Journal of Advertising Research,  Nov/Dec 1999

       This paper explores how foreign corporations advertise in China. A worldwide survey of foreign advertisers in China, the first such comprehensive survey, was conducted. The study found that a predominant majority of the companies surveyed use the combination strategy, that is, partly standardized and partly localized. Factors that relate to the advertising strategies used in China are the number of subsidiaries, the perceived importance of localizing language and product attributes, and the perceived importance of mostly Chinese cultural values.

       CHINA WITH ITS 1.2 billion people presents a huge market potential to the world. But the market is relatively new to the outside world. For almost three decades, China was closed to the rest of the world-until 1978 when the economic reforms began. The rapid and sustained economic growth in China since then has turned the potential of the Chinese market into a reality. The Economist (1993) predicted that the greatest consumer boom in history might be about to take place in China at the turn of the century.
       It put the number of Chinese with an annual income above $1,000 at 60 million in the early 1990s. The magazine predicted that that number could swell to 200 million by the year 2000. And early in the next century there is expected to be a rise of scores of millions of Chinese with an annual income above $4,000. China has become the largest emerging market in the world.
       The advertising industry has boomed, and international advertisers have also rushed in for a bigger share of the market. It's a new and exciting market for the industry, and it's a new topic for research.

       This study, a survey of international advertisers in China, conducted almost 20 years after China opened its doors to the outside world, intends to investigate how international corporations advertise to the Chinese, what advertising strategies they use, and what factors influence the determination of advertising strategies used in China.

       LITERATURE REVIEW: STANDARDIZATION OR LOCALIZATION?

       This study on international advertising strategies in China is a continuation of the debate on whether advertisers should standardize or localize in foreign markets. The point of departure in this debate is whether the market conditions in the world today warrant the standardized approach (Elinder,1965; Dunn, 1966; Levitt, 1983; Tansey, Hyman, and Zinkhan, 1990; De Mooij and Keegar, 1991) or the specialized or localized approach (Britt, 1974; Marquez, 1975; Green, Cunningham, and Cunningham, 1975; Harris, 1984; Onkvisit and Shaw, 1987; Tse et al., 1989). The standardized approach in international advertising means the adoption of one advertisement for all markets. A specialized or localized approach refers to the use of different advertisements for different markets in order to adapt to local market conditions.

       Theodore Levitt (1983) presented the bestknown argument for standardization-"the growing homogenization of needs across borders" legitimates standardization. He described it as the globalization of markets. Levitt's strongest support was technology and the trend toward modernization. He believed that technology had become a powerful force that drove the world toward a converging commonality.

      Yoram Wind (1986), an advocate for adaptation, cautioned that one could not ignore the differences in different markets and the need to adapt to them. He contended that most international blunders stemmed from instances of cultural insensitivity-lack of awareness of values and attitudes-that caused a strategy which was extremely successful in one country to prove wrong in another. Wind believed that the trend toward a homogenization of the people's wants did not exist and standardization was one of several possible strategies, along with differentiation and mixed strategies. Wind recommended "think globally, act locally."

       Other researchers, such as Philip Kotler (1986), believed the "mixed approach" or the combination strategy-partly standardized and partly localized-was the most effective strategy. It was also called the contingency approach (Agrawal, 1995) because the strategy varied depending on the situation.    Kluckhohn's argument about the human nature lent support for the adoption of the combined approach: "every man is, in certain respects, (a) like all other men, (b) like some other men, and (c) like no other man" (Kluckhohn, 1962).

       In a review of a 40-year debate in international advertising, Madhu Agrawal (1995) concluded that practitioners alternated between the adaptation approach and the standardization approach. A preference for localization in the 1950s due to a lack of familiarity with international consumers and markets shifted toward standardization in the 1960s as knowledge of international markets improved. This was followed by a reversal toward greater adaptation in the 1970s as a result of the rising nationalistic forces and some wellpublicized advertising blunders that occurred during the 1960s. Then there was the second reversal toward standardization in the 1980s, which witnessed the rise of multinational advertising agencies. What was the trend in the last decade of the 20th century-the 1990s?

