GLOBAL PRODUCT POLICY AND STRATEGIES CHAPTER OVERVIEW Global Product Strategies Standardization Versus Customization Multinational Diffusion Developing New Products for Global Markets Truly Global Innovation Global Branding Strategies Managing Multinational Product Lines Product Piracy Country-of-Origin (COO) Effects Global Marketing of Services

Copyright (c) 2007 John Wiley & Sons, Inc. Introduction A cornerstone of a global marketing mix program is the set of product policy decisions that multinational companies (MNCs) constantly need to formulate. The range of product policy questions may include: What new products should be developed for what markets? What products should be added, removed, or modified for the product line in each of the countries in which the company operates? What brand names should be used? How should the product be packaged and serviced? Chapter 11 Copyright (c) 2007 John Wiley & Sons, Inc.

Introduction Examples of improper product policy decisions in global marketing: Ikea in the United States Proctor & Gamble in Australia U.S. Car Makers in Japan

1. Global Product Strategies Three global strategies to penetrate foreign markets: Extension strategy Adaptation strategy Invention strategy

1. Global Product Strategies Five strategic options for the global marketplace: Strategic Option 1: Product and Communication Extension -- Dual Extension Strategic Option 2: Product Extension -- Communications Adaptation Strategic Option 3: Product Adaptation -- Communications Extension Strategic Option 4: Product and Communications Adaptation -- Dual Adaptation Strategic Option 5: Product Invention

1. Global Product Strategies

2. Standardization versus Customization Five forces favoring a globalized product strategy: 1. Common customer needs 2. Global customers 3. Scale economies 4. Time to market 5. Regional market agreements

2. Standardization versus Customization Degree of Standardization Modular Approach Core-Product (Common Platform) Approach Balancing act between standardization and adaptation Overstandardization vs. overcustomization

3. Multinational Diffusion Examples: Microsoft’s Xbox videogame NTT DoCoMo’s iMode The Adoption of new products is driven by three types of factors: Individual Differences Personal Influences Product Characteristics 1. Relative advantage 2. Compatibility 3. Complexity 4. Trialability 5. Observability

3. Multinational Diffusion Other country characteristics used to predict new product penetration patterns include: Homogeneous population Lead countries Lag countries Cosmopolitanism Mobility Labor force profile, Developing vs. Developed countries

3. Multinational Diffusion Time-to-Takeoff - Most new products display a distinct tradeoff-average 6 years from launch - Varies a great deal across product categories, between countries, previous takeoff experience

4. Development of New Products for Global Markets Identifying New Product Ideas 4 C’s: Company Customers Competition Collaborators New Product Development (NPD) Process Screening (see Exhibit 11-3 in your text) Concept Testing Conjoint Analysis To Standardize or not to Standardize Chapter 11 Copyright (c) 2007 John Wiley & Sons, Inc.

4. Development of New Products for Global Markets Test Marketing Timing of Entry: Waterfall versus Sprinkler Strategies (see Exhibit 11-9) Waterfall Strategy: Global phased rollout where new products trickle down in a cascade-like manner Sprinkler Strategy: Simultaneous worldwide entry

4. Development of New Products for Global Markets

5. Truly Global Innovation Scores of companies have research centers spread across the world. Challenge is to establish a truly global innovation process that transcends local clusters, i.e., to become a metanational innovator. To harvest the benefits of metanational innovation: Prospecting- find valuable new pockets of knowledge around the world. Assessing- decide on an optimal footprint (number and dispersion of knowledge sources).

5. Truly Global Innovation Mobilizing- to harness the benefits of global innovation, companies must find ways to mobilize pockets of knowledge (e.g., technical blueprints, patents, equipment, market knowledge). The optimal strategy for mobilizing knowledge depends on the type (simple vs. complex) and nature (technical vs. market) of the knowledge involved.

5. Truly Global Innovation 4 possible strategic scenarios for mobilizing knowledge: Exchange information (arm’s length, digital transfer is sufficient). Move information about the market where the technology is. Move information about the technology to where the market knowledge is Move knowledge by rotating people and by temporary co-location

5. Truly Global Innovation

6. Global Branding Strategies Companies that brand their products have various options when they sell their goods in multiple countries. More and more companies see global (or at least regional) branding as a must.

