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International Product Decisions

Prof. Mukul Mishra

Introduction 

Product
‡ Tangible Attributes ‡ Benefits ‡ Intangible Attributes 

Ex : Automobile

Definition 

A product, can be defined as a collection of physical, psychological, service, and symbolic attributes that collectively yield satisfaction or benefits, to a buyer or user.

Framework for Classification of Products
The four product categories in the locallocal-to global continuum
‡ ‡ ‡ ‡

Local National International Global

1. also called regional product These are new products (introduced using a rollout strategy ) Product that is distributed exclusively in that region. In the United States.Local products      A local product is available in a portion of a national market. Originally. Cape Cod Potato Chips was a local product in the New England market. .

National Products  A national product is one that. is offered in a single national market.2. in the context of a particular company. CocaCoca-Cola developed a non carbonated. Global companies cater to the needs of particular country markets. ginsengginsengflavored beverage for sale only in Japan    . Sony and other Japanese consumer electronics companies produce a variety of products that are not sold outside of Japan.

it became a multiregional company. regional markets. .International Products    International products that are offered in multinational. The classic international product is the Euro product.3. Renault was for many years a Euro product When Renault entered the Brazilian market. offered throughout Europe but not in the rest of the world.

like a national or international brand. Ex : Portable personal sound systems are a category of global product Product and Brand are different Sony is a global brand.Global Products and Global Brands      Global products are offered in global markets. A truly global product ± Triad/every world region/counties at every stage of development. is a symbol about which customers have beliefs or perceptions. . A global brand.

A global brand must convey the same images and same meanings everywhere./Mercedez Benz    . marketers must create global brands.Its a global brand. although the marketing mix may vary from country to country Ex : Avon is a premium prices product in Japan whereas its popularly priced in rest of the world. a global brand name can be used as an umbrella for introducing new products. has a stellar track record both as a global brand and "a manufacturer of global products. Sony.

" There is only one Coke. Ex : Coke is arguably the quintessential global product and global brand. . Coke's positioning and strategy are the same in all countries. Coke is "the real thing. good times. and enjoyment. it projects a global image of fun.

first formally used in 1969 ± Al Ries & Jack Trout . The word positioning.PRODUCT POSITIONING     Product positioning is a communications strategy based on the notion of mental "space³ positioning refers to the act of locating a brand in customers' minds over and against other products in terms of product attributes and benefits that the brand does and does not offer.

benefit or feature.     Attribute or Benefit exploits a particular product attribute.Positioning Strategies 1. .solid construction (afety in the event of a crash). Global Marketing ± imported product Volvo automobiles . VISA's advertising focuses on the benefit of worldwide merchant acceptance.

 Benetton uses the same positioning for itµs clothing when it targets the global youth market. .Quality / Price  Continuum from high fashion/quality and High price to good value (rather than low quality) at a low price.Use / User  how a product is used or associating a product with a user or class of users the same way in every market.2.  Ex : Zenith Computers 3.

High4.High-Tech Positioning  Personal computers. and automobiles are product categories for which highhigh-tech positioning has proven effective. video and stereo equipment. .  Buyers typically already possess or wish to acquire considerable technical information. although image may also be important.  Such products are frequently purchased on the basis of physical product features.4.

High Touch Positioning    less emphasis on specialized information and more emphasis on image. materialism.5. Buyers share a common language and set of symbols relating to themes of wealth. highhigh-touch categories are highly involving for consumers. . and romance.

Fragrances and fashions have traveled as a result of growing worldwide interest in highhigh-quality. highly visible. Upscale fragrances and designer fashions are examples of products whose positioning is strongly cosmopolitan in nature.   Ads that show friends talking over a cup of coffee in a cafe or quenching thirst with a soft drink during a day at the beach put the product at the center of everyday life and communicate the benefit offered in a way that is understood worldwide. high-priced highproducts that often enhance social status. .

4.Product Design Considerations   Should a company adapt product design for various national markets or offer a single design to the global market? Global marketers need to consider four factors when making product design decisions: 1. 3. cost. . and compatibility. 2. preferences. laws and regulations.

forced to adapt its award winning design in the United States. American consumers considered bulk and weight prima facie evidence of quality. 1. consumer wanted a heavy. bulky typewriter that was ugly by modern European design standards. therefore. Italy's Olivetti Corporation . There are marked and important differences in preferences around the world factors such as color and taste.known in Europe for its awardawardwinning modern consumer typewriter designs/displayed at the Museum of Modern Art in New York City. and Olivetti was. Olivetti's designs did not enjoy commercial success in the United States.Preferences      . Although critically acclaimed. The U. Marketers who ignore preferences do so at their own peril.S.

