Chapter 10 – Developing Global Products and Brands “People ask me what has driven the resurgence of the Levi’s® brand and my answer is always: “product, product and more product.” Among all the initiatives we are pursuing to strengthen the company, creating great products is the most critical to our success.” John Anderson, President and CEO, Levi Strauss & Co McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc All rights reserved Outline The Product Life Cycle Across Countries  Standardization Versus Adaptation  • Benefits of standardization • Challenges to standardization  Product Issues • Use • Perception and Expected Benefits • Attributes • Regulations and Standards • Aesthetics and Quality • Packaging • Brand Strategy • Country of Origin • Service Attributes Product Strategies in International Markets  Management Orientation  Summary  10-2 Reducing the Risk of Failure  In order to reduce the risk of foreign market failure, companies must assess:  Differences in product use  Expected benefits  Product and brand perception  Preferences in style, color and design  Examples:  VW – Phaeton  Costa Cruise Line  Starbucks – China 10-3 Product Life Cycle  The course a product’s sales and profits takes over its lifetime, from its introduction to its final withdrawal from the market, is described by the product life cycle (PLC) which is divided into five different stages      Product development stage Introduction phase Development phase Maturity phase Decline phase 10-4 The Product Life Cycle Figure 10-1 10-5 The PLC Across Countries  PLC can vary across countries • Shape of PLC curve  Differences in diffusion process among countries that shape the PLC curve:  Starting point In order to identify the phase occupied by  Take-off point a product/brand in the  Acceptance rate PLC, it is possible to • The product’s position within the various life phases analyze the market cycle demand 10-6 PLCs of Different Countries for a Specific Product Figure 10-2 10-7 Product Life Cycle and Advertising across Different Countries Figure 10-4 10-8 The Standardization versus Adaptation Dilemma  Five Alternatives The domestic product is exported with no adaptation The domestic product is exported with adaptations A global standardized product is created for a transnational segment across many markets A global product is created for a transnational segment, with some adaptation for local markets A new product is created to target a foreign market The phenomenon is complex, as it must take into account the relationship among market, industry and company factors 10-9 The Standardization/Adaptation Trade-Off Figure 10-5  Optimal level of standardization / adaptation is found when the combined costs of manufacturing and lost sales are at a minimum 10-10 Global Brand Positioning  Guidelines for success of a global brand • Recognition • Consistency • Emotion • Uniqueness • Adaptability • Management 10-26 Global Brand Positioning Difficult to implement because of markets’ progressive fragmentation  Brand reflects uniqueness of product image  Can allow companies to overcome potential negative attitudes  Can convey perception of functional and performance characteristics  10-27 Brand Name and Logo Selection Integral part of company’s product  Should be carefully chosen  The main questions that a company needs to answer when defining its brand and logo for selling abroad are:  • Can we use the same brand name in all our potential foreign markets? • Can we standardize our logo on an international level?  Branding options for foreign markets • Keep original brand name (e.g Chanel, Versace, Cartier) • Completely different brand name (e.g Unilever ice cream brands) 10-28 Country of Origin  Country-of-origin or made-in effect, represents the extension of the perception of a specific country to its products or brands, because consumers react differently depending on the country where the product has been manufactured  Perception depends on country of origin • Historical • Socio-Economical • Political • and Cultural of COO  Ethnocentrism phenomenon 10-29 Elements Influencing Product Nationality Perception  The national product's image versus imported or international products  Generic products perceived country of origin: yoghurt is associated with the Balkans, perfume evokes France, jeans the USA, pasta is linked with Italy, etc  The manufacturing company national image;  The image diffused by the brand name  The label “made in” image indicating the manufacturing origin, mandatory in international trade 10-30 Ideal Tools to Strengthen Brand Image The company’s products are guaranteed by independent manufacturers  The company’s products have been examined by external labs tests  The company offers warranties on the products  The company partners with prestigious distributors  10-31 Service Attributes Service attributes can be of significant importance for the evaluation of product quality They include:  Installation  After-sales service  Warranties  Repair and maintenance  Spare pars  Returns  Instruction manuals   In business to consumer marketing, the guarantee of an after sale service can be essential  If a company operates in the business to business sector, the evaluation of services offered to customers is more complex and needs to be considered together with the level of standardization and the type of warranties offered in the country of origin and abroad 10-32 Product Strategies in International Market  Five Strategies • Strategy 1: Product – Communication Extension (Dual Extension) • Strategy 2: Product Extension – Communication Adaptation • Strategy 3: Product Adaptation – Communication Extension • Strategy 4: Product – Communication Adaptation (Dual Adaptation) • Strategy 5: Product Invention 10-33 Dual Extension Selling the same product with the same communication strategies in different countries  Examples  • McDonald’s – Successful • Wal-Mart in Germany - Unsuccessful 10-34 Product Extension – Communication Adaption Product with homogeneous features, but differences in consumers’ perception  Example  • De’ Longhi 10-35 Product Adaptation – Communication Extension Markets similar in the communication approach, but need adaptation  Example  • MySpace 10-36 Product and Communication Adaption Markets that are totally different  Example  • Nokia in India Product invention when product adaptation is not sufficient  Examples  • Intel – One Laptop per Child (OLPC) • Ford – Global Program team for Europe, North America and Asia 10-37 Management Orientation  Management orientation (ethnocentric or global oriented) can determine the choice between standardization and adaptation 10-38 Summary The product is the most important element of the marketing program  Product strategy requires an evaluation of the basic needs and conditions of use in the company’s existing and proposed markets  Product Categorization  • Local • National • international • Global  The market potential for products determined by • product saturation levels • national income levels • technology standards • cultural conditions and others 10-39 Summary  Four factors when designing products for global markets: • Preferences • Costs • Regulations • Compatibility  Five strategic positioning alternatives • Product/communications extension • Product extension/communications adaptation • Product adaptation/communications extension • Dual adaptation • Product invention 10-40 ...  • Brand strategy (global versus local brands) • Brand positioning • Brand selection (name and logo) 10-22 Brand Strategy  Brands have acquired such an important position that the brand value... The use of two brand on the same product  Licensed brand • Eddie Bauer Jeeps, Martha Stewart pet products 10-25 Global Brand Positioning  Guidelines for success of a global brand • Recognition... Standardization versus Adaptation  Global versus local competition • Global: Standardization • Local: Adaptation  Global versus local customers • Global: Standardization • Local: Adaptation 