Global Products

Global Products

DefinitionGlobal 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 itMarketing 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 marketKey Benefits

Cost Reduction – Economies of scale & scope Improved Quality Enhanced Customer Preference Global Customers Global Market Segments

Drawbacks of StandardizationOff-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 thingsVulnerable to Trade Barriers – Global products

need free tradeStrong Local Competitors – Local competitors

are better at adapting to local needs, making a global products vulnerable

Extent of Standardization

In reality 100% standardization is rareSome features have to be localized

Packaging, pricing etc

Only the “Core Product” which acts as the foundation is standardizedAll 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

2. Insufficient Market Research

3. Over-Standardization

4. Rigid Implementation

5. Narrow Vision

6. Poor Follow-up

Insufficient Market Research

Insufficient Market Research leads to assumed market similarities, wrong demand estimationsLocal subsidiaries may become

disenchantedNon-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 beneficialOften Head-Quarters drives the

standardization of all efforts and fails to notice local tastes and ignores better ideas from subsidiariesStandardized strategies increases overall

sales growth but lowers ROI & ROA

Narrow Vision

Increased Standardization leads to a myopic view of the local marketsLocal subsidiaries fail to learn from other

subsidiaries of the parentKnowledge 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 taskOften firms do a poor job on following up

on efforts and results from other subsidiariesLocal 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 GlobalizedOften 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 DiffusionSpeed at which a new product is introduced

into other countries is termed Speed of DiffusionSpeed 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 managementBrand 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 PortfolioConsumer goods makers usually have a portfolio of few

global brands and several local BrandsLess than 10% of brands are globalIn 2001, Study by ACNielson found only 43 global brands

in consumer packaged goodsTypically 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 BrandCan Local Brands be replaced without affecting

market share?E.g: Electrolux maintains a host of local brands

to retain its local customersDoes 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 Brands1. Coca Cola2. Sony3. Mercedes-Benz4. Kodak5. Disney6. Nestle7. Toyota8. McDonald’s9. IBM10.Pepsi-Cola

1. Rolls-Royce

2. Honda

3. Panasonic

4. Levi’s

5. Kleenex

6. Ford

7. Volkswagen

8. Kellogg’s

9. Porsche

Replacing Local BrandsSeveral 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 etcExtensive, 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