Chapter 8 Product Adaptation Developed by Cool Pictures

Chapter 8 Product Adaptation Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Product Variables • The Core 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. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Standardization versus 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 foreign markets. – Incorporate all differences into one product and introduce it globally. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Standardization versus 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 Developed by Cool Pictures & Multi. Media Presentations • • • FACTORS ENCOURAGING ADAPTATION Differing use conditions Government and regulatory influences Differing consumer behavior patterns Local competition True to the marketing concept Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Strategic Adaptation to Foreign Markets 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. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

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 Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

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. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

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. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Product Characteristics • • Developed by Cool Pictures & Multi. Media Presentations Product Constituents Branding Packaging Appearance Method of Operation or Usage Quality Service Country-of-Origin Effects Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

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 Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

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. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Method of Operation or 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. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

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. Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Country-of-Origin Effects • The origin of a product may have a strong effect on consumer perceptions and biases about foreign products. Swiss France Developed by Cool Pictures & Multi. Media Presentations “Mad Cow” Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

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? Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

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 How to avoid Software piracy informational site Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Product Counterfeiting 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 Developed by Cool Pictures & Multi. Media Presentations Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.