International Product Decisions

International Product International Product DecisionsDecisions

Prof. Mukul MishraProf. Mukul Mishra

IntroductionIntroduction ProductProduct

• Tangible AttributesTangible Attributes• BenefitsBenefits• Intangible AttributesIntangible Attributes

Ex : AutomobileEx : Automobile

DefinitionDefinition

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

Framework for Classification of Framework for Classification of ProductsProducts

The four product categories in the The four product categories in the local-to global continuumlocal-to global continuum

• LocalLocal• NationalNational• InternationalInternational• GlobalGlobal

1.Local products1.Local products

A local product is available in a portion of A local product is available in a portion of a national market. a national market.

In the United States, also called regional In the United States, also called regional product product

These are new products (introduced using These are new products (introduced using a rollout strategy )a rollout strategy )

Product that is distributed exclusively in Product that is distributed exclusively in that region. that region.

Originally, Cape Cod Potato Chips was a Originally, Cape Cod Potato Chips was a local product in the New England market.local product in the New England market.

2.National Products2.National Products A national product is one that, in the context of a A national product is one that, in the context of a

particular company, is offered in a single national particular company, is offered in a single national market.market.

Global companies cater to the needs of particular Global companies cater to the needs of particular country markets.country markets.

Sony and other Japanese consumer electronics Sony and other Japanese consumer electronics companies produce a variety of products that are companies produce a variety of products that are not sold outside of Japan.not sold outside of Japan.

Coca-Cola developed a non carbonated, ginseng-Coca-Cola developed a non carbonated, ginseng-flavored beverage for sale only in Japanflavored beverage for sale only in Japan

3.International Products3.International Products International products that are offered in International products that are offered in

multinational, regional markets. multinational, regional markets. The classic international product is the The classic international product is the

Euro product, offered throughout Europe Euro product, offered throughout Europe but not in the rest of the world.but not in the rest of the world.

Renault was for many years a Euro Renault was for many years a Euro product When Renault entered the product When Renault entered the Brazilian market, it became a Brazilian market, it became a multiregional company.multiregional company.

Global Products and Global BrandsGlobal Products and Global Brands Global products are offered in global markets. Global products are offered in global markets. A truly global product – Triad/every world A truly global product – Triad/every world

region/counties at every stage of region/counties at every stage of development.development.

Ex : Portable personal sound systems are a Ex : Portable personal sound systems are a category of global productcategory of global product

Product and Brand are differentProduct and Brand are different Sony is a global brand. A global brand, like a Sony is a global brand. A global brand, like a

national or international brand, is a symbol national or international brand, is a symbol about which customers have beliefs or about which customers have beliefs or perceptions.perceptions.

marketers must create global brands; a global marketers must create global brands; a global brand name can be used as an umbrella for brand name can be used as an umbrella for introducing new products.introducing new products.

Sony, has a stellar track record both as a global Sony, has a stellar track record both as a global brand and "a manufacturer of global products.brand and "a manufacturer of global products.

A global brand must convey the same images and A global brand must convey the same images and same meanings everywhere, although the same meanings everywhere, although the marketing mix may vary from country to countrymarketing mix may vary from country to country

Ex : Avon is a premium prices product in Japan Ex : Avon is a premium prices product in Japan whereas its popularly priced in rest of the whereas its popularly priced in rest of the world.Its a global brand./Mercedez Benzworld.Its a global brand./Mercedez Benz

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

PRODUCT POSITIONINGPRODUCT POSITIONING Product positioning is a communications Product positioning is a communications

strategy strategy based on the notion of mental "space“based on the notion of mental "space“ positioning refers to the act of locating a positioning refers to the act of locating a

brand in customers' minds over and brand in customers' minds over and against other products in terms of product against other products in terms of product attributes and benefits that the brand does attributes and benefits that the brand does and does not offer. and does not offer.

The word positioning, first formally used in The word positioning, first formally used in 1969 – Al Ries & Jack Trout1969 – Al Ries & Jack Trout

Positioning StrategiesPositioning Strategies

1.1. Attribute or BenefitAttribute or Benefit exploits a particular product attribute, exploits a particular product attribute,

benefit or feature.benefit or feature. Global Marketing – imported product Global Marketing – imported product Volvo automobiles - solid construction Volvo automobiles - solid construction

(afety in the event of a crash). (afety in the event of a crash). VISA's advertising focuses on the VISA's advertising focuses on the

benefit of worldwide merchant benefit of worldwide merchant acceptance.acceptance.

