11 – Product Strategy for International Markets

Introduction

A product can be defined by its tangible physical characteristics, such as weight, dimensions, and materials. Thus, an automobile may be characterised as 3,000 pounds of metal or plastic, 190″ long, 75″ wide, and 59″ tall. On the other hand, any description limited to physical qualities provides an insufficient picture of a product’s benefits. At the very least, car consumers want a vehicle to provide safe and comfortable transportation, which is provided through physical amenities such as airbags and adjustable seats. On the other hand, marketers cannot disregard the status, charisma, and other intangible product features that a specific automobile model may bring. Indeed, significant areas of the auto industry have sprung up around these intangible characteristics.

Thus, a product can be defined as a collection of physical, psychological, service, and symbolic properties that, when combined, provide satisfaction or advantages to a customer or user. Several product classification frameworks have been created. One famous classification is based on users and differentiates between consumer and industrial goods.

Both commodities can be further categorised based on various factors, such as how they are purchased (convenience, preference, shopping, and particularly goods) and their life cycle (durable, non-durable and disposable). These and other types of categorizations (frameworks developed for domestic marketing) entirely apply to international marketing).

11.1 National and International Products

A product in marketing is anything that may be supplied to a market that may satisfy a want or need. The following are the product categories based on their nationality:

11.1.1 National Goods

A national product is one that a specific company offers in a single national market. When a global corporation responds to the needs and tastes of specific local markets, national products may arise.

Coca-Cola, for example, created a non-carbonated, ginseng-flavoured beverage for sale solely in Japan and Pasturina, a yellow, carbonated-flavoured drink designed to compete with Peru’s favourite soft drink, Inca Cola.

Regardless of such examples, there are various reasons why national products—even profitable ones—can represent a significant opportunity cost to a corporation. For starters, a single national firm does not allow for the development and utilisation of worldwide leverage from headquarters in marketing, R&D, and production. Second, the local product does not permit the transfer and application of expertise gained from one market to another. The lack of transferability of managerial experience established in the single-product region is a third drawback of a single-country product.

11.1.2 International Goods

Multinational and regional markets offer international or regional products. The archetypal international product is the Euro product, which is available throughout Europe but not elsewhere in the world. Renault is a European brand: It is a global product, as it is available in every EU market; nevertheless, unlike Toyota, it is not an international product.

For example, portable personal sound or personal stereos are a worldwide product; Sony is a well-known international brand. Like a national or worldwide brand, a global brand is a symbol about which customers form opinions or preconceived notions.

11.2 Product Innovation

What exactly is a new product? The product’s newness can be evaluated in the organizational and market contexts. The product could be a new invention or innovation, such as the Video Cassette Recorder (VCR) or compact disc. It could be a line extension (a change to an existing product), such as Diet Coke. Organizational newness can occur when a firm acquires an existing product with no prior expertise. Finally, an existing product not new to a corporation may be novel in a specific market.

The figure depicts the eight stages, which begin with a declaration of the new product development plan.

 

Developing New Product Concepts

An effective global new-product programme begins with an information system that seeks new-product ideas from all potentially relevant sources and channels. Relevant ideas are screened at decision-making centres within the organisation. Customers, suppliers, competitors, company salespeople, distributors and agents, subsidiary executives, headquarters executives, documentary sources (for example, information service reports and publications), and actual first-hand observation of the market environment are potential sources of new product ideas.

International New Product Division

As previously stated, a large volume of information flow is necessary to scan for new product opportunities adequately, and significant work is then required to evaluate these opportunities to find candidates for product development. A new product department is an organisational architecture that meets these needs. The four functions of such a department are as follows:

(1) to ensure that all relevant information sources are continuously tapped for new product ideas;

(2) to screen these ideas to identify candidates for investigation;

(3) to investigate and analyse selected new product ideas; and

(4) to ensure that the organisation commits resources to the most likely new product candidates and is continuously involved in an orderly programme of new product introduction and development globally.

New Products Are Being Tested in National Markets

The most important lesson of new product introduction outside of the home market has been that whenever a product interacts with human, mechanical, or chemical elements, there is the possibility of unforeseen incompatibility. Because almost every product fits this criterion, testing a product under real-world market conditions is critical before launching it on a large scale. A test does not always necessitate a full-fledged test marketing campaign.

It may simply entail monitoring how the product is used in the target market.

