Unit III

Dr. Shipra Agrawal

Assistant Professor
Aryabhatta College
 Developing Global Information System

•A management information system (MIS) provides managers and other

decision makers with a continuous flow of information about company
operations.

• MIS is a broad term that can be used in reference to a system of hardware and
software that a company uses to manage information.

• An MIS should provide a means for gathering, analyzing, classifying, storing,

retrieving, and reporting relevant data.
• The MIS should also cover important aspects of a company’s external
environment, including customers and competitors.

• One component of a firm’s MIS is a business intelligence (BI) network that

helps managers make decisions; its major objective is:

“to enable interactive access to data, enable manipulation of these data,

and to provide managers and analysts with the ability to conduct appropriate
analysis. By analysing historical and current data, situations, and
performances, decision makers get valuable insights upon which they can base
more informed and better decisions.”
 Global Management Information System
• Global competition intensifies the need for effective MIS and business
intelligence that are accessible throughout the company.

• Caterpillar, GE, Boeing, FedEx, Ford, Toyota, and many other companies
with global operations have made significant investments in IT in recent
years.

• Such investment is typically directed at upgrading a company’s computer

hardware and software.

• Microsoft, Sun Microsystems, SAP, Oracle, and IBM are some of the
beneficiaries of this trend.
 Big Data Analytics
• The term big data refers to extremely large data sets that can be subjected to
computation analysis to reveal patterns and trends

• For Example: A video –Streaming pioneer, Netflix has collected more than
10 billion movie ratings from subscribers. Netflix also gathers demographic
data about all its subscribers, including age, gender, and place of residence.
Netflix managers must determine how to use the ratings in conjunction with
demographic information and viewership data so that new subscribers can
enjoy a better content discovery experience
• Big data may include a great deal of “noise”, must be converted into
information (“signals”) by eliminating statistical redundancy and corruption.

• By applying data analytics, marketer can arrive at insights that are relevant
and useful for them.
DATA
INFORMATI
ON

INSIGHT

noise
 Intranet

• An intranet is a private network that allows authorized company personnel or

outsiders to share information electronically.

• Intranets allow a company’s information system to serve as a 24-hour nerve

center, enabling Amazon.com, Dell, and other companies to operate as real
time enterprises (RTEs).
 Electronic data interchange (EDI) system

• An electronic data interchange (EDI) system allows a company’s business units to

submit orders, issue invoices, and conduct business electronically with other

company units as well as outside companies.

• One of the key features of EDI is that its transaction formats are universal. This
enables computer systems at different companies to speak the same language.

• EDI links with vendors enable retailers to improve inventory management and
restock hot-selling products in a timely, cost-effective manner.
• Walmart is legendary for its sophisticated EDI system; for years, vendors

have received orders from the retailer on personal computers using dial-up

modems connected to third-party transmission networks.

• In 2002, Walmart informed vendors it was switching to an Internet-based EDI

system. The switch saves both time and money
 Efficient consumer response (ECR)

• Efficient consumer response (ECR)in an effort to work more closely with

vendors on stock replenishment.

• ECR systems utilize electronic point of sale (EPOS) data gathered by

checkout scanners to help retailers identify product sales patterns and how
consumer preferences vary with geography.
 Customer Relationship Management (CRM)
• A new business tool that helps companies collect, store, and analyze customer
data is called customer relationship management (CRM).

• CRM is a philosophy that values two-way communication between the

company and the customer.

• Every point of contact a company has with a consumer or business

customer—through a Web site, a warranty card or sweepstakes entry, a
payment on a credit card account, or an inquiry to a call center—is an
opportunity to collect data.
• CRM tools allow companies such as American Express, Dell, HSBC, Sharp,
and Sony to determine which customers are most valuable and to react in a
timely manner with customized product and service offerings that closely
match customer needs.

• If implemented correctly, CRM can make employees more productive and

enhance corporate profitability; it also benefits customers by providing value-
added products and services.
 Databases
• Databases called data warehouses are frequently an integral part of a company’s

CRM system. Data warehouses can serve other purposes as well.

• For example:

Helps in inventory management at all stores located in different areas

Company personnel can access data warehouses via standard Web browsers.
It is specialized software capable of performing multidimensional analyses that
use sophisticated techniques such as linear programming and regression analysis.

This enhances the ability of managers to respond to changing business

conditions by adjusting marketing mix elements.
 Basic Product Concepts

Product

•A product is a good, service, or idea with both tangible and intangible

attributes that collectively create value for a buyer or user.

