Chapter 11: Product Management Flashcards
Standardization vs. Adaptation: Factors affecting product-adaptation decisions
- Regional, country, or local characteristics
- Product characteristics
- Company considerations
Regional, country, or local characteristics
- Government Regulations
- Nontariff barriers
- Customer characteristics, expectations, and preferences
- Purchase Patterns
- Culture
- Economic status of potential users
- Stage of economic development
- Competitive offerings
- Climate and geography
Product Characteristics
- Product constituents
- Brand
- Packaging
- Physical form or appearance (e.g. size, styling, color)
- Function, attributes, features
- Method of operation or usage
- Durability or quality
- Service
- Country of origin
Company Consideration
- Profitability
- Market opportunity (market potential, product-market fit)
- Cost of adapting
- Policies (e.g. commonality, consistency)
- Organization
- Resources
The market environment: Government regulations
The most important factor contributing to product adaptation.
- E.g., Some governments require returnable containers for all beer and soft drinks, which seriously restricts foreign brewers whose businesses are not large enough to justify the logistics system necessary to handle returnables.
The market environment: Nontariff barriers
Include product standards, testing or approval procedures, subsidies for local products, etc.
- E.g., Japan requires testing of all pharmaceutical products in Japanese labs, maintaining that these tests are needed because Japanese may be physiologically different from Americans.
Another nontariff barrier example
Canadian content - the Canadian Radio-television and Telecommunications Commission (CRTC) requirements, derived from the Broadcasting Act of Canada, that radio and television broadcasters (including cable and satellite specialty channels) must air a certain percentage of content that was at least partly written, produced, presented, or otherwise contributed to by persons from Canada. It also refers to that content itself, and, more generally, to cultural and creative content that is Canadian in nature.
The market environment: Customer characteristics, expectations, and preferences
- Even when the benefits sought are similar, the physical characteristics of customers may dictate product adaptation.
- E.g., Oreo cookie: too sweet, and too large package for Chinese consumers.
- Solution: reformation and re-redesign of packaging.
The market environment: Economic development
As a country’s economy advances, buyers demand better products
The market environment: Reverse innovation
To meet demands of different countries.
- E.g., 10 – 20 USD cellphone in Africa
- Solar powered TV sets
The market environment: Climate and geography
- E.g., marketing chocolate products is challenging in hot climates
- Product has to be protected against longer transit times and longer shelf life
- Care must be taken to ensure that no nonallowed preservatives are used
Product Characteristics: Product standardization or adaptation caries by product categories:
- Consumer nondurables (e.g., food products) show high amount of sensitivity toward differences in national tastes and habits
- Consumer durables (e.g., cameras and home electronics) are more homogeneous, but with some adaptations (e.g., TV technical system)
- Industrial products tend to be more shielded from cultural influences.
Product Characteristics: Product constituents and content
- Should not be in violation of legal requirements or religious or social customs
- E.g., in deference to Hindu and Muslim beliefs, McDonald’s burgers are made with mutton in India
Product Characteristics: Translations of brand names
- Translation
- Transliteration – phonetic translation: same sound but likely different meaning
- Transparency (e.g., Sony)
- Trans-culture (e.g., Vodkas)
Product Characteristics: Packaging
- Product category requires packaging materials and transportation mode (e.g., seafood product)
- Packaging size
Product Characteristics: Appearance
- Color plays an important role in the way consumers perceive a product
- E.g., African nations prefer bold colors
Product Characteristics: Method of operation
- The product as it is offered in the domestic market may not be operable in the foreign markets
- E.g., electric power systems
- E.g., software in local language (proven to be weapon in fight against software piracy)
Product Characteristics: Quality
- Western exporters must emphasize quality in their strategies because they cannot compete on price alone
- Marketers may seek endorsement of their efforts from governmental or consumer organizations (e.g., Korean cars become more popular because of high J.D. Power car rankings)
Product Characteristics: Service
Obtaining, training, and holding a sophisticated engineering or repair staff overseas is not easy
Product Characteristics: Country-of-origin effects
- Has considerable influence on the quality perception of a product
- Can be positive or negative
- E.g., many consumers around the world perceive Nokia as a Japanese brand
Company considerations
- Product adaptation
- Decision to adapt
Product adaptation depends on the firm’s ability to:
- Control costs (i.e., “Is it worth it?”)
