Published on January 14, 2008
International Product Policy: International Product Policy Dr. Wolfgang Ulaga International Product Policy: International Product Policy Introduction: What to Sell ? International Product Strategies Standardization versus Customization Timing of Foreign Entry Managing an International Brand Portfolio Product Packaging and Labeling Managing International Product Lines 1. Introduction: What to Sell ?: 1. Introduction: What to Sell ? The international marketer needs to determine what the market offering should be in a foreign market : Defining the product offering Products versus Services/Rights The Product Offering: The Product Offering Core Benefit Generic Product Expected Product Augmented Product Potential Product Source : Adapted from: P. Kotler, Marketing Management, 1994 Product Warranty and Service: Product Warranty and Service Product Warranty : Should a company keep the same warranty for all markets or adapt it country by country ? Should the firm use warranty as a competitive weapon ? Product Service : Service capability to accredit the firm with foreign suppliers high investment in facilities, staffing, training, and distribution network Goods versus Services/Rights: Goods versus Services/Rights Instead of marketing a product abroad, the company may also sell rights or services in a foreign market: - rights : brand / trademark / patent - services : management skills (hotel chain) Sales of Rights - Examples: Sales of Rights - Examples Franchising business : - Coca-Cola : use of its name to licensed bottlers around the world. - Pilkington: licensing of the process of float glass. - Other : Manpower, McDonald's, etc. Sales of Rights - Examples: Sales of Rights - Examples Management Contracts : - Sheraton Hotels : Management contract for hotels abroad Sale of consulting and management contracts Little equity invested : Sheraton manages almost 400 hotels worldwide but has equity in only 40 of them. Advantages : minimum risk & strong competitive position. Sales of Rights - Examples: Sales of Rights - Examples Turn-Key operations : The firm is selling technical and engineering skills. The firm is training foreign nationals to run a plant. The firm is supplying material and equipment. 2. International Product Strategies: 2. International Product Strategies Straight Extension Product Product Adaptation Innovation The firm adopts the same policy used in its home market. The company caters to the needs and wants of its foreign customers. The firm designs a product from scratch for foreign customers. Source: W.J. Keegan, Multinational Product Planning: Strategic Alternatives, Journal of Marketing, 33, 1969, pp.58-62 These Three Basic Strategies Can Be Further Broken Down Into 5 Options: These Three Basic Strategies Can Be Further Broken Down Into 5 Options Source: W.J. Keegan Positioning in Foreign Markets: Positioning in Foreign Markets Domestic Market (Example Colgate Total USA - Whitening) Foreign Market B Foreign Market A (Example Colgate Total Europe - Cleaning) Position ? Position ? Position Established Convergence ? Divergence ? 3. Standardization versus Customization: 3. Standardization versus Customization Although the products sold abroad generally are not identical to their domestic counterparts, there is always a core of expertise that the firm can carry abroad. Principle " All Business is local." Reasons for Product Standardization: Reasons for Product Standardization Economies of scale : Production, R&D, Marketing Common Consumer needs : Drinking patterns, car sizes Consumer Mobility : Customer retention & Loyalty American Express, Kodak, ... Home Country Image : US jeans, French Perfumes,... Impact of technology : B to B Markets Convergence in Drinking Patterns: Convergence in Drinking Patterns Convergence of Car Sizes: Convergence of Car Sizes Reasons for Product Adaptation: Reasons for Product Adaptation Climate: US Air-conditioning equipment Skill level of users : Computers in Africa National consumer habits : - front-loading/top-loading washing machines - car models : four-door (F) - two-door (Germ.) Government regulations on products, packaging, and labels. Company history and operations (subsidiaries) Example:European Toothpaste Market: Example: European Toothpaste Market Market Size in France: FF 1,8 Bill. (1996) Trends: Multiple number of toothpastes/family Therapeutic / sophisticated products Cosmetic products Volume Price Competitors in France : Unilever 33% Colgate 22,5% Henkel 19% Smithkline B. 12% P&G 0% Drivers of Product AdaptationExample COLGATE Toothpaste: Drivers of Product Adaptation Example COLGATE Toothpaste (1) Differences in National Reglementation : Triclosan forbidden in Germany