• A product’s tangible attributes can be assessed in physical terms, such as

weight, dimensions, or materials used.
• Consider, for example, a flat-panel TV with an LCD screen that measures 42 inches
across. The unit weighs 50 pounds, is 5 inches deep, is equipped with four high-
definition media interface (HDMI) connections, has a built-in tuner capable of
receiving high-definition TV signals over the air, and delivers a screen resolution of
1080p. These tangible, physical features translate into benefits that enhance the
enjoyment of watching HDTV broadcasts and DVD movies. Accessories such as
wall mounts and floor stands enhance the value offering by enabling great flexibility
in placing the set in a living room or home theatre.

• Intangible product attributes, including the status associated with product ownership,
a manufacturer’s service commitment, and a brand’s overall reputation or mystique,
are also important.
Product Types

• A frequently used framework for classifying products distinguishes between

consumer and industrial goods.

• Consumer and industrial goods, in turn, can be further classified on the basis
of criteria such as buyer orientation. Buyer orientation is a composite measure
of the amount of effort a customer expends, the level of risk associated with a
purchase, and buyer involvement in the purchase. Electronics products are
often high-involvement purchases, and many shoppers will compare several
brands before making a decision.
• Products can also be categorized in terms of their life span (durable,
nondurable, and disposable). Samsung and other electronics companies
market products that are meant to last for many years; in other words, they are
durable goods.

• As these examples from the electronics industry suggest, traditional product

classification frameworks are fully applicable to global marketing.
 Global Product Strategies
EXTEND, ADAPT, CREATE

• Depending on organizational objectives and market needs, a particular

program may consist of extension strategies, adaptation strategies, or a
combination of the two.

•A company that has developed a successful local product or brand can

implement an extension strategy that calls for offering a product virtually
unchanged (i.e., “extending” it) in markets outside the home country.

• A second option is an adaptation strategy; this involves changing elements

of design, function, or packaging in response to needs or conditions in
particular country markets.
• These product strategies can be used in conjunction with extension or
adaptation communication strategies.

• This is the type of strategic decision facing executives at a company such as

Starbucks who build a brand and a product/service offering in the home-
country market before expanding into global markets.

• A third strategic option, product invention, entails developing new products.

 Strategy 1:Product-Communication Extension (Dual
Extension)

• Companies pursuing this strategy sell the same product with virtually no

adaptation, using the same advertising and promotional appeals used domestically,

in two or more country markets or segments.

• For this strategy to be effective, the advertiser’s message must be understood

across different cultures, including those in emerging markets.

• Example of the dual-extension strategy: Apple launched its iPhone in the
United States in mid-2007. In the following months, it was gradually rolled

out in several more markets, including France and the United Kingdom.

• As a general rule, extension/standardization strategies are utilized more

frequently with industrial (business-to-business) products than with consumer

products.

• The reason is simple: Industrial products tend to be less deeply rooted in

culture than consumer goods.

 Strategy 2:Product Extension-Communication
Adaptation
• In some instances, a product or brand can be successfully extended to

multiple country markets with some modification of the communication

strategy.

• Research may have revealed that consumer perceptions about one or more
aspects of the value proposition are different from country to country.

• It may also turn out that a product fills a different need, appeals to a different
segment, or serves a different function in a particular country or region.
• Whatever the reason, extending the product while adapting the marketing
communications program may be the key to market success.

• The appeal of the product extension-communication adaptation strategy is its

relatively low cost of implementation.

• Because the product itself is unchanged, expenditures for R&D,

manufacturing setup, and inventory are avoided.

• The biggest costs associated with this approach are in researching the market
and revising advertising, sales promotion efforts, point-of-sale material, and
other communication elements as appropriate.
• Examples of product extension-communication adaptation:
To promote its Centrino wireless chip, Intel launched a global ad

campaign that features different combinations of celebrities. The

celebrities—including comedian John Cleese, actress Lucy Liu, and

skateboard king Tony Hawk—were chosen because they are widely

recognized in key world markets.

In the United States, Sony’s TV ads for its Bravia high-definition TVs
encourage viewers to log onto the Internet and choose different endings. In
Europe, the ads are completely different: They feature bright images such as
colored balls bouncing in slow motion. As Mike Fasulo, chief marketing
officer at Sony Electronics, explains, “Consumer adoption as well as
awareness of high-definition products, including our line of Bravia
televisions, differs dramatically from region to region.”
 Strategy 3:Product Adaptation-Communication
Extension
• A third approach to global product planning is to adapt the product to local use or
preference conditions while extending, with minimal change, the basic home-market
communications strategy or brand name.

