Final Flashcards
Product
- bundle of satisfactions or utilities a buyer receives
- people use them to help achieve their lifestyle goals
- culture affects the consumers need
benefits of product standardization
- lower manufacturing costs
- lower inventory costs
- cost savings due to elimination of product adaptation efforts
- fast global roll-out possible
- can enhance consumers perception of a global brand
benefits of product adaptation
- mandatory adaptation allows products into otherwise closed markets
- products can be sold for different use in different climates/infrastructures
- modified products may perform better
- product costs may be decreased
- greater sales due to industry norms and cultural preferences
when entering a foreign market, should the company standardize its product marketing strategy or customize it?
most companies follow a strategy that is a combination of standardization and customization
mandatory product adaptation
necessary for product to be sold in a local market
California car emission standards
discretionary product adaptation
not necessary but may be beneficial
cultural color preferences
red and white have happy associations in Japan
green associated with jungle or sickness in Malaysia
cultural sound preferences
forces to eliminates “ping” noise from word processing in Japan because workers mortified when their mistakes were publicly obvious
cultural taste preference
what tastes good varies from country to country
physical realities of markets affect product decisions
- air conditioners in Saudi Arabia must be able to operate under hotter and dustier conditions
- paint must be adapted to various climactic conditions
infrastructures vary and people may use products differently in a market
- Cheer detergent adapted because Japanese consumers washed with cold tap water and liked to add fabric softeners
- Cadbury Dairy Milk shots designed for hot climates with no refrigeration
the physiological aspects of a product may need adaptation too
Frito Lay introduced a “cool lemon” chip packages in pastel shades because Chinese consumers associate fried foods with yang (which generates body heat and should be avoided in hot weather)
adapting to material culture
- small sized cars in Europe vs Hummers in the US
- smaller size appliances in Japan
different physical characteristics of conusmers
Swiss watch manufacturers learned to adapt their watchband to different wrist sizes (Japanese have smaller wrists than Americans)
cost and price considerations
lower available income may require smaller package sizes in developing countries
products designed in highly developed countries often exceed the performance needed in developing countries
customers in developing countries may prefer simpler products (to save costs and ensure better service over the products lifetime)
“good enough” products
try to optimize the price performance tradeoff (75% performance for a 25% price)
two types of national standards
voluntary and mandatory
size, shape, and materials adaptations
- product packaging norms
- existing standards
- economic development
- environmental concerns
color and text adaptations
- promotional strategy
- cultural meaning and implications
- language issues
- government regulations
law and politics adaptations
Green marketing and product development in Europe
- control of packaging components of solid waste
- consumer demand for environmentally friendly products
diffusion of innovations
rate of acceptance or resistance can be predicted
five characteristics of innovation basis
- relative advantage
- comparability
- complexity
- trialability
- observability
production of innovations using homogeneous and culturally diverse teams
- diversity groups for innovation; higher creative output
- long-term study on the long-term impact on work team performance
long-term study on the long-term impact on work team performance
diverse groups initially disadvantaged by communication issues, once the issues are overcome, diverse groups produced more ideas
Ford bets on Focus as global product
- design team includes Europeans, Americans, and Asians
- customers around the world wanted safety, technology, fuel efficiency, and style
- Focus built on one platform for all markets
analyzing product components for adaptation
a product is multidimensional entity and the sum of all its features determines the bundle of satisfactions or utilities received by consumer
product component model
- helps determine how product might be adapted to a market
- separates into three distinct components (support services, packaging, and core component)
- effects on cultural, physical, and mandatory factors can be focused on each component
global products = core + derivatives
- firms may not be able to standardize products 100%
- even moving the global core representing 15% of the total products to 20% may lead to big savings to some companies
modularity
development of standard modules that can easily be connected with other standard modules to increase the variety of products
how do automotive brands produce so many different types of vehicles and still make profit?
