PRODUCTS AND SERVICES

1
PRODUCTS AND SERVICES

• Product functions across culture
• Standardization vs. customization adaptation as
  a compromise
• Communication vs. product adaptations
• Branding
• Services

2
Review issues

• Country economics
• Demand for quality vs. low cost
• Cost of labor
• Within country segment variations
• Local competitive situation
• Overall competition
• Competition for specific product lines
• Possible competition with partners in other
  countries

3
Product Need Satisfaction

• Products serve different purposes in different
  countries e.g.,
• Autos transportation in U.S. largely status
  symbol in Japan
• Toothpaste Cavity prevention in U.S. breath
  freshener in Ireland
• Tang convenience, low cost beverage in U.S.
  pineapple flavor as special treat in Brazil (real
  oranges are cheap and plentiful)

4
Determining Local Product Need Satisfaction

• Focus groups
• Projective research
• Reading local magazines
• Watching shoppers
• Interviews with sales people

5
Approaches to Product Introduction
?Standardization
? Adaptation
? Localization
? Customization
Not suitable for the Middle East!
6
Standardization--Advantages

• Benefits
• Economies of scale
• More resources available for development effort
• Better quality
• Enhanced customer preference (?)
• Realistic when all cultural needs cannot be met
• Global customers
• Global segments

7
Standardization--Disadvantages

• No strong position
• Off target
• Lack of uniqueness
• Unnecessary features
• Vulnerability to trade barriers
• Strong local competitors

8
Product Adaptations

• Mandatory
• legal requirements
• infrastructure
• physical requirements
• Discretionary
• local tastes
• fit into cultural environment

Localization
Adaptation
9
The Reality Continuum of Mandatoriness
Legal requirements
Completely mandatory
Completely discretionary
Manner of use
Electric Voltage Product labeling
Taste Optimization Style, color
Performance Optimization
Economic Suitability
Strong Cultural Conflict
10
Mandatory Adaptation Issues

• Choices in approach to mandatory
  conditions--examples
• Power drills with noise suppression filters
• Non-public ear piercing in Japan
• Distribution and promotion implications
• Arbitrary standards (e.g., TV, DVD players)
• Conflicting rules between countriesmay not be
  possible to make product legal in all

11
Standardization of Selected FeaturesThe Core
Product Approach
ADAPTED OR CUSTOMIZED FEATURE
CORE PRODUCT
ADAPTED OR CUSTOMIZED FEATURE
ADAPTED OR CUSTOMIZED FEATURE
Customized or adapted parts are added to a
skeleton or core product.
12
The Modular Approach
Different modules are made. A model for each
country incorporates the best suited model for
the country market.
MODULE USED IN SELECTED MARKETS
MARKET SPECIFIC MODEL A
MODULE USED IN SELECTED MARKETS
MODULE USED IN SELECTED MARKETS
MARKET SPECIFIC MODEL B
MODULE USED IN SELECTED MARKETS
MODULE USED IN SELECTED MARKETS
13
Hybrid of Core Product and Modules
CORE PRODUCT
ADAPTED OR CUSTOMIZED FEATURE
ADAPTED OR CUSTOMIZED FEATURE
MODULE USED IN SELECTED MARKETS
MODULE USED IN SELECTED MARKETS
MODULE USED IN SELECTED MARKETS
MODULE USED IN SELECTED MARKETS
14
Compatibility Issues

• Basic requirements
• E.g., voltage, infrastructure, plugs
• Compatibility
• Ability to be used within a local system (e.g.,
  frequencies, electronic protocols)
• Multisystem compatibility
• Product can be set to operate within several
  standards

15
Pitfalls of Global Standardization

• Insufficient market research
• Over-standardization
• Poor follow-up
• Narrow vision
• Rigid implementation

16
Physical Product vs. Communication Adaptations
17
Global Product Lines

• Historical decisions
• Very difficult to change position of a product
• Mergers and acquisitions
• Trademark ownership across markets
• Preferences
• For products
• For manufacturers of product types
• Capacity
• Product Life Cycle (PLC) and market growth
• Channels