Cost     Issue of product design ± consider cost factors broadly. Other design-related cost whether incurred by the manufacturer or the end user-must also be considered. . the actual cost of producing the product will create a cost floor. Cost of repair services varies around the world and has an impact on product design.2.

there were 200 legal and regulatory barriers to cross-border trade within the European Union (EU) in 10 food categories.3.Laws & Regulations  Compliance with laws and regulations in different countries -> impact on product design decisions ->product design adaptations that increase costs. for example. Ex: Europe .    prohibitions or-taxes on products with certain ingredients. and different packaging and labeling laws. In the food industry.Impetus for the creation of the single market was to dismantle regulatory and legal barriers-particularly in the areas of technical standards and health and safety standardsthat prevented pan-European sales of standardized products. .

Compatability  product compatibility with the environment in which it is used. electrical systems range from 50 to 230 volts and from 50 to 60 cycles.4.    . failing to translate the user's manual into various languages can hurt sales of Made in India products Also. design of any product powered by electricity must be compatible with the power system in the country of use.

   .Labelling & Instructions  Product labeling/instructions ->comply with national law and regulation. Ex: There are precise labeling requirements for prescription drugs & poisons. Finally. Labeling can provide valuable consumer information on nutrition for food products.5. many products require operating and installation instructions.

 The use of multiple languages on labels and instructions simplifies inventory control: The same packaging can be used for multiple markets. .

Key Issues in Global Product Strategies  Key issue in global marketing mix decisions ‡ What new products ± what markets ‡ What products. removed. productsmodified  Mistakes are common .Ikea in U.S .added.

same communication Adaptation : cater to needs/wants of foreign customers. . Invention : products designed from scratch for global marketplace.Global Product Strategies    Extension : same product.

Table 1:Global Expansion Strategies Strategy Product function or need satisfied Conditions of Product Use Ability to buy the product Yes Recommended Product Strategy Recommended Communications Strategy Rank order from least to most expensive 1 Product Example 1 Same Same Extension Extension Soft Drinks 2 Different Same Yes Extension Adaptation 2 Scooters 3 Same Different Yes Extension Adaptation 3 Detergents 4 Different Different Yes Adaptation Adaptation 4 Clothing 5 Same - No Invention Develop new communications 5 Hand Powered washing machine .

.  Negative-alienate foreign customers Negative Modern production processes ( CAD/CAM) obviate the need for large batch sizes.  Early entrants/small cos.Strategic Option 1 :  Product & Communication Extension ± Dual Extension  Standardized Product/Uniform Communications Strategy. With limited resources  Results in substantial savings coming from economies of scale.  Product driven strategy rather than market driven.

 Manufacturing ± economies of scale retained .Strategic Option 2:  Product Extension-Communication ExtensionAdaptation  Difference in cultural/competitive environment ± benefits/functions sought are different from same product  Gap between home and foreign market ± firms use customized advertising campaigns.Advertising ± sacrificed  E.S‡ Europe-dental benefits Europe- . ‡ U. Wrigley ± benefits promoted vary from country to country.g.S-substitute to smoking U.

acquired brands in foreign countries.  Similar core values/consumer behavior -harmonized communications.  Marketing ideas transferred from country to country despite product differences.  P&G Pantene Shampoo Ad developed in Taiwan used with minor changes in Latin America. .Strategic Option 3:  Product Adaptation-Communication Extension Adaptation Firms adapt product/standardize communications strategy  Local Market Circumstances-product Circumstancesadaptation.

 E. Opera Singers. Slim fast weight loss products ‡ Germany-Celebrities Germany‡ U.K.g.KTeachers. therefore U.  Differences in both cultural & physical environments ± dual adaptation strategy. DJ¶s are used .Celebrities (not permitted).Strategic Option 4:  Product & Communications AdaptationAdaptationDual Adaptation.  Both product & communications strategy are adapted.

 Black & Decker-Product Invention DeckerStrategy.( Developed in Europe)  P&G Europe Pan-European product Pandevelopment efforts. .Strategic Option 5:  Product Invention  Genuine Global Marketers-create Marketersproducts with a global scope.( Worldwide Household Board)  Ford Mondeo ± part of Ford's world car strategy.  Identify common global needs and opportunities and design products catering to them.

