MKTG 305 - Chapter 10

True or False: Food Culture Is About More Than Just Taste!

True

True or False: Global launches are easier conceived than implemented.

True

True or False: Global products not only help contain costs they make time to market faster.

True

True or False: Products that are mature in the home market may be at the introduction or growth stage in foreign markets.

True

True or False: There are relatively few opportunities for producing completely standardized products.

True

True or False: No single country/market dominates the world economy.

True (BUT the US did in the mid-20th century)

True or False: McDonalds tries to standardize its products as much as possible around the world.

True (But McDonalds has made several product adaptations in foreign markets)

True or False: Growth in international commerce has increased the benefits of international standards.

True BUT - Country-to-country standards still predominate - National organizations set standards for products and business practices - U.S. standards system is fragmented - Unification of Europe forced EU to adopt regional standards

Strategy of testing in smaller markets

Usually tested in one or two markets before global roll-out

Two types of national standards

Voluntary and Mandatory

Many countries have organizations that set these standards for products and business practices. If producers adhere to these standards, buyers are assured of the stated level of product quality.

Voluntary standards

A portion of the final design is standardized, but the design retains some flexibility so that the end product can be tailored to the needs of individual markets

global product development

When would manufacturing subsidiaries assume R&D functions?

if adaptation is required

Implements strategy only

implementers

A market whose level of development exceeds that of the markets in other countries

lead market

Development of standard modules that can easily be connected with other standard modules to increase the variety of products.

modularity

responsible for developing a new range of products to be used by the entire company, may be assigned to a highly competent subsidiary in a market of strategic importance

strategic leaders

Can provide valuable insights before a global launch

test marketing

Foreign subsidiaries rarely play active R&D role unless...

they have manufacturing responsibilities

MNCs are increasing R&D investment abroad why?

to obtain key market input

Product Warranties Issues to consider:

◦Actual product use ◦Local competition ◦Spillover effects to other markets

Product Warranties Standardization versus Adaptation:

◦Domestic warranty valid worldwide? ◦Tailoring warranties to countries/markets? (Ex: Costco experienced a competitive advantage in Taiwan when it happily accepted all returns, including produce—no questions asked)

ISO 9000

◦Established 1987 ◦Based on the British standard for quality assurance (BS5750) ◦Generic management system standard (Ensures organization can consistently deliver a product or service that satisfies the customer's requirements because firm delivers state-of-the-art management system)

Today average time lag between domestic and foreign introduction has diminished substantially due to

◦Increasing R&D costs ◦Quicker-moving competition

What are most new product ideas inspired by? Different and new...

◦Influences in buyer demand ◦Manufacturing processes ◦Scientific discoveries

Lines in overseas markets typically are NARROWER than in home market. Why?

◦Lack of sufficient market size ◦Niche target segments at home may be smaller or absent ◦Lack of market sophistication ◦New product introductions tend to begin at home BUT new product lines are sometimes added overseas (ex: men's sandal in Payless in the Middle East)

Incompatible national standards can hinder global companies. How?

◦May require product, packaging, and labeling adaptation ◦Decreases opportunities for economies of scale in production, increases production costs ◦Requires time and effort to research and monitor standards ◦May dissuade firms from entering markets

1947 creation of International Standards Organization in Geneva

◦Non-governmental organization ◦Federation of national standards bodies from 140+ countries ◦Each member = the firm "most representative of standardization in its country" ◦Standards set by ISO are highly specific

}Maintaining required service levels outside of home market

◦Selecting organization to provide service - Company-owned or outsourced? ◦Adequate inventory of spare parts ◦Viewing investments in service costs as investments in future sales volume

Why do companies provide after-sales service for their products?

◦Warranty credibility ◦Differentiate from competition ◦Decrease economic loss to business customers due to product malfunction or downtime

True or False: Lead markets are restricted to technological developments.