- modularity
- platform and component sharing to reduce development and production costs
- if something goes wrong with one of the shared components it leads to massive problems for automakers
advantages of modular customization or platform production strategy
- ability to customize the product by combining different modules of the product
- lower costs of production due to economies of scale, lower levels of inventory, and lower cost of research and development
disadvantages of modular customization or platform production strategy
- defects in production of a module are magnified because it is used in many more products
- consumers purchasing a luxury car may be discouraged by the idea that their car shares a large number of parts with a less expensive car
adaptation of services
- mostly similar to product adaptation advice
- services are different because their intangible
intangibility results in three other important characteristics
inseparable - creation cannot be separated from consumption
heterogenous - individuality produced and is this unique
perishable - must be consumer simultaneous with creation
service opportunities in global markets
tourism, transportation, financial services, education, telecommunications, entertainment, information, healthcare
tourist services
two of the best vistas in the world are Tahiti above the water and the coral reefs off Belize under the water
support services component for adaptation
- important not to neglect (many otherwise successful marketing programs fail here)
- repair and maintenance a challenging feature (not as accessible or common in other countries)
- instruction manuals may need to be adapted (countries have varying literacy and education levels)
four barriers to entering global markets
protectionism
restrictions on transborder data flow
protection of intellectual property
cultural barriers and adaptation
increasingly services inseperable from the products
companies selling lights not lightbulbs
servitization
industries using their products to sell “outcome as a service” rather than a one-off sale
ex. internet examples are netflix and spotify
brand equity
consumer goodwill towards a brand - is the most valuable resource a company has
global brands
strong brands try to globalize them because:
- gives company worldwide positive association
- enhances efficiency and cost of new products
- accelerated by internet and technology
national brands
country specific brands
multinationals must consider cultural factors (increased nationalism in a country)
companies use both national and global strategies
country of origin effect (COE)
influence that country of manufacture, assembly, or design has on consumers perception of product
COE details
- can be positive or negative
- product specific
- ethnocentrism impacts attitudes toward foreign products
- good marketing can overcome a negative COE but it may take time
private/store brands of large international retailers
- consumers prefer less expensive, more local, private brands
- global brands must be priced competitively to be successful
internationalization
a firms expansion from its domestic market to foreign markets
opportunistic expansion
unsolicited orders from international markets
pursuing potential abroad
- may seek saturated market at home
- may seek to spread risk by diversifying beyond single country
following customers abroad (B-to-B marketing)
- important when business concentrated on a few large customers
- less risk as current customers likely to purchase from you in the new market
exploiting different market growth rates
- competitive disadvantages of not entering markets with faster growth rates
- products may become mature at; seek markets where product is not as well known
globalizing for defensive reasons
when competitors enter a firms market, the firm may decide to retaliate by entering the competitors home market
first mover advantage
gain access to key resources like distribution systems and best retail locations, build relationships with large buyers, difficult for followers to win due to switching costs
network effects
a phenomenon where a product or service gains additional value as more people use it
(Ex. instant messaging is a market with strong network effects)
first mover disadvantage
mover makes major investments, while the follower can learn from the first movers successes and failures
costs of going global
firms are internationalizing more quickly than in the past - but it takes time and money
born global firms
firms that recognize for inception that their markets are global, small percentage of firms but in key industries
(Ex. amazon)
stand-alone market attractiveness factors
- market and target segment size
- growth rate
- strength of competition
- market share potential
- government incentives
strategic importance of must-win markets
some markets may be current and future battlegrounds where global competitors engage each other - may not be stand-alone attractive but still strategically important
strategic importance of markets (home market of major customers)
multinational corporations want suppliers to understand and supply their needs in their home markets
strategic importance of markets (home market of competitors)
home markets of competitors are where innovations are most likely to appear first
lead markets
where innovations in an industry appear first
- bellwether markets for innovations in an industry
- vary by industry
- major R&D sites
- demanding consumers who push from quality and innovation
example lead markets
software - USA
clinical medicine - USA
immunology - Switzerland
ecology - Sweden
lead markets can be global or regional
- the US is a global lead market for hip hop clothing
- Japan is a regional lead market for style for many neighboring Asian countries
attractiveness of developed economies
consumers with considerable disposable income
triad - western Europe, USA, and Japan - account for about 50% of world trade
challenges of developed economies
high competition, established brand and product loyalty, labor costs are high
attractiveness of emerging markets
- “By 2025 annual consumption in emerging markets will reach 30 trillion, the biggest growth opportunity in the history of capitalism”
