International and Global

Product Strategy
What Is a Product ?
• Product: A bundle of attributes
• The Total Product
– Tangible attributes: materials, size, weight,
design, packaging, performance, comfort
– Intangibles: brand image, styling, other
benefits (installation, delivery, credit,
warranty, after-sale service, return policy)
 Managerial Issues

Product Product
Line Life
Decision Cycle

Industrial and Industrial and

International
Consumer Product Consumer Service
Product
Elements Elements
Decisions
•Features •Service Design
•Branding •Service Name
•Packaging •Delivery System
•Warranty •Locations
•Services Generic •Quality Levels
•Quality International
Product
Barriers to Strategies Barriers to
Customization Standardization

Customized Product Standardized Product

Environmental Factors Requiring Product
Design Changes
Environmental Factors
• Level of technological
Skills
• Level of Labor Costs
• Level of Literacy
• Level of Income
• Level of Interest Rates
• Level of Maintenance
• Climatic Differences
• Difference in Standards
• Availability of Materials
• Power Availability
• Special Conditions
Design Changes
• Product simplification
• Automation of Product
• Remaking of Product
• Quality and Price
Changes
• Product Adoption
• Product Simplification
• Recalibration of Product
• Change in Product
Structure
• Resizing of Product
• Product Redesign or
Innovation
Global Product Strategies
Local and International
Environment

Firm’s
Competitive Product Internal
Situation Strategies Situation

Customer Needs &

Price
Elasticity
Product Related Global Drivers
• Demand Drivers
– Higher expectations
– More information
– Higher switching costs
– Full-service expectations
• Supply Drivers
– Fast-paced innovations
– Frequent product modifications
– Manufacturing rationalization
– Outsourcing coordination
– Strategic Alliances
Global Product Decisions

• Existing Products
– Product phase-out
– Product modification
– Product introduction into new markets
– Product performance management
• New Product
– Product development
– Product introduction
– Product performance management
Global Product Development

• Standardization- developing same product

for multiple countries
– Premise-- consumes share some common
values, beliefs, and consumption patterns
– Advantages: economies of scale and scope,
price competitiveness, uniform image
Global Product Development

• Product Adaptation- modifying product

to reflect characteristics of a market
– Premise-- consumers are not the same
– Advantages: improved fit between product
and consumer, expanded penetration
Global Product Development
• Mandatory product adaptations
– Governmental regulations
– Technological considerations (e.g., voltage,
infrastructure)
– Cultural imperatives - is it acceptable to
consumers
– Measurement standards: volume, length,
weight, quantity
A Testable Framework of Product and
Promotion Adaptation

Technology
Cultural Specificity
Orientation of Product Uniqueness Type of Product
of Product
Industry

EXPORT MARKET
COMPANY

Similarity of Legal
Firms International
Regulations
Experience

Product Adaptation
- Upon Entry
Export Sales Goal
- After Entry Competitiveness Of
for the Venture Product Adaptation Export Market
- Upon Entry
Promotion Adaptation
- After Entry
- Positioning
Promotion Adaptation
Entry Scope - Packaging/Labeling Product Familiarity Of
Positioning
- Promotional Approach Export Customers
Packaging/Labeling
The View from Toyota

• Our global strategy used to center on “world

cars,” which we would modify slightly to
accommodate demand in different markets.
Today our focus is shifting to models that we
develop and manufacture especially for
selected regional markets.
The View from Honda

We are the most international of the Japanese

companies. At the moment we are the most
diversified, and we will be more diversified in
the future. Still, I think it would be very hard
to build a one-type world car. In the end, I
don’t think it would be very efficient.”
---Nobuhiko Kawamoto
President and CEO, Honda Motor Company
Global Product Planning and Strategic
Alternative

Bicycle and Motorcycle Greeting Cards

Application of Software
Electrical Products
Strategy 1: Product communication
Extension (Dual Extension)

• One of the easiest marketing strategy

• Most profitable (Design and Manufacturing
economies of scale)
• Using the same advertising and
promotional appeals
• Often fond for business product
• E.g. Application of Software
Strategy 2: Product Extension-
Communication Adaption

• Different perceptions in different countries

(e.g. Quality, Value)
• Deferent needs, segment, function
• Low cost of implementation
• E.g. Bicycles and Motorcycles
Strategy 3: Product Adaption-
Communication Extension

• Adapting a local use and preference

conditions
• Meets specific tastes and habits
• The same function under different
environmental conditions
• More expensive due to market adoption
• E.g. Electrical Products.
Strategy 4: Product-Communication
Adaption (Dual Adaption)

• Function of a product and consumer

receptivity to advertising appeals differ.
• Very expensive
• Often found in decentralized structures in
multinational corporation
• E.g. Greeting Cards.
Key factors to Choose Strategy

1. The product itself: define in terms of

needs/functions it serve.
2. The market: define in terms of the
condition under which the product is
used, the preferences of potential
customers and the ability to buy the
products.
3. The cost of adaptation and manufacture
to the company considering these
product – communication approaches.
only after analysis of the product – market
fit and analysis of company capabilities
and costs executive choose most
profitable international strategy.
New Product in Global Marketing

Continuous Dynamically
Innovations Continuous Discontinuous
Innovation Innovations
Continuous Innovation