2.Quality / Price 2.Quality / Price Continuum from high fashion/quality and Continuum from high fashion/quality and

High price to good value (rather than low High price to good value (rather than low quality) at a low price.quality) at a low price.

Ex : Zenith ComputersEx : Zenith Computers

3.Use / User3.Use / User how a product is used or associating a how a product is used or associating a

product with a user or class of users the product with a user or class of users the same way in every market.same way in every market.

Benetton uses the same positioning for it‘s Benetton uses the same positioning for it‘s clothing when it targets the global youth clothing when it targets the global youth market.market.

4.High-Tech Positioning4.High-Tech Positioning Personal computers, video and Personal computers, video and

stereo equipment, and automobiles stereo equipment, and automobiles are product categories for which are product categories for which high-tech positioning has proven high-tech positioning has proven effective. effective.

Such products are frequently Such products are frequently purchased on the basis of physical purchased on the basis of physical product features, although image product features, although image may also be important.may also be important.

Buyers typically already possess or Buyers typically already possess or wish to acquire considerable wish to acquire considerable technical information.technical information.

5.High Touch Positioning5.High Touch Positioning

less emphasis on specialized less emphasis on specialized information and more emphasis on information and more emphasis on image.image.

high-touch categories are highly high-touch categories are highly involving for consumers.involving for consumers.

Buyers share a common language Buyers share a common language and set of symbols relating to and set of symbols relating to themes of wealth, materialism, and themes of wealth, materialism, and romance.romance.

Ads that show friends talking over a cup of Ads that show friends talking over a cup of coffee in a cafe or quenching thirst with a coffee in a cafe or quenching thirst with a soft drink during a day at the beach put soft drink during a day at the beach put the product at the center of everyday life the product at the center of everyday life and communicate the benefit offered in a and communicate the benefit offered in a way that is understood worldwide. way that is understood worldwide.

Upscale fragrances and designer fashions Upscale fragrances and designer fashions are examples of products whose are examples of products whose positioning is strongly cosmopolitan in positioning is strongly cosmopolitan in nature. nature.

Fragrances and fashions have traveled as Fragrances and fashions have traveled as a result of growing worldwide interest in a result of growing worldwide interest in high-quality, highly visible, high-priced high-quality, highly visible, high-priced products that often enhance social status.products that often enhance social status.

Product Design ConsiderationsProduct Design Considerations Should a company adapt product Should a company adapt product

design for various national markets design for various national markets or offer a single design to the global or offer a single design to the global market?market?

Global marketers need to consider Global marketers need to consider four factors when making product four factors when making product design decisions: design decisions:

1.1. preferences, preferences, 2.2. cost, cost, 3.3. laws and regulations, and laws and regulations, and 4.4. compatibility.compatibility.

1.Preferences1.Preferences There are marked and important differences in preferences There are marked and important differences in preferences

around the world factors such as color and taste.around the world factors such as color and taste. Marketers who ignore preferences do so at their own peril.Marketers who ignore preferences do so at their own peril.

Italy's Olivetti Corporation - known in Europe for its award-Italy's Olivetti Corporation - known in Europe for its award-winning modern consumer typewriter designs/displayed at the winning modern consumer typewriter designs/displayed at the Museum of Modern Art in New York City. Museum of Modern Art in New York City.

Although critically acclaimed, Olivetti's designs did not enjoy Although critically acclaimed, Olivetti's designs did not enjoy commercial success in the United States.commercial success in the United States.

The U.S. consumer wanted a heavy, bulky typewriter that was The U.S. consumer wanted a heavy, bulky typewriter that was ugly by modern European design standards. ugly by modern European design standards.

American consumers considered bulk and weight prima facie American consumers considered bulk and weight prima facie evidence of quality, and Olivetti was, therefore, forced to adapt evidence of quality, and Olivetti was, therefore, forced to adapt its award winning design in the United States.its award winning design in the United States.

2.Cost2.Cost Issue of product design – consider cost

factors broadly. the actual cost of producing the product

will create a cost floor. Other design-related cost whether

incurred by the manufacturer or the end user-must also be considered.

Cost of repair services varies around the world and has an impact on product design.

3.Laws & Regulations3.Laws & Regulations Compliance with laws and regulations in different countries ->

impact on product design decisions ->product design adaptations that increase costs.

Ex: Europe - 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 standards-that prevented pan-European sales of standardized products.

In the food industry, for example, there were 200 legal and

regulatory barriers to cross-border trade within the European Union (EU) in 10 food categories.

prohibitions or-taxes on products with certain ingredients, and different packaging and labeling laws.

