Week 8:

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• Week 8
• MODIFYING PRODUCTS FOR OVERSEAS MARKETS

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Introduction

• A product may be successful in one country but it
  does not follow that it will be adopted elsewhere
• It is necessary to establish what the local needs
  of the country you are exporting to are
• As a rule it is easier to modify a product
  rather than change a consumers preference - a
  basic concept that is often ignored within
  international marketing

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Getting the balance right

• Effective global marketing is striking a balance
  between the pay off from extensively adapting
  products and brands to local market preferences

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The Product

• A Basic Definition
• A product is a collection of attributes
  physical, service or symbolic which yield
  satisfaction to the buyer or end-user.

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The Product

• Products the most important element of a
  companys marketing programme
• Product decisions
• Pricing promotion communication
  distribution
• Competitiveness the firm

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Marketing 101 lets remember! What is a product?

• Goods
• Services
• Ideas
• Tangible (physical characteristics e.g. weight,
  dimensions, materials used)
• Intangible (Status associated with product
  ownership, manufacturers service commitment,
  reputation)
• Products and brands the same thing?

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Brands

• A complex bundle of images experiences in the
  consumers mind
• Represent a promise quality certification?
• The marketplace experience (whats on offer?)
• Brand image
• Brand equity / added value

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Global Brands

• Can you name the top 10?

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The Global Brand

• The essence of the brand exists in the mind
• Intangible
• Distinctive packaging/logos to provide the visual
  representation of the brand

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The Global Brand

• Positioning - examples
• Nestle makes the very best
• Gillette the best a man can get
• BMW the ultimate driving machine
• Harley Davidson an American Legend
• Coke .?

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The Global Brand

• Benefits of global branding
• Economies of scale (single ad campaign)
• Product Visibility
• Familiarity
• Brand extensions stronger leverage/new
  categories and markets (diversify)
• Virgin, Richard Branson the master of this
  approach
• Brand built on reputation, quality, innovation
  and price
• Danger spread too thin?

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Global Brand Example Virgin

• The next phase of growth for the Virgin brand
  will be starting businesses in new countries and
  markets, rather than expanding the range of
  things that we do. By worldwide standards, Virgin
  is still a small group of companies, but the
  brand is a major multinational one. That gives us
  lots of opportunities to create a truly global
  presence, and to do some good, too.
• Richard Branson (2005)

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Global brand

• To be included in the GB category 20 sales
  from outside home country
• BUT- Q. is developing a global brand appropriate?
• Does it fit with the companies business strategy?
  
• Will it make money?
• Global branding team?

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Local vs. Global products Brands

• Coke, McDonalds, Singapore Airlines, Merc.Benz
  all transformed their local product and brands
  into global ones
• HOW?
• NEEDS identification
• REMEMBER Maslows hierarchy of needs?

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Maslows Hierarchy of Needs
Needing v.s Wanting?

• Self-Actualization
• Esteem Needs
• Social Needs
• Safety Needs
• Physiological Needs

Desires
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• Self-Actualization
• Self-actualization is the summit of Maslow's
  hierarchy of needs. It is the quest of reaching
  one's full potential as a person. Unlike lower
  level needs, this need is never fully satisfied
  as one grows psychologically there are always new
  opportunities to continue to grow.
  Self-actualized people tend to have needs such
  as
• Truth, Justice, Wisdom, Meaning
• Esteem Needs
• Once a person feels a sense of "belonging", the
  need to feel important arises. Esteem needs may
  be classified as internal or external. Internal
  esteem needs are those related to self-esteem
  such as self respect and achievement. External
  esteem needs are those such as social status and
  recognition. Some esteem needs are
• Self-respect, Achievement, Attention,
  Recognition, Reputation
• Social Needs
• Once a person has met the lower level
  physiological and safety needs, higher level
  needs awaken. The first level of higher level
  needs are social needs. Social needs are those
  related to interaction with others and may
  include
• Friendship, Belonging to a group, Giving and
  receiving love
• Safety Needs
• Once physiological needs are met, one's
  attention turns to safety and security in order
  to be free from the threat of physical and
  emotional harm. Such needs might be fulfilled by
• Living in a safe area, Job security, Financial
  reserves
• According to the Maslow hierarchy, if a person
  feels threatened, needs further up the pyramid
  will not receive attention until that need has
  been resolved.
• Physiological Needs
• Physiological needs are those required to
  sustain life, such as
• Water, Food, Sleep
• If these fundamental needs are not satisfied then
  one will surely be motivated to satisfy them.
  Higher needs such as social needs and esteem are
  not recognized until one satisfies the needs
  basic to existence.

