Psychic Distance the Natural Occurrence Term Paper

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Nevertheless, other psychic distance stimuli do still play a significant role.

Finally, Dow and Karunaratna (2006) also stressed Shenkar's (2001) 'the assumption of equivalence,' where it is inappropriate and unjustified to assume that all factors contribute equally to the overall psychic distance construct. Examples of this were Kogut and Singh's (1988) methodology for combining Hofstede's cultural dimensions and Barkema and Vermeulen's (1997) results. They showed that, for their sample population, the apparent relationship between a composite measure of Hofstede's cultural dimensions and international joint venture survival is driven entirely by only three of the five dimensions. The importance of various factors cannot be determined in isolation from appropriate dependent variables. The weighting of the various factors needs to be determined empirically, in concert with the dependent variable(s).

Conway and Swift (2000, p. 1391) looked at psychic distance from a different parameter based on this need for variables, specifically with relationship marketing (RM). Their paper outlined why, when working in the international rather than the domestic environment, the success of a relationship marketing strategy is heavily dependent on levels of psychic distance. At the different stages of relationship development, different variables of psychic distance assume relatively greater levels of importance. They suggested that a positive relationship exists between the level of psychic distance between the parties concerned and the financial and psychological investment that is normally needed to develop a successful RM strategy: the higher the level of psychic distance, the greater the "effort" required. Empirically proving such a relationship would suggest that the constituent variables of psychic distance should be important factors in impacting the development of international regional marketing strategies.

RM consists of organizations collecting information about their customers and then determining with whom they can best develop a dialogue; it gives buyers and sellers the opportunity to team together in problem solving ventures, reducing the pressures on the buyer. Rather than employing market share as a measure of marketing success, this approach uses customer retention (Gronroos, 1996; Gummesson, 1994). Morgan and Hunt (1994, p. 22) defined RM as: "Relationship marketing refers to all marketing activities directed toward establishing, developing and maintaining successful relational exchanges."

On the other hand, recent research has suggested that certain variables may make a relationship marketing less attractive (Sharland, 1997). For example, the costs incurred in the development and implementation of a relationship marketing strategy (Nevin, 1995), the degree to which the relationship improves competitive advantage (Day, 1995) and the impact of alternative sources of supply. When such alternatives do not exist, buyers feel more positive about the relationship regarding value and expected length (Sharland, 1997).

Blios (1998) and Johanson and Mattsson (1985) likewise argued that costs are incurred when developing and maintaining relationships. Such relationships are a "market investment" or an asset and have positive and negative aspects. Their value is determined by the relative importance of each and from the perspective of a specific customer; the balance between the positive and negative may vary between suppliers for myriad variety of reasons. As a complication, when RM is placed in an international context, instead of developing relationships within the same cultural context, they are developed cross-culturally. The degree to which interaction can occur is normally determined by the degree of distance.

As noted above, the factors of a successful business relationship are relatively more or less important based on the stage at which one looks at the relationship. According to Hallen and Wiedersheim-Paul (1984, p. 18), some determinants may be relatively more important than others. "Depending on the stage of evolution of a relationship, these determinants are assumed to influence the psychic distance with various strengths. They suggested four stages in the development of a relationship: pre-contact, initial interaction, development, and mature relationship. In the pre-contact stage, psychic distance is considered to be a medium level, since there is no personal experience of the other party. In the initial stage of interaction, the differences between the two parties are at their most apparent and thus at a high psychic distance. If the relationship further develops, the psychic distance will reduce with time. Thus, it is indicated that RM-based strategy may not always be the most appropriate under all circumstances. When working in an international context, the success or lack thereof of an RM-based strategy is dependent both on the stage of relationship development and the degree of psychic distance that exists. For each stage, the importance of each RM variable differs, which as implications for the communications role.

An overall concern regarding psychic distance is their generalizability. For example, in Dow and Karunaratna's study noted previously, the reported results are based on only one form of international exchange, exporting, and to a specific set of industries and countries. What happens if this set of psychic distance stimuli is applied to a different set of industries and/or a different entry mode, such as direct foreign investment? The relative degree of importance of the various stimuli may shift significantly. Differences in religion, the political systems, and levels of industrialization might very well become more significant factors, as might the "LTO" and "individuality" cultural aspect.

The most important aspect for businesses to keep in mind when they are attempting to put together a cross-cultural strategic plan is that they have to look especially at their own situation. They cannot just plug in Hofstede', but instead need to test a broader range of potential psychic distance stimuli. It is necessary to widen the net in terms of constructs of national culture.


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