International Product Planning

International Product Planning

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Product Decisions

Product decisions are crucial to a firms success in international markets.

In order gain significant percentage of market share, a firm should address an satisfy customers needs and expectations of overseas market.

A firm operating in international markets should not only identify the products for various markets but should also evolve suitable marketing strategies for developing such products.

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Product Decisions

Whether a single standardized product can be offered world wide or a customized product needs to be developed for each market is the most significant product decision that a firm, has to make while operating in international markets.

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Types of Product Decisions

Market segment decision Product mix decision Product specification Positioning and communications decisions

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Global Product Strategies

Companies can pursue three global strategies to penetrate foreign markets.

1. Companies can Extend their domestic product or communication strategies to their foreign markets.

2. Companies can Adapt their strategy to the local market place.

3. Companies can follow invention strategy, where products are designed for global market.

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1. Product and Communication Extension

A company can enter into a market with standardized product using a uniform communications strategy.

Early entrants in the global arena will often opt for this approach.

Small companies, with few resources typically prefer this option.

A standardized product pricing coupled with a uniform communication strategy offers substantial savings coming from economies of scale.

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2. Product Extension - Communication Adaptation

Due to the gaps between the foreign and home market, drive companies to market the same product using customized advertising campaigns.

It retains the scale economies on the manufacturing side.

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3. Product Adaptation - Communication Extension

In this case firms adapt their product but market it using a standardized communication strategy.

Local market circumstances favor the case of product adaptation.

Many companies add brands to their product portfolio by acquisitions of local companies.

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4. Product and Communication Adaptation

Differences in the both the cultural and environments in different countries call for a dual adaptation strategy.

Under such circumstances, adaptation of the company’s product and communication strategy is most viable option for international expansion

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5. Product Invention

Company which adopts the product invention aims at bring out new products that cater to common needs and opportunities around world.

In this option companies try to figure out how to create products with a global scope rather than just for a single country.

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Standardization V/s Adaptation

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Product Standardization

Process of marketing a product in overseas markets with little change except for some changes such as modified packaging and labeling.

Benefits Projecting global market image. Catering to customers globally Cost savings in-terms of economies of scale. Facilitating the development of a product as

a global brand.

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Product Standardization

The major factors that favour product standardization for international market include-

High level of technological intensity High adaptation costs Convergence of customers needs The country of origin impact

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Product Adaptation (Customization)

Making changes in a product response to the needs of the target market.

Adaptation of product may vary form major modifications in the product, packaging, logo or brand name.

Benefits It helps in gaining market share It fulfils needs and expectations of customers in

varied cultures and environments. It increases sales, leading to economies of

scale.

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Product Adaptation (Customization)

The major factors that favour product adaptation for international markets include-

Government regulations Operating system Measurement system Environmental changes Packing & labeling regulations Price sensitivity.

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Developing New Products for Global Markets

If a company find that good opportunity exists for products it does not manufacture now, to exploit that opportunity new product development becomes essential.

The steps to be followed in the global new product development process are, by and large similar to domestic marketing situations – but innovation efforts are implemented on a global scope

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New Product Development Process

IdeaIdeaGenerationGeneration

ConceptConceptDevelopmentDevelopmentand Testingand Testing

MarketingMarketingStrategyStrategy

DevelopmentDevelopment

IdeaIdeaScreeningScreening

BusinessBusinessAnalysisAnalysis

ProductProductDevelopmentDevelopment

MarketMarketTestingTesting

CommercializationCommercialization

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Company EmployeesCompany Employees

CustomersCustomers

CompetitorsCompetitors

DistributorsDistributors

SuppliersSuppliers

Idea Generation

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Idea Screening

Process to spot good ideas and drop poor ones.

Develop system to estimate: market size, product price, development time and costs, manufacturing costs, and rate of return.

Evaluate these findings against set of company criteria for new products.

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Concept Development and Testing

Product Idea: idea for a possible product that the company can see itself offering.

Product Concept: detailed version of the idea stated in meaningful consumer terms.

Product Image: the way consumers perceive an actual or potential product.

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Marketing Strategy Development

Part One Describes:The Target Market

Planned Product PositioningSales, Market Share, & Profit Goals

Part One Describes:The Target Market

Planned Product PositioningSales, Market Share, & Profit Goals

Part Two Outlines the First-Year’s:Product’s Planned Price

DistributionMarketing Budget

Part Two Outlines the First-Year’s:Product’s Planned Price

DistributionMarketing Budget

Part Three Describes Long-Run:Sales & Profit Goals

Marketing Mix Strategy

Part Three Describes Long-Run:Sales & Profit Goals

Marketing Mix Strategy

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Business Analysis

Involves a review of the sales, costs, Competition, investment and profit projections to assess fit with company objectives.

If yes, move to the product development phase.

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Product Development

Develop concept into physical product

Calls for large jump in investment

Prototypes are made Prototype must have

correct physical features and convey psychological characteristics

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Test Marketing

Product and program introduced in more realistic market setting.

Not needed for all products. Can be expensive and time consuming, but

better than making major marketing mistake.

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Test Marketing

Nokia test-marketed its new cell phone/mobile game player extensively before introducing it worldwide.

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Commercialization

Must decide on timing (i.e., when to introduce the product).

Must decide on where to introduce the product (e.g., single location, state, region, nationally, internationally).

Must develop a market rollout plan.

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Product Life Cycle in International Market

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Product Life Cycle in International Market

International markets follow a cyclical pattern over a period of time due to a variety of factors.

Factors like level of innovations and technology, resources, size of market and competitive structure influence the market patterns.

In addition, the ability of the customers in international markets also determines the stage of international product life cycle.

The PLC four international markets has the following four identifiable stage

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1. Introduction

A majority of new product inventions are made in highly industrialized and developed countries.

In the initial stages, the price of a new product is relatively high.

There fore , a firm find markets for new products only in developed countries.

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2. Growth

The demand in the international markets exhibits an increasing trend and an innovating firms gets better opportunities for exports.

Markets begin to mature in the developed countries, an innovating firm faces increased international competition in the target market.

In order to defend its position in the international markets, the firm establishes its production locations in the developed countries.

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3. Maturity

As the technical know-how of an innovative process becomes widely known, a firm begins to establish its operations in middle and low-in-come countries in order to take advantage of resources available at competitive prices.

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4. Decline

The major thrust of the marketing strategy at this stage shifts to price and cost competitiveness, as technical know-how and skills become widely available

There fore, the emphasis of a firm is most on the cost – effective locations.

Besides developing countries, production also intensifies in least developed countries.

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4. Decline

As a result, it has been observed that the innovating country begins to import such goods from other developing countries. Rather than manufacturing them itself.

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Product life cycle theory

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Branding Decisions

To brand or not to brand A firm has to make an initial decision

whether, it should sell the product as an undifferentiated generic commodity or sell it in branded form.

Selling an unbranded product reduces the cost of production, packaging and legal costs.

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Branding Decisions

Manufacturers brand or private brand A manufacturer may use for his products his

own or private brand. Many Indian firms are manufacturing

products for private brands of the foreign sellers.

It will be very difficult for the small exporter to sell their products abroad under his own unknown brand name

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Branding Decisions

Same Brand or different brand

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Global Branding Strategies

Global Brand Local Brand Private label Branding ( Store Brands) Umbrella Branding (Corporate brands)