The value of any pricing strategy is questionable if it is not congruent with the overall strategy of the firm. Pricing strategies, which do no reflect organizational goals, can detrimentally affect performance outcomes. Determining the benefit of specific strategies calls for models adapted to effectively measure the congruence between pricing strategies and venture strategies, and the influence of that congruence on the appropriate measure of venture performance. In this article, the author uses a methodological alternative to traditional linear, analogue and distance models for determining the value of pricing strategies in international operations. Using data from a survey of international marketing managers, this article investigates the value of specific pricing strategies relative to achieving stated international venture objectives, this using optimal models with polynomial regression equations augmented by response surface methodology (RSM). The results indicate that specific pricing strategies differ significantly in their ability to enhance venture performance.
Within the marketing literature, the greater proportion of strategy research has focused on the relationships among certain environmental or organizational attributes, strategy characteristics and performance outcomes (see Sullivan, 1998). This is an unfortunate trend, since the value of any marketing strategy, whether distribution, pricing or promotion-related, is questionable if it is not congruent with the overall strategic objectives of the firm (Keil et al., 2001). Hypothetically, an organization may (a) establish strategies which achieve specific end-goals, yet these outcomes may not benefit the firm's desired market position or (b) the established strategy may accurately reflect the firm's stated objectives, yet not assist in attaining these goals. Determining the benefit of specific marketing strategies calls for models adapted to measure the fit, or congruence, between marketing and organizational or venture strategies and the effect of that congruence on the appropriate measure of venture performance.
Determination of this fit is particularly timely in the area of export pricing. There are several reasons for this, all of which point to the need for this research:
1. To date, no linkage between export pricing strategy and venture performance has been identified within the literature, despite repeated attempts to do so.
A significant gap within the international marketing literature exists in that a key marketing decision variable has not been found to significantly influence performance in export markets, although major studies (e.g., Cavusgil and Zou, 1994 and Szymanski et al., 1993) have investigated this relationship.
2. The failure to identify export-pricing strategy–performance linkages may be due to the inappropriate manner in which strategy and performance relationships have been traditionally measured.
Strategy→performance studies have come under increasing criticism due to the traditional method of examining direct linkages of particular strategies with performance without considering the overall strategic focus of the firm or SBU. More recent efforts have argued for the need to consider the fit between specific marketing and management strategies and the firm's strategic position within the market. Furthermore, export-pricing research has consistently failed to evaluate pricing strategies relative to the appropriate performance measure, for example, the ability of a market share strategy to enhance market share, as opposed to a more generic economic outcome. Given the failure to link pricing strategies with export performance, it is clear that a study, which measures the fit of venture–pricing strategies and the influence of that fit on the appropriate outcome measure, is needed.
3. By understanding the value of fitting pricing strategies with venture strategies, international managers may more effectively allocate resources and set venture goals.
Numerous studies (e.g., Myers, 1997 and Cavusgil, 1996) have found that the setting of export prices is often ad hoc in nature and rarely aligned with the overall venture strategies of the firm. The setting and monitoring of prices often absorbs considerable resources via information accumulation of markets, competitors and regulatory constraints, and these resources may be better applied elsewhere if specific pricing approaches fail to render desired results.
The purpose of this article is to effectively determine the value of pricing strategy/venture strategy congruence relative to achieving stated venture goals in a cross-national setting. Congruence is formally defined as “the degree to which the needs, demands, goals, objectives and/or structures of one component are consistent with the needs, demands, goals, objectives and/or structures of another component” (see Nadler and Tushman, 1980, p. 281). While the underlying question for previous congruence, or fit, research has been that, for any firm, specific strategic resource deployments needed to maximize performance can be identified relative to environmental conditions (Venkatraman and Prescott, 1990), our study proposes that appropriate evaluation of strategic fit should incorporate measures of pricing strategy congruence with the firm's stated strategic objectives for the market or venture. Furthermore, this congruence should be evaluated by its ability to achieve the stated performance goals. To provide insight into strategic congruence→performance relationships, we develop a baseline model, which hypothesizes that congruence between pricing strategies and venture strategies lead to enhanced performance outcomes. We test this hypothesis with optimal models using polynomial regression equations. The methodology of Edwards (1996) is adopted which allows response surface methodology (RSM) to visually represent the strategic congruence–performance relationship in its curvilinear form.
