27f31product Strategies

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Amity Business School

Global Product Policy Decisions I: Developing New Products for

Global Markets

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Introduction• A cornerstone of a global marketing mix

program is the set of product policy decisions that multinational companies (MNCs) constantly need to formulate.

• The range of product policy questions may include: – What new products should be developed for

what markets?– What products should be added, removed,

or modified for the product line in each of the countries in which the company operates?

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Introduction (contd.)

– What brand names should be used?– How should the product be packaged and

serviced?• Examples of improper product policy decisions

in global marketing:– Ikea in the United States– Proctor & Gamble in Australia– U.S. Car Makers in Japan– Ford in Brazil

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1. Global Product Strategies

• Three global strategies to penetrate foreign markets:– Extension strategy– Adaptation strategy– Invention strategy

• Five strategic options for the global marketplace:• Strategic Option 1: Product and Communication

Extension -- Dual Extension• Strategic Option 2: Product Extension --

Communications Adaptation

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1. Global Product Strategies (contd.)

• Strategic Option 3: Product Adaptation -- Communications Extension

• Strategic Option 4: Product and Communications Adaptation -- Dual Adaptation

• Strategic Option 5: Product Invention

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2. Standardization Versus Customization

• Five forces favoring a globalized product strategy:

1. Common customer needs

2. Global customers

3. Scale economies

4. Time to market

5. Regional market agreements• Degree of Standardization

– Modular Approach

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2. Standardization versus Customization (contd. )

– Core-Product (Common Platform) Approach• Balancing act between standardization and

adaptation• Overstandardization vs. overcustomization

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3. Multinational Diffusion

• Examples: – Microsoft’s Xbox videogame– NTT DoCoMo’s iMode

• The Adoption of new products is driven by three types of factors:– Individual Differences– Personal Influences– Product Characteristics

1. Relative advantage2. Compatibility

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3. Multinational Diffusion (contd.)

3. Complexity

4. Trialability

5. Observability• Other country characteristics used to predict

new product penetration patterns include:– Homogeneous population– Lead countries– Lag countries

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3. Multinational Diffusion (contd.)

– Cosmopolitanism– Mobility– Labor force profile– Individualism and national innovativeness

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4. Developing New Products for Global Markets

• Identifying New Product Ideas– 4 C’s:

• Company• Customers• Competition• Collaborators

• New Product Development (NPD) Process• Screening • Concept Testing

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4. Developing New Products for Global Markets (contd.)

– Conjoint Analysis– To Standardize or not to Standardize

• Test Marketing• Timing of Entry: Waterfall versus Sprinkler

Strategies– Waterfall Strategy: Global phased rollout

where new products trickle down in a cascade-like manner

– Sprinkler Strategy: Simultaneous worldwide entry

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5. Global NPD and Culture• Global linkages between the new product

development process and national cultures where cultural differences heavily influence the NPD process.

• Differences between European and North American new product development programs:– The NPD process among European firms is

much more formalized.– European Go/No Go standards tend to be far

stricter than American norms.

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5. Global NPD and Culture (contd.)

– NPD projects within European firms are more likely to have a well-defined project leader and an assigned team of players than projects run by North American companies; European teams are much more multifunctional than American teams.

– European companies punish project leaders less in case of failure, reward intrapreneurs more generously, and offer more seed money for pet projects.

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5. Global NPD and Culture (contd.)

• Japanese Companies and Product Churning: – Japanese companies strongly believe in

rushing new products to the markets with little or no market research and then gauge the market’s reaction.

– Japanese NPD managers constantly listen to the “voice of the customers.”

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Global Product Policy Decisions II: Marketing Products and

Services

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Introduction

• Companies that brand their products have various options when they sell their goods in multiple countries.

• More and more companies see global (or at least regional) branding as a must.

• Multinational product line management entails issues such as: – What product assortment should the company

launch when it first enters a new market?

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Introduction (contd.)

– How should the firm expand its multinational product line over time?

– What product lines should be added or dropped?

• Global marketers also face the issue of global piracy.

• In global marketing, firms have to use a multitude of strategies to handle the negative country-of-origin stereotypes.

