1. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Product Adaptation

2. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Variables A product or service is a complex combination of tangible and intangible elements that distinguishes it from other entities in the marketplace.

3. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 10.1 - Elements of a Product

4. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Variables Standardization versus adaptation –Basic alternatives for approaching international markets are: Modify the product for different countries or regions. Incorporate all differences into one flexible product design and introduce it globally.

5. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 10.2 - Standardization versus Adaptation Factors encouraging standardization – –Economies in product R&D – –“Shrinking” of the world marketplace/economic integration – Factors encouraging adaptation – –Government and regulatory influences – –Local competition –

6. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 10.3 - 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): 92-101.

7. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Variables Factors affecting adaptation –Firms consider three factors in deciding the form in which the product is to be marketed abroad:

8. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 10.4 - Factors Affecting Product Adaptation

9. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Market Environment Government regulations –Political agendas often dictate government regulatory requirements. – –Economic integration reduces discretionary governmental regulations to some extent. Nontariff barriers –

10. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Market Environment Customer characteristics, expectations, and preferences – –Consumption patterns, psychosocial characteristics, and general cultural criteria determine cultural and psychological specificity in relation to products and services. –Product positioning -

11. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Market Environment Economic development –Affects demand characteristics and helps determine potentials for selling certain kinds of products and services. –

12. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Market Environment Competitive offerings - Climate and geography -

13. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Characteristics The inherent features of the product offering, whether actual or perceived. – –Branding – –Appearance – –Quality – –Country-of-origin effects

14. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Characteristics Product constituents and content – Appearance –

15. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Characteristics Branding –Brand - –Allows further standardization of other marketing elements such as promotional items. –Trademark - –Brand loyalty translates into profits even though favored brands may not be superior by any tangible measure.

16. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Characteristics The following approach has been suggested for avoiding problems with brand names in foreign markets: – – – –

17. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Characteristics Packaging –Serves three major functions— –Varies as a function of transportation mode, transit conditions, and length of time in transit. –

18. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Characteristics Packaging –User convenience is a priority in packaging decisions; Containers must withstand logistics challenge, and yet must be easy for customers to open. – –Package size varies according to purchasing patterns and market conditions.

19. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Characteristics Method of operation or usage –The product that is operable in the domestic market may not be operable in the foreign market. – –Products that rely heavily on written or spoken language have to be adapted for better penetration of the market. –

20. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Characteristics Quality –Quality is essential to marketing products internationally, especially in markets where price is not the sole competitive factor. – –Marketers seek endorsement of their efforts from governmental or consumer organizations. –

21. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Characteristics Service – –Product warranties provide instructions to customers about what to do if the product fails within a specified period of time.

22. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Characteristics Country-of-Origin effects –The origin of a product may have a strong effect on consumer perceptions and biases about foreign products. –This effect reduces as:

23. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Company Considerations Product adaption depends on: –The firm’s ability to control costs, correctly estimate market potential, and secure profitability in the long term. – –The firm’s ability to maintain consistency in their marketing efforts. –

24. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Counterfeiting Counterfeit goods – The European Union estimates that trade in counterfeit goods accounts for 2 percent of total world trade. The largest number of counterfeit goods are sourced from:

25. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Counterfeiting Counterfeiting is a pervasive problem not only in terms of geographic reach but also the ability of counterfeiters to deliver products, and the market’s willingness to buy them. After securing valuable intellectual property rights, the international marketer must act to enforce these rights.

26. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 10.8: Measures to Combat Counterfeiting

27. © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Counterfeiting Few acts, agreements, and alliances that help combat counterfeiting include: – –The Trademark Counterfeiting Act of 1984 – –The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement – –Counterfeit Intelligence and Investigating Bureau