Pros and Cons of Global Product Standardization

2. 11 Chapter Global Products

3. Introduction • Global products are usually standardized • Global brand examples • Gillette razor blades • Sony television sets • Benetton sweaters • Regional products and brands are unique to a particular trading region • Honda’s “European” car model • P& G’s Ariel and Vizir in Europe • Korea’s ginseng tea makers covering the Asian market

4. The Pros and Cons of Standardization • The Advantages of Standardization • Cost Reduction • Improved Quality • Enhanced Customer Preference • Global Customers • Global Segments

5. The Pros and Cons of Standardization • The Drawbacks of Standardization • Off-Target • Lack of Uniqueness • Vulnerability to Trade Barriers • Strong Local Competitors

6. Localization versus Adaptation • Basic Requirements • Localization • Generally speaking, localization avoids having potential customers reject the product out of hand • Compatibility Requirements • Localization represents the adjustments in the product specifications necessary for it to function in the foreign environment • Multisystem Compatibility • In many products today, localization is accomplished by building in compatibility with multiple systems at the outset

7. Pitfalls of Global Standardization • Reasons for Product Standardization Failure • Insufficient Market Research • Similarities among customers are often assumed rather than proved • Overstandardization • Standardization should not encroach onto the positioning strategy • Poor Follow-Up • Follow up needs to be implemented if a campaign is to succeed • Narrow Vision • The vision at the headquarters should not be narrow and inflexible • Rigid Implementation • Some flexibility in implementation needs to be retained by local units

8. Global Product Lines • Reasons for Product Line Differences • History • Different local products were well established before standardization was feasible • M&A (Mergers & Acquisitions) • Complete integration is difficult if the product lines are formed through M&A • Preferences • Differences in preferences give strategic rationale for product line customization • Capacity • Global product lines need large production capacity • Channels • Differences in channel structure make it difficult to support the same product lines

9. Developing New Global Products • Five Stages of the New Product Development Process • Idea Generation • Local subsidiaries are likely to have some ideas from their respective markets and new technology is a common source of new product ideas • Preliminary Screening • The most immediate evaluation of an idea is whether it is compatible with the company objectives, strategies, and resources. • Market Research • Focus Groups and Surveys • Focus groups offer the development team a chance to hear spontaneous reactions to a new concept and hear suggestions for improvement • The survey addition is useful with global products and different country sites

10. Developing New Global Products • Five Stages (cont’d) • Concept Testing • A more formal approach to selecting product attributes is using techniques such as trade-off analysis or conjoint analysis • Target Product Research • By analyzing the leading brands and their attributes, companies are able to understand what appeals to their consumers • Sales Forecast • The appropriate sales forecast approach is based on the product life cycle • Test Marketing • Once the sales forecast looks promising, the new product is usually placed in production and test marketed (see Ch. 4)

11. Globalizing Successful New Products • New Product Success Factors • The most important factor determining new product success are the relative product advantage and technological synergy with a company’s existing products and processes • Global Diffusion • Five specific product-related factors • Relative advantage – The leading cause of new product success • Compatibility – Can the product be used without any problem? • Complexity – Is the new product easy to use? • Trialability – Is it easy to try the new product? • Observability – So, how much faster does it connect to the Internet?

12. Globalizing Successful New Products • Global Diffusion • Three country-specific variables that influence innovative and imitative propensities • Cosmopolitanism • The degree to which a culture is open to outside influences • Geographic Mobility • Influences the propensity of imitation • The Proportion of Women in the Workforce • The higher this proportion, the less time there is for innovation

13. Global Brand Management • Brand Equity • The net revenues the brand can be expected to generate over time • Global Brands • Three advantages to using global brands • Demand spillover • Global customers • Scale economies

14. Global Brand Management • The Brand Portfolio • At any point in time, companies are likely to have • A portfolio of a few global brands and several local brands • The brands are typically managed in a hierarchical fashion and can take several forms • In one, the most important global brands are at the top, followed by regional and local brands • Alternatively, the top can be the corporate brand, possibly global, followed by subbranded model names • Brand sales tend to follow a cycle similar to the product life cycle

15. Global Brand Management • Brand Globalization Potential • Questions about appropriateness or brand fit • Does the brand make sense outside of the source country? • If the name suggests a country association, is the effect positive? • Is the name available legally in many countries? • Does the brand complement other global brands in the portfolio? • Should the growth be limited to the creation of a regional brand? • Implementation • Issues in implementing the globalization strategy • Is the globalization product-based? • Which local brands should be chosen for the changeover?

16. Global Brand Management • Changeover Tactics • Once the target brands have been identified, standard brand changeover tactics can be employed • The fade-in/fade-out gradual option is the most common • The global brand is linked to the local brand for a time, after which the local brand is dropped • A less gradual approach, sometimes called summary axing • Simply drops the local brand name and introduces the new brand • Using extensive forewarning is another approach to name changeover

17. Defending Local Products • The typical reason for the success of local products is the customization involved • In industrial markets • Personal attention, fast delivery, and prompt after-sales service are all factors tending to favor local products • In consumer goods • The sameness of global products creates a potential for local products in special niche segments of the market

18. Counterfeit Products • Counterfeit or knockoffs are fake products designed and branded to mislead the unwary customer into assuming that they are genuine • Counterfeit products pose an ominous problem in the global marketplace • Firms make an effort to find the factories that turn out the counterfeits and they track the fakes in the stores