• Example: When Kraft Foods launched Oreo brand cookies in China in 1996, it used a
product extension approach. Following several years of flat sales, Kraft’s in-country
marketing team launched a research study. The team learned that Oreo was too sweet for
the Chinese palate and that the price—14 cookies for 72 cents—was too high. Oreo was
reformulated as a less-sweet, chocolate-covered, four-layer wafer filled with vanilla and
chocolate cream. Packages of the new wafer Oreo contain fewer cookies but sell for
about 29 cents. Today, Oreo is the best-selling cookie brand in China.
 Strategy 4:Product-Communication Adaptation (Dual
Adaptation)

• As the name implies, both the product and one or more promotional elements
are adapted for a particular country or region.

• Sometimes marketers discover that environmental conditions or consumer

preferences differ from country to country; the same may be true of the

function a product serves or consumer receptivity to advertising appeals. (ex:

vacuum cleaner)
• Example: Unilever’s use of dual adaptation strategies. Unilever’s Italian
country managers discovered that, although Italian women spend more than
20 hours each week doing cleaning, ironing, and other tasks, they are not
interested in labor-saving conveniences. The final result—a really clean, shiny
floor, for example—is more important than saving time. For the Italian
market, Unilever reformulated its Cif brand spray cleaner to do a better job on
grease; several different varieties were also rolled out, as were bigger bottles.
Television commercials portray Cif as strong rather than convenient.
 Conclusion
• A company can simultaneously utilize different product-communication strategies in
different parts of the world.
• For example, Nike has built a global brand by marketing technologically advanced,
premium-priced athletic shoes in conjunction with advertising that emphasizes U.S.-style,
in-your-face brashness and “Just Do It” attitude. In the huge and strategically important
China market, however, this approach had several limitations. For one thing, Nike’s “bad
boy” image is at odds with ingrained Chinese values such as respect for authority and filial
piety. As a general rule, advertisements in China do not show disruption of harmony; this is
due, in part, to a government that discourages dissent. Price was another issue: A regular
pair of Nike shoes cost the equivalent of $60–$78, while average annual family income
ranges from about $200 in rural areas to $500 in urban areas. In the mid-1990s, Nike
responded by creating a shoe that could be assembled in China specifically for the Chinese
market using less expensive material and sold for less than $40. After years of running ads
designed for Western markets by longtime agency Wieden & Kennedy, Nike hired
Chinese-speaking art directors and copywriters working in WPP Group’s J. Walter
Thompson ad agency in Shanghai to create new advertising featuring local athletes that
would appeal to Chinese nationalistic sentiments.
 Strategy 5:Innovation

• Extension and adaptation strategies are effective approaches to many but not
all global market opportunities. For example, they do not respond to markets
where there is a need but not the purchasing power to buy either the existing
or adapted product (Case I).

• Global companies are likely to encounter this situation when targeting

consumers in India, China, and other emerging markets.

• When potential customers have limited purchasing power, a company may

need to develop an entirely new product designed to address the market
opportunity at a price point that is within the reach of the potential customer.
• The converse is also true (CaseII): Companies in low-income countries that
have achieved local success may have to go beyond mere adaptation by
“raising the bar” and bringing product designs up to world-class standards if
they are to succeed in high-income countries.

• Innovation, the process of endowing resources with a new capacity to create

value, is a demanding but potentially rewarding product strategy for reaching
mass markets in less developed countries as well as important market
segments in industrialized countries.
• Case I: Example of the innovation strategy is the South African company that
licensed the British patent for a hand-cranked, battery-powered radio. The
radio was designed by an English inventor responding to the need for radios
in low-income countries. Consumers in these countries do not have electricity
in their homes, and they cannot afford the cost of replacement batteries. His
invention is an obvious solution: a hand-cranked radio. It is ideal for the
needs of low-income people in emerging markets. Users simply crank the
radio, and it will play on the charge generated by a short cranking session for
almost an hour.
• Case II: Sometimes manufacturers in developing countries that intend to go global
also utilize the innovation strategy. For example, Thermax, an Indian company, had
achieved great success in its domestic market with small industrial boilers. Engineers
developed a new design for the Indian market that significantly reduced the size of
the individual boiler unit. However, the new design was not likely to succeed outside
India because installation was complex and time consuming. In India, where labor
costs are low, relatively elaborate installation requirements are not an issue. The
situation is different in higher-wage countries where industrial customers demand
sophisticated integrated systems that can be installed quickly. The managing director
at Thermax instructed his engineers to revise the design for the world market with
ease of installation as a key attribute. The gamble paid off: Today, Thermax is one of
the world’s largest producers of small boilers.58
 How to Choose a Strategy
• To sum up, the choice of product-communication strategy in global marketing is
a function of three key factors:

(1) the product itself, defined in terms of the function or need it serves;

(2) the market, defined in terms of the conditions under which the product is used,
the preferences of potential customers, and the ability and willingness to buy;
and

(3) adaptation and manufacturing costs to the company considering these product-
communication approaches.