- Correctly estimate market potential
- Secure long-term profitability
Decision to adapt should be preceded by…
a thorough analysis of the market.
Stages of the product development process:
- Idea generation
- Screening
- Product and process development
- Test marketing
- Commercialization
Global product development: The location of R&D activities
- In truly global companies, the location of R&D is determined by the existence of specific skills.
- R&D centers are seen as highly desirable investments by host governments
- Developing countries are increasingly demanding R&D facilities as a condition of investment
Global product launch
Introducing the product into countries in three or more regions within a narrow time frame
Benefits of global product launch:
- It permits the company to showcase its technology in all major markets at the same time
- It solves the dilemma of having old models available in some markets while customers know of the existence of the new product
- With the product development costs increasing and product life cycles shortening, global product launch becomes even more beneficial
Characteristics of global brands
- Carry a strong quality signal
- Cater to the need of feeling cosmopolitan
- Reflect the professional and personal status of the user
- Use their monetary and human resources to benefit society
Counterfeit goods
Goods bearing an unauthorized representation of a trademark, patented invention, or copyrighted work that is legally protected in the country where it is marketed
What is the core of a firm’s international operations?
A product or service
How can products be differentiated>
- Composition
- Country of origin
- Tangible features such as packaging or quality
- Augmented features such as warranties
What is an example of core product?
The component of a personal computer or the recipe for a soup
Elements of a product
- Core product
- Tangible product
- Intangible product
- Augmented product
Core product
Core benefit or service
Tangible product
- Packaging
- Brand Name
- Quality
- Aesthetics
Intangible Product
- Positioning
- Country of Origin
Augmented product
- Installation
- Delivery and Credit
- After-Sale Service
- Warranty
A firm has four basic alternatives in approaching international markets:
1) selling the product as is in the international marketplace
2) modifying products for different countries or regions
3) designing new products for foreign markets
4) incorporating all the differences into one flexible product design and introducing a global product.
In deciding the form in which the product is to be marketed abroad, the firm should consider three sets of factors:
1) the market(s) that have been targeted
2) the product and its characteristics
3) company characteristics, such as resources and policy.
For most firms, what is the key question linked to adaptation?
Whether the effort is worth the cost involved—in adjusting production runs, stock control, or servicing, for example—and the investigative research involved in determining, for example, features that would be most appealing.
What is the single most important factor contributing to product adaptation?
Government regulations
Why have nontariff forms of protection increased?
Because of a substantial decrease in tariff barriers.
ISO 9000
A set of technical standards designed to offer a uniform way of determining whether manufacturing plants and service organizations implement and document sound quality procedures.
ISO 14000
The standards, which basically require that a firm design an environmental management system, do provide benefits for the adopters such as substantial efficiencies in pollution control (e.g., packaging) and a better public image.
Product decisions of consumer-product marketers are especially affected by…
- Local behavior
- Tastes
- Attitudes
- Traditions
Three groups of factors determine cultural and psychological specificity in relation to products and services:
- Consumption patterns
- Psychosocial characteristics
- General cultural criteria
Positioning
refers to consumers’ perception of a brand as compared with competitors’ brands—the mental image that a brand, or the company as a whole, evokes.
What is the most important thing to focus on in a product when considering climate and geography?
Packaging
The international marketer must consider two sometimes contradictory aspects of packaging for the international market.
- On the one hand, the product itself has
to be protected against longer transit times and possibly for longer shelf life - On the other hand, care has to be taken that no non-allowed preservatives are used.
What must the packaging be able to do?
The packaging must be able to withstand the longer distribution channels and the longer time required for distribution, so the product will not arrive in stores in poor condition and can be sold properly. If a product is exposed to a lot of sunshine and heat as a result of being sold on street corners, as may be the case in developing countries, marketers are advised to use special varnishing or to gloss the product wrappers. Without this, the coloring may fade and make the product unattractive to the customer.