False

Benefits of Product Standardization

+Lower manufacturing costs +Lower input costs +Cost savings due to elimination of product adaptation efforts +Fast global roll-outs are possible +Product available for global customers +Enhance consumer perceptions of global brand

Benefits of Product Adaptation:

+Penetrate otherwise closed markets by adhering to government requirements +Able to use products in different climates and infrastructures +Better product performance in different use conditions +Decreased costs due to feature elimination +Increased sales due to better industry norms or cultural preferences

}Infrastructures vary and people may actually use the products differently in a market. Examples?

- Cadbury Dairy Milk shots designed for hot climates with no refrigeration - P&G had to adapt Cheer detergent because Japanese consumers washed their clothes in cold tap water, used leftover bath water, and liked to add fabric softeners

Types of Product Adaptation

- Mandatory: Necessary for product to be sold in a local market - Discretionary: Not necessary but may be beneficial

- MNCs that acquire a local competitor in developing country often overhaul production and marketing to integrate acquisitions into parent organization - Such investment costs can raise prices such that few developing-country consumers can afford the upgraded product

- Upgrading may be necessary and successfully done when targeting elite segments - But may be unwise if employing a mass-market strategy

What are some examples of cultural preferences?

- color - scent - taste - ound

Product Size and Dimensions:

-Adapting to material culture -Different physical characteristics of consumers -Metric versus non-metric -Cost and price considerations - Adapting to performance and quality expectations

Largest portion of firms' R&D expenditures are usually taken in home market because:

1.R&D integration into overall marketing strategy requires contact with key decision-makers, which is more frequent and intense in home market. 2.Centralized R&D maximizes results from scarce funds. 3.Prevent duplication of efforts across subsidiaries. 4.Company can leverage its relatively greater experience in home market.

Companies Interested in Doing Business Abroad Are Often at a Disadvantage. Customers often want EXTRA assurance that the supplier will back the product or service. What can we do?

Comprehensive warranty and service policies can be important marketing tools

Products designed in highly developed countries often exceed the performance needed in developing countries. Why?

Customers in developing countries may prefer simpler products - to save costs and ensure better service over the product's lifetime

Waterfall vs sprinker strategy

Global marketers must determine whether a waterfall strategy (staggering commercialization of new products across countries) is preferable to a sprinkler strategy (simultaneously introducing new products cross countries.) When choosing between the two strategies, global marketers should consider whether consumers across the globe will be inclined to adopt the new product at the same rate.

formula for developing global products:

Global products = core + derivatives

Seeking R&D from others:

Importing - Just buy it! Licensing - Teach me! Acquisitions - If you can't make it yourself, buy the know-how! JVs and Alliances - Let's cooperate!

Product standards regulated by law that are mandatory for market entry. Involve product quality and safety, hygiene, and environmental concerns. Meeting these standards can add costs to the product, but failing to comply may keep a firm out of an important markets.

Mandatory standards

The International Marketing Dilemma:

Product standardization? or Product Adaptation?

Packaging and Labeling Adaptations

Size, shape, materials ◦Product packaging norms ◦Existing standards ◦Economic development ◦Environmental concerns Color and text ◦Promotional strategy ◦Cultural meaning and implications ◦Government regulations ◦Language issues

Initially launched in home markets in industrialized countries, overseas markets lagged

Traditional product roll-out

Why must companies keep track of evolving lead markets?

as major sources for new product ideas and production techniques

}The shift from global to local development requires consideration of unique or special conditions for major markets at what point of product development?

at the very beginning

Physical realties of markets affect product decisions. Like what?

climate (Ex: 1. Air conditioners in Saudi Arabia must be able to operate under conditions that are hotter and dustier than those in most U.S. locations 2. Paint must also be adapted to various climatic conditions, such as heat, cold, moisture, and wind)

Importance of subjecting new product to actual use conditions when introducing it to a global market

concept tests

Adapt products in smaller but still important markets

contributors