• Only after analysis of the product-market fit and of company capabilities and
costs can executives choose the most profitable strategy.
 Adaptation

• Product may have to change in a number of ways to meet the physical or

mandatory requirements of a new market, ranging from simple package
changes to total redesign of the physical core product.

• In many countries, the term product homologation is used to describe the

changes mandated by local product and service standards.
• Some needed changes are obvious with relatively little analysis;
a cursory examination of a country will uncover the need to rewire electrical
goods for a different voltage system,

 simplify a product when the local level of technology is not high,

or print multilingual labels where required by law.
Electrolux, for example, offers a cold-wash-only washing machine in Asian
countries where electric power is expensive or scarce
• Legal, economic, political, technological, and climatic requirements of the
local marketplace often dictate product adaptation.

During a period in India when the government strongly opposed foreign

investment, PepsiCo. changed its product name to Lehar-Pepsi (in Hindi,
lehar means “wave”) to gain as much local support as possible. The name
returned to PepsiCola when the political climate turned favorable.

• Laws that vary among countries usually set specific package sizes and safety
and quality standards.
• Changes may also have to be made to accommodate climatic differences.
General Motors of Canada, for example, experienced major problems
with several thousand Chevrolet automobiles shipped to a Middle Eastern
country; GM quickly discovered they were unfit for the hot, dusty climate.
Supplementary air filters and different clutches had to be added to adjust
for the problem.

Similarly, crackers have to be packaged in tins rather than cardboard

boxes for humid areas.
• Famous example of product homologation comes from China.
• Oreos were first introduced there in 1996, but the company didn’t adapt them
to Chinese tastes until 9 years later. Now they’re the top-selling biscuit in the
country, after consumer research suggested reducing the sugar content and
reducing package sizes and prices.
 Product Design

• A product is multidimensional, and the sum of all its features determines the
bundle of satisfactions (utilities) received by the consumer.

• To identify all the possible ways a product may be adapted to a new market, it
helps to separate its many dimensions into three distinct components, these
are, core component, packaging component, and support services component.

• These components include all a product’s tangible and intangible elements

and provide the bundle of utilities the market receives from use of the
product.
 Core Component
• The core component consists of the physical product—the platform that contains
the essential technique—and all its design and functional features.

• It is on the product platform that product variations can be added or deleted to

satisfy local differences.

• Major adjustments in the platform aspect of the core component may be costly,
because a change in the platform can affect product processes and thus require
additional capital investment.

• However, alterations in design, functional features, flavors, color, and other

aspects can be made to adapt the product to cultural variations.
• In Japan, Nestlé originally sold the same kind of corn flakes it sells in the
United States, but Japanese children ate them mostly as snacks instead of for
breakfast. To move the product into the larger breakfast market, Nestlé
reformulated its cereals to more closely fit Japanese taste. The Japanese
traditionally eat fish and rice for breakfast, so Nestlé developed cereals with
familiar tastes—seaweed, carrots and zucchini, and coconut and papaya. The
result was a 12 percent share of the growing breakfast cereal market.
• Functional features can be added or eliminated depending on the market.

• In markets where hot water is not commonly available, washing machines

have heaters as a functional feature.

• In other markets, automatic soap and bleach dispensers may be eliminated to

cut costs or to minimize repair problems.

• Additional changes may be necessary to meet safety and electrical standards

or other mandatory (homologation) requirements.

• The physical product and all its functional features should be examined as
potential candidates for adaptation.
 Packaging Component
• The packaging component includes style features, packaging, labeling,

trademarks, brand name, quality, price, and all other aspects of a product’s

package.

• Packaging components frequently require both discretionary and mandatory

changes.

• For example, some countries require labels to be printed in more than one
language, while others forbid the use of any foreign language.

One study has found that consumers in the United States respond

negatively to bilingual packaging.

• Elements in the packaging component may incorporate symbols that convey
an unintended meaning and thus must be changed.

In China, a German children’s cereal brand that features cartoon drawings
of dogs, cats, birds, monkeys, and other animals on the package, was

located in the pet foods section of a supermarket. The label had no

Chinese, and store personnel were unfamiliar with the product. It is easy

to forget that in low-literacy countries, pictures and symbols are taken

literally as instructions and information.

• Care must be taken with respect to corporate trademarks
One company’s red-circle trademark was popular in some countries but
was rejected in parts of Asia, where it conjured up images of the Japanese
flag. Yellow flowers used in another company trademark were rejected in
Mexico, where a yellow flower symbolizes death or disrespect.

