1. Product and service adaptation

2. Marketing Policies Same products sold everywhere the same way = (full) standardization = global strategy Adapt to local conditions = adaptation = multidomestic strategy

3. Benefits from Standardization lower costs improved quality enhanced customer preference increased competitive leverage global customers and suppliers

4. Lower Costs Experience curve Bargaining power Economies of scale

5. Economies of Scale in manufacturing in research and development in advertising –scale economies in advertising –media overlaps –pan-European events

6. Price/fit Tradeoff Customers are willing to sacrifice perfect fit for price (Levitt 1983) –Italian washing machines –Japanese cars in US –but Whirlpool and Maytag in Europe

7. Improved quality Enhanced customer preference –better service to global customers –greater recognition, authority, and credibility of the product/brand increasingly the case as customers travel Increased competitive leverage –prevents imitation –Greater bargaining power –Global customers and suppliers

8. Benefits of standardization are reduced by… Transportation costs Government barriers Currency risk Management costs Intercountry taste differences

9. Benefits of standardization are reduced by government barriers Tax discrimination Foreign exchange risk Trade barriers Standards and regulations

10. Benefits of standardization are reduced by management costs Increased coordination costs Information loss Loss of local motivation

11. Benefits of standardization are reduced by differences in consumer tastes Consumer taste homogeneity –Uniformity (same consumption patterns across countries) –Vs. Interpenetration (more common segments across countries)

12. Interpenetration

13. Uniformity? Emergence of global products But still major differences across Europe for some products –cigarettes –Alcohol

14. Annual per-capita cigarette consumption 2004 (000)

15. Adult alcohol intake per year (litres of pure alcohol)

16. Consumption of beer outside the home (% of total)

17. Drinking occasions for beer

18. Convergence? Yes for some products, no for others

19. Annual per-capita cigarette consumption Greece2,7193,131 Bulgaria2,3712,693 Japan2,6682,354 Spain2,0192,274 South Korea2,1502,209 Czech Republic1,8902,068 Russia1,1772,058 China1,3971,446 Germany1,6461,373 U.S.1,8581,230 France1,556905 U.K.1,448866 Country 1994 2004 Percentage Change Note: Consumption defined by duty-paid sales; actual consumption can be higher. Source: ERC Group

20. Evolution of Yogurt Consumption (Kg per capita)

21. Less adaptation needed for producer than for consumer goods, yet still differences (earth moving equipment) In general, any product/service transferred to a foreign country will be “reconstructed” locally “wine and cheese parties” melons in Japan

22. Whyat needs to be adapted? Marketing Adaptation Checklist 1. product/service 2. price 3. promotion 4. distribution

23. 1. Why Product/Service adaptation? Conditions of use (size, features) –population density, weather Preferences (taste, smell) Habits and values –social class, religion

24. Why product/service adaptation? (2) Economic conditions –stage of development –degree of competition Standards and regulations –admissible ingredients and techniques

25. 2. Price Adaptations product positioning (elasticity of demand) competition government regulation

26. Automobile Price Differences in the EU Source: European Commission

27. 3. Promotion adaptations Brand Advertising

28. Global or Local Brand? Cost of creating and maintaining global brand? Scale economies in global brand? Value association with global vs. local brand? Cultural and legal hindrances with global brand?

29. Some Brands do not Transfer Pschitt Sissy Toyota MR2 Chevrolet Nova American Motors Matador Mitsubishi Pajero Air Mymorning Water Creap Clairol Mist Stick

30. Brands of 6 MNCs in 67 countries

31. European-based firms Subsidiaries of U.S.-based firms All firms European Firms Are Integrating Across the Continent Key:7…Agree strongly … 1…Disagree strongly 3.5 2.82.6 1.9 3.4 2.6

32. Country of Origin Effects Apparent country of origin affects reputation Germany = Robust France = Luxury Italy = Design Finland = Pure

33. Advertising Response to advertising Response to message Media availability Advertising restrictions

34. Response to Message Silent language –color –numbers –symbols Spoken language –perceptual gaps –encoding/decoding gaps

35. EncoderSender Culture Choice of words Choice of symbols Meaning Seller’s field of experience Seller in country A Decoder Receiver Culture Choice of words Choice of symbols Understanding Buyer in country B Message Medium

37. Share of advertising revenue by support, 2003

38. Distribution Channels –availability –cost –regulations

39. Store Density per 1000 inhabitants 2,21 5,30 5,61 6,49 8,94 11,11 11,48 RussiaUKFranceBrazilUSIndiaChina

40. Top 5 Chains Share in Supermarkets – 2004 2% 9% 41,40% 45% 62% 74,30% 88% India China Russia Brazil US France UK Canada

41. Vending machines Japan: 1 for every 25 persons US: 1 for every 40 persons China: 1 for every 26,000 people

42. Three points to keep in mind Price-Fit tradeoff Core vs. peripheral standardization Selective standardization

43. 1. Price/fit Tradeoff Customers are willing to sacrifice perfect fit for price (Levitt 1983) –Italian washing machines –Japanese cars in US –but Whirlpool and Maytag in Europe

44. 2. Product/service Core and Peripheral Elements McDonald’s –core: clean, family, fast –non-core: menus

45. McDonald’s Menu Adaptation Norway: McLaks, grilled salmon sandwich with dill sauce on a whole-grain bun Canada: Cheese vegetable, pepperoni and deluxe pizza France: Wine Uruguay: McHuevo, a hamburger with a poached egg on top, and McQueso, a toasted cheese sandwich Netherlands: Groenteburger, vegetable burger Germany: Frankfurters, tortellini and a cold four-course meal Greece and Italy: Salad bar Thailand: Samurai Pork Burger, marinated with teriyaki sauce, and palm-fruit sundae Singapore: Vanilla ice cream swirled with chocolate and strawberry and spiced for Singaporean tastes Philipines: McSpaghetti, a sweet tomato and meat sauce with frankfurter bits Japan: Chicken Tatsuta sandwich, fried chicken spiced with soy sauce and ginger served with cabbage and mustard mayonaise

46. 3. Optimal standardization almost never full standardization and varies... across products across elements of the marketing mix across areas across time

47. Standardization of the Marketing mix 1 2 3 4 5 No standardization Standardized concept and execution

48. Core Standardization

49. Conclusion One must search for the proper balance between full adaptation and full standardization Decision must be on a case-by-case basis Implementation difficulties should be taken into account