Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Product Adaptation Chapter 10

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Product Variables The Core Product –a product or services that is essentially the same as that of competitors. The Tangible Product –a product or service that is differentiated composition, origin, or tangible features from competing products. The Augmented Product –a product or service which is serviced after the sale and carries a warrantee from the producer, producing a continuing relationship with the seller.

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Standardization versus Adaptation The fundamental international product decision after the decision to internationalize. International market approach alternatives to adaptation. –Sell the product as it is internationally. –Modify product for different countries or regions. –Design new products for foreign markets. –Incorporate all differences into one product and introduce it globally.

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Standardization versus Adaptation FACTORS ENCOURAGING STANDARDIZATION Economies of scale in production Economies in product R&D Economies in marketing “Shrinking” of the world marketplace/economic integration Global competitions FACTORS ENCOURAGING ADAPTATION Differing use conditions Government and regulatory influences Differing consumer behavior patterns Local competition True to the marketing concept

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Strategic Adaptation to Foreign Markets Low High Industrial/ Technology Intensive Consumer Need for Adaptation Degree of Cultural Grounding Nature of Product Source: Adapted from W. Chan Kim and R. A. Mauborgne, “Cross-Cultural Strategies,” Journal of Business Strategy 7 (Spring 1987): 31; and John A. Quelch and Edward J. Hoff, “Customizing Global Marketing,” Harvard Business Review 64 (May-June 1986):

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Factors Affecting Adaptation Decision to Alter Domestic Product SOURCE: Adapted from V.Yorio, Adapting Products for Export (New York; Conference Board, 1983), 7. Reprinted with permission

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. The Market Environment Government Regulations –Political and social agendas often dictate regulatory requirements. Nontariff Barriers –Product standards, testing, subsidized local products. Customer Characteristics, Expectations, and Preferences –Physical size, local behaviors, tastes, attitudes, and traditions. –Consumption patterns, psychosocial characteristics, and general cultural criteria.

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. The Market Environment Economic Development –The stage of economic development affects the market size and demand characteristics. Backward innovation of the product may be required to meet local requirements. Competitive offerings –Monitoring competing local products is critical in adjusting the product for competitive advantage. Climate and geography –Local climatic conditions and terrain features can make products vulnerable to damage.

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Product Characteristics Product Constituents Branding Packaging Appearance Method of Operation or Usage Quality Service Country-of-Origin Effects

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Product Constituents and Branding Product ingredients must not violate local legal regulations and social or religious customs. Care must be taken that the brand in name, symbol, sign, or design does not offend the local customer. Trademarks are especially vulnerable to counterfeiters. Selecting the global brand name –Translation –Transliteration –Transparency –Transculture

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Packaging and Appearance Packaging serves three major functions: –Protection Improper handling and pilferage –Promotion Language and symbols –User convenience Packaging aesthetics- color and shape, overall size, and purchase quantity Adaptations in styling, color, size, and other appearance features play an importance role in how a consumer perceives a product.

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Method of Operation or Usage The product that is operable in in the domestic market may not be operable in the foreign market. Electrical voltages and connectors vary around the world. English and metric standards are not comparable. Software may have to be translated into the local language.

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Quality and Service Quality is essential to marketing products internationally, especially in markets where price is an important competitive factor. ISO compliance may be required by buyers. Servicing products in international markets requires producers to develop local repair staffs.

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Country-of-Origin Effects The origin of a product may have a strong effect on consumer perceptions and biases about foreign products. “Mad Cow” Swiss France

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Company Considerations Organizational capabilities? Is it worth it? Can we afford not to do it? Can a specific return-on-investment (ROI) be attained? Quality, price, and user perceptions? Warranties? Managerial talent?

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Product Counterfeiting Costs U.S. firms over $60 billion a year In 2001, losses to software piracy were more than 11 billion dollars. Counterfeiting is estimated at 2% to 5% of total world trade annually. The largest number of counterfeit goods come from: –China –Brazil –Taiwan –Korea –India How to avoid Software piracy informational site

Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved. Product Counterfeiting FIGHTING PRODUCT COUNTERFEITING –Secure valuable intellectual property rights patent applications registration of trademarks mask works –Act to enforce legislative action bilateral and multilateral negotiations joint private sector action individual company measures