1. Product Adaptation
Pesewa Presentations

2. Three Basic Considerations
Markets targeted.
Product and its characteristics.
Company resources and policy.

3. Defining a Product
A product is anything that can be offered to a market for attention, acquisition, use or consumption; it includes physical objects, services, personalities, places, organisations and ideas.
Philip Kotler

5. Product Variables The Core Product The Tangible Product
a product or services that is essentially the same as that of competitors.
The Tangible Product
a product or service that is differentiated composition, origin, or tangible features from competing products.
The Augmented Product
a product or service which is serviced after the sale and carries a warrantee from the producer, producing a continuing relationship with the seller.

6. Standardisation and Adaptation
The fundamental international product decision after the decision to internationalize.
International market approach alternatives to adaptation.
Sell the product as it is internationally.
Modify product for different countries or regions.
Design new products for foreign markets.
Incorporate all differences into one product and introduce it globally.

7. Standardisation and Adaptation
FACTORS ENCOURAGING STANDARDIZATION
Economies of scale in production
Economies in product R&D
Economies in marketing
“Shrinking” of the world marketplace/economic integration
Global competitions
FACTORS ENCOURAGING ADAPTATION
Differing use conditions
Government and regulatory influences
Differing consumer behavior patterns
Local competition
True to the marketing concept

8. Strategic Adaptation to Foreign Markets
Low
High
Industrial/ Technology Intensive
Consumer
Need for Adaptation
Degree of Cultural Grounding
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):

9. Factors Affecting Adaptation
Decision to Alter
Domestic
Product
SOURCE: Adapted from V.Yorio, Adapting Products for Export (New York; Conference Board, 1983), 7. Reprinted with permission

10. The Market Environment
Government Regulations
Political and social agendas often dictate regulatory requirements.
Nontariff Barriers
Product standards, testing, subsidized local products.
Customer Characteristics, Expectations, and Preferences
Physical size, local behaviors, tastes, attitudes, and traditions.
Consumption patterns, psychosocial characteristics, and general cultural criteria.

11. The Market Environment
Economic Development
The stage of economic development affects the market size and demand characteristics. Backward innovation of the product may be required to meet local requirements.
Competitive offerings
Monitoring competing local products is critical in adjusting the product for competitive advantage.
Climate and geography
Local climatic conditions and terrain features can make products vulnerable to damage.

12. Product Characteristics
Product Constituents
Branding
Packaging
Appearance
Method of Operation or Usage
Quality
Service
Country-of-Origin Effects

13. Product Constituents and Branding
Product ingredients must not violate local legal regulations and social or religious customs.
Care must be taken that the brand in name, symbol, sign, or design does not offend the local customer. Trademarks are especially vulnerable to counterfeiters.
Selecting the global brand name
Translation
Transliteration
Transparency
Transculture

14. Packaging and Appearance
Packaging serves three major functions:
Protection
Improper handling and pilferage
Promotion
Language and symbols
User convenience
Packaging aesthetics- color and shape, overall size, and purchase quantity
Adaptations in styling, color, size, and other appearance features play an importance role in how a consumer perceives a product.

15. Method of Operation and Usage
The product that is operable in in the domestic market may not be operable in the foreign market.
Electrical voltages and connectors vary around the world. English and metric standards are not comparable.
Software may have to be translated into the local language.

16. Quality and Service
Quality is essential to marketing products internationally, especially in markets where price is an important competitive factor.
ISO compliance may be required by buyers.
Servicing products in international markets requires producers to develop local repair staffs.

17. Country-of-Origin Effects
The origin of a product may have a strong effect on consumer perceptions and biases about foreign products.
“Mad Cow”
Swiss
France

18. Company Considerations
Organizational capabilities?
Is it worth it?
Can we afford not to do it?
Can a specific return-on-investment (ROI) be attained?
Quality, price, and user perceptions?
Warranties?
Managerial talent?

19. Product Counterfeiting
Costs U.S. firms over $60 billion a year
In 2001, losses to software piracy were more than 11 billion dollars.
Counterfeiting is estimated at 2% to 5% of total world trade annually.
The largest number of counterfeit goods come from:
China
Brazil
Taiwan
Korea
India

20. Fighting Product Counterfeiting
Secure valuable intellectual property rights
patent applications
registration of trademarks
mask works
Act to enforce
legislative action
bilateral and multilateral negotiations
joint private sector action
individual company measures

21. Four Product Alternatives for International Markets
Selling the product “as is”, in the international marketplace.
Modifying products for different countries and/or regions.
Designing new products for foreign markets.
Incorporating all the differences into one product design and introducing a global product.

22. Four Product Categories:
Local products: perceived as having potential only in a single national market
International products: Products having potential for a number of national markets
Multinational products: Products adapted to the perceived unique characteristics of national markets
Global products: Products designed to meet the needs of a global market segment

23. The Role of Brands
A brand is a distinguishing name and/or symbol (such as a logo, trademark or package design) intended to identify the goods or services of either one seller or a group of sellers, and to differentiate those goods or services from those of competitors. A brand thus signals to the customer the source of the product, and protects both the customer and the producer from competitors who would attempt to provide products that appear to be identical.

24. The International Brand: Four Approaches
Translation.
Transliteration testing existing brand name for connotative meaning, e.g., “flic” pen.
Transparency, i.e., meaningless brand name to minimize complexities.
Transculture. Foreign language name forms a brand, e.g., vodka or perfume.