       Susan H. C. Tai (1997) conducted a survey of 87 multinationals that advertise in China, Taiwan, Hong Kong, and Singapore. The study found that, on the average among the four markets, 31 percent of the advertising decisions were made using the same strategy as their home market, while 68 percent used a different strategy. William L. James and John S. Hill (1991) found that 40 percent of the sales platforms and 37 percent of the creative contexts adopted the standardized approach. Robert Hite and Cynthia Fraser (1988) found that 66 percent of the companies they surveyed used a combination strategy. Only 9 percent reported use of standardized advertising, while 37 percent adopt localized advertising. All three studies identified various factors relating to the advertising strategy used.

       Agrawal also found that academicians, in contrast, have generally been consistent in advocating adaptation because crosscultural studies have rarely shown similarities among consumers. Differences in market characteristics, industry conditions, and other environmental variables also have invariably been found in the empirical studies leading to the conclusion that adaptation is necessary.

       The differences between the practitioners and the academics apparently suggest that practitioners are motivated by a different set of factors in their advertising strategy decision making than the factors academics  consider important. This study attempts to help determine the trend of international advertising in the 1990s by finding out what is the popular international advertising strategy used in China. Instead of focusing on the factors researchers consider important, this study was designed to allow advertisers to rate the relative importance of various factors influencing transferability of advertising strategy and then examine how the attitudes of advertisers relate to the advertising strategy used.

       More specifically, this study set out to (1) examine the extent of the use of the standardized, localized, and combination strategies in China; (2) determine the relative importance of various factors influencing transferability of advertising strategy; (3) analyze if and how the demographics of a foreign company relate to the advertising strategy used in China; (4) if and how the attitudes of marketing executives influence the determination of advertising strategy used, and (5) finally, compare the results of this survey with those of earlier studies to find out any new trends in the field.

     RESEARCH METHODS: THE FIRST SUCH COMPREHENSIVE SURVEY

       Samples

       Samples were drawn from the Moody's Manual (1995) because a complete list of international advertisers in China was not available. The Moody's Manual (1995) was chosen because of its comprehensiveness. All the firms that have business in China were selected in hopes of getting as many international advertisers in China as possible. Using this method, this researcher found a total of 873 companies. All of the 873 selected companies were surveyed in order to ensure an adequate number of responses for this study. A total of 189 questionnaires were returned, of which 186 were usable. The response rate was about 21.6 percent. One major reason for the low response rate might be that the population from which samples were chosen is not specific enough for lack of information regarding advertising. Of all the international companies that do business in China, many may not advertise in China. If   a list of international advertisers in China were available, the samples could be more on the target, and the return rate could be higher.
      Companies from 16 countries that engage in 13 types of businesses responded to the survey. Some of these firms are involved in more than one type of business. About 50 percent of the companies have total sales between US$1 billion and US$25 billion. The majority of companies have over 26 subsidiaries across the globe and are very experienced in international marketing. Also, for the majority of the responding companies, more than 50 percent of their total sales come from foreign markets.

       The questionnaire

       A self-administered mail questionnaire was the data-collecting instrument for the study. Questionnaires were mailed to vice presidents in charge of marketing. The survey was conducted between June and November 1996.

       The questionnaire was divided into five parts: (1) demographic variables of each company, (2) advertising strategies used, (3) advertising agencies used, (4) importance of changing advertising components to blend with local culture, and (5) importance of environmental factors influencing transferability of advertising. Of the 20 environmental factors measured, 11 of which were studied by Dunn (1976) and Hite and Fraser (1988), nine items specific to the Chinese conditions and culture were added.

       RESULTS: THE COMBINATION STRATEGY DOMINATES

       Combination strategy is the popular choice

       Out of a total of 186 usable responses, the predominant majority, 140 companies, use the combination strategy, that is, partly localized and partly standardized. That makes up 77 percent of the total. Some 22 international companies, about 12 percent-a significantly lower number-use the specialized or localized     strategy in China, while 19 companies, 10 percent, use the standardized strategy (see Table 2). The results indicate a dear trend toward the use of the combination strategy in China.