• Particular attention should be given to translations of brand names and

colors used in packaging.

Chevrolet tried to sell the 'Nova' car to Spanish speakers in Latin

America, but the brand flopped because, in Spanish, “nova” means “it
doesn't go.”

 White, the color symbolizing purity in Western countries, is the color for
mourning in others.
• Package
 In some countries, laws stipulate specific bottle, can, and package sizes and
measurement units.

 High humidity or the need for long shelf life because of extended distribution
systems may dictate extra-heavy packaging for some products.

• Quality
Japanese attitudes about quality include the packaging of a product. A poorly
packaged product conveys an impression of poor quality to the Japanese.
• Style
Lever Brothers sells Lux soap in stylish boxes in Japan because more
than half of all soap cakes there are purchased during the two gift-giving
seasons.

• Size
Size of the package is also a factor that may make a difference to success
in Japan. Soft drinks are sold in smaller-size cans than in the United States

to accommodate the smaller Japanese hand.

• Labeling
Labeling laws vary from country to country and do not seem to follow any
predictable pattern.

 In Saudi Arabia, for example, product names must be specific. “Hot Chili”
will not do; it must be “Spiced Hot Chili.”

Prices are required to be printed on the labels in Venezuela, but in Chile

putting prices on labels or in any way suggesting retail prices is illegal.

Coca-Cola ran into a legal problem in Brazil with its Diet Coke. Brazilian law
interprets diet to have medicinal qualities. Under the law, producers must give
the daily recommended consumption on the labels of all medicines. Coca-Cola
had to get special approval to get around this restriction.
 Until recently in China, Western products could be labeled in a foreign
language with only a small temporary Chinese label affixed somewhere on
the package. Under the new Chinese labeling law, however, food products
must have their name, contents, and other specifics listed clearly in
Chinese printed directly on the package—no temporary labels are allowed.

• Labeling laws create a special problem for companies selling products in

various markets with different labeling laws and small initial demand in each.

In China, for example, there is demand for American- and European-style
snack foods even though that demand is not well developed at this time.
The expense of labeling specially to meet Chinese law often makes market
entry costs prohibitive.
 Support Service Component
• The support services component includes repair and maintenance, instructions,
installation, warranties, deliveries, and the availability of spare parts.

• Repair and maintenance are especially difficult problems in developing countries.

In the United States, a consumer has the option of obtaining service from the company
or from scores of competitive service retailers ready to repair and maintain anything
from automobiles to lawn mowers. Equally available are repair parts from company-
owned or licensed outlets or the local hardware store.

Consumers in a developing country and in many developed countries may not have
even one of the possibilities for repair and maintenance available in the United States,
and independent service providers can be used to enhance brand and product quality.
• The literacy rates and educational levels of a country may require a firm to
change a product’s instructions. A simple term in one country may be
incomprehensible in another.

In rural Africa, for example, consumers had trouble understanding that
Vaseline Intensive Care lotion is absorbed into the skin. Absorbed was
changed to soaks into , and the confusion was eliminated.

The manufacturers include videocassette players and videotapes with

detailed repair instructions as part of the standard instruction package. They
also minimize spare parts problems by using standardized, off-the-shelf
parts available throughout the world.
• Product warranties
A warranty can be an important element of a product’s value proposition.
An express warranty is a written guarantee that assures the buyer that he or
she is getting what he or she has paid for or that provides recourse in case a
product’s performance falls short of expectations.

In global marketing, warranties can be used as a competitive tool to

position a company in a positive way.
For example, in the late 1990s Hyundai Motor America chief executive realized
that many American car buyers perceived Korean cars as “cheap” and were

skeptical about the Hyundai nameplate’s reliability. The company had made

significant improvements in the quality and reliability of its vehicles, but

consumer perceptions of the brand had not kept pace with the changes. O’Neill

instituted a 10-year, 100,000-mile warranty program that represents the most

comprehensive coverage in the auto industry. Concurrently, Hyundai launched

several new vehicles and increased expenditures for advertising. The results are

impressive: Hyundai’s U.S. sales jumped from about 90,000 vehicles in 1998 to

more than 500,000 vehicles in 2010. Hyundai has also overtaken Toyota as

Europe’s best-selling Asian car brand.

 Conclusion

The Product Component Model can be a useful guide for examining the
adaptation requirements of products destined for foreign markets. A product
should be carefully evaluated on each of the three components to determine any
mandatory and discretionary changes that may be needed.
 New Products in Global Marketing

• To win in global competition, marketers, designers, and engineers must think

outside the box and create innovative new products that offer superior value
worldwide.

