2McDonalds Products Around the World McDonalds tries to standardize its products as much as possible around the worldBasic meal of sandwich, fries, drink in most marketsFries are exactly the same in each market!Information taken from:Vignali, Claudio “McDonald’s: Think Global, Act Local – The Marketing Mix” British Food Journal 103(2):
3McDonalds’ Product Adaptations Canada Cheese, vegetable, pepperoni and deluxe pizzaUruguay McHuevo - A hamburger with a poached egg on topThailand Samurai Pork burger - A sandwich marinated with teriyaki saucePhilippines McSpaghetti - Pasta in a sauce with frankfurter bitsNew Zealand Kiwiburger - A hamburger with a fried egg and slice of beetJapan Chicken Tatsuta - A fried chicken sandwich spiced with soy sauce and gingerGermany Frankfurters, beer and a cold four-course meal Taken from this web site:But McDonalds has made several product adaptations in foreign markets. Here are some examples.
4The International Marketing Dilemma ProductStandardizationProductAdaptationversus.McDonalds—like all international markters—must balance standardization and adaptation pressures in foreign markets.
5Benefits of Product Standardization Lower costsLower R&D costsLower ingredient / input costsFewer setup / changeover costsLower handling costsLower distribution costsFaster global roll-outs are possibleStronger (?) brand equity“Global Brand”
6Types of Product Adaptation MandatoryNecessary for product to be sold in a local marketDiscretionaryNot necessary but may be beneficial
7Competitive offerings Climate, geography, and infrastructure PRESSURES FOR PRODUCT ADAPTATIONCompetitive offeringsClimate, geography, and infrastructureGovernment regulations and international standardsCustomer expectations, preferences,and buyer behavior
8Benefits of Product Adaptation Penetrate otherwise closed markets“Stress-Testing” your product for global expansionBetter product performance in different use conditionsLower costs by using local inputsLower costs due to feature elimination
9Climatic, Infrastructure and Use Physical realties of markets affect product decisionsAir conditioners in Saudi Arabia must be able to operate under conditions that are hotter and dustier than those in most U.S. locationsPeople may actually use the products differently in a marketP&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
10Performance and Quality Standards – Developing and Developed Countries Products designed in highly developed countries often exceed the performance standards of developing countriesCustomers in developing countries may prefer simpler products – to save money and ensure better performance over the product’s 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.
11Be careful when upgrading!!! MNCs often acquire local competitor in developing countryoverhaul production and marketing capability to mirror that of the parent organizationCompany then raises prices, making products unaffordable to developing marketMarket size is extremely limited!Slide based on the article:Lunardini, Fernando “Building Brands in Emerging Markets” McKinsey Quarterly, 2: 1-3.Expensive brands and management processes can be more of a hindrance than a help in reaching the lower-income segments.Most MNCs acquire a local competitor (buying access to local distribution networks and facilities) and bring in brand managers from developed countries who overhaul manufacturing processes and launch expensive marketing campaigns. Then they integrate acquisitions into the parent organization by extending corporate functions to the local companies and allocating a share of these costs. Based on McKinsey’s research, IN ALMOST EVERY CASE COMPANIES THAT UNDERTOOK THESE ACTIONS HAD TO RAISE PRICES.This strategy is fine if the company plans to only target the elite segment in a developing country. But it can undercut success if the company plans to employ a mass-market strategy since it may result in the company out-pricing itself in the marketplace.
12Global StandardsGrowth in international commerce has increased the benefits of international standardsThe benefits of internationalstandards are obvious when you travel….Ever tried to use your U.S, hairdryer in another country?
13Global Standards (cont’d) Country-to-country standards still predominateNational organizations set standards for products and business practicesE.g., British Standards Institute, Canadian Standards AssociationU.S. standards system is fragmented450 different standard-setting groupsUnification of Europe forced EU to adopt regional standards
14Global StandardsIncompatible national standards can hinder global companiesMay require expensive product, packaging, and labeling adaptationFewer economies of scale opportunitiesTime and effort required to research and monitor standardsMay dissuade firms from entering markets
15Global Standards (cont’d) 1947 creation of International Standards Organization in GenevaNon-governmental organizationFederation of national standards bodies from 140+ countriesConsists of member firms “most representative of standardization in their home countries”Standards set by ISO are highly specificExamples: film speed codes, formats for telephone and banking cards, etc.
16Global Standards (cont’d) ISO 9000Established 1987Based on the British standard for quality assurance (BS5750)Generic management system standardEnsures organization can consistently deliver a product or service that satisfies the customer’s requirements via a state-of-the-art management system.
17Cultural Preferences Color Scent Sounds Taste Red and white have happy associations in Japan; green associated with jungle and illness in MalaysiaScentStrawberry shampoo failed in China where consumers shun non-edible items that smell like foodSoundsForced to eliminate “ping” sound from word processing in Japan because workers were mortified when their mistakes were made public.TasteWhat tastes good varies from country to country (saltiness, sourness, sweetness, etc.)
18Food 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 weatherThe solution?Frito Lay introduced a “cool lemon” chip packaged in pastel shades – it became the company’s best selling item in China!
19Product Size and Dimensions Different physical surroundings and available spaceDifferent physical characteristics of consumersConsumer income levels – more affluent consumers can buy in bulk
20Comprehensive warranty and service policies can be Companies Interested in Doing Business Abroad Are Often at a Disadvantage…Customers often want EXTRA assurance that the supplier will back the product or serviceComprehensive warranty andservice policies can beimportant marketing tools!
21Global Product Service (cont’d) Maintaining required service levels abroadSelecting organization to provide serviceCompany-owned or outsourced?Adequate inventory of spare partsViewing investments in service costs as investments in future volume
22Global Product Line Management Not all products are suitable for all markets!Coca-Cola’s traditional brands =90% global sales33% Japan subsidiary sales25 years of product innovation in Japanese subsidiary!
23Global Product Line Management (cont’d) Lines in overseas markets typically are NARROWER than in home marketLack of sufficient market sizeEarlier life cycle stagesNiche target segments at home may be smaller or absentLack of market sophisticationNew product introductions tend to begin at home and follow abroad
24Foreign Subsidiary Input in R&D Foreign subsidiaries can play active R&D roles – especially in adaptive environments - but oftentimes do notSales subsidiaries may provide ideas about product adaptationMNCs are increasing R&D investment abroad to obtain key market inputNew ideas come from foreign cultures and marketers – but where can they be re-applied?