Standardization Vs.( Minor alternations when needed) ‡ Capitalize on commonalities in customer¶s needs across countries ‡ Minimize costs-> cost savings passed to costscustomers via lower prices. ‡ Product driven orientation . Customization   Whether standardized or country tailored product strategies Standardization : offering uniform product on a regional or worldwide basis.

‡ Market driven mindset ± increasing customer satisfaction by adapting products to local needs. Customization: focus on cross border differences in the needs and wants of firm¶s target customers. ‡ Changes made to suit local market conditions. .

meter.Drivers of Global Product Strategy 1. Diet Coke ‡ Also many product categories show a gradual convergence of consumer preferences. In Triad Markets ± preferred car size has shifted towards a space of 7 to 9 sq.. . ‡ Same functions/usage conditions/benefits sought ‡ E. Common Customer Needs : ‡ Many product categories ± consumer needs similar in different countries.g.g.. E.

2. ‡ Buying/Sourcing are centralized or regionalized ‡ Such customers require services/products that are harmonized worldwide. In B2B marketing ± businesses for many firms comes from firms that are global customers. Global Customers : ‡ Imp. .

Diseconomies of scale with size-hidden costs sizelike bureaucratic structure. CAD/CAM-customized products. Scale Economies : ‡ ‡ ‡ ‡ ‡ ‡ ‡ In Manufacturing/distribution ± key driver for standardization. . However recent procedures like flexible manufacturing/JIT production shifted focus from size to timeliness.shopfloor inefficiency. Cost savings passed on to customers as lower prices.3. small batch size CAD/CAM& reduced costs. Sourcing efficiencies achieved/lowered R&D expenditures. Great advantage vis-à-vis local or regional viscompetitors.

Time to Market : ‡ Being innovative is not enough to be competitive ‡ Ways to shorten time to bring new products to market ‡ Centralizing R&D / focusing NPD efforts on few projects ‡ P&G in Europe ± Currently Pan European launch of liquid laundry detergent is done in 10% of the time it took in the early 1980¶s when marketing was decentralized.4. .

.g. ‡ RTA's also lead to harmonization of technical standards in many countries.5. ‡ Raider bar in Europe became Twix. ‡ Marathon in UK became Snickers in continental Europe as Europe is now one single market. the name used in UK. EU. Regional Market Agreements : ‡ Formation of RTA¶s ± encourages firms to launch regional products or redesign existing products as regional products e..

These parts can be assembled into numerous product configurations. Modular Approach-develop a range of product Approachparts that can be used worldwide. Core-Product Approach ± Common platform Coredesigned . .g. localization is not an either / or dilemma Look at it in terms of degree of globalization ‡ What elements of product policy should be tailored to local market conditions.attachments are added to meet local requirements.. Renault. e. ‡ Which elements should be left unchanged.  Standardization vs. 2. ‡ Strategies : 1.

Timing of Entry : Waterfall vs. Sprinkler Strategies    Key element of regional/global product launch strategy ± entry timing decision When to launch a new product in the target markets Two broad strategies ± waterfall & the sprinkler model .

‡ Whole process-lasts several decades. McDonald's ± 22 years . ‡ Motives for waterfall model    Customization of product for foreign market is time consuming Less demanding on firm¶s resources Absence of good local partners . lastly MNC introduces innovation in less advanced countries(3rd Phase). Waterfall Model : ‡ Global phased roll-out where new products rolltickle down in a cascade like manner.Coca-Cola± 20 . process‡ E. ‡ Introduce product first in firm¶s home market.g.. then in other advanced market (2nd Phase).Coca-Cola± yrs.

‡ Phases roll-out not always preferable roll‡ In B2B markets customers don¶t want to be left behind ‡ They want access to latest generation products and technologies ‡ They are knowledgeable about products offered in different countries. ‡ E. ‡ Gives competitors time to catch up.g. . Nokia has a simultaneous launch in both Europe & North America. firm faces the risk that consumers will view its products as outdated. ‡ By withholding the latest models.

Fig.1:Waterfall Model Home Country A B C D > 3 years .

‡ Motives: universal segments & issues of competitive preemption in foreign markets. Microsoft Xbox videogame    In U.2002) .S ( mid November 2001) In Japan ( February 22. ‡ E.. Sprinkler Strategy : ‡ Simultaneous worldwide entry ‡ Global roll-out takes place within a very rollnarrow time window.2002) In Europe ( March 14.g.

2:Sprinkler Model Home Country A B C D E F 1-2 years .Fig.