Product standardization strategy and product adaptation strategy

Product standardization strategy and product adaptation strategyThesis paper International Marketing: Product standardization strategy and product adaptation strategy offer some recommendations for Thesis paper International Marketing: Product standardization strategy and product adaptation strategy offer some recommendations for Thesis paper International Marketing: Product standardization strategy and product adaptation strategy offer some recommendations for

.FOREIGN TRADE UNIVERSITY

HO CHI MINH CITY CAMPUS

-*** -THESIS PAPER Subject: International Marketing PRODUCT STANDARDIZATION STRATEGY AND PRODUCT ADAPTATION STRATEGY

3 Nguyen Pham Phuong Ai 1201016001

4 Phan Ngoc Chau 1201016050

5 Nguyen ThiThien An 1201016004

6 Mai Hong Nhung 1201016383

7 Nguyen Thi Thu Thao 1201016493

8 Nguyen Thi Mai Anh 1201017016

9 Doan Tat Dat 1201017053

INSTRUCTOR’S COMMENTS

CHAPTER 1: INTRODUCTION 4

I Definition 4

1 Standardization 4

2 Adaptation 4

II Comparison between Standardization and Adaptation 5

CHAPTER 2: THE IMPORTANCE OF PRODUCT ADAPTATION STRATEGY- The failure to adapt of Kellogg and its lessons 8

I Introduction about Kellogg: 8

II The story of in India: 8

III Reason for failure: 9

IV The lessons from Kellogg: 9

CHAPTER 3: SUCCESSFUL EXAMPLE OF PRODUCT ADAPTATION STRATEGY: OREO in China 11

I Introduction of the OREO 11

II The story of Oreo in China 11

III The strategy 11

1 The taste 11

2 The packaging 12

3 The flavor: 12

4 New product 13

IV The results 14

V The lessons 14

CHAPTER 4: UNSUCCESSFUL EXAPMLE OF PRODUCT ADAPTATION STRATEGY – Mc Donald’s Hula Burger in Catholic Market 16

I Introduction about MC DONALD: 16

II The story in the Catholic Market: 16

III The result: 17

IV The reason: 17

V The lesson: 17

CHAPTER 5: CONCLUSION 19

REFERENCES: 21

2 Adaptation.

Product adaptation is the process of modifying an existing product so it issuitable for different customers or markets An adaptation strategy is particularlyimportant for companies that export their products because it ensures that theproduct meets local cultural and regulatory requirements

II Comparison between Standardization and Adaptation.

The cost benefit: as all of the

same features are applied in its foreign branches and

subsidiaries, this strategy help reducing the cost in changing style, equipment, materials, advertising,… in comparison with adaption

Enhance the managerial and performance consistency:

this is very essential during the current economic recession

Cultural characteristicsofthe foreign market: such as language,

religion and traditions have major impact on tastes, attitudes and buying habits of a product Thus, to sell more products, adaptation tothe cultureofthe host country is necessary

Changes in Economic Climate:

due to matters that are out of your control If problems in the economycause an overall reduction in sales, consider using less expensive materials or modifying the overall design of the product to make it more affordable for consumers

Government regulation:with

globalization, the degree of government intervention in trade and economic activities is

increasing The rules can be light orstrict on different levels, typified bythe national law, specifictrade policies, tariff andnon-

tariffbarriers, hygiene, environment Thus,foreign productshave to adapt to follow theserules

of scale: the rise in cost of

production will be increasingly smaller than the rise in output

if products are identical

Reduce consumer’s confusion: because the

company’s advertising programs are the same in all market, it will definitely eliminate the consumer’s

Meet differences at the stage of

development, consumer differences

in tastes, needs and wants, socio cultural differences, lifestyle, consumer perceptions, beliefs and consumer practices, physical environment, etc

Psychological meaning and the effect on the consumer: provide

decision makers with a diagnostic tool from which strategic marketing

confusion, especially those whotravel in different countries.

