Chapter 10

1. Chapter 10 Product Adaptation

2. Product Variables • The Core Product • a product or services that is essentially the same as that of competitors. • The Tangible Product • a product or service that is differentiated composition, origin, or tangible features from competing products. • The Augmented Product • a product or service which is serviced after the sale and carries a warrantee from the producer, producing a continuing relationship with the seller.

3. Standardization versus Adaptation • The fundamental international product decision after the decision to internationalize. • International market approach alternatives to adaptation. • Sell the product as it is internationally. • Modify product for different countries or regions. • Design new products for foreign markets. • Incorporate all differences into one product and introduce it globally.

4. FACTORS ENCOURAGING STANDARDIZATION Economies of scale in production Economies in product R&D Economies in marketing “Shrinking” of the world marketplace/economic integration Global competitions FACTORS ENCOURAGING ADAPTATION Differing use conditions Government and regulatory influences Differing consumer behavior patterns Local competition True to the marketing concept Standardization versus Adaptation

5. Strategic Adaptation to Foreign Markets High Need for Adaptation Degree of Cultural Grounding Low Industrial/ Technology Intensive Consumer 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.

6. Factors Affecting Adaptation Decision to Alter Domestic Product SOURCE: Adapted from V.Yorio, Adapting Products for Export (New York; Conference Board, 1983), 7. Reprinted with permission

7. The Market Environment • Government Regulations • Political and social agendas often dictate regulatory requirements. • Nontariff Barriers • Product standards, testing, subsidized local products. • Customer Characteristics, Expectations, and Preferences • Physical size, local behaviors, tastes, attitudes, and traditions. • Consumption patterns, psychosocial characteristics, and general cultural criteria.

8. The Market Environment • Economic Development • The stage of economic development affects the market size and demand characteristics. Backward innovation of the product may be required to meet local requirements. • Competitive offerings • Monitoring competing local products is critical in adjusting the product for competitive advantage. • Climate and geography • Local climatic conditions and terrain features can make products vulnerable to damage.

9. Product Characteristics • Product Constituents • Branding • Packaging • Appearance • Method of Operation or Usage • Quality • Service • Country-of-Origin Effects

10. Product Constituents and Branding • Product ingredients must not violate local legal regulations and social or religious customs. • Care must be taken that the brand in name, symbol, sign, or design does not offend the local customer. Trademarks are especially vulnerable to counterfeiters. • Selecting the global brand name • Translation • Transliteration • Transparency • Transculture

11. Packaging and Appearance • Packaging serves three major functions: • Protection • Improper handling and pilferage • Promotion • Language and symbols • User convenience • Packaging aesthetics- color and shape, overall size, and purchase quantity • Adaptations in styling, color, size, and other appearance features play an importance role in how a consumer perceives a product.

12. Method of Operation or Usage • The product that is operable in in the domestic market may not be operable in the foreign market. • Electrical voltages and connectors vary around the world. English and metric standards are not comparable. • Software may have to be translated into the local language.

13. Quality and Service • Quality is essential to marketing products internationally, especially in markets where price is an important competitive factor. • ISO compliance may be required by buyers. • Servicing products in international markets requires producers to develop local repair staffs.

14. Country-of-Origin Effects Swiss “Mad Cow” • The origin of a product may have a strong effect on consumer perceptions and biases about foreign products. France

15. Company Considerations • Organizational capabilities? • Is it worth it? • Can we afford not to do it? • Can a specific return-on-investment (ROI) be attained? • Quality, price, and user perceptions? • Warranties? • Managerial talent?

16. Product Counterfeiting • Costs U.S. firms over $60 billion a year • In 2001, losses to software piracy were more than 11 billion dollars. • Counterfeiting is estimated at 2% to 5% of total world trade annually. • The largest number of counterfeit goods come from: • China • Brazil • Taiwan • Korea • India How to avoid Software piracy informational site

17. Product Counterfeiting FIGHTING PRODUCT COUNTERFEITING • Secure valuable intellectual property rights • patent applications • registration of trademarks • mask works • Act to enforce • legislative action • bilateral and multilateral negotiations • joint private sector action • individual company measures