chapter 10 global product strategies. copyright © houghton mifflin company. all rights...

Chapter 10

Global Product Strategies

McDonalds Products Around the World

• McDonalds tries to standardize its products as much as possible around the world– Basic meal of sandwich, fries, drink in

most markets– Fries are exactly the same in each

market!

McDonalds’ Product Adaptations

• CanadaCheese, vegetable, pepperoni and deluxe pizza

• UruguayMcHuevo - A hamburger with a poached egg on top

• Thailand Samurai Pork burger - A sandwich marinated with teriyaki sauce

• Philippines McSpaghetti - Pasta in a sauce with frankfurter bits

• New Zealand Kiwiburger - A hamburger with a fried egg and slice of beet

• JapanChicken Tatsuta - A fried chicken sandwich spiced

with soy sauce and ginger • Germany

Frankfurters, beer and a

cold four-course meal

Product

Standardization

Product

Adaptationversus.

The International Marketing Dilemma

Benefits of Product Standardization

+Lower costs+ Lower R&D costs+ Lower ingredient / input costs+ Fewer setup / changeover costs+ Lower handling costs+ Lower distribution costs

+Faster global roll-outs are possible+Stronger (?) brand equity+“Global Brand”

Types of Product Adaptation

• Mandatory – Necessary for product to be sold in a local

market

• Discretionary– Not necessary but may be beneficial

PRESSURES FOR PRODUCT ADAPTATIONCompetitive offerings

Climate, geography, and infrastructureGovernment regulations and international standards

Customer expectations, preferences, and buyer behavior

Benefits of Product Adaptation

+Penetrate otherwise closed markets+“Stress-Testing” your product for global

expansion+Better product performance in different

use conditions+Lower costs by using local inputs+Lower costs due to feature elimination

Climatic, Infrastructure and Use

• Physical realties of markets affect product decisions– Air conditioners in Saudi Arabia must be able to

operate under conditions that are hotter and dustier than those in most U.S. locations

• People may actually use the products differently in a market– P&G had to adapt Cheer detergent because

Japanese consumers washed their clothes in cold tap water, used leftover bath water, and liked to add fabric softeners

Performance and Quality Standards – Developing and Developed Countries

• Products designed in highly developed countries often exceed the performance standards of developing countries– Customers in developing countries may prefer

simpler products – to save money and ensure better performance over the product’s life.

• Companies from developing countries selling to developed-country markets may have to improve the performance of their products to meet these countries’ higher standards of quality.

Be careful when upgrading!!!

• MNCs often acquire local competitor in developing country – overhaul production and marketing capability to

mirror that of the parent organization– Company then raises prices, making products

unaffordable to developing market– Market size is extremely limited!

Global Standards

• Growth in international commerce has increased the benefits of international standards

The benefits of international

standards are obvious when you travel….

Ever tried to use your U.S, hairdryer in another country?

Global Standards (cont’d)

• Country-to-country standards still predominate– National organizations set standards for

products and business practices• E.g., British Standards Institute,

Canadian Standards Association– U.S. standards system is fragmented• 450 different standard-setting groups

– Unification of Europe forced EU to adopt regional standards

Global Standards

• Incompatible national standards can hinder global companies– May require expensive product, packaging, and

labeling adaptation– Fewer economies of scale opportunities– Time and effort required to research and monitor

standards– May dissuade firms from entering markets

• 1947 creation of International Standards Organization in Geneva– Non-governmental organization– Federation of national standards bodies from

140+ countries– Consists of member firms “most representative of

standardization in their home countries”– Standards set by ISO are highly specific

• Examples: film speed codes, formats for telephone and banking cards, etc.

• ISO 9000– Established 1987– Based on the British standard for quality

assurance (BS5750)– Generic management system standard• Ensures organization can consistently deliver

a product or service that satisfies the customer’s requirements via a state-of-the-art management system.

Cultural Preferences

• Color– Red and white have happy

associations in Japan; green associated with jungle and illness in Malaysia

• Scent – Strawberry shampoo failed

in China where consumers shun non-edible items that smell like food

• Sounds– Forced to eliminate

“ping” sound from word processing in Japan because workers were mortified when their mistakes were made public.

• Taste– What tastes good varies

from country to country (saltiness, sourness, sweetness, etc.)

Food Culture Is About More Than Just Taste!

• Why did Frito Lay potato chips fail to sell in China in the summertime?– Chinese consumers associated fried foods with

yang – which according to Chinese traditional medicine generates body heat and should be avoided in hot weather

• The solution?– Frito Lay introduced a “cool lemon” chip

packaged in pastel shades – it became the company’s best selling item in China!

Product Size and Dimensions

• Different physical surroundings and available space

• Different physical characteristics of consumers

• Consumer income levels – more affluent consumers can buy in bulk

Customers often want EXTRA assurance that the supplier will back the product or service

Comprehensive warranty and

service policies can be

important marketing tools!

Companies Interested in Doing Business Abroad Are Often at a Disadvantage…

Global Product Service (cont’d)

• Maintaining required service levels abroad– Selecting organization to provide service• Company-owned or outsourced?

– Adequate inventory of spare parts– Viewing investments in service costs as

investments in future volume

Global Product Line Management

Not all products are suitable for all markets!– Coca-Cola’s traditional brands =

90% global sales 33% Japan subsidiary sales

25 years of product innovation in Japanese subsidiary!

• Lines in overseas markets typically are NARROWER than in home market– Lack of sufficient market size– Earlier life cycle stages– Niche target segments at home may be

smaller or absent– Lack of market sophistication– New product introductions tend to begin at

home and follow abroad

Global Product Line Management (cont’d)

Foreign Subsidiary Input in R&D

• Foreign subsidiaries can play active R&D roles – especially in adaptive environments - but oftentimes do not

• Sales subsidiaries may provide ideas about product adaptation

• MNCs are increasing R&D investment abroad to obtain key market input – New ideas come from foreign cultures and

marketers – but where can they be re-applied?

chapter 10 global product strategies. copyright © houghton mifflin company. all rights...

beneficial slide

global brand slide

country standards

quality standards

course meal slide

standards system

regional standards

monitor standards

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