Improve the control and planning of the firm: don’t

have to change the marketing programs significantly, or find new suppliers for changing materials,…

Create the worldwide uniformity and strengthen the brand image: provide the

customers with experience of using new and exotic products that they cannot find from theirdomestic producers

choices can be derived

Local competition and competitive practices: Adapting

your product to compete with others can stem from reactive or proactive strategies For example, ifyour competitor adds a feature consumers want and starts taking market share from you, you might

be left behind not to add that same feature If your revenues are good enough that you can add a new feature your competitor can’t afford

in order to take market share away from your competitor

region has its own perception, valuation, taste  their productmay be not accepted, even though they have shown a significant success in home country

Variation in government policies: this is considered as

one of the major obstacles:

different nations has different views and regulations, an advertising may be viewed as creative and interesting in one society, but their contents may

be viewed as illegal and offensive in others

Difference in living standard among markets: applying the

same product for all markets, including advanced countries and less developed countries may not be appropriate, because if the firm charge the same price, citizens in poor regions cannot afford to them,

Increase cost production: in

manufacturing, development, packaging and gain no benefit from economies of scale due to each product design vary from country

to country

Stress on Resources: Modifying a

single product or offering two versions of the same product can put a stress on your production, marketing and sales departments that doesn’t justify the decision When you change a product, you might need to modify your marketing materials, production methods, packaging, sales efforts and shipping procedures

Brand: Changing your product can

alter your brand or your image in the marketplace If you decrease the quality of your materials to save

on production costs and make it possible to sell at a lower price, your strategy might backfire if yourcustomers buy from you because they want quality or status If a

whereas lowering price while the cost of production remain unchanged, the firm may run a budget deficit.

competitor lowers prices, you might adapt by improving your product even if it requires you to raise prices consumers will come

to you for superior quality and the better warranty you can offer

It is noticeable that the two strategies above are opposite to each other, but they areall efficient methods in international marketing that worth considering It is important to make a profound and careful decision about which tool to apply As for our group’s task,

we will present an emphasis on the adaption strategy, which give you a clearer and more comprehensive knowledge of this marketing tools

CHAPTER 2: THE IMPORTANCE OF PRODUCT ADAPTATION STRATEGY- The failure

to adapt of Kellogg and its lessons

Kellogg’s was in fact known as the company that introduced the concept of Cornflakes as a breakfast throughout the world It even introduced its products in themarket where corn flakes has never been very popular as breakfast and convertedthem into a corn flake eating nations over a long period of time Kellogg’s hadproven that with right kind of marketing strategies and approach, markets could betamed and molded the way corporations wanted

In the late 80’s, Kellogg’s was riding on the success and was commanding astaggering 40 per cent of the US ready-to-eat market from its cereal products aloneand with a yearly sales of $ 6 billion with 20 plants in 18 countries

II The story of Kellogg in India:

In September 1994, Kellogg decided to penetrate the India Market KelloggCompany had set up its 30th manufacturing facility in India, with a total investment of

$ 30 million The Indian market held great significance for the Kellogg Companybecause its US sales were stagnating and only regular price increases had helped boostthe revenues in the 1990s

Kellogg's initial offerings in India included cornflakes, wheat flakes and Basmatirice flakes Despite offering good quality products and being supported by thetechnical, managerial and financial resources of its parent, Kellogg's products failed

in the Indian market Even a high-profile launch backed by hectic media activityfailed to make an impact in the marketplace

Meanwhile, negative media coverage regarding the products increased, as moreand more consumers were reportedly rejecting the taste According to analysts, out

of every 100 packets sold, only two were being bought by regular customers; with

the rest 98 being first-time buyers Converting these experimenters into regularbuyers had become a major problem for the company.

In April 1995, Kellogg India Ltd (Kellogg) received unsettling reports of agradual drop in sales from its distributors in Mumbai There was a 25% decline incountrywide sales since March1995, the month Kellogg products had been madeavailable nationally By September 1995, sales had virtually stagnated Marketingexperts pointed out various mistakes that Kellogg had committed and it was beingincreasingly felt that the company would find it extremely difficult to sustain itself inthe Indian market

III Reason for failure:

At the 1990s, the Indian sub-continent is a believer of home-eating breakfast andthe whole concept of ready-to-eat-creal market is a new idea Indeed, the mostcommon way to start the day in India was with a traditional regional breakfast.While this meant that Kellogg’s had few direct competitors it also meant that thecompany had to promote not only its product, but also the very idea of eatingbreakfast cereal in the first place And the Indian market has posed numbers ofchallenges to Kellogg

 Cultural factors and eating habits – population not used to processed foods

Kellogg posed itself as an alternative to the regularly consumed breakfast TheIndian breakfast is heavy and there is a feeling of fullness at the end of an Indianbreakfast Kellogg’s Corn flake breakfast does not give that feeling of fullness andthat went against the grain of having a full breakfast In short after having a cornflake based breakfast the Indian consumers were still hungry Also Indians havespicy and hot food for breakfast To ask them to eat the sweet tasting and cold cornflake breakfast was too much of a sweet breakfast for the Indians to digest

