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Product Adaptation

Chapter 10


Product Variables

• The Core Product– a product or services that is essentially the same

as that of competitors.• The Tangible Product

– a product or service that is differentiated composition, origin, or tangible features from competing products.

• The Augmented Product– a product or service which is serviced after the

sale and carries a warrantee from the producer, producing a continuing relationship with the seller.


Standardization versus Adaptation

• The fundamental international product decision after the decision to internationalize.

• International market approach alternatives to adaptation.– Sell the product as it is internationally.– Modify product for different countries or regions.– Design new products for foreign markets.– Incorporate all differences into one product and

introduce it globally.


Standardization versus Adaptation

FACTORS ENCOURAGING STANDARDIZATION

• Economies of scale in production

• Economies in product R&D• Economies in marketing• “Shrinking” of the world

marketplace/economic integration

• Global competitions

FACTORS ENCOURAGING ADAPTATION

• Differing use conditions• Government and regulatory

influences• Differing consumer behavior

patterns• Local competition• True to the marketing

concept


Strategic Adaptation to Foreign Markets

Low

High

Industrial/ Technology Intensive Consumer

Need for Adaptation

Degree of Cultural Grounding

Nature of Product

Source: Adapted from W. Chan Kim and R. A. Mauborgne, “Cross-Cultural Strategies,” Journal of Business Strategy 7 (Spring 1987): 31; and John A. Quelch and Edward J. Hoff, “Customizing Global Marketing,” Harvard Business Review 64 (May-June 1986): 92-101.


Factors Affecting Adaptation

Decision to Alter Domestic Product

SOURCE: Adapted from V.Yorio, Adapting Products for Export (New York; Conference Board, 1983), 7. Reprinted with permission


The Market Environment

• Government Regulations– Political and social agendas often dictate regulatory

requirements.

• Nontariff Barriers– Product standards, testing, subsidized local products.

• Customer Characteristics, Expectations, and Preferences– Physical size, local behaviors, tastes, attitudes, and

traditions.

– Consumption patterns, psychosocial characteristics, and general cultural criteria.


The Market Environment

• Economic Development– The stage of economic development affects the market

size and demand characteristics. Backward innovation of the product may be required to meet local requirements.

• Competitive offerings– Monitoring competing local products is critical in

adjusting the product for competitive advantage.

• Climate and geography– Local climatic conditions and terrain features can make

products vulnerable to damage.


Product Characteristics

• Product Constituents• Branding• Packaging• Appearance• Method of Operation or Usage• Quality• Service• Country-of-Origin Effects


Product Constituents and Branding

• Product ingredients must not violate local legal regulations and social or religious customs.

• Care must be taken that the brand in name, symbol, sign, or design does not offend the local customer. Trademarks are especially vulnerable to counterfeiters.

• Selecting the global brand name– Translation– Transliteration– Transparency– Transculture


Packaging and Appearance

• Packaging serves three major functions:– Protection

• Improper handling and pilferage

– Promotion• Language and symbols

– User convenience• Packaging aesthetics- color and shape, overall size, and

purchase quantity

• Adaptations in styling, color, size, and other appearance features play an importance role in how a consumer perceives a product.


Method of Operation or Usage

• The product that is operable in in the domestic market may not be operable in the foreign market.

• Electrical voltages and connectors vary around the world. English and metric standards are not comparable.

• Software may have to be translated into the local language.


Quality and Service

• Quality is essential to marketing products internationally, especially in markets where price is an important competitive factor.

• ISO compliance may be required by buyers.• Servicing products in international markets requires

producers to develop local repair staffs.


Country-of-Origin Effects

• The origin of a product may have a strong effect on consumer perceptions and biases about foreign products.

““Mad Cow”Mad Cow”

Swiss Swiss

FranceFrance


Company Considerations

• Organizational capabilities?• Is it worth it?• Can we afford not to do it?• Can a specific return-on-investment (ROI) be

attained?• Quality, price, and user perceptions?• Warranties?• Managerial talent?


Product Counterfeiting

• Costs U.S. firms over $60 billion a year• In 2001, losses to software piracy were more than 11 billion dollars.• Counterfeiting is estimated at 2% to 5% of total world trade annually.• The largest number of counterfeit goods come from:

– China– Brazil– Taiwan– Korea– India

How to avoid Software piracy informational site


Product Counterfeiting

FIGHTING PRODUCT COUNTERFEITING– Secure valuable intellectual property rights

• patent applications

• registration of trademarks

• mask works

– Act to enforce• legislative action

• bilateral and multilateral negotiations

• joint private sector action

• individual company measures

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Documents

tangible product

core product

product variables

augmented product

product adaptation chapter

division of thomson

product rd economies

domestic product source