Lecture International marketing (14/e) - Chapter 12

Chapter 12 - Global marketing management: Planning and organization. After studying this chapter you will be able to understand: How global marketing management differs from international marketing management, the need for planning to achieve company goals, the important factors for each alternative marketentry strategy, the increasing importance of international strategic alliances.

I n t e r n a t i o n a l M a r k e t i

n g

Products and Services for Consumers

• Define the country of origin effect and give examples

• The text in the book discusses stereotypes, ethnocentrism, degree of

economic development as the basis for generalizations about country

of origin effect on product perception Explain and give an example.

• What are the three major components of a product? Discuss their

important to product adaptation.

• How can knowledge of the diffusion of innovations help a product

manager plan international investment?

• Explain the PLC theory and how it applies to International Marketing

• “If the product sells in Dallas, it will sell in Tokyo or Berlin” Comment

What Should You Learn?

• The importance of offering a product suitable for the

intended market

• The relationship between product acceptance and

the market into which it is introduced

• The importance of quality and how quality is defined

• Country-of-origin effects on product image

• Physical, mandatory, and cultural requirements for

product adaptation

• The need to view all attributes of a product in order

to overcome resistance to acceptance

Global Perspective Hong Kong –

Disney Rolls the Dice Again

• Tokyo Disneyland – successful

• EuroDisney – disaster

• Hong Kong Disneyland – open for business

• Opportunities and challenges for international

marketers of consumer goods and services are

great and diverse

• Any marketing firm’s goal should be quality products

and services that meet the needs and wants of

consumers at an affordable price

• Shift to a customer’s market

• Increased customer knowledge

• The customer defines quality

• The cost and quality of a product

• Quality can be defined on two dimensions

• Most consumers expect performance quality

• In many industries quality is measured by third parties

Maintaining Quality

• Damage in the distribution chain

– Russian chocolate

• Quality is essential for success in today’s

competitive global market

• The decision to standardize or adapt a product

is crucial in delivering quality

Physical or Mandatory Requirements and Adaptation

Green Marketing and Product Development

• Green marketing concerns the environmental

consequences of a variety of marketing activities

• Critical issues affecting product development

– Control of the packaging component of solid waste

– Consumer demand for environmentally friendly products

• European Commission guidelines for

ecolabeling

• Laws to control solid waste

Products and Culture

• A product is the sum of the physical and

psychological satisfactions it provides the user

– Primary function

– Psychological attributes

• The need for cultural adaptation is often

necessary, affected by how the product

conforms

– Values

– Behavior patterns

Innovative Products

and Adaptation

• Determining the degree of newness as

perceived by the intended market

• Diffusion

• Established patterns of consumption and

behavior

• Foreign marketing goal

– Gaining the largest number of consumers in the market

► In the shortest span of time

– Probable rate of acceptance

– Among the members of a social system

• The element of time

• Variables affecting the rate of diffusion of an

object

– Degree of perceived newness

– Perceived attributes of the innovation

– Method used to communicate the idea

Production of Innovations

• Inventiveness of companies and countries

• Expenditures

• Japanese solutions

– American-style education programs

– American design centers

• New ideas come from a variety of sources

– Countries,

– Acquisitions

– Global collaborations

Analyzing Product Components for Adaptation

• Product is multidimensional

• Sum of its features determines the bundle of

satisfactions (utilities) received by consumer

• Three distinct components

– Core

– Packaging

– Support services

Product Component Model

Exhibit 12.1

Product Levels: The Customer

Value Hierarchy

Product Levels: The Customer Value

Hierarchy

• Core benefit: Service customer buys

• Turned into basic product

• Expected product - attributes expected

• Augmented product - exceeds expectations

• Potential product- all possible future

augmentations & transformations of product

Core Components

• Product platform

• Design features

• Functional features

Support Services Component

Barriers to Entering Global Markets

for Consumer Services

• Protectionism

• Restrictions on transborder data flows

• Protection of intellectual property

• Cultural barriers and adaptation

Brands in International Markets

• A global brand is the worldwide use of a name,

term, sign, symbol, design, or combination

– Intended to identify goods or services of one seller

– To differentiate them from those of competitors

• Importance is unquestionable

• Most valuable company resource

Top Twenty Brands

Top Twenty Brands

Global Brands

• The Internet and other technologies accelerate

the pace of the globalization of brands

• Ideally gives the company a uniform worldwide

image

• Balance

• Ability to translate

National Brands

• Acquiring national brand names

• Using global brand names

• Nationalistic pride impact on brands

• Use global brands where possible and national

brands where necessary

• Country-of-Origin effect

– Influences that the country of manufacture, assembly, or design

► Has on a consumer’s positive or negative perception of a product

• Consumers have broad but somewhat vague

stereotypes about specific countries and specific product categories that they judge “best”

