10 - Cengage Learning

Global Product
Learning Objectives
List the advantages of product standardization and product adaptation.
Differentiate between mandatory and discretionary product adaptations.
Explain the concepts of global product standards and generic
management system standards.
Explain why product lines can vary from country to country.
Define modularity and explain its impact on global product
Compare and contrast the product development roles played by a
multinational firm’s headquarters and the roles played by subsidiaries.
Explain the importance of lead markets and note their importance to
product development.
Describe how companies may access new products by purchasing
research and development or by importing products from other firms.
Discuss the use of acquisitions, joint ventures, and alliances for the
purpose of product development.
Explain the process of introducing new products to global markets,
including concept testing, test marketing, and the timing of new product
Chapter Overview
• Product design in a global environment
• Packaging and labeling for global
• Global warranty and service policies
• Managing a global product line
• Introducing new products to global
Types of Product Adaptation
• Mandatory
– Necessary for product to be sold in a local
• Discretionary
– Not necessary but may be beneficial
Climatic, Infrastructure and Use
• Physical realties of markets affect
product decisions
• People may actually use the products
differently in a market
Performance and Quality
• Products designed in highly developed
countries often exceed the performance needed
in developing countries
• Companies from developing countries selling
in developed-country markets may have to
increase the performance of their products to
meet the standards of industrialized countries
Global Standards
• Growth in international commerce has
increased the benefits of international
Global Standards (cont.)
• Country-to-country standards still
– National organizations set standards for
products and business practices
– U.S. standards system is fragmented
– Unification of Europe forced EU to adopt
regional standards
Global Standards
• Incompatible national standards can hinder
global companies
Packaging and Labeling
• Size, shape,
– Product packaging
– Existing standards
– Economic
– Environmental
• Color and text
– Promotional
– Cultural meaning
and implications
– Government
– Language issues
Product Warranties
• Standardization versus Adaptation
– Domestic warranty valid worldwide?
– Tailoring warranties to countries/markets?
• Issues to consider
– Actual product use
– Local competition
– Spillover effects to other markets
Global Product Service
• Why do companies provide after-sales
service for their products?
– Warranty credibility
– Differentiate from competition
– Decrease economic loss due to product
malfunction or downtime
• Modularity – Development of standard
modules that can easily be connected
with other standard modules to increase
the variety of products
New Product Development
• The shift from global to local
development requires consideration of
unique or special conditions for major
markets at the very beginning of product
Lead Markets and R&D
• Corporations must keep track of
evolving lead markets as major sources
for new product ideas and production
• Lead market – A market whose level of
development exceeds that of the markets
in other countries
Foreign Subsidiary Input in R&D
• Foreign subsidiaries rarely play active R&D
role unless they have manufacturing
• Manufacturing subsidiaries may assume R&D
functions if adaptation is required
• MNCs are increasing R&D investment abroad
to obtain key market input
Introducing New Products into
Global Markets
• Concept Tests
– Importance of subjecting new product
to actual use conditions