are at a higher level than competitors’, then the firm has a competitive advantage over its rivals. Hense another building block (dynamic capabilities) has been added to the initial model which affects the internationalization process and includes opportunity development capabilities, internationalization capabilities and network capabilities (ibid). However, in the revised Uppsala internationalization model (2017), Johanson and Vahlne divided the companies' capabilities into operational and dynamic capabilities which affect companies’ overall current and future performance. In addition, they claimed that trust-building, generating and learning knowledge which is known as the knowledge development process a can happened all over the internal and external networks (ibid).

Figure 3: The Uppsala internationalization model (Johanson & Vahlne, 2017)

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2.8.2 The Network Theories of Internationalization

The network theories of internationalization of the firms emphasize the importance of networks and relations of companies in their internationalization process. Various resources in the network provide companies with the market knowledge and enable them to recognize opportunities in the market (Coviello & Munro, 1997; Mort & Weerawardena, 2006). It can be claimed that network theories consider the market as a huge network and each party seeks for different aims such as seeking for joining another network or any resource that strengthens companies’

function (Hadley & Wilson, 2003). Likewise, the international network strategy concerns with establishing relationships with various economic and non-economic stakeholders in a business environment supported by the firm’s resources and abilities to achieve a competitive advantage in foreign markets (Jansson, 2020). The network theories also ally with the previously discussed Uppsala internationalization model that considers networks as a crucial component in the internationalization of the firm (Johanson & Vahlne, 2009).

When it comes to SMEs internationalization, the importance of the network becomes more apparent since they usually suffer from resource and partner limitation. Therefore, in some cases, they can rely on their connections with large firms and use it as an entry strategy to expand their operation across borders (Coviello & Munro, 1997). Furthermore, in a network, external resources have been considered as vital as internal resources and they play a key role in a company's performance. Therefore, SMEs can make the most of the benefits of being part of a network since their external resources are illimitable while their internal resources are usually restricted (Glückler, 2005). Hence, there is a consensus on the importance of networks in the internationalization process of SMEs, since it facilitates access to knowledge and resource in markets which results in easier entry to new markets (Coviello & Munro, 1997; Mort &

Weerawardena, 2006; Johanson & Vahlne, 2009).

2.9 Conceptual Framework

The previous subchapters of the theoretical framework presented some of the key theories and laid a foundation with which the authors tried to develop the following conceptual framework which can be seen in Figure 4 to answer the previously stated research question. As highlighted the main aspects of this research are the theories of green marketing and internationalization.

The two concepts have already been researched in depth individually, but the authors plan to

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combine the two concepts under one umbrella to presented a suitable concept for this thesis, that is able to explain the results of the research.

In the first step, the main concept which will be used for elaborating on the Green Marketing aspect is the Green Marketing Matrix by Ginsberg and Bloom (2004). It is a very suitable tool to differentiate companies in regard to their greenness and in detail to determine the chosen green marketing approach of a company. This will also help to determine how the strategic approach of various companies will differ and how they can develop a competitive advantage through green marketing.

On the second level, the resulting competitive advantage from the green marketing of the firms is evaluated. The theoretical foundation for that are the chapters 2.6 with the explanation of the competitive advantage and chapter 2.7 with the RBV. However, there are also some connections to Network Theories of internationalization (chapter 2.9) as they can also help by building a competitive advantage. Finally, the connection between green marketing, the competitive advantage, and its influence on the internationalization process is going to be analyzed.

Figure 4: Conceptual Framework (own illustration based on the Literature Review)

SME Internationalization

Competitive Advantage

Defensive Lean Shaded Extreme

Green Marketing

RQ1

RQ2

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3 Methodology

This chapter provides audiences the research method and strategy selected by the authors to conducting this paper considering sub-chapters of the research approach, research method, sampling process, data collection, interview, analysis and quality of the research.

3.1 Research Approach

As Bryman and Bell (2017) have asserted, the research approach brings the nature of the link between theory and research to the light and provides information concerning the type of the following result. Therefore, three dominant approaches have been pointed out to conducting scientific research including an inductive, deductive, and abductive approach which represent various outlooks to the research process (Alvesson & Sköldberg, 2009; Saunders et al., 2019).