       International advertising agencies are the favorites

       Of the seven types of advertising agencies, international agencies are the ones used most, followed by home-country agencies and corporate in-house agencies. A distant fourth are the Hong Kong advertising agencies, followed by agencies in the Chinese mainland and foreign affiliates in-house agency. The ones that register the lowest frequency are the advertising agencies in Taiwan. Some of the corporations use more than one type of agency, with results showing a preference for international agencies. This suggests that foreign advertisers in China need the experiences of the international agencies in foreign markets.

       Localizing language is rated the most important

       Of the seven advertising components studied, localizing language to blend with local culture is rated as "most important" in advertising transferability.Next in order of importance are the need to localize product attributes, models, colors of advertisements, humor, scenic background, and music.

       "Acceptance of trademark" is perceived to be the key to advertising transferability. Of the 20 environmental factors studied, acceptance of the trademark or brand name is rated as the most important in affecting transferring foreign advertisements to China. Next in importance is the group of factors concerning   the economy, the market, and the advertising industry: competence of personnel in the China office, rate of economic growth, transferability of slogan, level of market affluence, and level of consumer education. Last in order of importance is the group of factors concerning Chinese cultural values, lifestyles, media, and control-attitude toward country of product origin, media characteristics, level of government regulation, attitudes toward spending money, monetary gain, individual goals, facesaving, work, degree of nationalism in China, independence of media from government control, attitudes toward collective needs, authority, sex roles, and eating patterns of the market (see Figure 2).

       The number of subsidiaries is a major factor

       Chi-square test results show that, of all the demographic variables, only the number of subsidiaries relates to the advertising strategy used. Figure 3 illustrates that companies with fewer subsidiaries are more likely to use the standardized strategy while companies with more subsidiaries are more likely to use localized strategy.

       Perceptions of Chinese culture make the difference

       Chi-square test results show that the advertising strategy used relates to the rated importance of localizing language and Iocalizing product attributes, and the rated importance of 3 of the 20 environmental factors: attitude toward the country of product origin, attitudes toward collective needs, and attitudes toward authority.

       DISCUSSION

       Technology and modernization may not lead to standardization

       The survey results have identified the trend of international advertising in China as leaning toward the combination or mixed strategy. The majority of the companies surveyed have abandoned standardization. This study shows a higher percentage of companies using the combination strategy and a lower percentage of companies using specialized strategy compared with the Hite and Fraser study (1988), which surveyed American transnational corporations. But samples in this study tend to be larger firms.

       The popularity of the combination strategy in China casts doubt on the arguments for standardization. Levitt's strongest support for standardization is technology and the trend toward modernization. Today's China is modernizing fast. Imports of advanced technology are a top priority of the country. In 1997, China was the tenth largest trading nation in the world and attracted more foreign direct investment than any country except the United States (World Bank Country Report, 1997). The popularity of the combination strategy    in China indicates that technology and the trend toward modernization do not necessarily warrant standardization in foreign markets.

       One other factor that could relate to standardization is market affluence. James and Hill (1991) suggested that standardization opportunities were most likely to occur in markets with per capita annual income less than US$6,000. In 1996, per capita annual income in urban China was 4377.2 yuan (China Statistics Yearbook, 1996)-about US$497. Income in rural China was much lower. However, the majority of the advertisers still choose to use the combination strategy. This shows that less affluent markets, such as China, may not necessarily be the less competitive markets. Even though advertisers are more likely to standardize in less affluent markets as the James and Hill study has shown, adaptation is still preferred in emerging markets of developing economies like China. This may suggest that as the global trade is becoming more competitive, advertisers are adopting a longterm strategy-looking to the future of a market.

       The popularity of the combination strategy in China also shows that foreign advertisers recognize China as a distinctive market and, thus, the need to adapt. That is why they believe that it is important to localize advertising components to blend with the Chinese culture and that most of the 20 environmental factors in China are rated as important in advertising transferability. The adoption of the combination strategy also shows that foreign advertisers realize that the characteristics of the Chinese market cannot be ignored.

