1. Global Products and Services

2. Product standardization
Although there is increasing demand for local variety as economic growth takes place and as anti-globalization sentiment spreads, global products and brands are usually standardized in some ways.
Global product examples
Gillette razor blades
Sony television sets
Guess jeans
Regional products and brands are unique to a particular trading region
Honda’s European car model “Concerto”
P& G’s Ariel and Vizir in Europe

4. Standardization Pros and Cons
ADVANTAGES
DISADVANTAGES
Cost Reduction
Improved Quality
Enhanced Customer Preference
Global Customers
Global Segments
Off-Target
Lack of Uniqueness
Vulnerability to Trade Barriers
Strong Local Competitors

5. Localization vs Adaptation
LOCALIZATION: THIS REFERS TO THE CHANGES REQUIRED FOR A PRODUCT OR SERVICE TO FUNCTION IN A NEW COUNTRY (EX: FAX MACHINES FITTED WITH NEW TYPES OF TELEPHONE JACKS FOR USE IN A FOREIGN COUNTRY). LOCALIZATON AVOIDS HAVING POTENTIAL CUSTOMERS REJECT A PRODUCT OUTRIGHT.
ADAPTATION: WHEN PRODUCTS ARE CHANGED TO MATCH CUSTOMER TASTES OR PREFERENCES. ADAPTATION GIVES CUSTOMERS A POSITIVE REASON FOR CHOOSING A GIVEN PRODUCT.
NOTE: A standardized product still needs to be localized to function properly.

6. Line shows likelihood of Purchase
Uniform vs Adapted Product +
PREFER
Line shows likelihood of Purchase
Uniform
Localized
Adapted
REJECT -

7. What to Standardize? 100% standardization is rare
Usually starts with a core product as the foundation
Various features are added, these may differ according to the country market
Can also involve modular design, where various features are packaged as modules, different assembly combinations in different markets

8. Pitfalls of Standardization
Insufficient Market Research
Similarities among customers are assumed, not proven
Overstandardization
Standardization compromises the positioning strategy
Poor Follow-Up
Follow ups need to be implemented if a campaign is to succeed
Narrow Vision
Goals should not be narrow and inflexible
Rigid Implementation
Some flexibility in implementation needs to be retained by local units

9. Why do Global Product Lines Differ?
History
Different local products were well established before standardization was feasible
M&A (Mergers & Acquisitions)
Complete integration is often difficult in M&A cases
Preferences
Differences in preferences force product line customization
Capacity
Global product lines need large production capacity
Channels
Channel loyalties makes it difficult to drop local products.

10. Honda’s Non-Global Car Models
EUROPE
Honda Stream
ASIA
Honda City
NORTH AMERICA
Honda Element
LATIN AMERICA
Honda Fit

11. Goodyear’s Globally Uniform Tires
EUROPE
Goodyear Eagle F1
ASIA
Goodyear Eagle F1
NORTH AMERICA
Goodyear Eagle F1
LATIN AMERICA
Goodyear Eagle F1

12. Developing New Global Products
Five Stages of the New Product Development Process
Idea Generation
Local subsidiaries are likely to have some ideas from their respective markets and new technology is a common source of new product ideas
Preliminary Screening
The most immediate evaluation of an idea is whether it is compatible with the company objectives, strategies, and resources.
Concept Research
Focus Groups offer the development team a chance to hear spontaneous reactions to a new concept and hear suggestions for improvement.

13. Developing New Global Products
Five Stages (cont’d)
Concept Testing
A more formal approach to selecting product attributes is using techniques such as trade-off analysis or conjoint analysis
Sales Forecast
The appropriate sales forecast approach is based on the product life cycle (see Ch.4)
Test Marketing
Once the sales forecast looks promising, the new product is usually placed in production and test marketed.

14. Preliminary screening
“64 ideas make one successful product”
Number of surviving new product ideas
Idea generation (leading markets)
Preliminary screening
Concept research (focus groups, concept testing)
Sales forecasting
Test marketing

15. Target Positioning
Because new product development is so uncertain, many firms practice “TARGET POSITIONING”.
Step 1: Track which of the competitors’ new products appeal to consumers and find what features are desired.
Step 2: Reverse engineer the competitive success products.
Step 3: Develop own “me-too” version.
Step 4: Add new features to provide differentiation and a superior offering.
Note: Firms cannot let competitors stay unchallenged. Ex. Nokia lost a big chunk of its leading market share in cell-phones when the company decided not to follow the trend into the so-called clamshell phone models with lids.

16. PRODUCT SPECIFICATION
Target Positioning:
The Diagonal for “Me-too” Offerings
HI END
PRODUCT SPECIFICATION
TARGET BRAND
LO END
LO PRICE
PRICE POSITION
HI PRICE

17. New Products’ Speed of Diffusion
Relative advantage – how much better is the new product?
Compatibility – can the product be used in terms of local infrastructure & customs?
Complexity – is it easy to use?
Trialability – is it easy to try the new product?
Observability – are the advantages obvious?

