globalmarketing
TRANSCRIPT
StudsPlanet Leading Education consultant in India
www.StudsPlanet.com
CHAPTER 11CHAPTER 11
DEVELOPING NEW PRODUCTS FOR
GLOBAL MARKETS
Group members:
Denise Caesar
Debbie Goodman
Delicia John
Roxanne Risbrooke
CHAPTER OUTLINECHAPTER OUTLINE
1. Introducing products into foreign markets
2. Developing a global product
3. New product development processes for Global markets
4. Introducing new products to global markets
DEFINITIONSDEFINITIONS
PRODUCTS – Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. It includes physical objects, services, places, organizations, ideas and people.
GLOBAL MARKETING - A total commitment to international
marketing, in which a company applies its assets, experience and products to develop and maintain
marketing strategies on a global scale.
What are new products?What are new products?
New product lineAddition to product lineRepositioning to new market segmentsImprovements/revisionsCost reductions
Source: Booz, Allen & Hamilton
1. INTRODUCING PRODUCTS INTOFOREIGN MARKETS
STRATEGIC OPTIONS
1. EXTENSION STRATEGY – Same approach as home market
2. ADAPTATION STRATEGY -Makes changes to fit new market requirements
3. INVENTION STRATEGY -Entirely new approach is developed forthe new market
STRATEGIC OPTIONS
4. STANDARDIZATON – Same product, all markets
5. GLOBAL PRODUCTS -Only some aspects of the product is standardized
Product StrategyCommunications Strategy Highlight
1. Extension Extension Standardized product with same
communications strategy across the
globe.
- This strategy is Cost effective
- Allows for greater economies of
scale
- Rarely used for consumer type
products except soft drink and some luxury type goods
-Used mainly for industrial type
products
OPTION 1.
PRODUCT EXTENSION – COMMUNICATION EXTENSION
Product StrategyCommunications Strategy Highlight
1. Extension Adaptation Standardized product with different
communications strategies across the
globe.
- Cost effective because communications adaptation is
less expensive than the tailoring
product to a local market.
- Can be used for consumer type products eg. Bicycles
OPTION 2.
PRODUCT EXTENSION – COMMUNICATION ADAPTATION
Product StrategyCommunications Strategy Highlight
1. AdaptationExtension Changes made to the product, samecommunications strategy across
the globe.
- Product formulations are changed
without consumers knowing it. E.g.
detergents
- Entails research, development
expenses and tooling costs.
- Do not allow for economies of scale
to the extent possible under an product extension strategy
- savings can be realized from the creation of a single communications strategy
OPTION 3.
PRODUCT ADAPTATION - COMMUNICATION EXTENSION
Product StrategyCommunications Strategy Highlight
1. AdaptationAdaptation Dual adaptation:Changes made to the product,
changes made to communications strategy
- Recognizes the socio-cultural
differences from country to country
-To make this option profitable, the foreign market or markets need to be of sufficient volume
- Calls for extensive research and development expenses and tooling costs
OPTION 4.
PRODUCT ADAPTATION - COMMUNICATION ADAPTATION
Product StrategyCommunications Strategy Highlight
1. Invention Develop new communications Usually redesigning of an original product at a lower level of
complexity.
- Recognizes the socio-cultural
and economic differences from country to country
-Leads to more purchases as a result of the reinvention of the product
OPTION 5.
PRODUCT INVENTION
STANDARDIZATION VS ADAPTATIONSTANDARDIZATION VS ADAPTATION
Factors encouraging product standardization:Economies of Scale in:
ProductionMarketing/communicationsResearch & DevelopmentStock Holding
STANDARDIZATION VS ADAPTATION CONTINUEDSTANDARDIZATION VS ADAPTATION CONTINUED
Easier management and control i.e. familiarity
Homogeneity of markets, in other words markets available without adaptation e.g. denim jeans
Cultural insensitivity (except industrial and agricultural products)
Where “made in” image is important to a product’s perceived value e.g. France for perfumes, Sheffield for stainless steel
STANDARDIZATION VS ADAPTATION CONTINUEDSTANDARDIZATION VS ADAPTATION CONTINUED
For a firm selling a small proportion of its output overseas, the incremental costs may exceed the incremental sales value
Consumer mobility for travellers/tourists for example standardization is expected in certain products:
Camera film Hotel Chains
STANDARDIZATION VS ADAPTATION CONTINUEDSTANDARDIZATION VS ADAPTATION CONTINUEDFactors encouraging
adaptation/modificationMandatory Modification: Normally involves either adaptation to
comply with government requirements or Unavoidable technical changes Example: Car manufacturer
STANDARDIZATION VS ADAPTATION CONTINUEDSTANDARDIZATION VS ADAPTATION CONTINUED
Legal requirements can include: Specified exhaust emission levels (HSE
Laws & strict emission standards) Local components (economic law) Technical requirements such as: Modification of heating/cooling systems
for different climates Engine modification to use locally
available fuels
Discretionary Modifications:Discretionary Modifications:
This is called for to make the product more appealing in different markets. It is as a result of differing customer needs, preferences and tastes that market research, customer feedback among others may reveal.