High fluor content in local water (UK) Obligation to sell high fluor content toothpaste in pahrmacy (France) Stringent clinical tests in France Drivers of Product AdaptationExample COLGATE Toothpaste: Drivers of Product Adaptation Example COLGATE Toothpaste Packaging: Ecological Stand-up tubes in Germany Failure in France (Carrefour) Distribution: Role of pharmacy in Italy and Spain Role of drugstore in UK Communication: Medical in Italy and Spain (recommended by dentist) Non-medical in UK 4. Timing of Foreign Entry: 4. Timing of Foreign Entry Waterfall Strategy: Brand Time Span US-Foreign Launch Marlboro: 35 years Mc Donald’s: 22 years Coca-Cola: 20 years Sprinkler Strategy: Microsoft Windows 95 - Global roll out: 4-6 million customers worldwide bought the operating system in the first three weeks after the launch Waterfall Versus Sprinkler Strategy: Waterfall Versus Sprinkler Strategy Example Colgate: Example Colgate Global Roll-out: Colgate Total (104 countries) European Roll-out: Sensation (10 countries) National Roll-out: Stand-up’s in Germany (specific local need) Liquid toothpaste in Spain (follow Henkel) Tonygencyl in France (maintain local brand) Lead Country: Sensation in UK and Italy 5. Managing An International Brand Portfolio: 5. Managing An International Brand Portfolio Nestle’s Branding Tree: Nestle’s Branding Tree Nestle’s “Global Water”: Nestle’s “Global Water” 11% 16% 11% 14% 19% 16% 13% France Other Europe Germany Italy USA Asia/ Pacific Other World Worldwide Consumption of Bottled Mineral Water 72,5 Bill. Liters (1998) Brand ‘ Nestle Pure Life’ Local source Universal quality standard Main target: emerging markets Pakistan (Dec.1998) Brazil (July 1999) China India etc. Protecting International Brand Names and Trademarks: Protecting International Brand Names and Trademarks The firm must evaluate each market / brand whether to seek protection. (Blue Bell Inc. - trademark Wrangler registered in 135 countries) Global brands versus national brands : Priority in Use <-> Priority in Registration (Ford Mustang in Germany renamed Taunus) Brand piracy : local imitation or deliberate registration Family Brands: Family Brands USA Europe Mexico "Rabbit" "Golf" "Caribe" -> lightness -> prestige -> avoid negative connotation Private Label Branding: Private Label Branding Large retailers are moving increasingly into their own brand, i. e. Marks &Spencer. They try to obtain greater control and higher margins. Private branding can be an effective way to break into foreign markets. (Asian TV manufacturers) European Consumer Preferences Regarding Private Labels : European Consumer Preferences Regarding Private Labels Product Category Fr. All. It. Es. GB Edible Oils Pasta Yoghurt Frozen Vegetables Fresh Pasta Breakfast Cereals Instant Soups Icecream Whiskey Smoked Salmon Champagne 19 16 14 5 3 4 3 6 3 3 3 20 24 14 11 7 8 9 10 1 4 4 10 12 6 5 4 2 0 4 2 1 2 11 12 6 6 3 2 2 2 1 1 3 27 24 12 34 5 18 14 21 4 2 6 Private labels per product category (% of sales in qunqtities in hypermarkets and supermarkets) Source: Secodip International, 1998 European Households Judging Credibility of Private Labels: European Households Judging Credibility of Private Labels Private labels per product category (% of sales in qunqtities in hypermarkets and supermarkets) Source: Secodip International, 1998 Europe Germ. Spain France Italy UK Criteria 3 19 78 3 12 85 3 26 72 3 29 68 1 13 86 More expensive Same Less expensive 2 16 83 5 78 17 2 90 8 3 78 19 7 71 22 4 77 18 Higher quality Same Lower quality 6 73 21 6 74 21 3 84 12 4 73 23 10 66 24 5 74 21 More confidence Same Less confidence 7 71 22 6. Product Packaging and Labeling: 6. Product Packaging and Labeling European Packaging Trends: European Packaging Trends 7. Managing International Product Lines Example : Procter & Gamble Product-Line: 7. Managing International Product Lines Example : Procter & Gamble Product-Line Toothpaste Gleem Crest Denquel Bar Soaps Ivory Kirk's Lava Camay Zest Safeguard Coast Detergents Ivory Snow Dreft Tide Cheer Oxydol Dash Bold Gain Era Solo Detergents Charmin White Cloud Puffs Banner Disp. Diapers Pampers Luvs Product Line Width Product-Line Length Managing International Product Lines: Managing International Product Lines Deciding on the right individual product for world markets is only one aspect of product policy. The next step is to decide what family of products should be offered International Product Line Planning: International Product Line Planning The foreign product line is frequently smaller than the domestic line because of financial and market limitations. By introducing a limited product line into foreign markets the firm can test the market before taking a bigger plunge.