Chapter 15. Product Decisions for International Markets

What are the marketing objectives of using the product life cycle?

1. Create product awareness and trial 2. Maximize market share and profit while defending market share 3. Reduce expenditure and milk the brand

What are the different promotional/product strategies available to an international marketer?

1. Domestic-market-extension orientation Selling the same product that is sold in thehome country market internationally. Eg. cleaners and washing powders, Big Mac, Coca-Cola 2. Multidomestic-market orientation Developing different products to fit the uniqueness of each country market. The most common strategy 3. Global orientation Seeking commonalties in needs among sets of country markets and responding with a global product, eg. iPhone, Louis Vuitton, Chanel. An important issue in choosing which alternative to use is whether or not a company is starting from scratch (i.e., no existing products to market abroad), or whether it has products already established in various country markets. For a company starting fresh, the prudent alternative is to develop a global product. If the company has several products that have evolved over time in various foreign markets, then the task is one of repositioning the existing products into a global product.

What are the three major components of a product?

1. Its core - Product platform - Design features - Functional features 2. The packaging component - Trade mark - Brand name - Price - Quality - Package - Styling 3. The support services component - Repair and maintenance - Installation - Instructions - Other related services - Deliveries - Warranty - Spare parts The importance of each component, as well as the perceived component attributes are functions of culture. What may be desirable in one culture may be unimportant in another. A product is, in a large part, a cultural phenomenon; that is, culture determines the individual's perception of what a product is and what satisfaction that product provides. Therefore, in developing products for international markets, adaptation of that bundle of utilities or satisfaction received may be necessary to bring the product in line with the culture's needs. Such adaptation may require changes of any one or all of the product components as defined above.

What influences the market resistance towards a new product?

1. The relative advantage over the old product 2. Compatibility with acceptable norms and values 3. Complexity, trialability, and observability

What is the issue of global vs adapted products for the international marketer?

A recurring debate exists relative to product planning and focuses on the question of standardized products marketed worldwide versus differentiated products adapted or even redesigned for each culturally unique market. Those with a strong production and unit cost orientation advocate standardization and others, perhaps more culturally sensitive, propose the policy of a different product for each market. The issue cannot be resolved with a simple either/or decision. Cost revenue analyses need to be done and decisions made in the hard, cold lights of profitability. There is no question that significant cost savings can be realized from having standardized products, packages, brand names, and promotional messages but this makes sense only if there is adequate demand for the standardized products: costs must be balanced with demand. On the other hand, if the cost of an individualized product when evaluated against price/demand characteristics within a market exceeds potential profit, then it is ridiculous not to consider other alternatives including not marketing the product at all. To differentiate for the sake of differentiation is no solution, and realistic business practice requires a company to strive for uniformity in its marketing mix whenever and wherever possible. Economies of production, better planning, more effective control, and better use of creative managerial personnel are all advantages of standardization.

What is a discontinuous innovation?

An innovation that creates new consumption patterns and involves the creation of products that were previously completely unknown.

What is the difference between a product and a brand?

Brand and product are two different terms, which are commonly encountered in marketing. These two differ in the sense that a product is created by the company while a brand is built by the people using them i.e. customers. Moreover, the former can be easily duplicated, whereas a the latter is unique, and it cannot be copied. A product passes through a life cycle, but a brand is timeless.

How can different stages of the life cycle of a product influence the standardisation/adaptation decision?

Introduction. This stage is characterized by a low growth rate of sales as the product is newly launched and consumers may not know much about it. Traditionally, a company usually incurs losses rather than profits during this phase. Especially if the product is new on the market, users may not be aware of its true potential, necessitating widespread information and advertising campaigns through various media. Product: Offer a basic product Price: Use cost-plus Place: Build selective distribution Advertising: Build product awareness among early adopters and dealers Promotion: Use heavy sales promotion to entice trial Growth. The growth stage is the period during which the product eventually and increasingly gains acceptance among consumers, the industry, and the wider general public. During this stage, the product or the innovation becomes accepted in the market, and as a result sales and revenues start to increase. Profits begin to be generated, although the break even point is likely to remain unbreached for a significant time-even until the next stage, depending on the cost and revenue structures. Product: Offer product extensions, service, warranty Price: Price to penetrate market Place: Build intensive distribution Advertising: Build awareness and interest in the mass market Promotion: Reduce to take advantage of heavy consumer demand Maturity. During this stage, sales growth has started to slow down, and the product has already reached widespread acceptance in the market, in relative terms. Ultimately, during this stage, sales will peak. The company will want to prolong this phase so as to avoid decline, and this desire leads to new innovation and features in order to continue to compete with the competition which, by now, has become very established, advanced and fierce. Competitors ' products will begin to cut deeply into the company's market position and market share. However, despite this, sales continue to grow in the early part of the maturity phase. But, these sales will peak and ultimately decline, as the graph shows. Product: Diversify brands and models Price: Price to match or beat competitors Place: Build more intensive distribution Advertising: Stress brand differences and benefits Promotion: Increase to encourage brand switching Decline. Profitability will fall, eventually to the point where it is no longer profitable to produce, and production will stop. As a number of companies start to dominate the market, it becomes increasingly difficult for the company in question to maintain its level of sales. Consumer tastes also change, as do new technologies which may make the product become ultimately obsolete (as in the case of CDs and DVDs, and now Blu-Ray). Product: Phase out weak items Price: Cut price Place: Go selective: phase out unprofitable outlets Advertising: Reduce to level needed to retain hardcore loyals Promotion: Reduce to minimal level

What are the steps to deciding on a product line when going international?

Product line decisions, branding decisions, degree of adaptation, product life cycle, distribution systems and customer service.

How are products adapted physically and culturally in foreign markets?

Products can be adapted to a new culture in a variety of ways ranging from simple package changes to total redesign in the physical product. Some need for change becomes obvious with relatively little analysis. For example, a cursory analysis of a country will uncover the need to require electrical goods if it uses a different voltage system, or to indicate product simplification when the local level of technologies is not high, or the need for a color change if the present color violates local taboos. These changes can be spotted by looking at product usage patterns, the economy etc.

What is a customized product?

Products that are modified for each customer.

What is a differentiated product?

Refers to products that are considered different and thus better from other similar products.

What is a global product?

Refers to standardised products that can be sold all over the world without adaptation.

What is standardization?

When the same products are produced for many markets.