Levels of customer purchasing power – low incomes makes cheaper version of product more appealing in some less developed countries
Levels of education and technical sophistication – ease of use may be a crucial factor in decision-making
Standards of maintenance/repair facilities – simpler more robust versions may be needed
2. DEVELOPING A GLOBAL 2. DEVELOPING A GLOBAL PRODUCTPRODUCT
In order to remain competitive, firms often have to reduce their costs. Usually the production of standardize products provides cost advantage, however this strategy is not as common. Many firms now employ new strategies:1. Global Product Development strategy2. Modularity
A portion of the final product is standardized. However, the design retains some flexibility so that the end product can be tailored to the needs of individual markets.
- This represents a move to standardize as much as possible those areas involving common components or parts.
The Global Product Development Strategy
Modularity This process involved the development of
standard modules that can easily be connected with other standard modules to increase the variety of products.
E.g General Motors has established a modular product architecture for all its global automobile products. Future GM cars will be designed using combination of components from 70 different body modules and about a hundred major mechanical components (e.g. Engines, power trains, and suspension systems)
The Global Product Development Strategy
3. NEW PRODUCT DEVELOPMENT 3. NEW PRODUCT DEVELOPMENT
PROCESSES FOR GLOBAL MARKETSPROCESSES FOR GLOBAL MARKETS
Developing new products or services for global markets poses unique challenges.
To combat these challenges, the international firm can assign development responsibilities to any one of its international subsidiaries. The success however will depend on how well the firm marshals its resources on a global scale to develop new products for foreign markets.
Steps in New Product Steps in New Product Development processDevelopment process
Idea GenerationIdea ScreeningConcept Development & TestingMarketing Strategy DevelopmentBusiness AnalysisSmall Batch Prototype DevelopmentProduct Development & TestingTest MarketingCommercialization / Launch
Sources of New Product Sources of New Product DevelopmentDevelopment
1. Head office2. Lead markets3. Subsidiaries4. Purchasing research and development5. Importing new product technology6. Acquisitions7. Joint ventures8. Alliances9. Consortia
Sources of New Product Development #1Sources of New Product Development #1
The organization of Head Office-Sponsored The organization of Head Office-Sponsored Research and DevelopmentResearch and Development
Research and development for the introduction of new products is originally conducted in centralized facilities in the firm’s domestic market.
The largest portion of research and development monies spent by international firms goes to support efforts in domestically located facilities.
Initial introduction at home is followed by a phase-in introduction to the company’s foreign markets.
Reasons for Head Office-sponsored Approach:1. R&D is centralized so there is an integrative strategy with regards to product development. To achieve this there must be frequent contacts and interfacing between R&D facilities and the company’s main office.2. To minimize duplication3. For the effective and efficient utilization of scarce research funds4. To capitalize on the firm’s experience in their domestic market.
The organization of Head Office-Sponsored Research and Development
Sources of New Product Development #2 International Leads Markets and Research and Development
The lead market is a market whose level of development exceeds that of the market in other countries worldwide and whose developments tend to set a pattern for other countries.
Lead markets are not restricted to technological developments as embodied in product hardware.
Lead market advantage based on superior design, advanced features, function and quality, production processes, patterns in consumer demand, methods of marketing. (Any phase of the operation is subject to lead market influence)
Sources of New Product Development #3Sources of New Product Development #3
The Role of Foreign Subsidiaries in Research The Role of Foreign Subsidiaries in Research DevelopmentDevelopment
Subsidiarieso Subsidiaries may assume R&D function if products require
some adaptation to a local marketo Foreign subsidiaries of international firms rarely play an
active role in the R&D unless they have manufacturing responsibilities and capabilities
o Sales subsidiaries provide central organization with feedback on product adjustments or adaptation, but generally their participation does not go beyond the generation of ideas.
o A subsidiary located in a lead market is in a better position to observe developments and to accommodate new demands and can therefore act as an effective “listening post”
Roles of involvement for the Roles of involvement for the subsidiary:subsidiary:
Strategic leader role: With responsibility for developing a new range of products to
be used by the entire company. This role will be handled by a highly competent subsidiary in a market of strategic importance.