18. Global Brands
GLOBAL BRANDS ARE BRANDS ASSOCIATED WITH GLOBAL PRODUCTS WHICH ARE WELL KNOWN IN ALL MAJOR MARKETS OF THE WORLD.
Ex's: SONY, MERCEDES-BENZ, MICROSOFT, COCA-COLA.
THE TYPICAL MULTINATIONAL FIRM HAS A “PORTFOLIO” OF BRANDS, SOME OF WHICH ARE GLOBAL, SOME ARE REGIONAL, AND SOME LOCAL ONLY.

19. Global Brand Equity
Brand Equity is the value of the positive associations that consumers have with a product’s brand name.
These associations often involve emotional attachments, affinity, positive brand image, and brand identity.
They also involve cognitive factors such as familiarity, knowledge and perceived quality, as well as social factors including peer group acceptance.
When these associations turn negative (as in anti-globalization sentiments against global brands) the brand equity can go down very quickly.

20. Global Brand Equity
BRAND EQUITY is sometimes measured in terms of the discounted net revenues the brand is expected to generate over time.

21. Advantages of Global Brands
DEMAND SPILLOVER – The name is familiar because of media spillover, satellite communications, word-of-mouth etc.
GLOBAL CUSTOMERS- People travel to many countries and multinational customers operate in many locations, making the global brand a natural choice everywhere.
SCALE ECONOMIES – any spending on product improvements and advertising can be leveraged across more markets.

22. Disadvantages of Global Brands
NEGATIVE SPILLOVER –Bad news travel faster across country markets
PRODUCT LINE SPILLOVER - Negative spillover affects also other products with the same brand name.
BRAND LOYALTY – Local brand loyalties can be strong.

23. Globalizing a Brand Name: Checklist
Does the brand name make sense outside of the source country?
If the name suggests a country association, is the effect positive?
Is the name available legally in many countries?
Does the brand compete with other brands in the portfolio?
Should growth be limited to the creation of a regional brand?

24. Changing a Local to a Global Brand
Changeover strategies:
The fade-in/fade-out gradual option is the most common strategy
The global brand is linked to the local brand for a time, after which the local brand is dropped
A less gradual approach, sometimes called summary axing
Simply drops the local brand name and introduces the new brand
Companies also use extensive forewarning in media announcements to minimize changeover dissonance among loyal customers.

25. WORLDWIDE LOSSES DUE TO COUNTERFEITING IS OVER $20 BILLION ANNUALLY
Counterfeit Products
COUNTERFEITS OR KNOCKOFFS ARE FAKE PRODUCTS THAT ARE DESIGNED AND LABELED SO AS TO MISLEAD THE CUSTOMER INTO ASSUMING THAT THEY ARE “THE REAL DEAL.”
WORLDWIDE LOSSES DUE TO COUNTERFEITING IS OVER $20 BILLION ANNUALLY
COUNTERFEITERS OPERATE AT ALL LEVELS OF THE ECONOMY, JUST ABOUT ANY PRODUCT OR TECHNOLOGY DEVELOPMENT IS FAIR GAME

26. CODING DEVICES – firms encode unique signatures to products
Actions Against Counterfeits
“SEARCH & DESTROY” – firms hire private investigation agencies to track down fakes in stores and locate counterfeit factories
CODING DEVICES – firms encode unique signatures to products
(e.g. Levi’s micro-weave patterns, Microsoft’s Windows 95 tracking codes)

27. The Service Industries
Accounting
Advertising
Banking
Broadcasting
Computer services
Consulting
Data processing
Design & engineering
Distribution
Education
Entertainment
Health care
Insurance
Investment banking
Leasing
Legal Services
Lodging
Media
Reservation systems
Restaurants
Tourism
Telecommunications
Transportation
Utilities

28. Characteristics of Services
INTANGIBILITY – you cannot easily touch a service
HETEROGENEITY – the service is not exactly the same each time
INSEPARABILITY – services are produced when they are consumed
PERISHABILITY – you cannot store a service

29. The Service “Product”
CORE SERVICE: IS WHAT THE BUYER IS REALLY BUYING. FOR EXAMPLE, AN OIL CHANGE AND TUNE-UP FOR YOUR CAR PROVIDES TROUBLE-FREE OPERATION.
FORMAL SERVICE PACKAGE: SPECIFIC SERVICES OFFERED TO THE CUSTOMER INCLUDING PRICE, SERVICE FEATURES, THE PACKAGING, GUARANTEES.
AUGMENTED SERVICE: THE TOTALITY OF THE BENEFITS A CUSTOMER RECEIVES OR EXPERIENCES THEY HAVE WHEN BUYING THE PRODUCT.

