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Global Product Strategies
Chapter 10 Global Product Strategies
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McDonalds Products Around the World
McDonalds tries to standardize its products as much as possible around the world Basic meal of sandwich, fries, drink in most markets Fries 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):
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McDonalds’ Product Adaptations
Canada Cheese, vegetable, pepperoni and deluxe pizza Uruguay McHuevo - A hamburger with a poached egg on top Thailand Samurai Pork burger - A sandwich marinated with teriyaki sauce Philippines McSpaghetti - Pasta in a sauce with frankfurter bits New Zealand Kiwiburger - A hamburger with a fried egg and slice of beet Japan Chicken Tatsuta - A fried chicken sandwich spiced with soy sauce and ginger Germany 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.
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The International Marketing Dilemma
Product Standardization Product Adaptation versus. McDonalds—like all international markters—must balance standardization and adaptation pressures in foreign markets.
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Benefits of Product Standardization
Lower costs Lower R&D costs Lower ingredient / input costs Fewer setup / changeover costs Lower handling costs Lower distribution costs Faster global roll-outs are possible Stronger (?) brand equity “Global Brand”
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Types of Product Adaptation
Mandatory Necessary for product to be sold in a local market Discretionary Not necessary but may be beneficial
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Competitive offerings Climate, geography, and infrastructure
PRESSURES FOR PRODUCT ADAPTATION Competitive offerings Climate, geography, and infrastructure Government regulations and international standards Customer expectations, preferences, and buyer behavior
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Benefits of Product Adaptation
Penetrate otherwise closed markets “Stress-Testing” your product for global expansion Better product performance in different use conditions Lower costs by using local inputs Lower costs due to feature elimination
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Climatic, Infrastructure and Use
Physical realties of markets affect product decisions Air conditioners in Saudi Arabia must be able to operate under conditions that are hotter and dustier than those in most U.S. locations People may actually use the products differently in a market P&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
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Performance and Quality Standards – Developing and Developed Countries
Products designed in highly developed countries often exceed the performance standards of developing countries Customers 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.
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Be careful when upgrading!!!
MNCs often acquire local competitor in developing country overhaul production and marketing capability to mirror that of the parent organization Company then raises prices, making products unaffordable to developing market Market 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.
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Global Standards Growth in international commerce has increased the benefits of international standards The benefits of international standards are obvious when you travel…. Ever tried to use your U.S, hairdryer in another country?
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Global Standards (cont’d)
Country-to-country standards still predominate National organizations set standards for products and business practices E.g., British Standards Institute, Canadian Standards Association U.S. standards system is fragmented 450 different standard-setting groups Unification of Europe forced EU to adopt regional standards
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Global Standards Incompatible national standards can hinder global companies May require expensive product, packaging, and labeling adaptation Fewer economies of scale opportunities Time and effort required to research and monitor standards May dissuade firms from entering markets
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Global Standards (cont’d)
1947 creation of International Standards Organization in Geneva Non-governmental organization Federation of national standards bodies from 140+ countries Consists of member firms “most representative of standardization in their home countries” Standards set by ISO are highly specific Examples: film speed codes, formats for telephone and banking cards, etc.
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Global Standards (cont’d)
ISO 9000 Established 1987 Based on the British standard for quality assurance (BS5750) Generic management system standard Ensures organization can consistently deliver a product or service that satisfies the customer’s requirements via a state-of-the-art management system.
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Cultural Preferences Color Scent Sounds Taste
Red and white have happy associations in Japan; green associated with jungle and illness in Malaysia Scent Strawberry shampoo failed in China where consumers shun non-edible items that smell like food Sounds Forced to eliminate “ping” sound from word processing in Japan because workers were mortified when their mistakes were made public. Taste What tastes good varies from country to country (saltiness, sourness, sweetness, etc.)
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Food 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 weather The solution? Frito Lay introduced a “cool lemon” chip packaged in pastel shades – it became the company’s best selling item in China!
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Product Size and Dimensions
Different physical surroundings and available space Different physical characteristics of consumers Consumer income levels – more affluent consumers can buy in bulk
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Comprehensive 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 service Comprehensive warranty and service policies can be important marketing tools!
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Global Product Service (cont’d)
Maintaining required service levels abroad Selecting organization to provide service Company-owned or outsourced? Adequate inventory of spare parts Viewing investments in service costs as investments in future volume
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Global Product Line Management
Not all products are suitable for all markets! Coca-Cola’s traditional brands = 90% global sales 33% Japan subsidiary sales 25 years of product innovation in Japanese subsidiary!
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Global Product Line Management (cont’d)
Lines in overseas markets typically are NARROWER than in home market Lack of sufficient market size Earlier life cycle stages Niche target segments at home may be smaller or absent Lack of market sophistication New product introductions tend to begin at home and follow abroad
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Foreign Subsidiary Input in R&D
Foreign subsidiaries can play active R&D roles – especially in adaptive environments - but oftentimes do not Sales subsidiaries may provide ideas about product adaptation MNCs are increasing R&D investment abroad to obtain key market input New ideas come from foreign cultures and marketers – but where can they be re-applied?
