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Chapter
11Global Products
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Introduction
Global products are usually standardizedGlobal brand examples
Gillette razor blades
Sony television sets
Benetton sweaters
Regional products and brands are unique to a particular trading region
Hondas European car model P& Gs Ariel and Vizir in Europe
Koreas ginseng tea makers covering the Asian market
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The Pros and Cons of Standardization
The Advantages of Standardization
Cost Reduction
Improved Quality
Enhanced Customer PreferenceGlobal Customers
Global Segments
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The Pros and Cons of Standardization
The Drawbacks of Standardization
Off-Target
Lack of Uniqueness
Vulnerability to Trade BarriersStrong Local Competitors
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Localization versus Adaptation
Basic Requirements
Localization
Generally speaking, localization avoids having potential customers rejectthe product out of hand
Compatibility Requirements
Localization represents the adjustments in the product specificationsnecessary for it to function in the foreign environment
Multisystem CompatibilityIn many products today, localization is accomplished by building incompatibility with multiple systems at the outset
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Pitfalls of Global Standardization
Reasons for Product Standardization Failure
Insufficient Market ResearchSimilarities among customers are often assumed rather than proved
OverstandardizationStandardization should not encroach onto the positioning strategy
Poor Follow-UpFollow up needs to be implemented if a campaign is to succeed
Narrow VisionThe vision at the headquarters should not be narrow and inflexible
Rigid ImplementationSome flexibility in implementation needs to be retained by local units
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Global Product Lines
Reasons for Product Line Differences
HistoryDifferent 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
PreferencesDifferences in preferences give strategic rationale for product line customization
CapacityGlobal product lines need large production capacity
ChannelsDifferences in channel structure make it difficult to support the same product lines
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Developing New Global Products
Five Stages of the New Product Development Process
Idea Generation
Local subsidiaries are likely to have some ideas from their respectivemarkets 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 withthe company objectives, strategies, and resources.
Market Research
Focus Groups and Surveys
Focus groups offer the development team a chance to hear spontaneousreactions to a new concept and hear suggestions for improvement
The survey addition is useful with global products and different country sites
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Developing New Global Products
Five Stages (contd)
Concept Testing
A more formal approach to selecting product attributes is usingtechniques such as trade-off analysis or conjoint analysis
Target Product Research
By analyzing the leading brands and their attributes, companies are ableto understand what appeals to their consumers
Sales ForecastThe appropriate sales forecast approach is based on the product life cycle
Test MarketingOnce the sales forecast looks promising, the new product is usually placedin production and test marketed (see Ch. 4)
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Globalizing Successful New Products
New Product Success Factors
The most important factor determining new product success are therelative product advantage and technological synergy with acompanys 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?
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Globalizing Successful New Products
Global Diffusion
Three country-specific variables that influence innovative andimitative 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 WorkforceThe higher this proportion, the less time there is for innovation
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Global Brand Management
Brand Equity
The net revenues the brand can be expected to generate over time
Global BrandsThree advantages to using global brands
Demand spillover
Global customers
Scale economies
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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 takeseveral forms
In one, the most important global brands are at the top, followed by regionaland local brands
Alternatively, the top can be the corporate brand, possibly global, followed by
subbranded model namesBrand sales tend to follow a cycle similar to the product life cycle
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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?
ImplementationIssues in implementing the globalization strategy
Is the globalization product-based?
Which local brands should be chosen for the changeover?
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Global Brand Management
Changeover Tactics
Once the target brands have been identified, standard brandchangeover 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
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Defending Local Products
The typical reason for the success of local products is thecustomization involved
In industrial markets
Personal attention, fast delivery, and prompt after-sales service are allfactors tending to favor local products
In consumer goodsThe sameness of global products creates a potential for local products
in special niche segments of the market
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Counterfeit Products
Counterfeit or knockoffs are fake products designed and branded tomislead the unwary customer into assuming that they are genuine
Counterfeit products pose an ominous problem in the globalmarketplace
Firms make an effort to find the factories that turn out the counterfeitsand they track the fakes in the stores