• Ethnocentrism

Country-of-Origin Effects

and Global Brands

Ethnocentrism and COO

• “Buy American” concept

Animosity model of foreign product purchase

• Animosity is defined as the remnants of

antipathy related to previous or

on-going military, political, or economic

events It will affect consumers’

purchase behavior in the international

marketplace.

Animosity model of foreign product purchase

Findings from empirical study on 244 Chinese consumers

supported the model.

Source: Klein, Ettenson and Morris (1998)

• Countries are stereotyped

– On the basis of whether they are industrialized

– In the process of industrializing

– In process of developing

• Technical products

– Perception of one manufactured in a less-developed or newly

industrializing country less positive

• Fads often surround product from particular

countries or regions

Country-of-Origin Effects

and Global Brands

Late  Majority 34%

Laggards 16% Rogers, E.M (1983)

Diffusion of Innovation

Private Brands

• Growing as challengers to manufacturers’

brands

• Private labels

– Provide the retailer with high margins

– Receive preferential shelf space and in-store promotion

– Are quality products at low prices

• Manufacturers brands must be competitively

priced and provide real consumer value

• The growing globalization of markets must be

balanced with the continuing need to assess all markets for those differences that might require adaptation for successful acceptance

• In spite of the forces of homogenization,

consumers also see the world of global symbols, company images, and product choice through

the lens of their own local culture and its stage

of development and market sophistication

• Each product must be viewed in light of how it is

perceived by each culture with which it comes in contact

• Analyzing a product as an innovation and using

the Product Component Model may provide the marketer with important leads for adaptation

2 International Product

Strategies

Straight Extens ion AdaptationProduct InnovationProduct

The firm adopts

the same policy

used in its home

market.

The company caters

to the needs and wants

of its foreign customers.

The firm designs a product from scratch for foreign customers.

Source: W.J Keegan, Multinational Product Planning: Strategic Alternatives,

Source: W.J. Keegan

PRODUCT EXTENSION – COMMUNICATION EXTENSION

1 Extension Extension  Standardized product with same

communications strategy across the globe.

­ This strategy is Cost effective

­ Allows for greater economies of  scale

­ Rarely used for consumer type  products except soft drink and some  luxury type goods

­Used mainly for industrial type products

PRODUCT EXTENSION – COMMUNICATION 

ADAPTATION

1 Extension Adaptation Standardized product with different

communications strategies across the globe.

­ Cost effective because  communications adaptation is less expensive than the tailoring product to a local market.

­ Can be used for consumer type  products eg. Bicycles

PRODUCT ADAPTATION ­ COMMUNICATION EXTENSION

1 Adaptation Extension Changes made to the product, same

communications strategy across the  globe.

­ Product formulations are changed without consumers knowing it. E.g.

detergents 

­ Entails research, development expenses and tooling costs.

­ Do not allow for economies of scale

to the extent possible under an product  extension strategy

­ savings can be realized from the  creation of a single communications  strategy

PRODUCT ADAPTATION ­ COMMUNICATION ADAPTATION

1 Adaptation Adaptation Dual adaptation:

Changes made to the product, changes  made to communications strategy 

­ Recognizes the socio­cultural differences from country to country

­To make this option profitable, the  foreign market or markets need to be 

of sufficient volume

­ Calls for extensive research and  development expenses and tooling  costs

PRODUCT INVENTION

1 Invention Develop new communications Usually redesigning of an original 

product at a lower level of complexity. 

­ Recognizes the socio­cultural and economic differences from  country to country

­Leads to more purchases as a result 

of the reinvention of the product