Commencing with existing theories and translating them into real-world relevant research areas have been mentioned as the most observable feature of the deductive approach (Patton, 2002;

Alvesson & Sköldberg, 2009; Brinkmann & Kvale, 2015). In contrary to the deductive approach, in the inductive approach research process initiates with observation and finding empirical findings which can eventually result in theory generation and theory development. Ulti- mately, the abductive approach has been described as a paradigm between two previously mentioned approaches through which researchers tend to investigate empirical findings while they benefit from a prior study on existing theories. In other words, using this paradigm would provide authors the opportunity to take turns between theories and findings (ibid). The abductive approach, according to Dubois and Gadde (2002), has been claimed as a proper approach to investigate novel subjects since new phenomena cannot be well-understood by relying on mere theory or collected data. Moreover, this approach has been seen as a mean to enhance existing theories and develop new concepts since authors have the possibility to gain more and some- times unpredicted relevant data which lead to a deeper understanding of theories simultaneously (Strauss & Corbin, 1997; Merriam & Tisdell, 2016).

Concerning the function of each approach and research questions, this paper will be conducted based on an abductive approach since neither inductive and deductive approaches seem to be sufficient enough to investigate the research questions. Therefore, a theoretical foundation has been provided based on existing theories concerning the main concepts of the paper including

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greenness, internationalization of the firm, and competitiveness. Then through reviewing existing literature and analyzing empirical findings, a new framework tends to be developed in addition to answering the research questions.

3.2 Research Method and Strategy

Regarding the research method, studies can be classified into three main categories including quantitative researches, qualitative researches, and a combination of these two methods (Saun- der et al., 2019). In contrary to quantitative researches which mainly focus on verification of current hypothesis, qualitative researches aim at presenting and exploring hypothesis. Hence, researchers need to determine the intended research method based on their research questions (Alvesson & Sköldberg, 2009). The qualitative method, according to Marschan-Piekkari and Welch (2004), is known as an innovative approach that enables researchers to investigate on new, social and complex issues (Rubin & Rubin, 2005; Myers, 2020). Additionally, the qualitative method has been considered as an approach to look into the factual world by generates descriptive data relying on participants’ point of view and experiences (Taylor, Bogdan &

DeVault, 2015). The research aims to explore practical and real developments. For this purpose, the case companies will be studied to obtain information on how the companies use green marketing in their business and apply possible advantages in their internationalization. The study, therefore, focuses on the experiences and information of the case companies, which not only should answer the research questions but also provide an understanding of the practice, for which the chosen qualitative approach presents the best solution as it is a rather new topic.

Five various strategies have been described for conducting qualitative inquiries: experiment, survey, archival analysis, history and case studies that researchers choose between based on the kind of research question, the amount of researches’ control on the studied situation and the degree of focus on current and past circumstances (Yin, 2014). As, according to Yin and Davis (2007), the strategy of case studying provides authors the opportunity to obtain a deeper insight and better understanding of real-world circumstances related to the topic, this approach has been selected for carrying out this paper due to the need of investigating the impacts of implementing green marketing strategy as an environment-friendly technique on the internationalization process of the firms and also gaining competitive advantages. This choice is also aligned

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with Yin’s (2014) assertion according to which case study is an appropriate strategy for answering the “Why” and “How” research questions.

Moreover, case study research, as a flexible strategy, enables authors to decide whether they tend to work on single or multiple case studies (Meyer, 2001). While a single case study approach focuses merely on one sample, a multiple case study strategy tends to gather and analyze the information collected from various cases (Merriam, 1998). It is worth noting that in contrary to a single case study which proposes limited information and makes the paper less generaliza- ble, a multiple case study provides researchers with a relatively vast range of information which not only increases the generalizability of the research but also contributes to research validity and reliability increase (Merriam, 1998, Eisenhardt, 1989). On the other hand, the number of cases should be also taken into consideration. As the depth and quality of findings and analysis outweigh the number of cases (Meyer, 2001) and a number between four to ten has been identified as an appropriate number of case studies (Eisenhardt, 1989), the authors tend to work on at least four case studies to investigate the research questions. As the concept of green marketing and internationalization are highly engaged with the current business environment and the need for gaining an accurate insight on these issues are felt more than ever, working on several case studies has been identified by authors as the most appropriate approach for this paper. Through this strategy, the researchers can gain a deeper experience and knowledge directly from practice, which helps to provide a sound and in-depth knowledge base in this topic area.

3.3 Research Process

In order to clarify the way how the authors intend to gather required materials, the following sub-chapters have been developed to augment the transparency of the research procedure.

3.3.1 Sampling Process

Conscious and careful selection of case studies, according to Fletcher and Plakoyiannaki (2011), is of great importance in qualitative research since it can influence the results of the research. Two main strategies are proposed to carry out this step including purposive sampling which considers the suitability and applicability of the samples and theoretical sampling which merely focuses on the topic (ibid). As purposive sampling is driven by time and resource limitations (Silverman, 2013), this approach has been selected to choosing between companies as

Going green across borders