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Global Product Development
2
• Product development is essential for catering to new or changing customer needs on a global basis.
• The goal of the product development process is to build adaptability into products and product lines to achieve worldwide appeal.
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Global Product Development
3
• Stages of the product development process
– Idea generation
– Screening
– Product and process development
– Scale-up
– Commercialization
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Global Product Development
4
• Sources for idea generation:
– Company
– Customers
– Lead users
– Procurement requisitions from governments and supranational organizations
– Facilitating agents, such as advertising agencies or market research organizations
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Global Product Development
5
• Product ideas are screened on the basis of market, technical, and financial criteria.
• A product idea that at some stage fails to meet the specified criteria is not scrapped; data from these banks are used in the development of other products.
• 3M criteria:
– Is the market substantial and penetrable?
– Can the product be mass produced?
– Can the company product and market profitably?
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Global Product Development
6
• The use of computer aided design (CAD) allows inexpensive adaptation of the product designs for future markets.
• The product development process can be initiated by any unit of the organization, in the parent country or abroad.
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Global Product Development
7
• The assignment of product development responsibility may be based on a combination of special market and technical knowledge.
• Though product development activity takes place in the parent country, the affected units participate in the development and market planning for a new product.
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Exhibit 14.1 – Global Program Management
8
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Global Product Development
9
• The time lag between product development and introduction into the market depends on:
– The product involved
– Degree of newness
– Customer characteristics
– Geographic proximity
– Firm-related variables
– Degree of commitment of resources
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Global Product Development
10
• Reasons for investing in R&D activities abroad:
– Aids technology transfer from parent to subsidiary.
– Develops new and improved products for foreign markets.
– Develops new products and processes for simultaneous application in world markets of the firm.
– Generates new technology of a long-term exploratory nature.
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Global Product Development
11
• The organization of global product development
– Product development activity is undertaken by specific teams to:
• Subject new products to tough scrutiny at specified points in the development cycle.
• Eliminate weak products.
• Guide promising prototypes from labs to the market.
– Representatives of all the affected functional areas serve on each team to ensure the integrity of the project.
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Global Product Development
12
– Multidisciplinary teams in an organization
• Maximize the payoff from R&D by streamlining decision making.
• Reduce development time of a new product.
• Reduce overall material costs.
• Trim manufacturing processes.
– Companies increase communication and exchange of personnel to reduce language and cultural barriers among R&D teams.
– R&D consortia have been established provide the benefits and face the challenges of any strategic alliance.
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Global Product Development
13
• Testing of new product concepts for performance and customer acceptance
– Is the final stage of product development.
– Ranges from reliability tests to mini-launches.
– Is undertaken to avoid high rate of product failure.
• Reasons for product failure:
– Relying on instinct or hunch rather than testing and research.
– Lack of product distinctiveness.
– Unexpected technical problems.
– Mismatch between functions.
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Global Product Development
14
• Three techniques used for international product testing include:
– Laboratory test markets - Capture consumer reactions in a controlled environment.
– Microtest marketing - Uses a permanent panel of consumers and assesses their willingness to buy after exposure to media and purchase incentives.
– Forced distribution tests - Rely on the continuous report of consumer reactions to new products already in the market.
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Global Product Development
15
• Global product launch
– Introducing the product into countries in three or more regions within a narrow timeframe.
– Measures undertaken for successful launches:
• Involvement of country managers.
• Pre-launch attention to localization and translation requirements.
• Increased education and support of the sales channel.
– Benefits of a successful global launch:
• Permits the company to showcase the product.
• Removes old models at once.
• Captures new product’s higher margins.
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Management of the Product and
Brand Portfolio
16
• The marketer should have a balanced product and market portfolio —a proper mix of new, growing, and mature products to provide a sustainable competitive advantage.
• The product portfolio should take into account various interlinkages, both external and internal to the firm.
• Product portfolio analysis
– Is based on growth rates and market share positions.
– Is used to analyze:
• Business entities, product lines, or individual products.
• Market, product, and business interlinkages.
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Management of the Product and
Brand Portfolio
17
Advantages of product portfolio approach
– A global view of competitive structures.
