Global Products and Services
Product standardization
Although there is increasing demand for local variety as economic
growth takes place and as anti-globalization sentiment spreads,
global products and brands are usually standardized in some ways.
 Global product examples
 Gillette razor blades
 Sony television sets
 Guess jeans
 Regional products and brands are unique to a particular
trading region
 Honda’s European car model “Concerto”
 P& G’s Ariel and Vizir in Europe
Standardization Pros and Cons
ADVANTAGES
DISADVANTAGES
•
Cost Reduction
•
Off-Target
•
Improved Quality
•
Lack of Uniqueness
Enhanced Customer
Preference
•
•
Global Customers
•
Global Segments
Vulnerability to Trade
Barriers
•
•
Strong Local Competitors
Localization vs Adaptation
 LOCALIZATION: THIS REFERS TO THE CHANGES
REQUIRED FOR A PRODUCT OR SERVICE TO FUNCTION IN
A NEW COUNTRY (EX: FAX MACHINES FITTED WITH NEW
TYPES OF TELEPHONE JACKS FOR USE IN A FOREIGN
COUNTRY). LOCALIZATON AVOIDS HAVING POTENTIAL
CUSTOMERS REJECT A PRODUCT OUTRIGHT.
 ADAPTATION: WHEN PRODUCTS ARE CHANGED TO
MATCH CUSTOMER TASTES OR PREFERENCES.
ADAPTATION GIVES CUSTOMERS A POSITIVE REASON
FOR CHOOSING A GIVEN PRODUCT.
 NOTE: A standardized product still needs to be localized to function
properly.
Uniform vs Adapted Product
+
PREFER
Line shows
likelihood of
Purchase
Uniform
REJECT
-
Localized
Adapted
What to Standardize?
•
•
•
•
100% standardization is rare
Usually starts with a core product as the
foundation
Various features are added, these may differ
according to the country market
Can also involve modular design, where various
features are packaged as modules, different
assembly combinations in different markets
Pitfalls of Standardization
•Insufficient
Market Research
Similarities among customers are assumed, not proven
•Overstandardization
Standardization compromises the positioning strategy
•Poor
Follow-Up
Follow ups need to be implemented if a campaign is to
succeed
•Narrow
Vision
Goals should not be narrow and inflexible
•Rigid
Implementation
Some flexibility in implementation needs to be retained by
local units
Why do Global Product Lines Differ?
History
Different local products were well established before
standardization was feasible
M&A (Mergers & Acquisitions)
Complete integration is often difficult in M&A cases
Preferences
Differences in preferences force product line customization
Capacity
Global product lines need large production capacity
Channels
Channel loyalties makes it difficult to drop local products.
Honda’s Non-Global Car Models
EUROPE
ASIA
NORTH AMERICA
LATIN AMERICA
Honda Stream
Honda City
Honda Element
Honda Fit
Goodyear’s Globally Uniform Tires
EUROPE
Goodyear Eagle F1
ASIA
Goodyear Eagle F1
NORTH AMERICA
Goodyear Eagle F1
LATIN AMERICA
Goodyear Eagle F1
Developing New Global Products
 Five Stages of the New Product Development Process
 Idea Generation
 Local subsidiaries are likely to have some ideas from their
respective markets 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 with the company objectives, strategies, and
resources.
 Concept Research
 Focus Groups offer the development team a chance to hear
spontaneous reactions to a new concept and hear suggestions
for improvement.
Developing New Global Products
 Five Stages (cont’d)
 Concept Testing
 A more formal approach to selecting product attributes is
using techniques such as trade-off analysis or conjoint analysis
 Sales Forecast
 The appropriate sales forecast approach is based on the
product life cycle (see Ch.4)
 Test Marketing
 Once the sales forecast looks promising, the new product is
usually placed in production and test marketed.
“64 ideas make one successful product”
Number of
surviving
new
product
ideas
Idea
generation
(leading markets)
Preliminary
screening
Concept
research
(focus groups,
concept testing)
Sales
forecasting
Test
marketing
Target Positioning
 Because new product development is so uncertain, many firms
practice “TARGET POSITIONING”.
 Step 1: Track which of the competitors’ new products appeal
to consumers and find what features are desired.
 Step 2: Reverse engineer the competitive success products.
 Step 3: Develop own “me-too” version.
 Step 4: Add new features to provide differentiation and a
superior offering.
 Note: Firms cannot let competitors stay unchallenged. Ex.
Nokia lost a big chunk of its leading market share in cellphones when the company decided not to follow the trend into
the so-called clamshell phone models with lids.
Target Positioning:
The Diagonal for “Me-too” Offerings
HI END
PRODUCT
SPECIFICATION
TARGET
BRAND
LO END
LO PRICE
PRICE POSITION
HI PRICE
New Products’ Speed of Diffusion
Relative advantage – how much better is the new product?
