Product Strategy for

International Markets
Developing Products for
International Markets
1.Ethnocentric Approach
2.Polycentric Approach
3.Regiocentric Approach
4.Geocentric Approach
1.Ethnocentric Approach

• This Approach is based on the assumption

that consumer needs and market
conditions are more or less
homogeneous in international markets
as a result of globalization
• A firm markets its products developed for
the home market with little adaptation.
2.Polycentric Approach

• An international firm is aware of the fact

that each country market is
significantly different from the other
• It therefore adopts separate approaches for
different markets
• In a polycentric approach products are
developed separately for different
markets to suit local marketing
conditions.
3.Regeocentric Approach
4.
• Once an international firm establishes itself
in various markets the world over, it
attempts to consolidate its gains and
tries to ascertain product similarity
within market clusters
• Generally, such market clusters are based
on geographical and psychic proximity.
4.Geocentric Approach
5.
• Instead of extending the domestic products
into international markets, a firm tries
to identify similarities in consumption
patterns that can be targeted with a
standard product around the world.
Standardization vs Adaptation in
International Markets
• A firm operating in international markets
has to make a crucial decision, whether to
sell a uniform product across countries
or customize the product to meet different
market requirements
• Although no readymade solution can be
suggested for the decision to standardize
or adapt the product in international
markets, firms are required to carry out a
careful cost- benefit analysis before
arriving at a decision
• It has been observed that most firms
attempt to project a uniform product image
across global markets but often customize
the perceived value of the product to suit
customers in the target market
• While retaining its brand name, the firm
attempts to customize the augmented
product components such as features,
packaging, and labelling
• The support service components
including warrantees, guarantees,
delivery schedule, installation, and
payment terms are most often adapted to
suit the needs of the target market
• Generally, industrial products and services
are insensitive to cross-country preferences
and may be marketed as standardized
products, whereas foods, fads, fashions,
and styles are highly sensitive and customer
preferences for these items vary widely
among markets
• Such products often require a much higher
level of customization
• The leading fast food giant McDonald’s
serves a variety of customized products in
different markets to satisfy customers’ needs
and expectations
• It serves Hamburgers in the US, Chicken
tatsuta, teriyaki chicken, and teriyaki
McBurger in Japan, and has replaced its
traditional Big Mac with the Maharaja Mac in
India
• Despite its image of a family restaurant,
McDonald’s serves beer as well as
McCroissants in Germany
• In New Zealand, McDonald’s serves its
Kiwiburger with beetroot sauce and an
optional apricot pie
• In Singapore, it serves fries with chilli sauce
besides chicken rice
• It also uses vegetable oil in food
preparation in the Singapore market
• The Dutch veggie burger, made of spiced
potatoes, peas, carrots, and onions is served
in the Dutch market
• McPalta, made from avocados in Chile,
currey potato pie, shake fries, red bean
sundae in Hong Kong, and a variety of salads
featuring
Mediterranean flavours in Italy, reflect careful
product adaptation by McDonald’s to address
the varied needs of international customers.

1. Product Standardization
2. Product Adaptation
1.Product Standardization
• Product standardization refers to the
process of marketing a product in
overseas markets with little change
except for some cosmetic changes,
such as modified packaging and
lebelling
• The benefits associated with using
standardized products in international
markets include the following:
• Projecting a global product
image
• Catering to customers globally
• Cost savings in terms of
economies of scale in
production
• Designing & monitoring various
The major factors that favour product standardization for
international markets include:

1a. High Level of Technology Intensity

1b. Formidable Adaptation Costs
1c. Convergence of Customer Needs Worldwide
1d. The country of Origin Impact.
2.Product Adaptation

• Making changes in a product in response to

the needs of the target market is
termed product adaptation or
customization
• In view of local consumption requirements,
a product for the international markets
is often customized
• Adaptation of a product may vary from
major modification sin the product itself
to its packaging, logo, or brand name
• A thorough market research needs to be
conducted so as to identify the
customers’ requirements in the target
market
Customizing products for international markets offers
a number of benefits including the following:
• It enables a firm to tap markets, which
are not accessible due to mandatory
requirements
• It fulfils the needs and expectations of
customers in varied cultures and
environments
• It helps in gaining market share
• It increases sales leading to economies
of scale.
2.1 Mandatory Factors Influencing
Product Adaptation in International Markets