Multinational product line management entails issues such as: What product assortment should the company launch when it first enters a new market? How should the firm expand its multinational product line over time? What product lines should be added or dropped? Global marketers also face the issue of global piracy. In global marketing, firms have to use a multitude of strategies to handle the negative country-of-origin stereotypes.

Global Brands (see Exhibit 12-1) A truly global brand is one that has a consistent identity with consumers across the world. The development costs for products launched under the global brand name can be spread over large volumes. A global brand has much more visibility than a local brand. The fact of being global adds to the image of a brand country.

Global brands are also able to leverage the country association for the product. The value of a global brand (brand equity) usually varies a great deal from country to country (three key value dimensions: quality signal, global myth, and social responsibility). Inter-country gaps in brand equity may be due to any following factors: History Competitive climate Marketing support Cultural receptivity to brands Product category penetration

A firm’s global brand is shaped by three types of factors: Local Branding Examples: Coca Cola owns numerous local and regional brands across the globe; Mecca Cola from France Global or Local Brands? Solo branding, hallmark branding, family branding, and extension branding. A firm’s global brand is shaped by three types of factors: Firm-based drivers Product-market drivers Market dynamics

Brand Name Changeover Strategies Fade-in/fade-out Co-branding Umbrella branding Transparent forewarning Summary axing

Improved quality of private-label products Private Label Branding (“Store Brands”): Factors explaining success of private labels: Improved quality of private-label products 2. Development of premium private-label brands A system where a single banner brand is used worldwide, often with a sub-brand name, for almost the entire product mix of the company. 3. Shift in balance of power between retailers and manufacturers 4. Expansion into new product categories 5. Internationalization of retail chains 6. Economic downturns

Umbrella (Corporate) Branding Umbrella branding facilitates brand-building efforts over a range of products. Umbrella branding makes it easier to add or drop new products. Protecting Brand Names Brands are vital assets to brand owners.

In the area of brand protection, the oldest treaty is the Paris Convention for the Protection of Intellectual Property. The difference in opinion held by industrialized and developing countries on intellectual property (see Exhibit 12-5) Many elements of the brand franchise may require protection.

7. Management of Multinational Product Lines The product assortment is usually described on two dimensions: the width and the length. Drivers affecting the composition of a firm’s international product line: Customer Preference Price Spectrum Competitive Climate Organizational Structure History

Categories of product lines: Core products Niche products Seasonal products Filler products

8. Product Piracy Any aspect of the product is vulnerable to piracy, including the brand name, the logo, the design, and the package (see Exhibit 12-8). Strategic Options Against Product Piracy: Lobbying Activities Legal Action Customs Product Policy Options Distribution Communication Options

9. Country-of-Origin (COO) Stereotypes Country-of-Origin (COO) Influences on Consumers For many products, the “made in” label matters a great deal to consumers. Key research findings of COO effects: COO effects are not stable Consumers prefer domestic products over imports Both the country of design and the country of manufacturing/assembly play a role in consumer attraction.

COO particularly influences the elderly, less educated, and politically conservative; consumer expertise also makes a difference. Cultural orientation play a role. Consumers are likely to use the origin of a product as a cue when they are unfamiliar with the brand name carried by the product. COO effects depend on the product category.

Strategies to Cope with COO Stereotypes: Product Policy Pricing Distribution Communication

10. Global Marketing of Services Challenges in Marketing Services Internationally: Protectionism Immediate Face to Face Contacts with Service Transactions Difficulties in Measuring Customer Satisfaction Overseas Opportunities in the Global Service Industries: Deregulation of Service Industries Increasing Demand for Premium Services Increased Value Consciousness

Global Service Marketing Strategies: Capitalize on Cultural Forces in the Host Market Standardize and Customize Give Information Technologies (IT) a Central Role Add Value by Differentiation Establish Global Service Networks