• Improved Version of Existing Product

• Less R&D Expenditure
• Minimal Disruption of existing
consumption patterns.
• E.g. PC upgrade with more configurations
Dynamically Continuous Innovations

• Less learning required

• Share certain features with earlier
generations
• New feature with added value
• Sony’s Walkman to Diskman
Discontinuous Innovations

• Large amount of learning required

• Create new markets and new consumption
patterns
• High R&D expenditure
International Product Life Cycle

Introduction Early Late Decline

and Growth Maturity: Maturity
Stages:
MNC Manufactures MNC Moves Developing Developing Country
Product in Developed Production to Country Markets Remain Viable
Countries; Exports to Developing Competitor Target Markets for
Developing Countries Country; Begins Exports Product MNC; MNC Home
Importing to To MNC Home Country Market Is
Home Country Country; Diminishing
Competes
with MNC
Imports
• The Product Introduction Stage
 Products are developed and marketed
in developed countries
• The Growth Stage
 Increasing competition and rapid
product adoption
 Marketed primarily in developed
countries
 Product is exported to developing
countries
• The Maturity Stage
 Product is adopted by most target consumers
 Sales are leveling off
 Profits decline due to intense competition
 Manufacturing operations move to developing
countries to take advantage of cheap labor
 New competitors: firms from developing
countries
• The Decline Stage
 Products are rapidly losing ground to
new technologies and product
alternatives
 Decrease in sales and profits
 Product lifecycle is extended through
sales to consumers in developing
countries
Dimensions of the International Product
Mix

• Product length
 Total number of brands
• Product width
 Total number of product lines
• Product depth
 Total number of different offerings for a
product category
New Product Development

• Newness can be assess by the product itself

• The product may be entirely new invention or
innovation e.g. Video Cassette Recorder or
the Compact Disc.
• It may be line extension (Modification of
Existing product)
• It may be organizational (as and when a
company acquire and already existing
product with which it has no previous
experience. And existing product becomes
new to a company may be new to particular
market.
• Honda, Compaq, Motorola, Canon, Merck,
Microsoft, Intel and Toyota.
• They are global company that follow
opportunities in competitive global market
• They focus on one or only a few business
• Senior management is actively participate in
defining and improving the product
development process.
• They have the ability to recruit and retain the
best and the brightest people in their fields.
• They understand that speed in bringing new
products to market reinforces product quality.
Generating New Product Ideas

• Most product and service firms are

driven by the marketing concept
 Product development decisions are based
on identifying the needs, wants, and
desires of consumers
• Technology firms focus on the
products
 Focus on research and development
Product Ideas

• Consumers
• Competitive Analyses
• Channel Members
• Employees
• Top Management
• Inventors
• Consultants
• University Research
New product Development Location

1. How big the market for this product at

various price?
2. Can we market the product through our
existing structure? If not what changes will
be necessary and what costs will be
required to make the changes?
3. Estimates of potential demand for product
at specified prices with estimated levels of
competition, can we source the product with
profit?
4. What are the likely competitive moves in
response to our activity with this product?
5. Does this product fit our strategic
development plan?
– Is the product consistent with our overall goal?
– Is the product consistent with our available
resources?
– Is the product consistent with our management
structure?
– Does the product have adequate global
potential?
Test Marketing

• Involves testing new product performance in

a limited area of a national or regional target
market
• Provides estimate of product performance in
the respective country or region
• Expensive
• Time consuming
• Open to competitive sabotage
Types of Test Marketing

• Simulated Test Marketing

 Test marketing simulating purchase
environment where samples of target
consumers are observed during the
decision-making process
• Controlled Test Marketing
 Test marketing that involves offering a new
product to a group of stores and evaluating
market reaction
• Test Marketing
 Focus on cities appropriate for the test;
involves selecting distributors and the
ancillary marketing infrastructure
 Most costly
 Leaves the company most exposed to
competitive sabotage
Launching Product Internationally

• Quality of launch
 High service quality
 On-time shipment
 Appropriate product availability
 Quality sales force and support
 Quality and amount of promotion
International Launch Decisions

• Timing of launch
• Consumers and countries
• Marketing mix decisions
 Product mix
 Place
 Price
 Promotion
Degree of Product/Service Newness

• New product to existing market

• New product to existing company
• New line
• New item in an existing product line
• Modification of an existing company product
• Innovation
Product Diffusion

• Product Factors
 Relative advantage compared to competitive
products
 Compatibility with the needs of the consumers
 Observability, or communicability to other
consumers
 Trialability – the ability of consumers to experience
the product with only minimal effort
• Country (Market) Factors – the
country may be a
 Lead country – wealthy industrialized
country where the product is adopted first
 Lag country – developing country that
adopts the product later
Adopters

• Innovators
 Risk takers who can afford to pay a higher
price during the introduction stage
 Primarily consumers in developed
countries
• Early adopters
 Consumers who purchase the product
early in the lifecycle stage and who tend to
be opinion leaders in their community
 Primarily consumers in developed
countries
• Early Maturity
 Consumers who enjoy status of being
among the first to purchase a popular
product
 Consumers are primarily from developed
countries
• Late Maturity
 Consumers who adopt popular products
when the risk associated with them is
minimal
 Consumers are from both developed and
developing countries
• laggard
 The last consumers to adopt a product;
they are risk averse and conservative in
their spending
 Consumers are primarily from developing
countries