4.Compatability4.Compatability product compatibility with the environment in which

it is used.

failing to translate the user's manual into various languages can hurt sales of Made in India products

Also, electrical systems range from 50 to 230 volts and from 50 to 60 cycles.

design of any product powered by electricity must be compatible with the power system in the country of use.

5.Labelling & Instructions5.Labelling & Instructions Product labeling/instructions ->comply with

national law and regulation.

Ex: There are precise labeling requirements for prescription drugs & poisons.

Labeling can provide valuable consumer

information on nutrition for food products.

Finally, 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 Key Issues in Global Product StrategiesStrategies

Key issue in global marketing mix Key issue in global marketing mix decisionsdecisions• What new products – what marketsWhat new products – what markets• What products- added, removed, What products- added, removed,

modifiedmodified Mistakes are common - Ikea in U.SMistakes are common - Ikea in U.S

Global Product StrategiesGlobal Product Strategies Extension : same product, same Extension : same product, same

communicationcommunication Adaptation : cater to needs/wants of Adaptation : cater to needs/wants of

foreign customers.foreign customers. Invention : products designed from Invention : products designed from

scratch for global marketplace.scratch for global marketplace.

StrategyStrategy Product Product function or function or

need satisfiedneed satisfied

Conditions Conditions of Product of Product

UseUse

Ability Ability to buy to buy

the the productproduct

Recommended Recommended Product Product StrategyStrategy

Recommended Recommended Communications Communications

StrategyStrategy

Rank order Rank order from least to from least to

most most expensiveexpensive

Product Product ExampleExample

11 SameSame SameSame YesYes ExtensionExtension ExtensionExtension 11 Soft Soft DrinksDrinks

22 DifferentDifferent SameSame YesYes ExtensionExtension AdaptationAdaptation 22 ScootersScooters

33 SameSame DifferentDifferent YesYes ExtensionExtension AdaptationAdaptation 33 DetergentsDetergents

44 DifferentDifferent DifferentDifferent YesYes AdaptationAdaptation AdaptationAdaptation 44 ClothingClothing

55 SameSame -- NoNo InventionInvention Develop new Develop new communicationscommunications

55 Hand Hand Powered Powered washing washing machinemachine

Table 1:Global Expansion Strategies

Strategic Option 1 :Strategic Option 1 : Product & Communication Extension – Dual Product & Communication Extension – Dual

ExtensionExtension Standardized Product/Uniform Standardized Product/Uniform

Communications Strategy.Communications Strategy. Early entrants/small cos. With limited Early entrants/small cos. With limited

resourcesresources Results in substantial savings coming from Results in substantial savings coming from

economies of scale.economies of scale. Product driven strategy rather than market Product driven strategy rather than market

driven.driven. Negative-alienate foreign customersNegative-alienate foreign customers Modern production processes ( CAD/CAM) Modern production processes ( CAD/CAM)

obviate the need for large batch sizes.obviate the need for large batch sizes.

Strategic Option 2:Strategic Option 2: Product Extension-Communication Product Extension-Communication

AdaptationAdaptation Difference in cultural/competitive Difference in cultural/competitive

environment – benefits/functions sought are environment – benefits/functions sought are different from same productdifferent from same product

Gap between home and foreign market – Gap between home and foreign market – firms use customized advertising campaigns.firms use customized advertising campaigns.

Manufacturing – economies of scale Manufacturing – economies of scale retained ;Advertising – sacrificedretained ;Advertising – sacrificed

E.g. Wrigley – benefits promoted vary from E.g. Wrigley – benefits promoted vary from country to country.country to country.• U.S-substitute to smokingU.S-substitute to smoking• Europe-dental benefitsEurope-dental benefits

Strategic Option 3:Strategic Option 3: Product Adaptation-Communication ExtensionProduct Adaptation-Communication Extension Firms adapt product/standardize Firms adapt product/standardize

communications strategycommunications strategy Local Market Circumstances-product Local Market Circumstances-product

adaptation, acquired brands in foreign adaptation, acquired brands in foreign countries.countries.

Similar core values/consumer behaviorSimilar core values/consumer behavior-harmonized communications.-harmonized communications.

Marketing ideas transferred from country to Marketing ideas transferred from country to country despite product differences.country despite product differences.

P&G Pantene Shampoo Ad developed in P&G Pantene Shampoo Ad developed in Taiwan used with minor changes in Latin Taiwan used with minor changes in Latin America. America.

