10 Global Product Strategies

Learning Objectives List the advantages of product standardization and product adaptation. Differentiate between mandatory and discretionary product adaptations. Explain the concepts of global product standards and generic management system standards. Explain why product lines can vary from country to country. Define modularity and explain its impact on global product development. Compare and contrast the product development roles played by a multinational firm’s headquarters and the roles played by subsidiaries. Explain the importance of lead markets and note their importance to product development. Describe how companies may access new products by purchasing research and development or by importing products from other firms. Discuss the use of acquisitions, joint ventures, and alliances for the purpose of product development. Explain the process of introducing new products to global markets, including concept testing, test marketing, and the timing of new product introduction.

Chapter Overview Product design in a global environment Packaging and labeling for global markets Global warranty and service policies Managing a global product line Introducing new products to global markets

Types of Product Adaptation Mandatory –Necessary for product to be sold in a local market Discretionary –Not necessary but may be beneficial

Climatic, Infrastructure and Use Physical realties of markets affect product decisions People may actually use the products differently in a market

Performance and Quality Standards Products designed in highly developed countries often exceed the performance needed in developing countries Companies from developing countries selling in developed-country markets may have to increase the performance of their products to meet the standards of industrialized countries

Global Standards Growth in international commerce has increased the benefits of international standards

Global Standards (cont.) Country-to-country standards still predominate –National organizations set standards for products and business practices –U.S. standards system is fragmented –Unification of Europe forced EU to adopt regional standards

Global Standards Incompatible national standards can hinder global companies

Packaging and Labeling Adaptations Size, shape, materials –Product packaging norms –Existing standards –Economic development –Environmental concerns Color and text –Promotional strategy –Cultural meaning and implications –Government regulations –Language issues

Product Warranties Standardization versus Adaptation –Domestic warranty valid worldwide? –Tailoring warranties to countries/markets? Issues to consider –Actual product use –Local competition –Spillover effects to other markets

Global Product Service Why do companies provide after-sales service for their products? –Warranty credibility –Differentiate from competition –Decrease economic loss due to product malfunction or downtime

Modularity Modularity – Development of standard modules that can easily be connected with other standard modules to increase the variety of products

New Product Development Processes The shift from global to local development requires consideration of unique or special conditions for major markets at the very beginning of product development

Lead Markets and R&D Corporations must keep track of evolving lead markets as major sources for new product ideas and production techniques Lead market – A market whose level of development exceeds that of the markets in other countries

Foreign Subsidiary Input in R&D Foreign subsidiaries rarely play active R&D role unless they have manufacturing responsibilities Manufacturing subsidiaries may assume R&D functions if adaptation is required MNCs are increasing R&D investment abroad to obtain key market input

Introducing New Products into Global Markets Concept Tests –Importance of subjecting new product to actual use conditions