11.3 International Product Development

International product planning entails deciding which products to introduce into which countries, what changes to make to the products, what new products to add, what brand names to use, what package designs to use, what guarantees and warranties to provide, what after-sales services to offer, and when to enter the market. All of these are critical decisions that necessitate a range of informational inputs. Three more considerations are crucial to these decisions:

(1) product objectives,

(2) product planning coordination between headquarters and subsidiaries, and

(3) overseas collaboration

A company’s product objectives would follow from the definition of its business. Finally, the product should deliver consumer satisfaction, reflected in achieving both the corporation’s and the host country’s aims.

Product objectives are derived from the host country, and company objectives are combined through the business description. The company’s goals are stability, profit growth, and return on investment. To put it another way, corporate objectives can be defined in terms of activities (such as the manufacture of a specific product or export to a particular market), financial indicators (such as achieving a targeted return on investment), desired position (market share and relative market leadership), and all of these in combination. The parent firm is frequently held accountable for a set of objectives in the interests of many stakeholders. The objectives of the host country differ depending on the country’s economic, political, and cultural context.

The goals of the host country and the enterprise are opposed. However, in any emerging market worldwide, no company can hope to prosper unless it aligns itself with the host country’s national issues. There are no models to use to describe such an alignment.

A macro examination of a country’s socioeconomic perspectives, on the other hand, should provide insights into its various worries and difficulties. The company can then determine whether its operations would benefit the government in any manner, either directly or indirectly. This should then prepare the business definition. For example, a lack of foreign exchange could be a significant issue for a country. The desire of a multinational marketer to conduct a considerable effort of export promotion in the country would amount to a goal in line with the country’s requirements. A corporation that manufactures and markets consumer items such as toiletries and canned foods in a country interested in developing an essential industrial development foundation may not serve the national interest.

Product objectives should be derived from the business definition. Product goals can be described in either physical or marketing terms. “We offer instant coffee,” for example, articulates goals in physical terms. The objective statement in marketing would emphasise fulfilling a client’s requirements. Because it supports the marketing premise, the latter strategy is preferred.

The viewpoints of international product planning can be divided into two categories: day-to-day concerns and strategic concerns. Day-to-day challenges develop when implementing previously established decisions. Strategic challenges necessitate significant commitments, which must be discussed with the parent firm.

Aside from ad hoc concerns, which may be day-to-day or strategic, the parent may need a periodic evaluation of the subsidiary’s plants. Each host country/geographic area would then provide product planning for established product lines and plans for developing and marketing new product lines, which would be separately submitted to corporate management for approval.

11.4 Product Adoption vs. Standardization

The following are the key differences between product acceptance and standardisation:

11.4.1 Product Adoption

Marketers must evaluate elements that influence product adoption before entering a foreign market. According to Diffusion Theory, at least six elements influence adoption: relative benefit, compatibility, trialability/divisibility, observability, complexity, and price. These are all perceptual and, thus, subjective elements.

To be acceptable, a product must demonstrate its relative superiority over current alternatives. It must also be appropriate for local norms and habits. In Asia, where people like fresh food, a freezer would not be available in a ready market. A new product should also be compatible with the consumers’ existing possessions. If a new product necessitates the replacement of previously used products, product adoption becomes a costly proposition.

It is advantageous if a new product can be divided and evaluated in tiny trial numbers to determine its acceptability and benefits. This is the trialability/divisibility factor of a product. Disposable diapers and blue pants lend themselves well to trialability.

Public observation of a product encourages social acceptance and reinforcement, resulting in its faster and less resistant adoption.

A product’s complexity or difficulty understanding its quality hinders its market acceptance. This explains why ground coffee has had difficulty replacing instant coffee in many nations.

11.4.2 Standardization

Its strengths are its simplicity and low cost of standardisation in manufacturing and distributing goods and services. It is a simple method that CEOs can comprehend and apply, and it is also cost-effective. If cost is the primary consideration, standardisation is unquestionably the best option because economies of scale may be used to minimise production costs. However, lowering production costs does not always imply increased profits. Simplicity is not always advantageous, and expenditures are sometimes misunderstood with gains. Cost cuts do not always result in increased profits; the opposite may be true. Controlling production costs through uniformity may result in a product unsuited for other markets. As a result, demand for goods from other countries may fall, resulting in lower profits.

In some cases, cost control is possible, but at the sacrifice of overall earnings. As a result, it is wise to note that cost should not be overstated. The primary marketing goal should be to maximise profits, with production cost reductions as a secondary goal.

11.5 International Product Promotion

Product standardisation and modification may convey that a marketer must choose between the two procedures and that one method is superior. A compromise between the two is often preferable to adopting either processor alone. Black and Decker have abandoned tailoring items for each country in favour of a few global products that may be marketed anywhere. Prentice Hall and Harper Collins, two US publishers, have also adopted the “International Book” concept, which allows English language books to have world copywrites. Publishers only update the title page cover and jacket if necessary.