• In today’s dynamic, competitive market environment, many companies

realize that continuous development and introduction of new products are
keys to survival and growth.

• Similarly, marketers should look for opportunities to create global advertising

campaigns to support the new product or brand.
 The
Identifying
New Product International Testing New
New-Product
Development New-Product Products
Ideas
Department
 Step 1: Identifying New-Product Ideas
• Product Newness
A product’s newness can be assessed in terms of its relation to those
who buy or use it (amount of learning require).

Newness may also be organizational, as when a company acquires an

already existing product with which it has no previous experience.

Finally, an existing product that is not new to a company may be new to

a particular market.

• The starting point for an effective worldwide new-product program is an

information system that seeks new-product ideas from all potentially useful
sources and channels.
• Ideas can come from many sources, including customers, suppliers,
competitors, company salespeople, distributors and agents, subsidiary
executives, headquarters executives, documentary sources (e.g., information
service reports and publications), and, finally, actual first-hand observation of
the market environment.
The three degrees of product newness can be represented in terms of a
continuum
• Discontinuous Innovations
The product may be an entirely new invention or innovation that requires a
significant amount of learning on the part of users.

When such products are successful, they create new markets, new

consumption patterns, and have a disruptive impact on industry structures.

 They are game-changers.

For example, the VCR’s revolutionary impact in the 1970s can be
explained by the concept of time shifting: The device’s initial appeal was
that it freed TV viewers from the tyranny of network programming
schedules—and allowed viewers to fast-forward past commercials!
Likewise, the personal computer revolution that began three decades ago
resulted in the democratization of technology. When they were first
introduced, PCs were a discontinuous innovation that dramatically
transformed the way users live and work. Apple’s brilliant string of
newproduct introductions in the 2000s—the iPod (2001), the iPhone
(2007), and the iPad (2010)— likewise represents a hat-trick of
discontinuous innovation.
• Dynamically Continuous Innovations

An intermediate category of newness is less disruptive and requires less learning
on the part of consumers; such products are called dynamically continuous
innovations.

Products that embody this level of innovation share certain features with earlier
generations while incorporating new features that offer added value such as a
substantial improvement in performance or greater convenience.

Such products cause relatively smaller disruptions of previously existing

consumption patterns.

Example: The Sensor, SensorExcel, and MACH3 shaving systems represent

Gillette’s ongoing efforts to bring new technology to bear on wet shaving, an activity
that is performed today pretty much as it has been for decades.
The consumer electronics industry has been the source of many dynamically
continuous innovations. Personal stereos such as Sony’s Walkman provide
music on the go, something that people had grown accustomed to since the
transistor radio was introduced in the 1950s; the innovation was a
miniaturized playback-only cassette tape system. The advent of the compact
disc in the early 1980s provided an improved music listening experience but
didn’t require significant behavioral changes.

Similarly, much to the delight of couch potatoes everywhere, widescreen,

flat-panel HDTVs offer viewers significantly improved performance.
• Continuous Innovation
Most new products fall into a third category, continuous innovation.
Such products are typically “new and improved” versions of existing ones
and require less R&D expenditure to develop than dynamically continuous
innovations.

Continuous innovations cause minimal disruption of existing consumption

patterns and require the least amount of learning on the part of buyers.
Example: When a current PC user seeking an upgrade buys a new model
with a faster processor or more memory, the PC can be viewed as a
continuous innovation. However, to a first-time user, the same computer
represents a discontinuous innovation.

Consumer packaged goods companies and food marketers rely heavily on

continuous innovation when rolling out new products. These often take the
form of line extensions, such as new sizes, flavors, and low-fat versions.
 Step 2: New-Product Development

• A major driver for the development of global products is the cost of product
R&D.

• As competition intensifies, companies discover they can reduce the cost of

R&D for a product by developing a global product design.

• Often the goal is to create a single platform, or core product design element or
component, that can be quickly and cheaply adapted to various country
markets.
• Example: Automobiles, which must meet national safety and pollution
standards, are now designed with global markets in mind. With a global
product platform, automakers can offer an adaptation of a global design as
needed instead of creating unique designs for individual countries or
geographic regions. The first-generation Ford Focus, launched in Europe at
the end of 1998 and in the United States in 1999, was marketed globally with
a minimum of adaptation. The chief program engineer on the Focus project
was from Great Britain, the chief technical officer was German, the project
manager was Irish, and an Anglo-Australian was chief designer. Under Ford
2000, about $1,000 per vehicle was cut out of the development cost.
• Other design-related costs, whether incurred by the manufacturer or the end
user, must also be considered.