Strategic Option 4:Strategic Option 4: Product & Communications Adaptation-Product & Communications Adaptation-

Dual Adaptation.Dual Adaptation. Differences in both cultural & physical Differences in both cultural & physical

environments – dual adaptation environments – dual adaptation strategy.strategy.

Both product & communications Both product & communications strategy are adapted.strategy are adapted.

E.g. Slim fast weight loss productsE.g. Slim fast weight loss products• Germany-CelebritiesGermany-Celebrities• U.K- Celebrities (not permitted), therefore U.K- Celebrities (not permitted), therefore

Teachers, Opera Singers, DJ’s are usedTeachers, Opera Singers, DJ’s are used

Strategic Option 5:Strategic Option 5: Product InventionProduct Invention Genuine Global Marketers-create Genuine Global Marketers-create

products with a global scope.products with a global scope. Identify common global needs and Identify common global needs and

opportunities and design products opportunities and design products catering to them.catering to them.

Black & Decker-Product Invention Black & Decker-Product Invention Strategy.( Worldwide Household Board)Strategy.( Worldwide Household Board)

Ford Mondeo – part of Ford's world car Ford Mondeo – part of Ford's world car strategy.( Developed in Europe)strategy.( Developed in Europe)

P&G Europe Pan-European product P&G Europe Pan-European product development efforts.development efforts.

Standardization Vs. CustomizationStandardization Vs. Customization

Whether standardized or country Whether standardized or country tailored product strategiestailored product strategies

Standardization : offering uniform Standardization : offering uniform product on a regional or worldwide product on a regional or worldwide basis.( Minor alternations when needed)basis.( Minor alternations when needed)• Capitalize on commonalities in customer’s Capitalize on commonalities in customer’s

needs across countriesneeds across countries• Minimize costs-> cost savings passed to Minimize costs-> cost savings passed to

customers via lower prices.customers via lower prices.• Product driven orientationProduct driven orientation

Customization: focus on cross border Customization: focus on cross border differences in the needs and wants of differences in the needs and wants of firm’s target customers.firm’s target customers.• Changes made to suit local market Changes made to suit local market

conditions.conditions.• Market driven mindset – increasing Market driven mindset – increasing

customer satisfaction by adapting products customer satisfaction by adapting products to local needs.to local needs.

Drivers of Global Product StrategyDrivers of Global Product Strategy1.1. Common Customer NeedsCommon Customer Needs : :

• Many product categories – consumer Many product categories – consumer needs similar in different countries.needs similar in different countries.

• Same functions/usage conditions/benefits Same functions/usage conditions/benefits soughtsought

• E.g., Diet CokeE.g., Diet Coke• Also many product categories show a Also many product categories show a

gradual convergence of consumer gradual convergence of consumer preferences. E.g., In Triad Markets – preferences. E.g., In Triad Markets – preferred car size has shifted towards a preferred car size has shifted towards a space of 7 to 9 sq. meter.space of 7 to 9 sq. meter.

2.2. Global Customers Global Customers ::• Imp. In B2B marketing – businesses for Imp. In B2B marketing – businesses for

many firms comes from firms that are many firms comes from firms that are global customers.global customers.

• Buying/Sourcing are centralized or Buying/Sourcing are centralized or regionalizedregionalized

• Such customers require services/products Such customers require services/products that are harmonized worldwide.that are harmonized worldwide.

3.3. Scale Economies Scale Economies ::• In Manufacturing/distribution – key driver for In Manufacturing/distribution – key driver for

standardization.standardization.• Sourcing efficiencies achieved/lowered R&D Sourcing efficiencies achieved/lowered R&D

expenditures.expenditures.• Cost savings passed on to customers as lower Cost savings passed on to customers as lower

prices.prices.• Great advantage vis-à-vis local or regional Great advantage vis-à-vis local or regional

competitors.competitors.• However recent procedures like flexible However recent procedures like flexible

manufacturing/JIT production shifted focus from manufacturing/JIT production shifted focus from size to timeliness.size to timeliness.

• CAD/CAM-customized products, small batch size CAD/CAM-customized products, small batch size & reduced costs.& reduced costs.

• Diseconomies of scale with size-hidden costs like Diseconomies of scale with size-hidden costs like bureaucratic structure,shopfloor inefficiency.bureaucratic structure,shopfloor inefficiency.

4.4. Time to Market Time to Market ::• Being innovative is not enough to be Being innovative is not enough to be

competitivecompetitive• Ways to shorten time to bring new Ways to shorten time to bring new

products to marketproducts to market• Centralizing R&D / focusing NPD efforts on Centralizing R&D / focusing NPD efforts on

few projects few projects • P&G in Europe – Currently Pan European P&G in Europe – Currently Pan European

launch of liquid laundry detergent is done launch of liquid laundry detergent is done in 10% of the time it took in the early in 10% of the time it took in the early 1980’s when marketing was decentralized.1980’s when marketing was decentralized.