A global product is intended for the worldwide market. A standardised product is developed for a single national market and then exported to an international market with no changes.

A company’s transition to a global offering is a sensible and healthy step. If a corporation must change a product for each market, this can be a very costly prospect. However, without the essential modifications, a product may not sell at all. Committing to the design of a global product can provide a solution to these two primary concerns that most businesses confront when dealing with the international market.

It is a fallacy to believe that a global product will be more expensive than a national or local product because the global product may require multipurpose parts. The international product should result in more significant savings for two reasons. For starters, costly production downtime is unnecessary when changing or converting equipment to manufacture distinct national versions. Second, a global product considerably simplifies inventory control because just one universal part must be stopped rather than many different parts.

A global product may also reduce certain manufacturing costs by anticipating the need for local adaptation.

Example: The Japanese ministry requires 32 changes on most US-built cars, including replacing headlamps that dip in the wrong direction due to left-hand drive, changing sharp-edged door handles, replacing the outside rearview mirror, and filling the space between the body and the rear bumper to prevent catching the sleeves of Kimono-clad women. Honda can sell its US-made automobiles at comparatively modest prices in Japan because it manufactures cars that are ready for sale in Japan. Because GM, Ford, and Chrysler vehicles are designed for the American market, they must undergo costly modifications to fulfil Japanese rules.

The world’s products, too, have some intrinsic flaws. Many car manufacturers in India do not have Euro-I and Euro-II adaptations to reduce emissions. As a result, cars that do not have these changes cannot be registered in New Delhi (NCR). Similarly, the Ford Escort car was designed in Europe to be Ford’s global vehicle.

11.6 Product Adaptation Factors in International Markets

Product adaptation is an essential commercial process in which a corporation modifies or “adapts” an existing product. It may be a strategy to stay competitive in a changing domestic market or sell items abroad that would not be desirable to foreign consumers without minor or major alterations.

Living Standards: Foreign markets are likely to have a different standard of living than the country where a product was first offered. This could indicate a necessity to cut the price or a chance to boost it. One method of product adaptation that addresses the needs of new markets is to adapt a product to use different materials and meet other quality standards.

Regulations: When government or industry rules compel products to satisfy specific criteria, selling products abroad may be an essential aspect of product adaptation. This is true for many foreign autos, which must undergo extensive product adaptation before being sold in the United States to fulfil strict American safety and emissions criteria. Electronic equipment manufacturers must also adjust to satisfy the voltage requirements of new markets.

Product Usage Conditions: Product usage conditions can have an impact on product adaptation in a variety of ways. The temperature, altitude, and distance of a new market may necessitate the development of new solutions that allow a product to perform as intended or new packaging that allows the product to arrive in excellent condition. Storage and sales tendencies in a new market may necessitate product adaptation, with producers developing new product versions that may be stacked, hung, or exhibited following regional customs. Food containers are an excellent illustration of this, with producers required to provide bottles and cartons that will fit in consumers’ refrigerators and cupboards in a new market.

Cultural Context and Style: Sometimes, a product needs a superficial alteration to fit into a new market. For example, colours, language, and numbers have significantly varied meanings in different cultures. This could imply that a manufacturer will have better success changing a product’s name or colour while maintaining its functional components unchanged. Manufacturers may also need to change a product’s name to minimise misunderstandings during translation or avoid using a name already copyrighted or linked with a different product in the new market.

11.7 Optimal Trade-off Strategy

“A trade-off implies that having more of one item necessitates having less of another.” When activities are incompatible, trade-offs occur for three reasons:

1. A corporation that provides one type of value may lose credibility, confuse customers, or harm its reputation by providing a different value or attempting to provide two conflicting items simultaneously.
2. Trade-offs develop as a result of the activity themselves. Distinct occupations necessitate different product configurations, equipment, employee behaviour, talents, and management techniques. In general, value is lost when an activity is overdesigned or underdesigned.
3. Trade-offs develop as a result of limitations in internal coordination and control. Management demonstrates its organisational goals by competing in one method but not the other. On the other hand, companies that try to be all things to all consumers frequently risk creating confusion among their staff, who then attempt to make day-to-day operational decisions without a defined framework.

Furthermore, trade-offs increase the demand for choice while guarding against repositions and straddlers. As a result, strategy can also be described as the process of making trade-offs when competing. The core of strategy is deciding not to do anything.

11.8 IPLC

The international product life cycle is a theoretical model that describes how an industry evolves over time and across borders. This theory also chronicles the evolution of a company’s marketing strategy when competing on domestic and international fronts. International product life cycle concepts incorporate economic principles such as market development and economies of scale, product life cycle marketing, and other standard business models.