- trade and investment liberalization
- market growth may be higher
- middle class growth
BRIC Markets (Brazil, Russia, India, China)
fastest growing developing economies, represents 40% of the world population and cover 25% of the world land mass
challenges of emerging markets
political risk, economic risk, more trade and investment restrictions, competition is increasing
strategic importance of emerging economies
many may not be stand alone attractive at this time but are strategically important
country selection
each additional country demands more financial investment and more management time and effort
too many markets can result in lessened profitability (spread too thin)
lack of management knowledge can result in:
ignoring countries with good potential
spending too much time and effort investigating countries with poor potential
circumstances may make companies want to leave a country or market
- tough competition
- financial considerations may be done to save or raise money
- refocus on home market
- political considerations
market re-entry
markets left by international firms over the past decades have become attractive again, some companies reverse their exit decisions and entered the market a second time
home market channel members
export management company, export agent, direct exporting, internet
foreign market channel members
important intermediaries, local wholesalers, retailers
developing a global distribution strategy
- locating and selecting channel members, managing the distribution channels
- gaining access to the distribution channels
- global supply chain management
- trends in global distribution
level of economic development and consumer disposable income
less developed countries have more unorganized retailers
every neighborhood has a relatively self-contained marketplace
poor consumers must shop in small quantities almost daily and need a retailer close to home
developing economies distribution systems
long, fractured, inefficient systems
small scale retailers
- often sell single use products
- 60% of in-store sales in Latin America are in small retail outlets or home with limited space to store items
marketer as channel educator
training programs for middlemen and store personnel
- prepare manuals and pamphlets describing products and services
- help middlemen develop facilities, inventory, shipment, shelving procedures and establish accounting systems
infrastructure quality and physical environment
less developed countries may lack infrastructure to allow for organized large scale retailing, so they tend to be dominated by small scale retailers
(lack of space for construction and lack of transportation)
culture impacts where people shop and how often they shop
- France has large scale retailers as well as many small unorganized retailers
- Japan has convenience stores everywhere that are always open and carry a variety of products
culture shock in Germany
Wal-Mart’s customer service friendliness and hominess was not welcome in Germany, they hesitate to be friendly because this behavior could be seen as hypocrisy or attempting to curry favor
legal/political system
operating hours and days (operating hours in Australia are regulated)
what can and cannot be sold in a particular type of store
distribution systems in developing countries are evolving
modernization of retailing, improvements in infrastructure, integration and consolidation in distribution networks
channel length
the number of intermediaries involved in bringing a given product from the manufacturer to the consumer
channel length influencing factors
products distribution density, average order quantity, availability of channel members
product distribution density
amount of exposure or coverage desired for a product, particularly the number of sales outlets necessary for adequate coverage
high density = longer channel
three levels of distribution density
extensive (many outlets per marketing area)
selective (fewer outlets per marketing area)
exclusive (very limited number of outlets per marketing area)
average order quantity
low average order quantity will require high distribution density which requires a longer channel
availability of channel members
some culture require certain channel members
channel alignment and leadership
the structure of the chosen channel members to achieve a unified strategy
channel captain
dominant member of the channel who frequently dictates terms of: pricing, delivery, and product design
indirect exporting
reaching markets with the use of an intermediary located in the exporters home country
+ leverage intermediary’s expertise
+ good for firms with minimal international experience
- less profit, less control
intermediaries for indirect exporting
export management company (EMC) and export agents
export management company (EMC)
handles all aspects of export operations (market research, patent protection, channel credit, shipping, logistics, marketing)
can act as merchant or as agent
export agents
individuals or firms that assist manufacturers in exporting goods
tend to provide more limited services than EMCs and focus on one part of the world
(sale and handling of goods, take title to the goods)
firms may need several agents to have adequate coverage
direct exporting
reaching markets either yourself or with the use of an intermediary in the foreign market
+ more profit, greater control
- requires more expertise, management time, and financial resources
direct exporting activities
- identifying market opportunity (product, price, promotion)
- distributing the product (shipping, insurance, clearing customs, getting product to the buyers, after sales support)
cooperating for export
companies competing against each other in their domestic market may unite to address export markets
export trading companies (ETCs)
ETC act allows producers of similar products to from ETCs
distribution via the internet
internet has greatly increased the ability of firms to export directly, especially beneficial for SMEs
SME’s
firms with fewer than 500 employees, accounted for 98% of the number of US exporters in 2013 and $471 billion in know value of goods exports
e-commerce
important method of distribution for multinationals
online B2B enhances performance