30. The service as a “product”
Provider’s behavior
Augmented service
Features
Price
Packaging
Physical surroundings
Provider’s appearance
Generic benefits
After-sales support
Warranty
Quality
Formal service package
Core service
Brand image

31. Three factors that influence the globalization potential of services
Service Globalization Potential
Three factors that influence the globalization potential of services
Stage in the Life Cycle – potential is highest during the maturity stage because then the service is fully developed and can be blueprinted.
Infrastructure barriers – service applicability depends on availability of infrastructure, as when, for example, warehouse stores require customers to take home large items in their own cars.
Idiosyncratic Home Markets – special regulations induce domestic service providers to develop practices that are not applicable elsewhere, as when, for example, advertising agencies in Japan produce television programs whose sponsorship the agency controls.

32. Reasonable similarity to the home country situation
Keys to Successful Service Globalization
Distilling exactly what the key features of the product/service concept are 1 2
Reasonable similarity to the home country situation
Localization of the key features to another environment while still maintaining the FSA's of the firm 3

33. The Four Service Entry Modes
EXPORTING – where services can be transferred via communications media or personal travel to countries
LICENSING – when local involvement is important, where the service can be standardized (e.g. franchising)
STRATEGIC ALLIANCES – when a local presence is necessary but where government regulations are restrictive to foreigners
FOREIGN DIRECT INVESTMENT – when a local presence is feasible, where foreign ownership is permitted

34. Foreign Entry of Services
Tourism exports provide an illustration of foreign trade in services, as when Americans visit France.
A franchising expansion by McDonalds provides an illustration of a licensing mode of service entry.
In marketing research, it is common to strike up alliances with research firms in other countries to be able to provide global coverage to clients.
In consulting services, foreign direct investment is sometimes necessary, as when Price-Waterhouse opens an office in Brussels.

35. The Local Marketing of a Service
MARKET SEGMENTATION – typically new services from abroad target very specific segments or audiences
POSITIONING – the customer benefit of the service needs to be identified clearly to position the service accordingly
PRODUCT LINE – a service provider that fits the local infrastructure
BRANDING – is always important given the intangibility of services.

36. The Local Marketing of a Service (cont’d)
5. PRICING – competitive parity, costs, demand, and the value of time spent by customers must be factored in
6. PROMOTION – many professional services have restrictions on promotional activities that differ across countries
7. DISTRIBUTION – since a service is produced & consumed at the same time, service delivery is identical to service production; consequently, distribution becomes the “critical incident” or “moment of truth.”

37. Desired Service – highest or ideal quality
Service Quality
CRITICAL INCIDENTS/MOMENTS OF TRUTH – the period of time during which an individual consumes the service
Desired Service – highest or ideal quality
Predicted or Expected Service – lies somewhere between the desired & the adequate service
Adequate Service – forms the lower limit below which the service quality is unacceptable
Perceived Service –must lie between the desired & the adequate service levels to make sure customer is satisfied

38. Predicted/Expected Service (Perceived Service low)
Service Quality:
The Gap and the Zone of Tolerance
Desired Service
Surprise
(Perceived Service high)
Predicted/Expected Service
Zone of tolerance
Acceptable
Adequate Service
Dissatisfaction
Performance Gap
(Perceived Service low)
Inadequate Service

39. Culture and Service Quality
Since services are intangible, service quality is more difficult to quantify, allowing for a more subjective view
Different cultures have different habits and preferences and therefore different definitions of service quality
So culture affects perceived service quality & customer satisfaction strongly
And what is considered high service quality in one country is not necessarily high in another country.

40. Personal Service Quality: Differences in Complaint Handling
Americans
Japanese
Asking
Listening
Expressing doubt
Expressing sympathy
Explain what cannot be done
Explain what can be done
Defending company policy
Apologize for company policy
Responsibility of the buyer
Responsibility of the seller
“We’ll fix it, but…”
“I’m very sorry”
Low customer satisfaction
High customer satisfaction

41. E.g. McDonalds, KFC, Wendy’s, Dunkin Donuts, Pizza Hut
Close-up: Fast Food Franchising
E.g. McDonalds, KFC, Wendy’s, Dunkin Donuts, Pizza Hut
Has been growing in the last two decades
Mitigates risk of financial exposure in other country markets
Common method of penetrating new markets, leveraging existing brand names
Firms provide pre-planning tools to entice local investors
ADVANTAGES – allows franchisee to start a business with limited capital, benefiting from local experience of franchiser
DISADVANTAGES – franchiser’s ability to dictate many facets of the business may seem overly intrusive

42. E.g. lawyers, doctors, accounting firms
Close-up: Professional Services
E.g. lawyers, doctors, accounting firms
Professional services are expanding globally despite idiosyncratic local regulations
A gradual move toward making regulations more homogeneous benefits this expansion (e.g. EU certification of lawyers & doctors)
Accounting standards are converging, allowing accounting firms to go global, with clients outside their home countries
Increased sophistication in creating strategic alliances aid global service expansion