 Challenges of the different between Indian consumer and the original product

Indians always boiled their milk unlike in the West and consumed it warm orlukewarm and they also liked to add sugar to their milk When Kellogg flakes wereput in hot milk, they became soggy and did not taste good If one tried having it withcold milk, it was not sweet enough because the sugar did not dissolve easily in coldmilk

 Availability of various low-priced traditional breakfast

Indian breakfast is known for its variety There can be 30 types of Dosas (there

is a restaurant in Hyderabad that offers 99 types of Dosas!) or Idlis, Parantas or

other types of native Indian breakfast items Indians are used to a variety and oneitem that is eaten will not be on offer for the next two or three weeks Asking Indians

to have the same type of corn flake based breakfast was too much of a culturalchange for the Indians to accept

When Kellogg decided to introduced into India, due to the clumsy marketresearch, it took for granted the fact the whole idea of easy-to-make cereal breakfast iscompletely new to the Indians consumer The information of Indian as a potentialmarket with a large population, which means a huge numbers of potential consumers

of their product, combined with the fact that there are no competitors in the cerealbreakfast fields has made them chose the wrong approach and lead them to the failure

Globalization may be an increasing trend, but regional identities, customs andtastes are as distinct as ever It may be easy for brand managers of global brands toview the world as homogenous, where consumer demands are all the same, but thereality is rather different According to analysts, a major reason for Kellogg's failurewas the fact that the taste of its products did not suit Indian breakfast habits

CHAPTER 3: SUCCESSFUL EXAMPLE OF PRODUCT ADAPTATION STRATEGY: OREO

in China

Oreo is a sandwich cookie consisting of two chocolate disks with a sweet cream filling in between The version currently sold in the United States is made by the Nabisco division of Mondelēz International Oreo has become the best-selling cookie

in the United States since its introduction in 1912

In 1996, Kraft food flagship Oreo brand launched the product in China.However, apart from a small rise in 2003, Oreo sales had been sluggish from theoutset, and shipments into China were projected to drop by more than 10 per cent in

2005 and even a near 40 per cent rise in marketing spend yielded no boost in sales

In 2005, it controlled a mere 3% of the Chinese cookie market

Before cookie was considered to be pulled out China market, Kraft decided toresearch the Chinese market to understand why the Oreo cookie that was sosuccessful in most countries had failed to resonate with the Chinese Researchrevealed that Kraft’s positioning of the brand had missed the mark: Kraft had paidtoo little attention to what Chinese consumers prefer Chinese were not historicallybig cookie eaters; they said it is a little bit too sweet and too bitter In addition, 72cents for a pack of 14 Oreos was too expensive for the value-conscious Chinese

Mr Warren and his team needed to challenge decisions that had been made atKraft’s Illinois head office and convince it to make Oreos more suited to Chineseconsumers

III The strategy

The Oreo China team adopted a multi-pronged approach:

1 The taste

Kraft introduced a less sweet version called Light Sweet Oreo It changed therecipe and made the cookie more chocolate, the cream less cloying and developed 20prototypes of reduced-sugar Oreos and tested them with Chinese consumers beforearriving at a formula that tasted right.

The team also convinced headquarters to reformulate the original Oreo – forthe first time in its 93-year history – to adapt biscuits on sale in China to local tastes

2 The packaging

Kraft also found that its traditional package size was too big and expensive forthe average Chinese consumers, who have less disposable income than NorthAmericans So the size of the packet was reduced for just 29 cents to cater to Chinesebuying habits while the team also introduced another, smaller packet so consumerscould get a first taste of Oreo biscuits at a lower cost The smaller packets requiredchanges in the manufacturing plant Similarly, marketing promotions that relied onbonus packs (extra biscuits for the same price in a bigger pack) were replaced withmore economical in-store samples

3 The flavor:

a Green-tea ice –cream- flavored cookies

In China, sales of cookies and other chocolate products tend to slow down inthe summer Warren says the Chinese have what they call “heaty” foods and coolingfoods, the former for colder months and the latter for warmer times of the year.Cookies were traditionally a heaty food

To boost summer sales, in 2009 Oreo developed a crème that had a coolingsensation when licked to create both a vanilla and green-tea ice-cream-flavoredcookie It’s green-tea ice cream It’s now the second-most-popular flavor afteroriginal Oreo

b Double fruits cookies

The success of the ice-cream-flavoured cookies led them to try more coolingvariations In 2011, after researching what fruit flavours Chinese consumers wouldlike best, they launched Oreo double fruits that put combinations between thefamiliar biscuits like blueberry-raspberry, the blueberry had a slight sourness to it