Product strategy
Product and Brand Decisions in
a Global Environment
• Management must develop product and
brand policies and strategies that are
sensitive to
• Market needs
• Competition
• Company ambitions and resources on a
global scale
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International product
management
Basic Product Concepts
• A product can be defined as
• Mcdonald’s (www.Mcdonalds.com) aims
to create a standardised set of items
that taste the same in Singapore, Spain
or South Africa
– a collection of physical, psychological,
service, and symbolic attributes that
collectively yield satisfaction, or benefits,
to a buyer or user
• Think global, act local
• Toyota ‘tropicalises’ their cars according
to climatic conditions
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International product strategy
based upon
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• A brand represents a promise by a particular
company about a particular product
– Brand image is a mental image about both the
physical product and the company that markets
the product
• Market and customer expectations
• Marketing mix support
– Bundle of images and experiences in the
customer’s mind
• Environmental constraints
– Brand equity reflects the brand’s value to a
company as an intangible asset e.g Coca Cola
and Marlboro
• Risk and control
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Brands
• The company’s market objectives
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Brands
Global Products and Brands
• Local products and brands: single
national market e.g Coca Cola has
launched a ginseng-flavored beverage
only for Japan
• A global product meets the wants and
needs of a global market
• A global brand has the same name and
a similar image and positioning
throughout the world (e.g. Coca-Cola,
Nike, Gillette,Swatch)
• International products and Brands:
several markets in a particular region-Euro
Brands e.g Honda’s Jazz in Europe
• Global products and brands: meets the
wants and needs of the market e.g
Gilette,BMW and Harley Davidson
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• Combination or tiered branding is using a
corporate name combined with a product
brand name (e.g. Sony Walkman)
• Cobranding is branding in which two or
more different company or product
brands are featured prominently on
product packaging or in advertising (Dell
and Intel)
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Product design considerations for
global marketers
• Preferences around the world such as colour
and taste decision
• Cost and design related costs
• Laws and regulations e.g different packaging
and labour laws
• Compatibility with the environment in which it
is used e.g electrical systems voltage
requirements
• Labeling and instructions comply with
national law regulation
• Language in which it will be printed e.g use of
multiple languages on the label simplifies
inventory control
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Two types of errors regarding product
decisions in global marketing
Global Products and Brands
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• Impose product decision policy on all affiliate
companies on the assumption that what is
right for customers in the home market must
also be right for customers everywhere e.g.
Volkswagen in Germany v/s US
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Strategic Alternatives in
Global Marketing- Extend, Adapt and
Create
• Extension Strategy
– Calls for marketing a standardized product,
using a standardized communication
approach in multiple markets
• Adaptation Strategy
– Involves changing elements of design,
function, packaging in response to needs
or conditions in particular country markets
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Different
Strategy 2:
Product Extension/
Comm. Adaptation
Strategy 4:
Dual Adaptation
Same
Communication
Global Product Planning:
Strategic Alternatives
Strategy 1:
Dual Extension
Strategy 3:
Product Adaptation/
Comm. Extension
Same
Global Product Planning:
Strategic Alternatives
• Strategy 1: Product-Communication
Extension (Dual Extension)
– Campbell Soup failed in United Kingdom but succeeded in
Japan. Why? Corn potage flavour for Japanese
• Strategy 2: Product ExtensionCommunication Adaptation
– Bicycles and motor scooters in different countries
– Perrier mineral water is a symbol of healthful quality in
Europe but in US, it is a chic beverage to order in bars and
restaurants instead of a cocktail
Different
Product
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Global Product Planning:
Strategic Alternatives
• Strategy 5: Product Invention
– Soap and detergent manufacturers in Japan to meet
local water and washing equipment conditions
• Strategy 4: Product-Communication
Adaptation (Dual Adaptation)
– Unilever’s experience with fabric softener in Europe
(different brand and different messages for each
region)
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New Products in Global Marketing
• Identifying New Product Ideas
• Entirely new inventions or innovations that
require a relatively large amount of learning on
the part of users (e.g. DVDs or 3D Flat Screen
TVs)
– Dynamically Continuous Innovations
• An intermediate category of newness that is
less disruptive and requires less learning on the
part of consumers (e.g. Gillette’s shaving
system)
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– Invention is a demanding but potentially
rewarding product strategy for reaching
mass markets in less developed countries
– When consumers have limited purchasing
power and price to be within the reach of
the potential customers e.g TOTAL
toothpaste by Colgate to translate across
national boundaries
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New Products in Global Marketing
• Continuous Innovation
– Discontinuous Innovations
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Global Product Planning:
Strategic Alternatives
• Strategy 3: Product AdaptationCommunication Extension
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– Products that are typically “new and
improved” versions
– Often take the form of line extensions,
such as new sizes, flavors, and low-fat
versions (mayonnaise)
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Basic Pricing Concepts
•
Pricing Decisions- Global
Opportunities and Constraints
Basic pricing considerations global
marketing
1. Does the price reflect the products quality?
2. Is the price competitive?
3. Should the firm pursue market penetration,
market skimming, or another pricing objective?