• Customizing products includes product

modifications that a firm has to carry out in
international markets not as a matter of choice
but as a compulsion
• The major factors influencing product
modification are as follows:
2.1a Government Regulations
2.1b Standards for Electric Current
2.1c Operating Systems
2.1d Measurement Systems
2.1e Packaging & labeling Regulations.
2.1a Government Regulations

• A firm may have to adapt its products in

various markets due to government
regulations
• Approval by the FDA (Food and Drug
Administration) is needed for marketing a
food or pharmaceutical product in the US
• The anti-smoking warnings on cigarette
packets in India and other developing
countries are very subtle
• While the regulations in Canada and
Brazil require the use of shock graphic
warnings on cigarette packs
• Singapore law requires that gruesome
pictures of death and decay on cigarette
packs greet smokers from 1 August 2004
• The European Union has unveiled a
library of 42n shocking pictures of
blackened lungs, rotten teeth, throat
tumours, and corpses in hospital morgues
to be used on cigarette packs from 2005
by each member country.
2.1b Standards for Electric Current

• The electrical current standards also

vary from country to country
• In India, electric current of 220 volts at a
frequency of 50Hz is used, while in the
US it is 110-120 volts at a frequency of
60Hz
• Therefore, electric equipment should be
modified for use in the target market
depending on the country’s electricity
standards.
2.1c Operating Systems

• Differences in operating systems affect

product design, which needs to be adapted
to suit the target market
• In India, China, the UK, Singapore,
Pakistan, UAE, and Tanzania televisions
operate on phone alternating lines (PAL)
while in the United States, Japan,
Philippines, and South Korea they work on
national television systems committee
(NTSC) standards
• However, in France, Vietnam, Russia,
and Mauritius televisions operate on
system electrique pour couleur avec
memoire (SECAM).
2.1d Measurement Systems

• Different systems of measurement also

affect product design
• India follows the metric system with
kilogram, metre, and litre as
measurement units
• However, the US follows the imperial
system of measurement using pound,
feet, and gallon
• Therefore, the packaging size, weights, and
measures of products need to be
modified depending upon the
measurement system followed in the
target market.
2.1e Packaging and Labeling Regulations

• Each country prescribes separate

regulations for packaging and labeling,
which have to be adhered to by an
international marketing firm
• Most countries in the Middle East
emphasize the use of Arabic
• Similar linguistic regulations are also
required in a number of European countries
• In India, food products generally bear
the duration for use of a product
• In most developed countries, the date of
expiry is also mentioned explicitly
• Even regulations requiring magazines to
display the date after which they should
not remain on bookstands are not
uncommon in a number of high-income
countries
• Due to the sensitive vegetarianism
issue, regulations in India require food
packages to exhibit a mark, i.e. veg. or
non-veg., so as to explicitly inform the
consumers about their contents.
 Voluntary Factors Influencing
Product Adaptation in International
Markets
A.Consumer Demographics
B.Culture
C.Local Customs and Traditions
D.Conditions of Use
E.Price
A. Consumer Demographics

• Mattel has adapted its Barbie dolls for

different countries
• The Egyptian Barbie wears a serpent
ornament with a stunning golden crown
inspired by the royalty of ancient Egypt
royalty
• Mattel has customized the Barbie doll for
India as well by cladding her in a
conventional saree and traditional jewellery.
B.Culture
•
• Culture factors affect products decisions for
international markets
• In India and other South Asian countries, ghee
clarified butter) is the most important milk
product and sells at a premium price
• Besides, ghee is used in the preparation of
variety of Indian sweets and other dishes
• However, in a majority of developed countries
toned milk is preferred and costs more than
full cream
• In India, the cow is considered to be the holiest
of all living creatures and eating beef is taboo
for the Hindus
• Islam prohibits the consumption of pork
• Therefore, in Islamic countries no pork is
sold.
C.Local Customs and Traditions

• Kellogg’s concept of having cornflakes with cold

milk did not succeed as people in India like
steaming hot food
• It was only after several years of operation in the
country that Kellogg’s realized its mistake and
took the corrective steps
• It took the company some time to understand the
strength and the deep-rooted traditions of
Indian food, which were difficult to replace
with cornflakes
• Later, as a part of a strategic decision, Kellogg’s
repositioned its cornflakes as complementary
to traditional breakfast rather than as a
replacement and strived for market creation in
the long term
• In India and other Asian countries, the
fairness of the skin is the most important
parameter for women’s beauty
• On the contrary, Africans are surprised at
fairness being considered the key parameter of
beauty
• In African markets, personal care products like
the brand Dark and Lovely are highly popular.
D.Conditions of Use