18
Types of Innovations

• Continuous--same product, just small improvements
  over time--e.g., typical automobile/stereo system
  model changes
• Dynamically continuous--product form changed, but
  function and usage are roughly similar--e.g., jet
  aircraft, ball point pen, word processor
• Discontinuous--entirely new product usage
  approach changes (e.g., fax)

19
Developing New Global Products
IDEA GENERATION
CONCEPT RESEARCH
PRELIMINARY SCREENING
FOCUS GROUPS
CONCEPT TESTING
TEST MARKETING
SALES FORECAST
TARGET RESEARCH
20
Concept Research

• Focus groups Find out very broad background for
  further research
• Concept testing
• Prototypes
• Benefit package evaluations
• Target research
• Decision making strategies
• Shopping habits
• Beliefs/expectations

CONCEPT RESEARCH
FOCUS GROUPS
CONCEPT TESTING
TARGET RESEARCH
21
Branding Issues

• Demand spillover
• Media coverage
• Internet expusre
• Global customers
• Scale economies
• Importance of brands within country
• Country of origin
• Expertise
• Prestige

22
Local Market Branding Expectations

• Asian consumers typically have more concern with
  brands
• conglomerates have brands encompassing large
  range of goods (e.g., Mitsubishi food products)

23
The Brand Portfolio

• Brand extensions vs.
• Creation of new brands
• Brand ownership (brand tiers)
• Brand hierarchies

24
Brand Globalization Potential

• Word meanings
• Word appeal
• Pleasantness of associations
• Suitability of associations
• Pronounciability
• Pleasantness of sound
• Writing and pictoral apearance

• Trademark and name availability
• Access to desired name
• Protection against close imitations by others
  (e.g., Lindows)
• Complementarity with other product line items
• Growth plansregional vs. internatinal

25
Implementation

• Brand building (see promotion material)
• Fade-in/fade-out
• Endorsement branding
• For implementation
• For distinction of lower tier brand
• Double branding

26
Positioning a Brand

• Position relative to existing brands?
• Same
• Generally better
• Foreign image
• Lower price
• Special, unique benefit
• Appeal across segments?
• Usage occasion/need

27
Counterfeit Products

• Impact
• Loss of sales
• Loss of exclusivity/price pressure
• Possible lack of confidence in quality
• Warranty issues
• Approaches
• Legal
• Search and destroy

28
Physical Product vs. Communication Adaptations
29
Diffusion of Innovation

• Product characteristics influencing the speed of
  diffusion
• Relative advantage
• Compatibility
• Complexity
• Trialability
• Observability

• Societal influences on the speed of diffusion
• Cosmopolitanism
• Mobility
• women in labor force
• Modernity
• Homophily
• Physical distance

30
The International Life Cycle

• Market for older technology tends to exist in
  less developed countries
• Manufacturing of older generation
  technology--e.g., Pentium I computers
• Resale of capital equipmente.g., DC 8 aircraft,
  old three part canning machines
• Some countries tend to be more receptive to
  innovation than others

• Leap frogging
• Going directly from old technology to the very
  newest, skipping intermediate step (e.g.,
  wireless rather than wired technology)
• Shortening of product life cycles

31
Country of Origin Effects

• Perception of product
• quality (e.g., Japan, Germany)
• elegance and style (e.g., France, Italy)
• Historical associations
• Positioning strategies
• Emphasis on origin (e.g., French wine)
• De-emphasis/obfuscation of of country of origin
  (e.g., French beer, American products with French
  language labels)

32
Services

• Scope
• Characteristics
• Intangibility
• Heterogeneity
• Inseperability
• Perishability
• The Service-Tangible Product Continuum

33
Service Issues

• Country expectations
• Willingness to pay
• Quality
• Speed
• Competence of personnel
• Courtesy/deference
• Decision making authority of personnel

• Cost
• Availability of skilled personnel
• Control over personnel performance
• Overhead issues