4. What type of discount and allowance should the
firm offer its international customers?
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5. Should prices differ with market segment?
6. What pricing options are available if the firm’s
costs increases or decrease?
7. Are the firm’s prices likely to be viewed by the
host-country government as exploitative?
8. Do the foreign country dumping laws pose a
problem?
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• Companies must carefully consider how
customers in one country or region will react
if they discover they are paying significantly
higher prices for the same product as other
customers in other parts of the world
• Eurozone are adjusting to the new crossborder transparency of prices
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• Profit-Based Objectives and Strategies
• Currency fluctuations e.g devaluation and
appreciation of the rupee
– Companies that seek competitive advantage
by pursuing differentiation strategies
frequently use
• Exchange rate clauses
• Pricing in an inflationary environment
• Marketing skimming strategies
• Government control and subsidies
– Attempt to reach a segment that is willing to
pay a premium price for a particular brand or
for a unique product e.g Mercedes-Benz
• Competitive behaviour
• Price and Quality leadership
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Global Pricing Objectives
and Strategies
Environmental influences on Pricing
decisions
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• The Internet has made price information for
many products available around the globe
Basic pricing considerations (cont’d)
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Role of Internet in Global
Pricing
Basic Pricing Concepts
•
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Global Pricing Objectives
and Strategies
Global Pricing Objectives
and Strategies
• Sales-Based Objectives and Strategies
• Cost-Based Pricing
– Setting sales-based price objectives and
using price as a competitive weapon to gain
market position
• Penetration pricing strategy
– Advantage is simplicity
– Disadvantage is that this approach completely
ignores demand and competitive conditions in
target markets
– Setting price levels that are low enough to
quickly build market share
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Global Pricing Objectives
and Strategies
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Environmental Influences
on Pricing Decisions
• Price Escalation
• Currency Fluctuations (cont’d)
– The cost-plus formula can drive up the final
selling price of exported products
• Price escalation
– F.O.B. (free on board)
• Buyer is responsible for the insurance and freight
– C.I.F. (cost, insurance, freight)
– Price Transparency
• Means that buyers will be able to comparison
shop easily because good will be priced in euros
as opposed to marks, francs or lira
– Inflationary environment: persistent upward
change in price levels where maintenance of
operating profit margins is important
• Seller is responsible for the insurance and freight
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Environmental Influences
on Pricing Decisions
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• Extension or Ethnocentric Pricing Policy
– Per unit price of an item is the same
regardless of where in the world the buyer is
located e.g Mattel’s Barbie dolls
• Financial crisis
• Competitive behaviour e.g Levis, Lee
and Wrangler and pricing policies
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Global Pricing: Three Policy
Alternatives
• Government controls, subsidies and
regulations
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• Advantage is extreme simplicity
• Disadvantage is it does not respond to the
competitive and market conditions of each
national market
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Global Pricing: Three Policy
Alternatives
Gray Market Goods
• Gray Market Goods
• Adaptation or Polycentric Pricing Policy
– Trademarked products that are exported from one
country to another and sold by unauthorized
persons
– Permits subsidiary managers to establish
the price they feel is most desirable e.g
IKEA furniture in China
– When the product is in short supply
• Parallel Importing
• Invention or Geocentric Pricing Policy
– When gray marketers bring a product produced in
one country into a second-country market to
compete with authorized importers
– A company strikes an intermediate
position
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Dumping
Devaluation and revaluation
– The sale of an imported product at a price
lower than that normally charged in a
domestic market
• With devaluation, domestically
produced goods become cheaper and it
is easier to export
• Dumping
• Revaluation has the opposite effect
– For proof that dumping has occurred in the
U.S.,
• Both price discrimination and injury must be
demonstrated
• www.worldbank.org/trade
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Conclusion
• The final factor on the price decision is
the local marketing strategy and mix
• Price on the global market must fit the
other elements of the marketing
programme
• The geo-centric approach lends itself to
global competitive strategy
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