Compatibility – can the product be used in terms of local
infrastructure & customs?
Complexity – is it easy to use?
Trialability – is it easy to try the new product?
Observability – are the advantages obvious?
Global Brands
 GLOBAL BRANDS ARE BRANDS ASSOCIATED
WITH GLOBAL PRODUCTS WHICH ARE WELL
KNOWN IN ALL MAJOR MARKETS OF THE
WORLD.
 Ex's: SONY, MERCEDES-BENZ, MICROSOFT,
COCA-COLA.
 THE TYPICAL MULTINATIONAL FIRM HAS A
“PORTFOLIO” OF BRANDS, SOME OF WHICH ARE
GLOBAL, SOME ARE REGIONAL, AND SOME
LOCAL ONLY.
Global Brand Equity
 Brand Equity is the value of the positive associations that
consumers have with a product’s brand name.
 These associations often involve emotional attachments,
affinity, positive brand image, and brand identity.
 They also involve cognitive factors such as familiarity,
knowledge and perceived quality, as well as social factors
including peer group acceptance.
 When these associations turn negative (as in antiglobalization sentiments against global brands) the
brand equity can go down very quickly.
Global Brand Equity
BRAND EQUITY is sometimes measured in terms of the
discounted net revenues the brand is expected to
generate over time.
Advantages of Global Brands
DEMAND SPILLOVER – The name is
familiar because of media spillover, satellite
communications, word-of-mouth etc.
GLOBAL CUSTOMERS- People travel to
many countries and multinational customers
operate in many locations, making the global
brand a natural choice everywhere.
SCALE ECONOMIES – any spending on
product improvements and advertising can
be leveraged across more markets.
Disadvantages of Global Brands
NEGATIVE SPILLOVER –Bad news travel
faster across country markets
PRODUCT LINE SPILLOVER - Negative
spillover affects also other products with the
same brand name.
BRAND LOYALTY – Local brand loyalties
can be strong.
Globalizing a Brand Name: Checklist
1. Does the brand name make sense outside of the source
country?
2. If the name suggests a country association, is the effect
positive?
3. Is the name available legally in many countries?
4. Does the brand compete with other brands in the portfolio?
5. Should growth be limited to the creation of a regional brand?
Changing a Local to a Global Brand
 Changeover strategies:
 The fade-in/fade-out gradual option is the most common
strategy
 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
 Companies also use extensive forewarning in media
announcements to minimize changeover dissonance among
loyal customers.
Counterfeit Products
• COUNTERFEITS OR KNOCKOFFS ARE FAKE
PRODUCTS THAT ARE DESIGNED AND LABELED SO
AS TO MISLEAD THE CUSTOMER INTO ASSUMING
THAT THEY ARE “THE REAL DEAL.”
• WORLDWIDE LOSSES DUE TO COUNTERFEITING IS
OVER $20 BILLION ANNUALLY
• COUNTERFEITERS OPERATE AT ALL LEVELS OF
THE ECONOMY, JUST ABOUT ANY PRODUCT OR
TECHNOLOGY DEVELOPMENT IS FAIR GAME
Actions Against Counterfeits
“SEARCH & DESTROY” – firms hire private
investigation agencies to track down fakes in stores and
locate counterfeit factories
CODING DEVICES – firms encode unique signatures to
products
(e.g. Levi’s micro-weave patterns, Microsoft’s Windows
95 tracking codes)
The Service Industries
•
Accounting
•
Insurance
•
Advertising
•
Investment banking
•
Banking
•
Leasing
•
Broadcasting
•
Legal Services
•
Computer services
•
Lodging
•
Consulting
•
Media
•
Data processing
•
Reservation systems
•
Design & engineering
•
Restaurants
•
Distribution
•
Tourism
•
Education
•
Telecommunications
•
Entertainment
•
Transportation
•
Health care
•
Utilities
Characteristics of Services
•
INTANGIBILITY – you cannot easily touch a service
•
HETEROGENEITY – the service is not exactly the same each time
•
INSEPARABILITY – services are produced when they are
consumed
•
PERISHABILITY – you cannot store a service
The Service “Product”
CORE SERVICE: IS WHAT THE BUYER IS REALLY BUYING. FOR EXAMPLE, AN OIL
CHANGE AND TUNE-UP FOR YOUR CAR PROVIDES TROUBLE-FREE OPERATION.
FORMAL SERVICE PACKAGE: SPECIFIC SERVICES OFFERED TO THE CUSTOMER
INCLUDING PRICE, SERVICE FEATURES, THE PACKAGING, GUARANTEES.
AUGMENTED SERVICE: THE TOTALITY OF THE BENEFITS A CUSTOMER RECEIVES
OR EXPERIENCES THEY HAVE WHEN BUYING THE PRODUCT.