5.5. Regional Market Agreements Regional Market Agreements ::• Formation of RTA’s – encourages firms to Formation of RTA’s – encourages firms to

launch regional products or redesign launch regional products or redesign existing products as regional products existing products as regional products e.g., EU.e.g., EU.

• RTA's also lead to harmonization of RTA's also lead to harmonization of technical standards in many countries. technical standards in many countries.

• Marathon in UK became Snickers in Marathon in UK became Snickers in continental Europe as Europe is now one continental Europe as Europe is now one single market.single market.

• Raider bar in Europe became Twix, the Raider bar in Europe became Twix, the name used in UK.name used in UK.

Standardization vs. localization is not an Standardization vs. localization is not an either / or dilemmaeither / or dilemma

Look at it in terms of degree of Look at it in terms of degree of globalizationglobalization

• What elements of product policy should be What elements of product policy should be tailored to local market conditions.tailored to local market conditions.

• Which elements should be left unchanged.Which elements should be left unchanged.• Strategies :Strategies :1.1. Modular Approach-develop a range of product Modular Approach-develop a range of product

parts that can be used worldwide. These parts parts that can be used worldwide. These parts can be assembled into numerous product can be assembled into numerous product configurations.configurations.

2.2. Core-Product Approach – Common platform Core-Product Approach – Common platform designed ,attachments are added to meet local designed ,attachments are added to meet local requirements. e.g., Renault.requirements. e.g., Renault.

Timing of Entry : Timing of Entry : Waterfall vs. Sprinkler StrategiesWaterfall vs. Sprinkler Strategies

Key element of regional/global product Key element of regional/global product launch strategy – entry timing decisionlaunch strategy – entry timing decision

When to launch a new product in the When to launch a new product in the target marketstarget markets

Two broad strategies – waterfall & the Two broad strategies – waterfall & the sprinkler modelsprinkler model

Waterfall Model Waterfall Model ::• Global phased roll-out where new products Global phased roll-out where new products

tickle down in a cascade like manner.tickle down in a cascade like manner.• Introduce product first in firm’s home Introduce product first in firm’s home

market, then in other advanced market (2market, then in other advanced market (2ndnd Phase), lastly MNC introduces innovation in Phase), lastly MNC introduces innovation in less advanced countries(3less advanced countries(3rdrd Phase). Phase).

• Whole process-lasts several decades.Whole process-lasts several decades.• E.g., McDonald's – 22 years ;Coca-Cola– 20 E.g., McDonald's – 22 years ;Coca-Cola– 20

yrs.yrs.• Motives for waterfall modelMotives for waterfall model

Customization of product for foreign market is Customization of product for foreign market is time consumingtime consuming

Less demanding on firm’s resourcesLess demanding on firm’s resources Absence of good local partnersAbsence of good local partners

• Phases roll-out not always preferablePhases roll-out not always preferable• In B2B markets customers don’t want to be In B2B markets customers don’t want to be

left behindleft behind• They want access to latest generation They want access to latest generation

products and technologiesproducts and technologies• They are knowledgeable about products They are knowledgeable about products

offered in different countries.offered in different countries.• By withholding the latest models, firm faces By withholding the latest models, firm faces

the risk that consumers will view its the risk that consumers will view its products as outdated.products as outdated.

• Gives competitors time to catch up.Gives competitors time to catch up.• E.g. Nokia has a simultaneous launch in E.g. Nokia has a simultaneous launch in

both Europe & North America.both Europe & North America.

Home Country

A

B

C

D

Fig.1:Waterfall Model

> 3 years

Sprinkler Strategy Sprinkler Strategy ::• Simultaneous worldwide entrySimultaneous worldwide entry• Global roll-out takes place within a very Global roll-out takes place within a very

narrow time window.narrow time window.• Motives: universal segments & issues of Motives: universal segments & issues of

competitive preemption in foreign markets.competitive preemption in foreign markets.• E.g., Microsoft Xbox videogameE.g., Microsoft Xbox videogame

In U.S ( mid November 2001)In U.S ( mid November 2001) In Japan ( February 22,2002)In Japan ( February 22,2002) In Europe ( March 14,2002)In Europe ( March 14,2002)

Fig.2:Sprinkler Model

Home Country

A B C D E F

1-2 years