Global Marketing Management, 5e Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 1 Chapter 10 Global Product Policy Decisions I: Developing New Products for Global Markets

Chapter Overview 1.Global Product Strategies 2.Standardization Versus Customization 3.Multinational Diffusion 4.Developing New Products for Global Markets 5.Truly Global Product Development Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 2

Introduction  A cornerstone of a global marketing mix program is the set of product policy decisions that multinational companies (MNCs) constantly need to formulate.  The range of product policy questions may include:  What new products should be developed for what markets?  What products should be added, removed, or modified for the product line in each of the countries in which the company operates?  What brand names should be used?  How should the product be packaged and serviced? Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 3

Introduction  Examples of improper product policy decisions in global marketing:  Ikea in the United States  Procter & Gamble in Australia  U.S. Car Makers in Japan Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 4

1. Global Product Strategies  Three global strategies to penetrate foreign markets:  Extension strategy  Adaptation strategy  Invention strategy Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 5

1. Global Product Strategies  Five strategic options for the global marketplace:  Strategic Option 1: Product and Communication Extension -- Dual Extension  Strategic Option 2: Product Extension -- Communications Adaptation  Strategic Option 3: Product Adaptation -- Communications Extension  Strategic Option 4: Product and Communications Adaptation -- Dual Adaptation  Strategic Option 5: Product Invention Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 6

Exhibit 10-1: Global Expansion Strategies Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 7

2. Standardization versus Customization  Five forces favoring a globalized product strategy: 1. Common customer needs 2. Global customers 3. Scale economies 4. Time to market 5. Regional market agreements Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 8

2. Standardization versus Customization  Degree of Standardization  Modular Approach  Core-Product (Common Platform) Approach Balancing act between standardization and adaptation Overstandardization vs. overcustomization Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 9

Chapter 11Copyright (c) 2007 John Wiley & Sons, Inc. 10 Exhibit 10-2: 2008 Automotive Color Popularity

Chapter 11Copyright (c) 2007 John Wiley & Sons, Inc. 11 Exhibit 10-2 (cont): 2008 Automotive Color Popularity

Chapter 11Copyright (c) 2007 John Wiley & Sons, Inc. 12 Exhibit 10-2 (cont): 2008 Automotive Color Popularity

3. Multinational Diffusion  Example:  Microsoft’s Xbox videogame  The Adoption of new products is driven by three types of factors:  Individual Differences  Personal Influences  Product Characteristics 1. Relative advantage 2. Compatibility 3. Complexity 4. Trialability 5. Observability Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 13

3. Multinational Diffusion  Other country characteristics used to predict new product penetration patterns include:  Homogeneous population  Lead countries  Lag countries  Cosmopolitanism  Mobility  Labor force profile, Developing vs. Developed countries Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 14

3. Multinational Diffusion Time to “Take off” - Most new products display a distinct period of time to takeoff - Varies a great deal across product categories, between countries, previous takeoff experience Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 15

Chapter 11Copyright (c) 2007 John Wiley & Sons, Inc. 16 Exhibit 10-3: Mean Time to Take Off Across Product Categories within a Country

Chapter 11Copyright (c) 2007 John Wiley & Sons, Inc Developing New Products for Global Markets  Identifying New Product Ideas  4 C’s: Company Customers Competition Collaborators  New Product Development (NPD) Process  Screening  Concept Testing  Conjoint analysis  To Standardize or not to standardize

Chapter 11Copyright (c) 2007 John Wiley & Sons, Inc Developing New Products for Global Markets  Test marketing  May be skipped to save money  Lead markets can be used as projections (Exhibit 10-4)  Timing of Entry (Exhibit 10-5)  Waterfall—staged rollout beginning with home country  Sprinkler—global rollout simultaneously Often used for high tech goods

Chapter 11Copyright (c) 2007 John Wiley & Sons, Inc. 19 Exhibit 10-4: Examples of Test Market Countries

Exhibit 10-5: Waterfall versus Sprinkler Models Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 20

Chapter 11Copyright (c) 2007 John Wiley & Sons, Inc. 21 Exhibit 10-6: Roll-Out of Xbox 360 and Sony Playstation 3

5. Truly Global Product Development  Scores of companies have research centers spread across the world. Challenge is to establish a truly global innovation process that transcends local clusters (i.e., to become a metanational innovator).  To harvest the benefits of metanational innovation:  Prospecting- find valuable new pockets of knowledge around the world.  Assessing- decide on an optimal footprint (number and dispersion of knowledge sources). Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 22

5. Truly Global Product Development  Mobilizing: To harness the benefits of global innovation, companies must find ways to mobilize pockets of knowledge (e.g., technical blueprints, patents, equipment, market knowledge).  The optimal strategy for mobilizing knowledge depends on the type (simple vs. complex) and nature (technical vs. market) of the knowledge involved. Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 23

5. Truly Global Product Development  4 possible strategic scenarios for mobilizing knowledge:  Exchange information (arm’s length, digital transfer is sufficient).  Move information about the market where the technology is.  Move information about the technology to where the market knowledge is  Move knowledge by rotating people and by temporary co- location (See Exhibit 10-7.) Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 24

Exhibit 10-7: Mobilizing Knowledge Chapter 10Copyright (c) 2009 John Wiley & Sons, Inc. 25