The service as a “product”
Provider’s behavior
Augmented
service
Features
Price
Physical
surroundings
Packaging
Provider’s
appearance
Generic benefits
After-sales
support
Warranty
Quality
Core
service
Brand image
Formal
service package
Service Globalization Potential
Three factors that influence the globalization
potential of services
Stage in the Life Cycle – potential is highest during the maturity stage
because then the service is fully developed and can be blueprinted.
•
Infrastructure barriers – service applicability depends on availability of
infrastructure, as when, for example, warehouse stores require
customers to take home large items in their own cars.
•
Idiosyncratic Home Markets – special regulations induce domestic
service providers to develop practices that are not applicable elsewhere,
as when, for example, advertising agencies in Japan produce television
programs whose sponsorship the agency controls.
•
Keys to Successful Service Globalization
1
Distilling exactly what the key features of the product/service
concept are
2
Reasonable similarity to the home country situation
3
Localization of the key features to another environment while still
maintaining the FSA's of the firm
The Four Service Entry Modes
1.
EXPORTING – where services can be transferred via
communications media or personal travel to countries
2.
LICENSING – when local involvement is important, where the
service can be standardized (e.g. franchising)
3.
STRATEGIC ALLIANCES – when a local presence is necessary
but where government regulations are restrictive to foreigners
4.
FOREIGN DIRECT INVESTMENT – when a local presence is
feasible, where foreign ownership is permitted
Foreign Entry of Services
 Tourism exports provide an illustration of foreign trade in
services, as when Americans visit France.
 A franchising expansion by McDonalds provides an illustration
of a licensing mode of service entry.
 In marketing research, it is common to strike up alliances with
research firms in other countries to be able to provide global
coverage to clients.
 In consulting services, foreign direct investment is sometimes
necessary, as when Price-Waterhouse opens an office in
Brussels.
The Local Marketing of a Service
1.
MARKET SEGMENTATION – typically new services from abroad
target very specific segments or audiences
2.
POSITIONING – the customer benefit of the service needs to be
identified clearly to position the service accordingly
3.
PRODUCT LINE – a service provider that fits the local
infrastructure
4.
BRANDING – is always important given the intangibility of
services.
The Local Marketing of a Service (cont’d)
5. PRICING – competitive parity, costs, demand, and the value of time
spent by customers must be factored in
6. PROMOTION – many professional services have restrictions on
promotional activities that differ across countries
7. DISTRIBUTION – since a service is produced & consumed at the
same time, service delivery is identical to service production;
consequently, distribution becomes the “critical incident” or “moment
of truth.”
Service Quality
CRITICAL INCIDENTS/MOMENTS OF TRUTH – the period of time during
which an individual consumes the service
Desired Service – highest or ideal quality
Predicted or Expected Service – lies somewhere
between the desired & the adequate service
Adequate Service – forms the lower limit below which the
service quality is unacceptable
Perceived Service –must lie between the desired & the adequate
service levels to make sure customer is satisfied
Service Quality:
The Gap and the Zone of Tolerance
Desired Service
Surprise
(Perceived Service
high)
Predicted/Expected
Service
Zone of
tolerance
Acceptable
Adequate
Service
Dissatisfaction
Inadequate Service
(Perceived Service
low)
Performance
Gap
Culture and Service Quality
•Since services are intangible, service quality is more
difficult to quantify, allowing for a more subjective
view
•Different cultures have different habits and
preferences and therefore different definitions of
service quality
•So culture affects perceived service quality &
customer satisfaction strongly
•And what is considered high service quality in one
country is not necessarily high in another country.
Personal Service Quality:
Differences in Complaint Handling
Americans
Japanese
• Asking
• Listening
• Expressing doubt
• Expressing sympathy
• Explain what cannot be done
• Explain what can be done
• Defending company policy
• Apologize for company policy
• Responsibility of the buyer
• Responsibility of the seller
• “We’ll fix it, but…”
• “I’m very sorry”
• Low customer satisfaction
• High customer satisfaction
Close-up: Fast Food Franchising
E.g. McDonalds, KFC, Wendy’s, Dunkin Donuts, Pizza Hut
• Has been growing in the last two decades
• Mitigates risk of financial exposure in other country markets
• Common method of penetrating new markets, leveraging existing brand
names
• Firms provide pre-planning tools to entice local investors
ADVANTAGES – allows franchisee to start a business with limited capital,
benefiting from local experience of franchiser
DISADVANTAGES – franchiser’s ability to dictate many facets of the
business may seem overly intrusive
Close-up: Professional Services
E.g. lawyers, doctors, accounting firms
• Professional services are expanding globally despite idiosyncratic
local regulations
• A gradual move toward making regulations more homogeneous
benefits this expansion (e.g. EU certification of lawyers & doctors)
• Accounting standards are converging, allowing accounting firms to go
global, with clients outside their home countries
• Increased sophistication in creating strategic alliances aid global
service expansion