25. Brand Name Selection Criteria
Easy to learn and memorize.
Suggest a product class.
Support a symbol or logo.
Suggest associations.
Be credible.
Be distinctive.
Be available and legally protectable.

26. What Is Brand Equity?
The set of brand assets and liabilities linked to the brand - its name and symbols - that add value to, or subtract value from, a product or service. These assets include brand loyalty, name awareness, perceived quality and associations.

27. Brand Equity Assets Brand Loyalty.
Awareness of Brand Name and Symbols.
Perceived Quality.
Associations.
Others, e.g., patents, trademarks, channel relationships.

28. Export Pricing

29. Export Pricing Price Dynamics
Pricing is the only revenue generating element of the marketing mix.
Pricing is a means of attracting and communicating an offer to a potential buyer.
Pricing is a competitive tool.
Pricing can be used to position the product or service in the marketplace.

30. Price Dynamics Skimming Market Pricing Penetration Pricing
Using high-priced unique products to achieve the highest possible contribution in a short initial time period, then gradually lowering the price as the market.
Market Pricing
Following competitive pricing in the target market; adjusting production and marketing mix to competitive conditions.
Penetration Pricing
Offering low pricing to generate volume sales which hopefully will compensate for low margins

31. The Setting of Export Prices
ASSESSMENT OF PRICING ENVIRONMENTS
INTERNAL
Marketing Mix
Product (e.g., old/new; standardized/differentiated
Distribution system (e.g., length)
Promotion needs (e.g., sales efforts)
Company characteristics
Extent of internationalization
Countries exported to
Management attitudes
Importance of exports
Overall price position of firm
EXTERNAL
Market-related factors
Nature of demand/target audience characteristics
Government regulations (e.g., duties)
Exchange rate stability
Industry-related factors
Competition intensity
Nature of competition
Pricing Policy Selection
Pricing Strategy Determination
Setting of Specific Price

32. The Setting of Export Prices
Customer Purchase Factors
ability to pay
price-quality relationship
reaction to marketing mix
market support
Pricing Policies Factors
profit maximization
market share
survival
return on investment
competitive policies
copy competitive pricing
follow competitive pricing
price to discourage competitive entry

33. Export Pricing Strategy
Cost-oriented pricing
Standard worldwide price- regardless of buyer’s location in the market(s)
Dual pricing differentiates between domestic and export prices
Cost-plus method allocates domestic and foreign costs to the product.
Marginal cost method considers direct costs of producing and selling exports as floor (lowest) price.
Market-differentiated pricing
based on the dynamics of the marketplace
changes in competition, exchange rates, etc.

34. Export-Related Costs Export-related costs
Cost of modifying a product for a foreign market
Operational costs of exporting
Cost incurred in entering the foreign market
Price escalation for exports results from
Clear-cut and hidden costs
Methods for combating price escalation
Reorganize the channel of distribution
Product adaptation
Change tariff or tax classifications
Overseas assembly or production

35. Terms of Sale
Incoterms are the internationally accepted standard definitions for terms of sale set by the International Chamber of Commerce (ICC) since 1936.
Incoterms
exworks (EXW)
free carrier (FCA)
free alongside ship (FAS)
free on board (FOB)
cost and freight (CFR)
delivered duty paid (DDP)
delivered duty unpaid (DDU)

36. Negotiating Terms of Payment
Considerations
The amount of payment and the need for protection.
Terms offered by competitors.
Practices in the industry.
Capacity for financing international transactions.
Relative strength of the parties involved.

37. The Risk Triangle BUYER’S PERSPECTIVE SELLER’S PERSPECTIVE
Source: Adapted from Chase Manhattan Bank, Dynamics of Trade Finance (New York: Chase Manhattan Bank, 1984),5

38. Terms of Payment Types of Payment Cash in Advance Letter of Credit
Not widely used except for first time transactions
Letter of Credit
Promise to pay
Irrevocable, confirmed, revolving
Drafts
Similar to personal check
Must obtain shipping documents prior to delivery
Documentary collection
Bank acts as collection agent
Draft may be sold at discounted rate for immediate cash

39. Managing Foreign Exchange Risk
Forward rate exchange market
“the exchange of currencies on a future date at an agreed upon exchange rate”
Spot rate transaction
“the exchange of currencies for immediate delivery”
Possible price manipulation responses to currency movements
Make no change in the dollar price (pass-through).
Decrease the export price (absorption).
Pass-through only a portion of the increase.

40. Exporter Strategies Under Varying Currency Conditions
WEAK POSITION
Stress price benefits
Expand product line
Shift sourcing to domestic market
Cash-for-goods trade
Full costing
Speed repatriation
Minimize expenditure in local currency
STRONG POSITION
Non-price competition
Improve productivity/ cost reduction
Sourcing overseas
Prioritize exports
Countertrade with weak currency countries
Marginal-cost pricing
Slow collections
Buy needed services abroad

41. Price Negotiations
Be aware that price is only one part of a comprehensive package. Avoid early price concessions.
Carefully consider concessions that reduce price or profitability.
discounts, payment terms, product features
Know conditions in importer’s market.
Focus negotiations first on substantive issues (quality and delivery), then on price.

42. Dumping Ranges of dumping Remedies for dumping Predatory dumping
is intentional selling at a loss to increase market share
Unintentional dumping
occurs when market factors cause the import’s selling price to fall below prices in the exporter’s home market
Remedies for dumping
Antidumping duty
are levied on imported goods sold at less than fair market value
Countervailing duties
are imposed on imports which are subsidized in the exporter’s home country