The four essential elements of international product life cycle theory are as follows: the structure of the product’s demand, manufacturing, global competition and marketing strategy, and the marketing strategy of the company that produced or innovated the product. These elements are classified based on the stage of the product in the traditional product life cycle.

The International Product Life Cycle (IPLC) theory describes the stages a product goes through from its introduction to its decline in international markets. According to Raymond Vernon’s 1960s theory, a product’s life cycle consists of four main stages: introduction, growth, maturity, and decline. Each stage presents unique challenges and opportunities for businesses operating in international markets.

1. Introduction Stage: In this initial phase, the product is introduced to the market, typically in the country where it was developed. Sales and initial investments in research, development, and marketing are low. The product may not be suitable for international markets due to limited awareness and demand. Example: When Apple launched the iPhone in 2007, it was initially available only in the United States. International expansion came later as the product gained popularity and demand increased.
2. Growth Stage: During this phase, sales increase rapidly as consumer awareness grows and the product gains acceptance in the market. Companies may expand internationally to capitalize on increasing demand and explore new market opportunities. Competition intensifies as more firms enter the market. Example: Netflix experienced significant growth in the early 2010s as streaming services gained popularity worldwide. The company expanded its services internationally to tap into new markets and sustain its growth trajectory.
3. Maturity Stage: In this stage, sales growth stabilizes, and the market becomes saturated with competing products. Price competition intensifies, and companies focus on product differentiation and cost-cutting measures to maintain market share. International expansion may continue, but at a slower pace, with a focus on market penetration and diversification strategies. Example: Coca-Cola, a globally recognized brand, reached maturity in many international markets decades after its initial introduction. The company continues to expand into new countries while adapting its marketing strategies to sustain growth in mature markets.
4. Decline Stage: Sales begin to decline due to market saturation, changing consumer preferences, or the introduction of newer and more innovative products. Companies may withdraw from specific international markets or discontinue the product altogether if it becomes unprofitable. Example: BlackBerry, once a dominant player in the smartphone market, experienced a decline in sales and market share due to the rise of competitors like Apple and Samsung. The company eventually exited many international markets and shifted its focus to enterprise software and services.

11.9 Product Development Strategy

A product strategy is the product’s ultimate vision, stating where the product will end up. By developing a product strategy, you may choose the direction of your product activities.

For example, when using a map effectively, you must decide on a destination before planning your journey. The product has its plan and destination, much as a corporation has a strategic vision of what it wants to be when it grows up.

11.9.1 Why is a Product Strategy Necessary?

The product strategy is the foundation for a roadmap and subsequent product releases. Instead of striving to be everything to everyone, the approach allows the organisation to focus on a specified target market and feature set.

11.9.2 Product Strategy Elements

Answer the following questions when developing your product strategy:. Each question below links to an article that expands on the issue, so explore the related articles as you formulate your plan. Who are you trying to sell to? Define your target market or customer. Determine who you’re selling to and what your market looks like.

• What exactly are you selling? Describe how prospective clients will see your product in comparison to competitors. Recognize what makes your product stand out in the market.
• What kind of value do you offer your customers? Determine the issues that your solution solves for customers. Within a specific market, you cannot be everything to everyone, but you may assist in resolving particular difficulties. Create a value proposition highlighting your value and the benefits your solution will provide customers.
• What will you charge for your product? Specify how you intend to price the product. Include a pricing model and its perceived worth.
• How will you market your product? Please describe how you want to sell your product and how your target market will obtain it.

11.9.3 Developing a Product Strategy

Before developing your product strategy, identify the market challenges you want to tackle. This process includes interviewing your target market, analysing the competitive landscape, and determining how you will differentiate yourself.

Your product strategy will evolve as you learn more about your business and decide (whether) to enter new markets. Listening to your market and building your product strategy is cyclical; as you learn more, your product strategy and the challenges you answer will alter.

Example: Product Development Strategy

Here’s a quick rundown of a product strategy. Your product plan will likely differ and be longer, but it should adhere to the topic of the five questions listed above.

• We manufacture high-quality kitchen hardware for residential consumers.
• Our clients are young North American families that require kitchen hardware that can withstand the wear and tear of children. They are looking for materials that are both child-safe and environmentally beneficial.
• We offer our products through a retail channel.
• Our products are priced per unit and are considered “high-end” hardware solutions.

11.9.4 Product Strategy’s Strength

What you define and exclude will determine the effectiveness of a product strategy. You exclude other markets by focusing your product approach on a specific target market. This assists your firm in determining whether projects fall outside the product strategy and divert attention away from critical goals.