Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter

11

Global Products

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Introduction

Global products are usually standardized

Global brand examples

Gillette razor blades Sony television sets Benetton sweaters

Regional products and brands are unique to a particular trading region

Hondas European car model P& Gs Ariel and Vizir in Europe Koreas ginseng tea makers covering the Asian market

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

The Pros and Cons of Standardization

The Advantages of Standardization

Cost Reduction
Improved Quality Enhanced Customer Preference

Global Customers
Global Segments

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

The Pros and Cons of Standardization

The Drawbacks of Standardization

Off-Target
Lack of Uniqueness Vulnerability to Trade Barriers

Strong Local Competitors

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Localization versus Adaptation

Basic Requirements

Localization

Generally speaking, localization avoids having potential customers reject the product out of hand

Compatibility Requirements

Localization represents the adjustments in the product specifications necessary for it to function in the foreign environment

Multisystem Compatibility

In many products today, localization is accomplished by building in compatibility with multiple systems at the outset

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Pitfalls of Global Standardization

Reasons for Product Standardization Failure

Insufficient Market Research

Similarities among customers are often assumed rather than proved

Overstandardization

Standardization should not encroach onto the positioning strategy

Poor Follow-Up

Follow up needs to be implemented if a campaign is to succeed

Narrow Vision

The vision at the headquarters should not be narrow and inflexible

Rigid Implementation

Some flexibility in implementation needs to be retained by local units

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Global Product Lines

Reasons for Product Line Differences

History

Different local products were well established before standardization was feasible

M&A (Mergers & Acquisitions)

Complete integration is difficult if the product lines are formed through M&A

Preferences

Differences in preferences give strategic rationale for product line customization

Capacity

Global product lines need large production capacity

Channels

Differences in channel structure make it difficult to support the same product lines
Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Developing New Global Products

Five Stages of the New Product Development Process

Idea Generation

Local subsidiaries are likely to have some ideas from their respective markets and new technology is a common source of new product ideas

Preliminary Screening

The most immediate evaluation of an idea is whether it is compatible with the company objectives, strategies, and resources.

Market Research

Focus Groups and Surveys

Focus groups offer the development team a chance to hear spontaneous reactions to a new concept and hear suggestions for improvement The survey addition is useful with global products and different country sites
Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Developing New Global Products

Five Stages (contd)

Concept Testing

A more formal approach to selecting product attributes is using techniques such as trade-off analysis or conjoint analysis

Target Product Research

By analyzing the leading brands and their attributes, companies are able to understand what appeals to their consumers

Sales Forecast

The appropriate sales forecast approach is based on the product life cycle

Test Marketing

Once the sales forecast looks promising, the new product is usually placed in production and test marketed (see Ch. 4)
Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Globalizing Successful New Products

New Product Success Factors

The most important factor determining new product success are the relative product advantage and technological synergy with a companys existing products and processes Five specific product-related factors

Global Diffusion

Relative advantage The leading cause of new product success Compatibility Can the product be used without any problem?

Complexity Is the new product easy to use?

Trialability Is it easy to try the new product? Observability So, how much faster does it connect to the Internet?
Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Globalizing Successful New Products

Global Diffusion

Three country-specific variables that influence innovative and imitative propensities

Cosmopolitanism

The degree to which a culture is open to outside influences

Geographic Mobility

Influences the propensity of imitation

The Proportion of Women in the Workforce

The higher this proportion, the less time there is for innovation

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Global Brand Management

Brand Equity

The net revenues the brand can be expected to generate over time

Global Brands

Three advantages to using global brands

Demand spillover Global customers Scale economies

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Global Brand Management

The Brand Portfolio

At any point in time, companies are likely to have

A portfolio of a few global brands and several local brands The brands are typically managed in a hierarchical fashion and can take several forms

In one, the most important global brands are at the top, followed by regional and local brands Alternatively, the top can be the corporate brand, possibly global, followed by subbranded model names

Brand sales tend to follow a cycle similar to the product life cycle

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Global Brand Management

Brand Globalization Potential

Questions about appropriateness or brand fit

Does the brand make sense outside of the source country? If the name suggests a country association, is the effect positive? Is the name available legally in many countries? Does the brand complement other global brands in the portfolio? Should the growth be limited to the creation of a regional brand?

Implementation

Issues in implementing the globalization strategy

Is the globalization product-based? Which local brands should be chosen for the changeover?
Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Global Brand Management

Changeover Tactics

Once the target brands have been identified, standard brand changeover tactics can be employed

The fade-in/fade-out gradual option is the most common

The global brand is linked to the local brand for a time, after which the local brand is dropped

A less gradual approach, sometimes called summary axing

Simply drops the local brand name and introduces the new brand

Using extensive forewarning is another approach to name changeover

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Defending Local Products

The typical reason for the success of local products is the customization involved

In industrial markets

Personal attention, fast delivery, and prompt after-sales service are all factors tending to favor local products

In consumer goods

The sameness of global products creates a potential for local products in special niche segments of the market

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Counterfeit Products

Counterfeit or knockoffs are fake products designed and branded to mislead the unwary customer into assuming that they are genuine

Counterfeit products pose an ominous problem in the global marketplace Firms make an effort to find the factories that turn out the counterfeits and they track the fakes in the stores

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.