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Product Development modification
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Product Modification

• Before a product is exported it may have
  to be modified for its intended market WHY?
• Competitive reasons brand name
• Legal reasons weights and measures
• Linguistic reasons bi-lingual market
• Cultural reasons colours, offensive?
• Fiscal reasons lower rate of duty
• Political reasons meet Govt regs
• Economic reasons cannot afford
  in current form

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International Product Diffusion and Adoption

• Diffusion the movement of new products
• Adoption of product Stages (awareness,
  interest, evaluation, trial and adoption)
• There are lots of new products but they are not
  all commercial successes
• Most innovations are incremental develop an
  already established product
• US research conducted in 2000 found that of the
  20,000 new products that appeared in US
  supermarkets in 1994 only 10 were still
  available 2 years later
• What can we learn from this?

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International Product Diffusion and Adoption
It is impractical for the IM to wait and see
which new products are entering the market in
order to identify a niche. Product life cycles
are now shorter, costs and competition have also
intensified Ideally in at the start of the
product life-cycle WHY? Styles (2000)
believes that the international manager can adopt
3 strategies with respect to new product
innovation Passive Pacemaking
Participative Co-operation
Portfolio Task Force
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REDEFINING THE BUSINESS to become global

• The factors to bear in mind
• Customer benefits
• Customer segments Technology
  
• Value chain

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Customer Benefits

• Consumers around the world have many different
  needs and perceive products as satisfying these
  needs in differing degrees.
• Different countries, different needs ALSO High or
  low involvement
• (Eg Africa, living standards, same product
  different benefits)

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Customer Segments

• Entering or expanding activities in overseas
  market may result in the firm targeting different
  segments to those targeted in the home market.
  (eg Domestos UK vs
  Germany)

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Technology

• E.G. The technologies that are used in Australia
  may be either too sophisticated or too
  unsophisticated for various overseas markets.
• Issues re overseas countries
• The appropriateness of different technologies
  will be a matter of levels of education,
  availability of infrastructure, the R D
  environment, the cultural attitude towards
  innovation and the relative cost of various
  factors of production.

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The Value Chain

• A definition
• Production is defined as value-creating
  activity. Added value is achieved by converting
  inputs of lesser worth into outputs of greater
  worth.
• (refer Fig 8.1, p.255)

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THE PRODUCT LIFE CYCLE

• A product in one stage of the product life cycle
  in the domestic country may be in a different
  stage of the product life cycle in an overseas
  country
• THE STAGES Introduction-growth-maturity-saturatio
  n-decline
• Onkavist and Shaw (1983) developed a 5 stage
  description of the international product life
  cycle
• Local innovation affluent countries can develop
  products easily for home market
• Overseas innovation look overseas because
  domestic saturation
• Maturity smaller firms get involved
• Worldwide imitation lots of orgs all doing the
  same thing!
• Reversal the innovating country is put out of
  business/smaller cheaper rivals

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LEVERAGING CAPABILITIES

• The extent to which the firm makes use of its
  the new capabilities it has acquired from
  exposure to an overseas market to gain
  competitive advantage
• Shared physical assets manufacturing
• Shared external relationships networks
• Shared information and expertise e.g.
  Pharmaceutical industry, trials testing

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Understanding Product Market Structure

• The structure of the market for a product varies
  from one overseas country to another, different
  ethnic groups within the country.
• The market is defined by
• Identifying the product market boundaries
• Beer in OZ!
• Product differentiation and branding
• Formula / colour / uses
• Dimensions of the product market
• Segments and cultural groups

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Identifying the Product Market Boundaries

• The boundaries of a market are likely to differ
  from country to country in terms of
• The products use
• What the product category includes
• The activities of competitors

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Product Differentiation and Branding

• The form in which the product is currently
  available in the overseas market is important.
• To think about
• should the product to be offered be
  differentiated from competitors offerings by
  changing the form in which it is presented or the
  benefits claimed for it, such as varying the size
  of the pack or the end-use application?

