Global Products Definition Global Products are standardized products

Global Products

Definition -Global Products are standardized products with a common brand name, with uniform features in all countries § Eg: Gillette, Benetton Sweaters -Regional products & regional brands are unique to a particular region. § E. g: P&G’s Ariel, Honda’s City etc -Regional products are latently global. They may become global as more customers know about it -Marketing Global products is lot more complex than selling Regional Products

Advantages of Standardization -For many products standardization is inevitable § Uniform need for the product – Steel, Metals § Economies of Scale & Scope. Benefit from a large market -Key Benefits § § § Cost Reduction – Economies of scale & scope Improved Quality Enhanced Customer Preference Global Customers Global Market Segments

Drawbacks of Standardization -Off-Target or Wrong positioning in some countries § Customers may have different needs § Market segmentation is not always identical across cultures -Lack of Uniqueness – Customers want to differentiate themselves with unique things -Vulnerable to Trade Barriers – Global products need free trade -Strong Local Competitors – Local competitors are better at adapting to local needs, making a global products vulnerable

Extent of Standardization -In reality 100% standardization is rare -Some features have to be localized § Packaging, pricing etc -Only the “Core Product” which acts as the foundation is standardized -All additional features are standardized in varying degrees to meet local tastes § E. g : Coca-Cola -Standardization can involve use of Modular design

Factors Favoring Localization -Cultural Demands – Local Tastes & preferences § Even a “Globally standardized” product needs to be localized -Compatibility Requirements § Government Rules § Local Climate & weather § Local Technology standards

Pitfalls of Standardization Five Common Reasons why Standardized products fail 1. Insufficient Market Research 2. Over-Standardization 3. Rigid Implementation 4. Narrow Vision 5. Poor Follow-up

Insufficient Market Research -Insufficient Market Research leads to assumed market similarities, wrong demand estimations -Local subsidiaries may become disenchanted -Non-Acceptance of the product in local markets

Over-Standardization -A standard Product is assumed to be used in a standard way irrespective of the local preferences. -This leads to: § Poor product positioning § Wrong market segmentation -Standard product may need localized marketing efforts

Rigid Implementation -A standardized marketing program is not always beneficial -Often Head-Quarters drives the standardization of all efforts and fails to notice local tastes and ignores better ideas from subsidiaries -Standardized strategies increases overall sales growth but lowers ROI & ROA

Narrow Vision -Increased Standardization leads to a myopic view of the local markets -Local subsidiaries fail to learn from other subsidiaries of the parent -Knowledge sharing and knowledge transfer becomes limited, leading to duplication of efforts, lost opportunities & profits

Poor Follow-up -Launching Standard Global products world wide is a complex task -Often firms do a poor job on following up on efforts and results from other subsidiaries -Local Subsidiaries may not have the required resources to support the global product

Challenges of Global Products Its difficult to maintain a global product line § § § History : Existing local products M&A: Integration of product lines is tough Local Preferences differ Distribution Channels are different Manufacturing Capacity Constrains -Colgate has been quite successful in developing a long line of global products

Globalizing New Products -Successful New products can be Globalized if the factors for its success can be Globalized -Often times factors for a products success in not clearly understood § More than 50% of global new products fail § Market orientation & commitment of senior management is a must § Asian markets need a higher level of technological sophistication, marketing synergies and longer commitment

New Product Success Factors -Some of the common success factors are: § Relative Product Advantage – Advantage over existing alternatives § Synergy with the existing products § Degree to with the new product is innovative § Market orientation & Management Commitment § Intensity of competitive reaction. If more number of competitors react, lesser is the chance of success § Compatibility of the new product with existing infrastructure

Speed of Diffusion -Speed at which a new product is introduced into other countries is termed Speed of Diffusion -Speed of Diffusion depends on: § § § Relative Advantage Compatibility with existing systems Complexity – How easy is it to use? Trailability – How easy is it to try a new product Observability – Ability of potential customers to observe the benefits of the new product § Cosmopolitianism - Hetrogeneity slows down product adaptation

Global Brand Management -Global Brands needs Global brand management -Brand has Brand value and Brand Equity § Coca-Cola brand is worth $69 Billion § Intel Brand is worth $35 Billion -Brand Equity is the present value of the net revenues the brand can be expected to generate over time -Brand Equity depends on intangibles like § Awareness, Knowledge, attractiveness – Brand Stature § Differentiation, Relevance – Brand Vitality -Brand Value is off-books but affects how Brands are managed

Advantages of Global Brand -Demand Spillover § Marketing efforts in one country can create demand on other countries. TV, Internet etc -Global Customers § Global customers often demand a globally standardized products -Scale Economies § Global Advertising, Standardized packaging can cut costs

Brand Portfolio -Consumer goods makers usually have a portfolio of few global brands and several local Brands -Less than 10% of brands are global -In 2001, Study by ACNielson found only 43 global brands in consumer packaged goods -Typically Brands are managed in a Brand Hierarchy, Global/Corporate brand at the top and local brand next § E. g: Honda Accord, Intel Pentium, Sony Vega TV -Global Brands are managed by the parent. Local brands are managed by subsidiaries -Brand Extensions is done to introduce a new product

Brand Globalization Potential -Not all local brands can become global. Here’s a checklist to see the brand fit: § Does the brand name make sense outside the country? § Does the brand suggest a country association? § Can the brand name registered abroad? § Is there synergy with existing Global Brands? § Can a new Global Brand be Justified? § Does the regional brand offer tough competition to global brands in that region?

Implementing Global Brand Implementing a globalization strategy raises few issues: -In the globalization product based involving product entry into new markets? -Is the product category unique to the company? -Can the local brand names be replaced with a global brand name? -E. g: Nokia brands all its telecom products as Nokia, even replacing brand names of acquired companies

Implementing Global Brand -Can Local Brands be replaced without affecting market share? -E. g: Electrolux maintains a host of local brands to retain its local customers -Does replacing a local brand has a significant impact on the product? § E. g: Budweiser in Europe, Thumbs up in India -Does replacing a local brand affect the local competitiveness in the local market? § Local Brands tend to be strongly associated with local culture & offers a higher competitiveness than global brands

Top Global Brands 1. Coca Cola 2. Sony 3. Mercedes-Benz 4. Kodak 5. Disney 6. Nestle 7. Toyota 8. Mc. Donald’s 9. IBM 10. Pepsi-Cola 11. Rolls. Royce 12. Honda 13. Panasonic 14. Levi’s 15. Kleenex 16. Ford 17. Volkswage n 18. Kellogg’s 19. Porsche

Replacing Local Brands Several standard brand Changeover tactics are: -Fade-in/fade-out: Global brand is first associated with the local brand then the local brand is slowly faded out -Endorsement Branding: Use a strong local brand to introduce a global brand § Eg: Acura by Honda -Double Branding: Local-Global brands or Old-New brand together -Summary Axing: Simply drop a local brand & introduce a Global Brand

Counterfeit Products -Strong & Successful Global brand names attracts counterfeiters. -Counterfeit product is more common in high end fashion products § Eg: Gucci, Ray-Ban etc -Counterfeit or fake products are now seen in chemicals, computers etc -Extensive, sustained operation is needed to fight fake goods, often government help is needed

Closing Thoughts -Globalization involves global products and global brand names -Global products is standardized to an extent to gain economies of scale & scope but localized to meet local requirements -Global Brands are few in number and require global scale brand management -New Global brands can be developed with substantial effort & commitment -Changing local Brand names is not easy & requires extensive resources -Counterfeit products is a major threat to established Brand names