Chapter 10 Product Adaptation

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Chapter 10

Product Adaptation


Product Variables

• A product or service is a complex combination of tangible and intangible elements that distinguishes it from other entities in the marketplace.

•


Exhibit 10.1 - Elements of a Product


Product Variables

• Standardization versus adaptation– Basic alternatives for approaching international

markets are:• • Modify the product for different countries or regions.• • Incorporate all differences into one flexible product

design and introduce it globally.


Exhibit 10.2 - Standardization versus Adaptation

Factors encouraging standardization–

– Economies in product R&D

– – “Shrinking” of the world

marketplace/economic integration

–

Factors encouraging adaptation– – Government and

regulatory influences–

– Local competition–


Exhibit 10.3 - Strategic Adaptation to Foreign Markets

Low

High

Industrial/ Technology Intensive Consumer

Need for Adaptation

Degree of Cultural Grounding

Nature of Product

Source: Adapted from W. Chan Kim and R. A. Mauborgne, “Cross-Cultural Strategies,” Journal of Business Strategy 7 (Spring 1987): 31; and John A. Quelch and Edward J. Hoff, “Customizing Global Marketing,” Harvard Business Review 64 (May-June 1986): 92-101.


Product Variables

• Factors affecting adaptation– Firms consider three factors in deciding the form in

which the product is to be marketed abroad: • • •


Exhibit 10.4 - Factors Affecting Product Adaptation


The Market Environment

• Government regulations– Political agendas often dictate government regulatory

requirements.

–

– Economic integration reduces discretionary governmental regulations to some extent.

• Nontariff barriers–



• Customer characteristics, expectations, and preferences–

– Consumption patterns, psychosocial characteristics, and general cultural criteria determine cultural and psychological specificity in relation to products and services.

– Product positioning -



• Economic development– Affects demand characteristics and helps determine

potentials for selling certain kinds of products and services.

–



• Competitive offerings -

• Climate and geography -


Product Characteristics

• The inherent features of the product offering, whether actual or perceived.–

– Branding

–

– Appearance

–

– Quality

–

– Country-of-origin effects



• Product constituents and content–

• Appearance–



• Branding– Brand -

– Allows further standardization of other marketing elements such as promotional items.

– Trademark -

– Brand loyalty translates into profits even though favored brands may not be superior by any tangible measure.



• The following approach has been suggested for avoiding problems with brand names in foreign markets:–

–

–

–



• Packaging – Serves three major functions—

– Varies as a function of transportation mode, transit conditions, and length of time in transit.

–



• Packaging – User convenience is a priority in packaging decisions;

Containers must withstand logistics challenge, and yet must be easy for customers to open.

–

– Package size varies according to purchasing patterns and market conditions.



• Method of operation or usage– The product that is operable in the domestic market

may not be operable in the foreign market.

–

– Products that rely heavily on written or spoken language have to be adapted for better penetration of the market.

–



• Quality– Quality is essential to marketing products

internationally, especially in markets where price is not the sole competitive factor.

–

– Marketers seek endorsement of their efforts from governmental or consumer organizations.

–



• Service–

– Product warranties provide instructions to customers about what to do if the product fails within a specified period of time.



• Country-of-Origin effects– The origin of a product may have a strong effect on

consumer perceptions and biases about foreign products.

– This effect reduces as:• •


Company Considerations

• Product adaption depends on:– The firm’s ability to control costs, correctly estimate

market potential, and secure profitability in the long term.

–

– The firm’s ability to maintain consistency in their marketing efforts.

–


Product Counterfeiting

• Counterfeit goods –

• The European Union estimates that trade in counterfeit goods accounts for 2 percent of total world trade.

• The largest number of counterfeit goods are sourced from:



• Counterfeiting is a pervasive problem not only in terms of geographic reach but also the ability of counterfeiters to deliver products, and the market’s willingness to buy them.

•

• After securing valuable intellectual property rights, the international marketer must act to enforce these rights.


Exhibit 10.8: Measures to Combat Counterfeiting



• Few acts, agreements, and alliances that help combat counterfeiting include:–

– The Trademark Counterfeiting Act of 1984

–

– The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement

–

– Counterfeit Intelligence and Investigating Bureau

Documents

Chapter 10 Product Adaptation