• Durability and quality are important product characteristics that must be

appropriate for the proposed market.

• In the United States and Europe, car buyers do not wish to incur high service
bills.

• Ironically, the new Ford Focus was designed to be less expensive to maintain
and repair.

• For example, engine removal takes only about 1.5 hours, about half the time
required to remove the engine in the discontinued Escort.
 Step 3: The International New-Product Department
• A high volume of information flow is required to scan adequately for new-
product opportunities, and considerable effort is subsequently required to
screen these opportunities to identify candidates for product development.

• The best organizational design for addressing these requirements is a new-

product department.

• Managers in such a department engage in several activities.

1. First, they ensure that all relevant information sources are continuously
tapped for new-product ideas.
2. Second, they screen these ideas to identify candidates for investigation.
Third, they investigate and analyze selected new-product ideas.

3. Finally, they ensure that the organization commits resources to the most
likely new-product candidates and is continuously involved in an orderly
program of new-product introduction and development on a worldwide
basis.
• With the enormous number of possible new products, most companies establish
screening grids in order to focus on those ideas that are most appropriate for
investigation.

• The following questions are relevant to this task:

1. How big is the market for this product at various prices?
2. What are the likely competitive moves in response to our activity with this
product?

3. Can we market the product through our existing structure? If not, what
changes will be required, and what costs will be incurred to make the changes?

4. Given estimates of potential demand for this product at specified prices with
estimated levels of competition, can we source the product at a cost that will
yield an adequate profit?
5. Does this product fit our strategic development plan?
a) Is the product consistent with our overall goals and objectives?
b) Is the product consistent with our available resources?
c) Is the product consistent with our management structure?
d) Does the product have adequate global potential?
 Step 4: Testing New Products

• The major lesson of new-product introduction outside the home market has been
that whenever a product interacts with human, mechanical, or chemical elements,
there is the potential for a surprising and unexpected incompatibility.

• Because virtually every product matches this description, it is important to test a

product under actual market conditions before proceeding with full-scale
introduction.

• A test does not necessarily involve a full-scale test-marketing effort. It may be

simply observing the actual use of the product in the target market.
• Failure to assess actual use conditions can lead to big surprises, as Unilever learned when it rolled
out a new detergent brand in Europe without sufficient testing. Unilever spent $150 million to
develop the new detergent, which was formulated with a stain-fighting manganese complex
molecule intended to clean fabrics faster at lower temperatures than competing products such as
Procter & Gamble’s Ariel. Backed by a $300 million marketing budget, the detergent was launched
in April 1994 as Persil Power, Omo Power, and other brand names. After a restructuring, Unilever
had cut the time required to roll out new products in Europe from 3 years to 16 months. In this
particular instance, the increased efficiency combined with corporate enthusiasm for the new
formula resulted in a marketing debacle. Consumers discovered that some clothing items were
damaged after being washed with Power. P&G was quick to capitalize on the situation; P&G ran
newspaper ads denouncing Power and commissioned lab tests to verify that the damage did, in fact,
occur. Unilever chairman Sir Michael Perry called the Power fiasco, “the greatest marketing
setback we’ve seen.” Unilever reformulated Power, but it was too late to save the brand. The
company lost the opportunity to gain share against P&G in Europe
 Marketing Consumer Services Globally

• Much of the advice regarding adapting products for international consumer

markets also applies to adapting services.

• Moreover, some services are closely associated with products.

• However, services are distinguished by four unique characteristics—

intangibility, inseparability, heterogeneity, and perishability— and thus
require special consideration.
• Products are often classified as tangible, whereas services are intangible .
Automobiles, computers, and furniture are examples of products that have a
physical presence; they are things or objects that can be stored and possessed, and
their intrinsic value is embedded within their physical presence.

• Insurance, dry cleaning, hotel accommodations, and airline passenger or freight

service, in contrast, are intangible and have intrinsic value resulting from a process,
a performance, or an occurrence that exists only while it is being created.

• The intangibility of services results in characteristics unique to a service:

 It is inseparable in that its creation cannot be separated from its consumption;
 it is heterogeneous in that it is individually produced and is thus unique;
 and it is perishable in that once created it cannot be stored but must be
consumed simultaneously with its creation.
 Brands in International Markets
• Hand in hand with global products and services are global brands.

• A global brand is defined as the worldwide use of a name, term, sign, symbol (visual and/

or auditory), design, or combination thereof intended to identify goods or services of one

seller and to differentiate them from those of competitors.

• Much like the experience with global products, the question of whether or not to establish

global brands has no single answer.

• However, the importance of a brand name, even in the nonprofit sector, is unquestionable.

