UNIT-3

By

Shantanu Krishna

Product, Price, Promotion & DistributionPolicy

Product policy• Product policy has two dimensions:

a.) Product planning and development

b.) Product strategy-product adaptation & standardisation.• Components of product:

1.) physical product: functional features (style, presentation)

2.) product package: packaging, brand name, trademark

3.) Auxiliary services: warranties, use instructions, installation, after-sales services.

Product planning and development:

In international marketing, there are 4 major forms of product development:

1.) NPD, 2.) changes in existing products, 3.) finding new uses for existing products, 4.) product elimination.

Product policy• Adding new products (NPD):

a.) Export Domestic Products

b.) Acquire a firm : E.g. M&A’s happening in Europe in 1980’s acquiring firms for greater innovation.

E.g. unilever and nestle going into JV for frozen foods-can be a costly affair.

E.g.. TATA motors going acquiring jaguar and landrover in 2007-08

c.) Copying products: Imitation of the product offerings, developed successfully by the others.

d.) Internal product development (NPD process)

Product policyIdea Generation

Initial screening

Business Analysis

Develop the product

Market testing

Commercialisation

Product policyOther additional issues that are relevant to the internal

development of new products merit brief discussion:a.) Location of R&D facilities and firmsb.) process of screening new product ideasc.) diffusion of new product innovationsd.) quality management-Concept of TQM ( To get products from

the market faster,with fewer defects and at a lower cost. E.g. ISO 9000: specifies design, manufacturing, manufacturing, logistics, standards etc.)

Changes in existing products: e.g. of US cars being right handed when exported to UK.

New Uses for existing products: Finding new uses for the existing product. Extending the length and breadth of the product to be used in a no. of ways e.g. of Cornflakes being used as a snack in the evening.

Product policyProduct elimination:

Keeping weak products can add substantially to overhead costs. 80-20principle: certain % of products in the product mix and product lines beings in a disproportionately greater or lesser % of sales and profits.

Product policy:• Product Portfolio Matrix:

Determinants of product line decisions:• Internal determinants: factors emerging from the firm itself. These are

concerned with the company objectives, resources and potential profitability. • Answers questions related to firm’s strategy, growth, market share,

resources and differential advantages.

• External Determinants-

a.) Customer Influences: Nature of customer needs and wants in each market affects the marketing effort of the firm. In US, bicycles being used for recreation, as compared to EU where it’s a means of transportation.

b.) Country of Origin Effect: extent to which the place of manufacture influences product evaluations. COE effect affects consumer perceptions of product quality.

c.) Competition: PLC

d.) Other factors: Marketing structure, distribution, import regulations, govt. regulations, level of economic dev.

Selection of Export Markets• Other Bases of Division of World Markets:

1. Population : Age Groups, Social Class, Educational background, Geographic Concentration

2. Standard of living., GDP, Level of Political Involvement, Risks associated, Industrial development & Market Size.

3. Per Capita Real Income, Gini-Index-measures the equality of wealth

• National Income: Production, Income & Expenditure.

• Analyzing Factors of Production: Land, Labour, Capital, Entrepreneur.

Market Entry Conditions:

• GSP ( Generalised System of Preferences): Countries with relaxed rules, Duty Free imports, export subsidies, SEZ’s are favored more for a trade engagement.

• Setting up of Export Promotion Centres

• Import Promotion Centres:

• "Its not what the business provides that expands the business, its what the customers need and to what extent do we cater to their requirements that differs from market to market”. Shantanu Krishna

• Identifying the needs: Japan Automobile Importers Association identifying 4 types of people who buy imported cars- the quality seekers, status seekers, enthusiasts & the followers.

• Changing consumer habits, less price difference, general attitude of people changing towards foreign products, greater trade & liberalization.

• Product V/s Product Type: Product type is the aggregate of various products, performing same kind of function or giving same kind of satisfaction.

• Product Adaptation: Product that is good for one market, may not be good for another. Driving forces of using the product is different in different markets.

• Need to understand:• Who buys the product, Who uses the product, How is the product used, where is it

bought, how is it bought, why is it bought, when is it bought???• Need for adaptation: for products to gain acceptance in the foreign markets. For size,

functions, materials, design, functions, color, taste, standards.

Export marketing strategy-Product

Export marketing strategy-Product13 Environmental factors by

Robinson:

• level of technical skills• Level of Labor cost• Level of Literacy• Level of Income• Level of Interest Rates• Level of Maintenance• Climatic Differences• Isolation• Differences in Standards• Availability of other products• Availability of Materials• Power Availability• Special Conditions

Economic Goods: Consumer Goods & producer goods.

Consumer goods: those that satisfy the wants of the consumers directly are

called consumer goods.They are of different types:

• Durable Goods: Life span of different years. Eg. Car, TV

• Semi-Durable Goods: Life span of one year or more. Eg. Furniture, clothes, shoes.

• Non-Durable Goods: Single use consumer goods. E.g. milk, eggs, fruits, food grains etc.

• Producer Goods: The goods which help in the production of other goods & services are known as producer goods. E.g. machines, roadways, railways, highways.

Export marketing strategy-Product Standardization

6 factors favoring International Product Standardization:

• Economies of Scale: Larger Production runs having economies of scale, resulting in lower manufacturing cost.

• Economies in product research & Development: Allows recovery of the cost incurred in product R&D. Additional expenditure on adapting product to each individual market can be avoided.

• Economies in Marketing: Marketing of the same product for marketing it in different markets. Same sales literature, sales force training, inventory management, advertising & after-sales service requirements.

• Increasing Brand Loyalty

• Impact of Technology: Not much in case of Industrial products.

Export marketing strategy-International Product Life Cycle