V Evaluate the stages of the international

product life cycle identify locus of

operations and target markets at each stage
V Identify the different dimensions of the
international product mix with company
illustrations
V Examine the new product development
process and the activities involved at each
stage in international markets
V Examine degrees of product newness and
address international diffusion processes
V In
1966, Raymond Vernon published a
model that described internationalisation
patterns of organisations.
V —he IPLC international trade cycle
consists of three stages:
1. NEW PRODUC—
. MA—URING PRODUC—

. S—ANDARDISED PRODUC—

  
   

   
  

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V —he Product Introduction Stage
0 Products are developed and marketed in developed
countries
V —he Growth Stage
0 Increasing competition and rapid product adoption
0 Marketed primarily in developed countries
0 Product is exported to developing countries
V —he Decline Stage
0 Products are rapidly losing ground to new technologies and
product alternatives
0 Decrease in sales and profits
0 Product lifecycle is extended through sales to consumers in
developing countries
V



0 —otal number of brands

V

  
0 —otal number of product lines

V

 
0 —otal number of different offerings for a product category
V ¢

  
V 
   
 
0 Competition can appropriate the product/service idea
and deliver final product or service to the market more
swiftly than the initial developer
0 International consumers might not respond as anticipated
0 Local and/or home-country government might impose
restrictions on product testing
0 —echnological infrastructure of individual markets may be
substandard and unable to support the product
V  
    
     
0 Product development decisions are based on identifying the
needs, wants, and desires of consumers

V 
  
  


0 uocus on research and development
V Consumers
V Competitive Analyses
V Channel Members
V Employees
V —op Management
V Inventors
V Consultants
V University Research
V Consider:
0 uit with target consumers and the overall mission of the
organization
0 —he extent to which product offers unique benefits
0 —he extent to which target market is large and/or is
likely to grow
0 uit between new product requirements and resources,
skills, experience of the firm
V Develop detailed description of
product
V Ask consumers to evaluate and
indicate willingness to buy
V Use:
0 uocus Groups
0 Conjoint Analysis
V Estimate:
0 Project costs
0 Return on investment
0 Cash flow
0 uixed/variable costs
V Create prototypes
V Create brand identity and marketing mix

V Coordinate strategy across international

subsidiaries
V Involves testing new product performance
in a limited area of a national or regional
target market
V Provides estimate of product performance
in the respective country or region
V Expensive
V —ime consuming
V Open to competitive sabotage
V Simulated —est Marketing
0 —est marketing simulating purchase environment where
samples of target consumers are observed during the
decision-making process
V Controlled —est Marketing
0 —est marketing that involves offering a new product to a
group of stores and evaluating market reaction
V —est Marketing
0 uull-blown test marketing
0 uocus on cities appropriate for the test; involves selecting
distributors and the ancillary marketing infrastructure
0 Most costly
0 Leaves the company most exposed to competitive sabotage
V 4uality of launch
0 igh service quality
0 On-time shipment
0 Appropriate product availability
0 4uality sales force and support
0 4uality and amount of promotion
V —iming of launch
V Consumers and countries

V Marketing mix decisions

0 Product mix
0 Place
0 Price
0 Promotion
V New product to existing market
V New product to existing company

V New line

V New item in an existing product line

V Modification of an existing company

product
V Innovation
V Product uactors
0 Relative advantage compared to competitive products
0 Compatibility with the needs of the consumers
0 Observability, or communicability to other consumers
0 —rialability ² the ability of consumers to experience the
product with only minimal effort
V Country(Market) uactors ² the country
may be a
0 Lead country ² wealthy industrialized country where the
product is adopted first
0 Lag country ² developing country that adopts the product
later
V Innovators
0 Risk takers who can afford to pay a higher price during the
introduction stage ( .5% of the total market)
0 Primarily consumers in developed countries

V Early adopters
0 Consumers who purchase the product early in the lifecycle
stage and who tend to be opinion leaders in their
community
0 (1
.5% of the total market)
0 Primarily consumers in developed countries
V Early majority
0 Consumers who enjoy status of being among the first to
purchase a popular product (
% of the total market)
0 Consumers are primarily from developed countries
V Late majority
0 Consumers who adopt popular products when the risk
associated with them is minimal (
% of the total market)
0 Consumers are from both developed and developing countries
V Laggards
0 —he last consumers to adopt a product; they are risk averse and
conservative in their spending (16% of the total population)
0 Consumers are primarily from developing countries
V —he IPLC begins when a company in a
developed country wants to exploit a
technological breakthrough by launching a
new, innovative product on its home market.
V Such a market is more likely to start in a
developed nation because more high-income
consumers are able to buy and are willing to
experiment with new, expensive products (low
price elasticy).
V uurthermore, easier access to capital markets exists to
fund new product development
V Export to other industrial countries may occur at the
end of this stage that allows the innovator to increase
revenue and to increase the downward descent of the
product·s experience curve.
V Other advanced nations have consumers with similar
desires and incomes making exporting the easiest first
step in an internationalisation effort. Competition
comes from a few local or domestic players that
produce their own unique product variations
V Exports to markets in advanced countries
further increase through time making it
economically possible and sometimes
politically necessary to start local
production.
V —he product·s design and production
process becomes increasingly stable.
uoreign direct investments (uDI) in
production plants drive down unit cost
because labour cost and transportation cost
decrease.
V Offshore production facilities are meant
to serve local markets that substitute
exports from the organisation·s home
market. Production still requires high-
skilled, high paid employees
V Competition from local firms jump start
in these non-domestic advanced markets.
Export orders will begin to come from
countries with lower incomes.
V During this phase, the principal markets
become saturated.
V —he innovator's original comparative
advantage based on functional benefits
has eroded
V —he firm begins to focus on the reduction
of process cost rather than the addition of
new product features. As a result, the
product and its production process
become increasingly standardised
V —his enables further economies of scale
and increases the mobility of
manufacturing operations. Labour can
start to be replaced by capital. ´If
economies of scale are being fully
exploited, the principal difference
between any two locations is likely to be
labour costsµ.
V
—he demand of the original product in the
domestic country dwindles from the arrival of
new technologies, and other established markets
will have become increasingly price-sensitive.
V A MNC will internally maximize ´offshoreµ
production to low-wage countries since it can
move capital and technology around, but not
labour. As a result, the domestic market will have
to import relatively capital intensive products
from low income countries.
V Evaluated stages of the international
product lifecycle
V Identified focus of operations and target
markets at each stage
V Identified the different dimensions of the
international product mix
V Examined the new product development
process
V Examined degrees of product newness and
addressed the international diffusion
processes