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Dimensions of the Product MarketQ. at what stage
is the market at?

• In some countries, the product is at a mature
  stage of the product life cycle, the potential is
  likely to be low and the market mainly a
  replacement one.
• In markets where the stage of the life cycle
  is one of growth, the potential is much larger,
  especially if these countries have large
  populations and high economic growth.

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Tailoring Products to suit Overseas Markets

• It may be possible to take a product made in
  Australia and modify it to enhance its appeal in
  other selected markets overseas.

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Modifying Products for Overseas Markets

• Product Standards and Regulations
• Measurement and calibration
• Trademarks
• Climate and Usage
• Language and symbolism
• Style, design and taste
• Technology issues and performance standards
• Warranty and servicing issues

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Developing a Product for an Overseas Market

• Robinson (1961), when considering the
  implications for developing products specifically
  for less developed countries listed the following
  factors
• Level of technical skills - product
  simplification?
• Level of labour costs - impact on manualisation?
• Level of literacy - instructions/simplification?
• Level of income - quality built in?
• Level of interest rates cost?
• Level of maintenance impact on nature guarantee
• Climate operating conditions/product
  packaging/product protection
• Isolation repairs/expense?
• Different standards recalibration and re-sizing

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Standardization Versus Adaptation

• A frequently debated issue in international
  marketing is
• whether the firm should modify and adapt
  products when offering them to overseas markets.
  
• The alternative is to standardise the product to
  all markets.

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Standardization Versus Adaptation

• Factors that encourage standardization
  include
• High cost of adaptation
• Nature of the product
• Convergence of taste between countries
• Economies of scale in manufacture
• Economies in research and development
• Economies in marketing
• Economies in integration between countries
• Competition
• Variation in consumer needs and tastes
• Differing conditions under which product is used
• Government influence
• Legal requirements

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Creating a Global Product

• An alternative to the usual approach of taking an
  Australian product and offering it overseas in a
  standard or an adoptive form, is to design a
  product which can be offered in overseas as well
  as domestic markets virtually simultaneously.

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Marketing Industrial Products Overseas

• Unique features of industrial products
• Industrial products are usually purchased for
  re-use in creating other products
• Demand for industrial products is usually derived
  from consumer demand for a particular product
• Demand for industrial products is often
  reciprocal
• Demand for industrial goods often rests in the
  hands of only a few buyers

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Industrial Buying Decisions

• Industrial buying decision process characterized
  by Bonoma (1982)
• Initiator
• Decider
• Influencer
• Gatekeeper
• User
• Purchaser

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Industrial Buying Situations

• Buying decision making is likely to be influenced
  by the nature of the purchase.
• There are 3 categories of buying situations
• Extensive problem solving (the buying situation
  is unique/unusual i.e. expensive item)
• Limited problem solving (industrial products, imp
  to buyer technical, financial reasons,
  experience in this area)
• Routinised purchasing behavior (products
  purchased on an ongoing basis, supplier
  preferences well established)

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Features of the International Market for
Industrial Products

• Different characteristics of buyers
• Overseas market potential
• Targeting decision makers
• Government control
• Service support
• Direct contact between buyer and seller
• Terms of sale

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Branding and Packaging for Overseas Markets

• Branding and packaging
• are two important issues related to the
  international marketing of products that need to
  be taken into account when modifying products for
  overseas markets.

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Modification of Brand Names

• Czinkota and Robinson (1998)
• Suggest that the appropriateness of a brand name
  in an overseas market should take into account
• Translation
• Transliteration
• Transparency
• Transculture

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Brand name strategies

• Brand names are a critical element in making an
  impact on the customer. Important issues are
• Brand names are an important product marketing
  component in IM
• One global brand name? Regional brand names or a
  different brand name per country?
• Language differences between domestic and
  international destination country influence
  branding decision

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Packaging and Labeling

• The main function of packaging
• Protection
• Promotion
• Convenience

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Packaging for Global Markets

• Environmental Differences May Require Special
  Package Adaptations
• Climate
• Promotional Role of Package
• Distribution Handling Requirements
• Customs and Traditions
• Environmental (Green) Consequences of the Package
  Itself

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SEE CHAPTER 8 for more information