Chapter 10 Product Adaptation

1. 0 Chapter 10 Product Adaptation

2. Product Variables 0 • A product or service is a complex combination of tangible and intangible elements that distinguishes it from other entities in the marketplace.

3. Exhibit 10.1 - Elements of a Product 0

4. Product Variables 0 • Standardization versus adaptation • Basic alternatives for approaching international markets are: • Modify the product for different countries or regions. • Incorporate all differences into one flexible product design and introduce it globally.

5. Factors encouraging standardization Economies in product R&D “Shrinking” of the world marketplace/economic integration Factors encouraging adaptation Government and regulatory influences Local competition Exhibit 10.2 - Standardization versus Adaptation 0

6. Exhibit 10.3 - Strategic Adaptation to Foreign Markets 0 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.

7. Product Variables 0 • Factors affecting adaptation • Firms consider three factors in deciding the form in which the product is to be marketed abroad:

8. Exhibit 10.4 - Factors Affecting Product Adaptation 0

9. The Market Environment 0 • Government regulations • Political agendas often dictate government regulatory requirements. • Economic integration reduces discretionary governmental regulations to some extent. • Nontariff barriers

10. The Market Environment 0 • Customer characteristics, expectations, and preferences • Consumption patterns, psychosocial characteristics, and general cultural criteria determine cultural and psychological specificity in relation to products and services. • Product positioning -

11. The Market Environment 0 • Economic development • Affects demand characteristics and helps determine potentials for selling certain kinds of products and services.

12. The Market Environment 0 • Competitive offerings - • Climate and geography -

13. Product Characteristics 0 • The inherent features of the product offering, whether actual or perceived. • Branding • Appearance • Quality • Country-of-origin effects

14. Product Characteristics 0 • Product constituents and content • Appearance

15. Product Characteristics 0 • Branding • Brand - • Allows further standardization of other marketing elements such as promotional items. • Trademark - • Brand loyalty translates into profits even though favored brands may not be superior by any tangible measure.

16. Product Characteristics 0 • The following approach has been suggested for avoiding problems with brand names in foreign markets:

17. Product Characteristics 0 • Packaging • Serves three major functions— • Varies as a function of transportation mode, transit conditions, and length of time in transit.

18. Product Characteristics 0 • Packaging • User convenience is a priority in packaging decisions; Containers must withstand logistics challenge, and yet must be easy for customers to open. • Package size varies according to purchasing patterns and market conditions.

19. Product Characteristics 0 • Method of operation or usage • The product that is operable in the domestic market may not be operable in the foreign market. • Products that rely heavily on written or spoken language have to be adapted for better penetration of the market.

20. Product Characteristics 0 • Quality • Quality is essential to marketing products internationally, especially in markets where price is not the sole competitive factor. • Marketers seek endorsement of their efforts from governmental or consumer organizations.

21. Product Characteristics 0 • Service • Product warranties provide instructions to customers about what to do if the product fails within a specified period of time.

22. Product Characteristics 0 • 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:

23. Company Considerations 0 • Product adaption depends on: • The firm’s ability to control costs, correctly estimate market potential, and secure profitability in the long term. • The firm’s ability to maintain consistency in their marketing efforts.

24. Product Counterfeiting 0 • Counterfeit goods – • 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:

25. Product Counterfeiting 0 • 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. • After securing valuable intellectual property rights, the international marketer must act to enforce these rights.

26. Exhibit 10.8: Measures to Combat Counterfeiting 0

27. Product Counterfeiting 0 • Few acts, agreements, and alliances that help combat counterfeiting include: • The Trademark Counterfeiting Act of 1984 • The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement • Counterfeit Intelligence and Investigating Bureau