• Indeed, Exhibit 13.2 lists the estimated worth (equity) of the 20 top global brands. And as

indicated in previous chapters, protecting brand names is also a big business.

V
• A successful brand is the most valuable resource a company has.
• The brand name encompasses the years of advertising, goodwill, quality

evaluations, product experience, and other beneficial attributes the market

associates with the product.

• Brand image is at the very core of business identity and strategy.

• In a sense, the consumer–brand interaction becomes much like an interpersonal

interaction, wherein cultural differences hold high control.

• This comparison also implies that even global brands must be positioned

locally, as a Japanese consumer will see and interact with the Coke brand

differently than a French consumer,

• For example. Research shows that the importance and impact of brands vary
with cultural values around the world. Thus, customers everywhere respond

to images, myths, and metaphors that help them define their personal and

national identities within a global context of world culture and product

benefits.
 Global Brand

• Naturally, companies with strong brands strive to use those brands globally.

• In fact, even perceived “globalness” can lead to increases in sales.

• The Internet and other technologies accelerate the pace of the globalization of
brands.

• Even for products that must be adapted to local market conditions, a global

brand can be successfully used with careful consideration.

• Heinz produces a multitude of products that are sold under the Heinz brand all
over the world. In the United Kingdom, for example, Heinz Baked Beans
Pizza (available with cheese or sausage) was a runaway hit, selling over 2.5
million pizzas in the First six months after its introduction. In the British
market, Heinz’s brand of baked beans is one of the more popular products.
The British consumer eats an average of 16 cans annually, for a sales total of
$1.5 billion a year. The company realizes that consumers in other countries
are unlikely to rush to stores for bean pizzas, but the idea could lead to the
creation of products more suited to other cultures and markets.
• Ideally a global brand gives a company uniformly positive worldwide brand
associations that enhance efficiency and cost savings when introducing other
products with the brand name, but not all companies believe a single global
approach is the best.

• Indeed, we know that the same brand does not necessarily hold the same
meanings in different countries. In addition to companies such as Apple,
Kellogg, Coca-Cola, Caterpillar, and Levi’s, which use the same brands
worldwide, other multinationals such as Nestlé, Mars, Procter & Gamble, and
Gillette have some brands that are promoted worldwide and others that are
country specific.
• Companies that already have successful country-specific brand names must
balance the benefits of a global brand against the risk of losing the benefits of an
established brand.

• The cost of re-establishing the same level of brand preference and market share for
the global brand that the local brand has must be offset against the long-term cost
savings and benefits of having only one brand name worldwide.

• In those markets where the global brand is unknown, many companies are buying
local brands of products that consumers want and then revamping, repackaging,
and finally relaunching them with a new image. Unilever purchased a local brand
of washing powder, Biopan, which had a 9 percent share of the market in
Hungary; after relaunching, market share rose to about 25 percent.
• When Mars, a U.S. company that includes candy and pet food among its product lines,
adopted a global strategy, it brought all its products under a global brand, even those with
strong local brand names. In Britain, the largest candy market in Europe, M&Ms previously
were sold as Treets, and Snickers candy was sold under the name Marathon to avoid
association with knickers , the British word for women’s underpants. To bring the two
candy products under the global umbrella, Mars returned the candies to their original
names. The pet food division adopted Whiskas and Sheba for cat foods and Pedigree for
dog food as the global brand name, replacing KalKan. To support this global division that
accounts for over $4 billion annually, Mars also developed a Web site for its pet food
brands. The site functions as a “global infrastructure” that can be customized locally by any
Pedigree Petfoods branch worldwide. For instance, Pedigree offices can localize languages
and information on subjects such as veterinarians and cat-owner gatherings.
• Finally, researchers are beginning to address the sometimes difficult problem
of brand extensions in global markets.

• Consumers in “Eastern” cultures may be more likely to understand and

appreciate brand extensions because of their more holistic thinking than
consumers in “Western” cultures, with their more analytical thinking patterns.

• Obviously more work needs to be done in this area, but important differences
across cultures are readily discernable in the acceptance of brand extensions
 National Brand
• Different strategy is followed by the Nestlé Company, which has a stable of
global and country-specific national brands in its product line. The Nestlé
name itself is promoted globally, but its global brand expansion strategy is
two-pronged. In some markets, it acquires well-established national brands
when it can and builds on their strengths—there are 7,000 local brands in its
family of brands. In other markets where there are no strong brands it can
acquire, it uses global brand names. The company is described as preferring
brands to be local, people to be regional, and technology to be global. It does,
however, own some of the world’s largest global brands; Nescafé is but one.