International Marketing Principles of Chapter 10 Product Adaptation Principles of International Marketing 9th Edition Chapter 10 Product Adaptation

Product Variables A product or service is a complex combination of tangible and intangible elements that distinguishes it from other entities in the marketplace. Products can be differentiated by their composition, country of origin, tangible features such as packaging or quality, or augmented features such as warranty.

Exhibit 10.1 - Elements of a Product

Product Variables Standardization versus adaptation Standardization versus adaptation Basic alternatives for approaching international markets are: Sell the product as it is internationally. Modify the product for different countries or regions. Design new products for foreign markets. Incorporate all differences into one flexible product design and introduce it globally.

Exhibit 10.2 - Standardization versus Adaptation Factors encouraging standardization luxury products Economies of scale in production cost saving Economies in product R&D Economies in marketing Global competition Factors encouraging adaptation food products Differing use conditions Government and regulatory influences Differing consumer behavior patterns cultures Local competition

Exhibit 10.3 - Strategic Adaptation to Foreign Markets High Need for Adaptation Degree of Cultural Grounding Low Industrial/ Technology Intensive Consumer Nature of Product Source: Adapted from W. Chan Kim and R. A. Mauborgne, “Cross-Cultural Strategies,” Journal of Business Strategy 7 (Spring 1987): 31; and John A. Quelch and Edward J. Hoff, “Customizing Global Marketing,” Harvard Business Review 64 (May-June 1986): 92-101.

Product Variables Factors affecting adaptation Factors affecting adaptation Firms consider three factors in deciding the form in which the product is to be marketed abroad: The market(s) that have been targeted. The product and its characteristics. Company characteristics, such as resources and policy.

Exhibit 10.4 - Factors Affecting Product Adaptation

The Market Environment Government regulations Political agendas often dictate government regulatory requirements Firms can influence these regulations by lobbying directly or through industry associations. Economic integration reduces discretionary governmental regulations to some extent. Nontariff barriers Include product standards, testing or approval procedures, subsidies for local products.

The Market Environment Customer characteristics, expectations, and preferences Physical size, local behaviors, tastes, attitudes, and traditions influence product adaptation decisions. Consumption patterns, psychosocial characteristics, and general cultural criteria determine cultural and psychological specificity in relation to products and services. Product positioning - Consumers’ perception of a brand as compared with that of competitors’ brands. Diet Coke to light

The Market Environment Economic development Affects demand characteristics and helps determine potentials for selling certain kinds of products and services. Backward innovation of the product may be required to meet local requirements.

The Market Environment Competitive offerings - Monitoring competitors’ product features is critical in adjusting the product for competitive advantage. Climate and geography - Have an effect on the total product offering— the core product; tangible elements, mainly packaging; and the augmented features.

Product Characteristics The inherent features of the product offering, whether actual or perceived. Product constituents and content Branding Packaging Appearance Method of operation or usage Quality Service Country-of-origin effects

Product Characteristics Product constituents and content Product ingredients must not violate local legal regulations and social or religious customs. Appearance Adaptations in styling, color, size, and other appearance features play an importance role in how a consumer perceives a product.

Product Characteristics Branding Brand - Name, term, symbol, sign, or design used by a firm to differentiate its offerings from those of its competitors. Allows further standardization of other marketing elements such as promotional items. Trademark - The legally protected part of the brand, indicated by the symbol ®; are quite vulnerable to counterfeiters. Brand loyalty translates into profits even though favored brands may not be superior by any tangible measure.

Product Characteristics The following approach has been suggested for avoiding problems with brand names in foreign markets: Transliteration Transparency Transculture

Product Characteristics Packaging Serves three major functions—protection, promotion, and user convenience. Varies as a function of transportation mode, transit conditions, and length of time in transit. The promotional aspect of packaging relates mostly to labeling.

Product Characteristics Packaging User convenience is a priority in packaging decisions; Containers must withstand logistics challenge, and yet must be easy for customers to open. Package aesthetics mainly involves the prudent choice of colors and package shapes. Package size varies according to purchasing patterns and market conditions.

Product Characteristics Method of operation or usage The product that is operable in the domestic market may not be operable in the foreign market. Exporters should determine the required product adjustments by observing competitive products or having their product tested by a local entity. Products that rely heavily on written or spoken language have to be adapted for better penetration of the market. Marketers may also have to adapt the product to different uses and be open to ideas for new uses for the product being offered.

Product Characteristics Quality Quality is essential to marketing products internationally, especially in markets where price is not the sole competitive factor. Firms invest in research and development for new products as well as manufacturing methods. Marketers seek endorsement of their efforts from governmental or consumer organizations. Markets must meet international quality standards to compete for business and win contracts; for example compliance with ISO standards.

Product Characteristics Service Repair arrangements must be up to standards to handle product breakdowns. Product warranties provide instructions to customers about what to do if the product fails within a specified period of time.

Product Characteristics Country-of-Origin effects The origin of a product may have a strong effect on consumer perceptions and biases about foreign products. This effect reduces as: Customers become more informed. Countries develop the necessary bases to manufacture products.

Company Considerations Product adaption depends on: The firm’s ability to control costs, correctly estimate market potential, and secure profitability in the long The firm’s ability. o maintain consistency in their marketing efforts. Availability of managerial expertise to decide between standardization and adaptation.

Product Counterfeiting 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. The European Union estimates that trade in counterfeit goods accounts for 2 percent of total world trade. The largest number of counterfeit goods are sourced from China, Brazil, Taiwan, Korea, and India.

Product Counterfeiting Counterfeiting is a pervasive problem not only in terms of geographic reach but also the ability of counterfeiters to deliver products, and the market’s willingness to buy them. The first task in fighting intellectual property violation is to use patent application or registration of trademarks or mask works. After securing valuable intellectual property rights, the international marketer must act to enforce these rights.