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1. Global Branding Strategies

• Global Brands– A truly global brand is one that has a

consistent identity with consumers across the world.

– The development costs for products launched under the global brand name can be spread over large volumes.

– A global brand has much more visibility than a local brand.

– The fact of being global adds to the image of a brand country.

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1. Global Branding Strategies (contd.)

– Global brands are also able to leverage the country association for the product.

– The value of a global brand (brand equity) usually varies a great deal from country to country.

– Inter-country gaps in brand equity may be due to any following factors:• History• Competitive climate• Marketing support

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• Cultural receptivity to brands• Product category penetration

• Local Branding– Examples: Interbrew has a portfolio of 200 local

and regional brands across the globe; Mecca Cola from France

• Global or Local Brands?– Solo branding, hallmark branding, family branding,

and extension branding.

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– A firm’s global brand is shaped by three types of factors:• Firm-based drivers• Product-market drivers• Market dynamics

• Brand Name Changeover Strategies– Fade-in/fade-out

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– Co-branding– Umbrella branding– Transparent forewarningPrivate Label Branding (“Store Brands”): Factors

explaining success of private labels:

1. Improved quality of private-label products

2. Development of premium private-label brands

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– A system where a single banner brand is used worldwide, often with a sub-brand name, for almost the entire product mix of the company.

3. Shift in balance of power between retailers and manufacturers

4. Expansion into new product categories

5. Internationalization of retail chains

6. Economic downturns

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• Umbrella (Corporate) Branding– Umbrella branding facilitates brand-building

efforts over a range of products.– Umbrella branding makes it easier to add or

drop new products.• Protecting Brand Names

– Brands are vital assets to brand owners.

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– In the area of brand protection, the oldest treaty is the Paris Convention for the Protection of Intellectual Property.

– The difference in opinion held by industrialized and developing countries on intellectual property (see Exhibit 12-6)

– Many elements of the brand franchise may require protection.

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2. Managing Multinational Product Lines

• The product assortment is usually described on two dimensions: the width and the length.

• Drivers affecting the composition of a firm’s international product line:– Customer Preference– Price Spectrum– Competitive Climate– Organizational Structure– History

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2. Managing Multinational Product Lines (contd.)

• Categories of product lines:– Core products– Niche products– Seasonal products– Filler products

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3. Product Piracy• Any aspect of the product is vulnerable to

piracy, including the brand name, the logo, the design, and the package (see Exhibit 12-10).

• Strategic Options Against Product Piracy: – Lobbying Activities– Legal Action– Customs– Product Policy Options– Distribution– Communication Options

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4. Country-of-Origin Stereotypes

• Country-of-Origin (COO) Influences on Consumers– For many products, the “made in” label

matters a great deal to consumers.– Key research findings of COO effects:

• COO effects are not stable• Consumers prefer domestic products

over imports• Both the country of design and the

country of manufacturing/assembly play a role in consumer attraction.

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4. Country of Origin Stereotypes (contd.)

• COO particularly influences the elderly, less educated, and politically conservative; consumer expertise also makes a difference.

• Cultural orientation play a role.• Consumers are likely to use the origin of a

product as a cue when they are unfamiliar with the brand name carried by the product.

• COO effects depend on the product category.

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4. Country of Origin Stereotypes (contd.)

• Strategies to Cope with COO Stereotypes (see Exhibit 12-11):

• Product Policy– Pricing– Distribution– Communication

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5. Global Marketing of Services

• Challenges in Marketing Services Internationally:– Protectionism– Immediate Face-to-Face Contacts with

Service Transactions– Difficulties in Measuring Customer

Satisfaction Overseas• Opportunities in the Global Service Industries:

– Deregulation of Service Industries– Increasing Demand for Premium Services

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5. Global Marketing of Services (contd.)

– Increased Value Consciousness• Global Service Marketing Strategies:

– Capitalize on Cultural Forces in the Host Market

– Standardize and Customize– Give Information Technologies (IT) a

Central Role– Add Value by Differentiation– Establish Global Service Networks

27f31product Strategies

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