       The popularity of the combination strategy signals the increasing sophistication of international advertising when advertisers choose to partly standardize and partly localize in hopes of combining the advantages of both strategies-consistent brand image and successful communication accommodating cultural differences.      Future studies can focus more on what has been standardized and what has been localized and why. The results of this study can help shed some light on the trend of international advertising in the 1990s after the dramatic shifts in the last four decades.

       The influence of Chinese culture on advertising strategies used

       The number of subsidiaries is the only demographic variable that directly relates to the advertising strategy used. When companies have more subsidiaries, their markets are more likely to be widely scattered across the world and, thus, a standardized strategy may not be appropriate for all the markets.Also, more subsidiaries may mean bigger operations in foreign markets and more resources for advertising. Adaptation in most cases costs more than standardization but may result in higher economic returns, which can justify the cost.

       Chi-square test results show that the association between advertising strategy and the other three demographic variables are not significant. However, an analysis of Chi-square test crosstabs and bar charts (see Figures 4, 5, and 6) shows an identifiable pattern-higher total sales and percentage of foreign sales, and more years in international marketing suggest more opportunities for localization and vice versa. The reason may also be that higher sales guarantee the resources for localization. More years of international marketing also suggest more possibilities for localization, which may be attributed to the fact that the longer a firm stays in a foreign market, the better it knows the market and the more it sees the need to adapt. But more studies are needed to look into this relationship.

       Chi-square tests also fail to show associations between advertising strategy and the following three variable groups: place of headquarters, types of business, and advertising agencies used.

       However, test results show more variations in the advertising strategy used based on place of headquarters than on types of business. For each business type, the majority of companies use the combination strategy while only a small number of companies use either standardized or localized strategies. The only exception is the electronics industry where no company uses the localized strategy. But overall in this study, type of business fails to be a significant factor in influencing the advertising strategy used, as is shown by the studies by James and Hill (1991) and Tai (1997).

       Also, a closer look at the crosstabs of Chi-square test results shows that international agencies, home country, and corporate in-house agencies are more likely to standardize, while local agencies and foreign-affiliate agencies are more likely to adapt. As a matter of fact, none of the agencies in the second group uses the standardized strategy. This may be due to the different perspectives and experiences of the professionals in international versus local agencies. Most professionals in local agencies are more familiar     with the Chinese culture than staff at international, home-country, and corporate inhouse agencies and, thus, may be more sensitive to cultural differences regarding marketing.

       Changing language and product attributes to blend with local culture are rated as the two most important factors in that variable group regarding advertising transfer, which is consistent with the resuits of the Hite and Fraser study (1988). Given the fact that many commercials get their messages across through language, the importance of localizing language is hard to overemphasize. The majority of companies also acknowledge the  importance of localizing product attributes. The high rating of the factor shows that foreign advertisers in China recognize the possibility that people may need the same product but for different reasons, depending on the local culture. And even "homogenization of needs" across borders may not justify standardization. Anthropologist Clark Wissler summarized the relationship between culture and needs this way: culture universals stop at biological needs or drives (White, 1964). "The only thing one might term cultural is man's response to his innate drives. Thus, eating is biological, but how one satisfies one's hunger is cultural, and in this respect people are dissimilar in different parts of the world. Sex, too, is biological; but with whom and how it is permitted is cultural" (White, 1964).

       Of the seven advertising components, only the rated importance of localizing language and product attributes relates to the advertising strategy used. Even though most advertisers rate the two items as very important, there are significant differences among the three advertising strategy groups in their rated importance of these two items. Firms using the standardized strategy rate the two items much less important than firms using either the localized or combination strategy.

       Of the 20 environmental factors, "acceptance of trademark or brand name" is rated as the most important regarding transferability of advertising, which is also consistent with the results of Hite and Fraser's study. The success and popularity of Coca-Cola, Nike, and Philips electrical appliances in China may testify to the importance of acceptance of brand names. Next in importance are the group of factors about economic and market conditions. It is interesting to note that most of the factors in this group are environmental factors. After all, purchasing decisions are limited by purchasing power, and consumer choices depend on the level of consumer education. It is also interesting to note that even though most advertisers agree that these factors are very important to the transferability of advertising strategy, they do not relate to the advertising strategy used. In other words, there are no significant differences among the three advertising strategy groups in rating the importance of these factors.