Contributor: This role would be assumed by a subsidiary in a distinct area
and the subsidiary will adapt some products in smaller though important markets
Implementer:These are smaller subsidiaries located in less strategic markets that act as implementers of the overall strategy without making a major contribution to either technology or strategy
Sources of New Product Development #4Sources of New Product Development #4
Purchasing Research and Development from Purchasing Research and Development from Foreign CountriesForeign Countries
A company may acquire material or information from independent outside sources that have acquired lead market status.
How? Literature published in lead markets Regular visits to foreign countries Trade fairs Management contact with lead markets
These are admittedly ad hoc measure though.
Sources of New Product Development #5Sources of New Product Development #5
Importing as a Source of New ProductsImporting as a Source of New Products
Some companies import finished products directly from a foreign firm to supplement their product lines.
This is usually done in areas that do not represent the core of the firm’s business and technology, and is used to extend the product offering.
Sources of New Product Development #6Sources of New Product Development #6
Acquisition as a Route to New ProductsAcquisition as a Route to New Products
Advantages:Efficient, cost-effective way to create a new
product instead of trying to conceptualize, R&D and launch new products from the ground up.
Overcomes the process of acquiring technological experience
Establish supplier relationshipsCircumvents need for large Advertising &
Promotional Budgets to gain visibility & brand recognition
Sources of New Product Development #7Sources of New Product Development #7
Joint Ventures for New Product DevelopmentJoint Ventures for New Product Development
Usually pursued with technologically advanced foreign company usually at lower costs
Good way to pursue an opportunity that is too complex, uneconomical or risky for a single organization to pursue alone
Provide entry into desirable foreign markets when access is restricted by government
Used when opportunities in new industry require broader range of competencies that any one company can marshal
Sources of New Product Development #8Sources of New Product Development #8
Alliances for New Product DevelopmentAlliances for New Product Development
Companies are using alliances or the Consortium Approach to share technology and R&D to gain competitive advantage
Consortium Approach – member firms join in working relationship without forming a new entity. On completion of assigned task, member firms are free to seek other relationships with different firms.
4. INTRODUCING NEW PRODUCTS TO GLOBAL 4. INTRODUCING NEW PRODUCTS TO GLOBAL MARKETSMARKETS
Once a product has been developed for commercial introduction, the following decisions need to be made:
- Test Marketing procedure- The target country- The timing or sequence of introduction into foreign market
These decisions are influenced by sales potential. Following careful analysis, a list of target countries is developed, then the company will choose from among several paths to the actual introduction in the target country/countries.
Determining Introduction in target countriesDetermining Introduction in target countries
Concept TestThis involves presenting the product concept to appropriate target consumers and getting their reactions. The concepts can be presented symbolically or physically. However the more the tested concepts resembles the final product or experience, the more dependable concept testing is.
In recent times, companies are also using virtual reality to test product concepts. This entails the use of sensory devices to stimulate reality.
Test MarketingTest Marketing
Test MarketThe ultimate way to test a new consumer product is to put it into full-blown test markets. The company chooses a few representative cities, and the sales force tries to sell the trade on carrying the product and giving it good shelf exposure, full advertising and promotional strategy, similar to the one use in the home market.
- Simulated Test MarketingThis entails finding 30 to 40 qualified shoppers and questioning them about brand familiarity and preference in a specific product category.
Test MarketingTest Marketing
- Controlled Test MarketingIn this method, the number of geographic locations are tested. The product is delivered to the participating stores and the product is placed in a strategic position. Sales results will be measured electronically through scanners at the checkout.
Market-entry timing is critical. A company may be faced with the challenge of trying to enter a market with a new product and learns that a competitor is nearing the end of its development work. The company faces three choices:
First entryParallel entryLate entry
Timing of New Product Introduction
Timing of New Product Introduction continuedTiming of New Product Introduction continued
First EntryThe first firm entering a market usually enjoys first mover advantages of locking up key distributors and customers while gaining the reputation of product leader. If the product is rushed before to market before it is thoroughly debugged, the product can acquire a flawed image.
Timing of New Product Introduction Timing of New Product Introduction ContinuedContinued
Parallel EntryThe firm might time its entry to coincide with the competitor’s entry. The market may pay more attention when two companies are advertising the new product.
Late EntryThe firm might delay its launch until after the competitor has entered. The competitor will have borne the cost of educating the market. The competitor’s product may review faults the late entrant can avoid.
Timing of New Product Introduction continuedTiming of New Product Introduction continued
Timing decisions involves additional considerations
- If the new product replaces an older product, the company might delay the introduction until the old product’s stock is drawn down.- If the product is highly seasonal, it might be delayed until the right season arrives.