– A guide for formulation of global marketing strategy based on allocation of scarce resources.
– A guide for formulation of marketing objectives based on the role of product lines in the markets served.
– A convenient visual communication goal.
Disadvantages of product portfolio approach
– Foreign competition does not follow the same rules as domestic competition.
– Relationships between market share and profitability may vary.
– Government regulations.
– Local content laws.
– Different production sites impact perceptions of risk and quality.
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High
Exhibit 14.3 - Example of Market-Product-
Business Portfolio
18
Canned Tea-US Canned Tea-Asia
Ice Cream-US
Canned Tea-Europe
Ice Cream-Asia
Ice Cream-Europe
Frozen Main Dishes-
Europe
Frozen Vegetables-
Europe
Low
Frozen Vegetables-US
Low Competitive Strength High
Technology and Production Interconnectedness
SOURCE: Adapted from Susan P. Douglas and Samuel Craig, “Global Portfolio Planning and Market Interconnectedness,” Journal of International Marketing 4 (no.I, 1996):93-110.
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Management of the Product and
Brand Portfolio
19
• Managing the brand portfolio
– Branding is one of the major beneficiaries of a wellconducted portfolio analysis.
– Brands help to:
• Shape customer decisions and create economic value.
• Influence the purchasing decisions of both consumer as well as business-to-business situations.
• Simplify everyday choices of customers, reduce the risk of complicated buying decisions, provide emotional benefits, and offer a sense of community.
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Management of the Product and
Brand Portfolio
20
– Co-branding - A strategic alliance where two or more brands are combined in an offer.
– Global marketers have three choices of branding:
• Use of the corporate name.
• Use family brands for a wide product line.
• Use individual brands for each item in the product line.
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Management of the Product and
Brand Portfolio
21
• Brand strategy decisions
– Global brands are a key way of creating consistency and impact.
– While some of the global brands are completely standardized, some elements of the product may be adapted to local conditions.
– Characteristics of global brands
• Carry a strong quality signal and compete on emotion.
• Cater to the need of feeling cosmopolitan.
• Reflect the professional and personal status of the user.
• Use their monetary and human resources to benefit society.
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Management of the Product and
Brand Portfolio
22
• Brand strategy decisions
– Three main implications for the marketing manager to consider:
• Avoid hiding globality by communicating the features of a brand to consumers.
• Tackle home-country bias.
• Satisfy the basic quality and aspiration associated with brands.
– The SBU and general management establish a planning policy document with respect to brand positioning, labeling, packaging, and other marketing mix issues, such as a communications platform.
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Management of the Product and
Brand Portfolio
23
• Brand strategy decisions
– Carefully crafted brand portfolios allow marketers to serve defined parts of specific markets.
– The brand portfolio needs to be periodically and regularly assessed.
– Before disposing a brand, managers need to assess it in terms of current sales, loyalty, potential, and trends.
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Management of the Product and
Brand Portfolio
24
• Private brand policies
– The intermediaries’ own branded products or “store brands.”
– Methods used for private branding:
• Umbrella branding with the intermediary’s name.
• Separate brand names for individual products or product lines.
– Private brand goods have achieved a significant penetration in many countries due to increase in price sensitivity and decrease in brand loyalty.
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Exhibit 14.7 - Private Brand Strategies
25
Strategy Rationale Circumstance
No participation
Capacity filling
Market control
Competitive leverage
Chief source of business
Dedicated producer
Refusal to produce private label
Stake in both markets
Major focus
Leading cost position
Heavily branded markets; high distinctiveness; technological advantage
Opportunistic
Influence category sales
High brand shares where distinctiveness is less; more switching by consumers
Little or no differentiation by consumers
SOURCES: Adapted from Sabine Bonnot, Emma Carr and Michael J. Reyner, “Fighting Brawn with Brain,” The McKinsey Quarterly 40 (no 2. 2000): 85-92; and Francois
Glemet and Rafael Mira, “The Brand Leader’s Dilemma,” The Mckinsey Quarterly 33 (no 2. 1993):4.
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