       Last is the group of factors concerning Chinese cultural values, lifestyles, and the media. Most of the factors in this group are attitudinal and they are central to the Chinese cultural values. Of this group, it is the rated importance of attitudes toward country of product origin, attitudes toward authority, and attitudes toward collective needs that relates to the advertising strategy used.

       Firms that standardize rate the attitudes toward country of product origin more important than firms using either the combination or localized strategy do. In its history China had always been proud of its cultural and economic development and considered itself the center of the earth. But in more modem times, China was invaded, humiliated, and partly occupied by various foreign powers. The Chinese do remember their history. But their attitudes toward countries of the world are sometimes complicated by the economic needs they face.

       Firms using the standardized strategy rate the attitudes toward collective needs and authority much less important than firms adopting the localized or combination strategy do. In the Chinese culture, authorities are to be respected and obeyed, and collective needs are more important than individual goals. And these are not just attitudes or beliefs; they are the guidelines for people's actions. However, with the economic reforms underway in China, these traditional cultural values are facing serious challenges.

       The associations between advertising strategy and the rated importance of the attitudes toward face-saving and monetary gain are statistically not significant. But the pattern is clear-firms using standardized strategy rate the two attitudes much less important than firms using the localized and combination strategy. In Chinese culture, "the face" is very important; it means respect, honor, influence, or vanity.

       Of the factors that relate to the advertising strategy used, firms that standardize rate all the factors, except the attitudes toward country of product origin, much less important than firms using the other two strategies.  This suggests that attitudes of the advertisers significantly influence the advertising strategy used. It is their attitudes toward mostly Chinese cultural values that relate to the advertising strategy they use. The more    important they rate those factors, the more likely they are to adapt. Of the 20 environmental factors, firms that standardize rate only three factors as more important than firms using the other two strategies do: transferability of slogan, country of product origin, and independence of media from government control. This suggests that firms using standardization seem to be less concerned with cultural values in China than with marketing tools and product characteristics.

       In conclusion, this study has found that most international advertisers in China use the combination strategy.

       Demographic and environmental factors are not as influential as Chinese cultural values in the determination of the advertising strategy used; what relates to the advertising strategy used in China is mostly the rated importance of Chinese cultural values. The only demographic variable that relates to the advertising strategy used is the number of subsidiaries. Hite and Fraser also found that demographic variables fail to be a factor in influencing advertising strategy used. This may not be surprising considering the fact that the Chinese culture dates back 2,000 years. Similar studies in other countries are needed to find out whether the predominant influence of local culture in the advertising strategy used is a part of the trend of international advertising in the 1990s or specific to the Chinese market.

       Another important finding of the study is that international marketing executives' perception of Chinese culture influences the advertising strategy used. International advertisers in China are encouraged to examine their own attitudes toward Chinese cultural values because what they believe about the Chinese culture convinces them what advertising strategy to use.

      As the attitudes of advertisers relate to the advertising strategy used, those attitudes should be based on solid knowledge of the Chinese culture rather than superficial impressions of it, which may mislead in decision  making and result in disasters in marketing. International advertisers in China are also encouraged to keep in mind that China is a competitive market even though it is still a less affluent one. If they believe that standardization is enough for low-income markets like China, they may face serious competition from other advertisers who recognize Chinese cultural differences and are willing to adapt. It is also recommended that they pay more attention to the combination strategy, which may become the most popular and practical advertising strategy in the years to come.

       Future studies can also examine the combination strategy to see what is standardized and what is localized and how those decisions are made. Separate studies can investigate the attitudes of international marketing executives toward cultures in foreign markets. Instead of debating on whether local cultures are different enough to warrant adaptation, it may be high time we turned our attention to whether it is generally true that cultural factors influence advertising strategy more than economic or marketing conditions or demographic variables of a firm, and why local cultures seem to influence some international marketing executives more than others.

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