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Chapter 10 Global Product Strategies. Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 2 McDonalds Products Around the World.

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Presentation on theme: "Chapter 10 Global Product Strategies. Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 2 McDonalds Products Around the World."— Presentation transcript:

1 Chapter 10 Global Product Strategies

2 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 2 McDonalds Products Around the World McDonalds tries to standardize its products as much as possible around the world –Basic meal of sandwich, fries, drink in most markets –Fries are exactly the same in each market!

3 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 3 McDonalds Product Adaptations Canada Cheese, vegetable, pepperoni and deluxe pizza Uruguay McHuevo - A hamburger with a poached egg on top Thailand Samurai Pork burger - A sandwich marinated with teriyaki sauce Philippines McSpaghetti - Pasta in a sauce with frankfurter bits New Zealand Kiwiburger - A hamburger with a fried egg and slice of beet Japan Chicken Tatsuta - A fried chicken sandwich spiced with soy sauce and ginger Germany Frankfurters, beer and a cold four-course meal

4 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 4 Product Standardization Product Adaptation versus. The International Marketing Dilemma

5 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 5 Benefits of Product Standardization + Lower costs + Lower R&D costs + Lower ingredient / input costs + Fewer setup / changeover costs + Lower handling costs + Lower distribution costs + Faster global roll-outs are possible + Stronger (?) brand equity + Global Brand

6 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 6 Types of Product Adaptation Mandatory –Necessary for product to be sold in a local market Discretionary –Not necessary but may be beneficial

7 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 7 PRESSURES FOR PRODUCT ADAPTATION Competitive offerings Climate, geography, and infrastructure Government regulations and international standards Customer expectations, preferences, and buyer behavior

8 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 8 Benefits of Product Adaptation + Penetrate otherwise closed markets + Stress-Testing your product for global expansion + Better product performance in different use conditions + Lower costs by using local inputs + Lower costs due to feature elimination

9 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 9 Climatic, Infrastructure and Use Physical realties of markets affect product decisions –Air conditioners in Saudi Arabia must be able to operate under conditions that are hotter and dustier than those in most U.S. locations People may actually use the products differently in a market –P&G had to adapt Cheer detergent because Japanese consumers washed their clothes in cold tap water, used leftover bath water, and liked to add fabric softeners

10 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 10 Performance and Quality Standards – Developing and Developed Countries Products designed in highly developed countries often exceed the performance standards of developing countries –Customers in developing countries may prefer simpler products – to save money and ensure better performance over the products life. Companies from developing countries selling to developed-country markets may have to improve the performance of their products to meet these countries higher standards of quality.

11 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 11 Be careful when upgrading!!! MNCs often acquire local competitor in developing country –overhaul production and marketing capability to mirror that of the parent organization –Company then raises prices, making products unaffordable to developing market –Market size is extremely limited!

12 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 12 Global Standards Growth in international commerce has increased the benefits of international standards The benefits of international standards are obvious when you travel…. Ever tried to use your U.S, hairdryer in another country?

13 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 13 Global Standards (contd) Country-to-country standards still predominate –National organizations set standards for products and business practices E.g., British Standards Institute, Canadian Standards Association –U.S. standards system is fragmented 450 different standard-setting groups –Unification of Europe forced EU to adopt regional standards

14 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 14 Global Standards Incompatible national standards can hinder global companies –May require expensive product, packaging, and labeling adaptation –Fewer economies of scale opportunities –Time and effort required to research and monitor standards –May dissuade firms from entering markets

15 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 15 Global Standards (contd) 1947 creation of International Standards Organization in Geneva –Non-governmental organization –Federation of national standards bodies from 140+ countries –Consists of member firms most representative of standardization in their home countries –Standards set by ISO are highly specific Examples: film speed codes, formats for telephone and banking cards, etc.

16 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 16 Global Standards (contd) ISO 9000 –Established 1987 –Based on the British standard for quality assurance (BS5750) –Generic management system standard Ensures organization can consistently deliver a product or service that satisfies the customers requirements via a state-of-the-art management system.

17 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 17 Cultural Preferences Color –Red and white have happy associations in Japan; green associated with jungle and illness in Malaysia Scent –Strawberry shampoo failed in China where consumers shun non-edible items that smell like food Sounds –Forced to eliminate ping sound from word processing in Japan because workers were mortified when their mistakes were made public. Taste –What tastes good varies from country to country (saltiness, sourness, sweetness, etc.)

18 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 18 Food Culture Is About More Than Just Taste! Why did Frito Lay potato chips fail to sell in China in the summertime? –Chinese consumers associated fried foods with yang – which according to Chinese traditional medicine generates body heat and should be avoided in hot weather The solution? –Frito Lay introduced a cool lemon chip packaged in pastel shades – it became the companys best selling item in China!

19 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 19 Product Size and Dimensions Different physical surroundings and available space Different physical characteristics of consumers Consumer income levels – more affluent consumers can buy in bulk

20 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 20 Customers often want EXTRA assurance that the supplier will back the product or service Comprehensive warranty and service policies can be important marketing tools! Companies Interested in Doing Business Abroad Are Often at a Disadvantage…

21 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 21 Global Product Service (contd) Maintaining required service levels abroad –Selecting organization to provide service Company-owned or outsourced? –Adequate inventory of spare parts –Viewing investments in service costs as investments in future volume

22 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 22 Global Product Line Management Not all products are suitable for all markets! –Coca-Colas traditional brands = 90% global sales 33% Japan subsidiary sales 25 years of product innovation in Japanese subsidiary!

23 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 23 Lines in overseas markets typically are NARROWER than in home market –Lack of sufficient market size –Earlier life cycle stages –Niche target segments at home may be smaller or absent –Lack of market sophistication –New product introductions tend to begin at home and follow abroad Global Product Line Management (contd)

24 Copyright © Houghton Mifflin Company. All rights reserved.Chapter 10 | Slide 24 Foreign Subsidiary Input in R&D Foreign subsidiaries can play active R&D roles – especially in adaptive environments - but oftentimes do not Sales subsidiaries may provide ideas about product adaptation MNCs are increasing R&D investment abroad to obtain key market input –New ideas come from foreign cultures and marketers – but where can they be re-applied?


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