• Nokia has introduced its brand ‘Nokia 1100’ with

emphasis on its ‘Made for India’ features,
such as anti-slip grip, built-in torchlight, dust
resistant cover, and, of course, the price.
D.Price

• Low-income countries are highly sensitive to

price, which constitutes the most significant
determinant of a purchase decision
• The level of sophistication of buyers in adopting
new products and processes also varies
among countries
• On a seven point scale, buyers in developed
markets, such as Iceland (6.2%), the US
(6.1%), Hong Kong (6.1%), and the UK
(5.9%), actively seek the latest products,
technologies, and processes as compared to
buyers in Angola (2.7%), Mozambique
(2.8%), and Bangladesh (3.7%), who are slow
to adopt new products and processes
• Indian buyers are rated at 4.7% on the scale
of sophistication with respect to products and
processes
• The proton dot matrix printer, the least
expensive dot matrix printer in the world, from
TVS Electronics has revolutionalized the rural
retailing of IT hardware.
New Product Launch
I.‘Waterfall’ Approach
II.‘Sprinkler’ Approach
I. ‘Waterfall’ Approach

• ‘Waterfall’ approach is generally more

suitable for firms that have limited
resources and find it difficult to
manage multiple markets
simultaneously
• This strategy had long been followed in
international marketing
• It took a long time for a number of firms,
which are now global, to launch their
products in international markets
• For instance, it took almost 22 years for
McDonald’s to market outside the US
whereas Coca Cola took about 20
years and Marlboro about 35 years to
market overseas.
II.‘Sprinkler’ Approach

• Under this approach a product is

simultaneously launched in various
countries
• The sprinkler approach of simultaneous market
entry is preferred under the following
circumstances:
• If the competitive intensity of the
market is very high with strong
and fierce competitors
• If the life cycle of the product is
relatively short
• If the markets have high potential,
such as
• Large market size
• Rapid growth
• Cost of entry is relatively
International Product Strategy
A. International Competitive Posture Matrix
A.International Competitive Posture
Matrix

• The resources available with a firm for

expansion of international markets and
strengthening the product features are
limited
• Product strengthening is necessary to
create and maintain a product’s
competitive position in the markets
• At the same time, a firm has to peruse its
geographical expansion so as to grab
global opportunities and respond to
competitors in international markets
• Figure 1, depicts the international competitive
posture matrix developed by Gogel and
Larrenche (1989) and offers the following
strategic options:
1. Kings
2. Barons
3. Crusaders
4. Commoners
 Product strength

High Barons Kings

Low Commoners Crusaders

Low High

Geographical Coverage

(Figure 1)The International Competitive Posture Matrix

1. Kings
2.
• Firms with a strong product portfolio and wide
geographic coverage are termed kings
• These firms have strong products and expanded
geographic coverage
• For an effective global strategy, such firms are in
the best position
• Global firms like Coke, Pepsi, McDonald, Sony,
etc. fall under this category.
2. Barons
3.
• Such companies operate in a limited number of
countries
• Due to their high product strength, geographical
expansion becomes attractive
• Firms with weak product portfolios in foreign
markets tend to be their takeover targets
• Alternatively, they may enter into some sort of
strategic alliance with such firms in foreign
markets
• The Indian firm, Tata Motors with high product
strength in motor vehicles acquired the Rs
400 crore Daewoo Commercial Vehicle
Company in April 2004
• In August, 2004, Tata Steel acquired Netsteel
of Singapore for US $ 289.5 million, which not
only made Tata Steel the 10th largest steel
producer in the world in terms of capacity but
also gave it ready access to Netsteels’
customers in South East Asia, a region that
consumes a third of the world’s steel
production.
3. Crusaders
4.
• Despite a weak product base, these are the firms
that expand globally
• Such firms are highly prone to global competitors
• Outsourcing, acquisition, or international product
development is required by firms to
consolidate their product portfolio in
international markets.
4. Commoners
5.
• Firms with low product strength and limited
geographical coverage are termed
commoners
• Such firms sustain themselves in the domestic
market or to a limited extent in the overseas
markets due to protectionist regulations that
act as barriers to free markets competition
• Generally, their expansion in overseas markets is
opportunistic in nature
• These firms need to strengthen their portfolios
before expanding into international markets.