INTERNATIONAL

MARKETING
Global Marketing in the 21st Century
 The world is shrinking rapidly with the
advent of faster communication,
transportation, and financial flows.
 International trade is booming and
accounts for 25% of U.S. GDP.
 Global competition is intensifying.
 Globalization.
Global Marketing
 GLOBAL MARKETING - A total
commitment to international marketing,
in which a company applies its assets,
experience and products to develop and
maintain marketing strategies on a
global scale.
Major International Marketing Decisions
 The Marketing Environment
 The marketing environment consists of all factors external to an
organization that can affect the organization’s marketing activities.
Identifying Market Opportunities and Threats
 Many firms use environmental scanning to identify important trends and
determine whether they represent present or future market opportunities or threats.
The Social Environment
 The social environment includes all factors and trends related to groups of
people, including their number, characteristics, behavior, and growth projections.

Number of
People

Growth Social Characteristics

Projection
Environment

Behavior
The Demographic Environment
 The demographic environment refers to the size,
distribution, and growth rate of groups of people with
different characteristics.
 The demographic characteristics of interest to
marketers relate in some way to purchasing behavior,
because people from different countries, cultures, age
groups, or household arrangements often exhibit
different purchasing behaviors.
 A global perspective requires that marketers be familiar
with important demographic trends around the world as
well as within the United States.
Population Estimate —Year 2025
 Demographic Trends
 World and country population statistics are important, but
most marketers target subgroups. Trends in population
subgroups are typically the most useful to marketers, for
example, the growth of the urban population.
 Demographic Trends
 Another interesting trend is the aging of the population. The
aging of the population is especially evident in Italy, Japan,
Britain, and the United States.
The Cultural Environment
 The cultural environment refers to factors and
trends related to how people live and behave.

Values

Subgroup Ideas
Activities Cultural
Factors

Beliefs Attitudes
Cultural Diversity
 Cultural differences are important in both international and
domestic markets.
 Much of the population and buying power growth in the United
States is and will be from multicultural groups.
Changing Roles
 As more women enter the
workforce and household
compositions change,
typical household roles are
altered.
 Tremendous market
opportunities exist for firms
that can develop effective
strategies for appealing to
these changing roles.
 Emphasis on Health & Fitness
 The pursuit of a more healthful lifestyle includes:
 eating more nutritious foods
 exercising regularly
 participating in various sports activities
 focusing on wellness.
 This translates into potential market opportunities
for firms that provide products and services
geared toward improving health and fitness.
The Desire for Convenience
 Increased desire for convenience
created by:
 Changes in household composition
 Increases in the number of working women
 General shortage of time
 Consumerism
 Consumerism is the
movement to establish and
protect the rights of buyers.
 One increasingly important
consumer issue is
environmentalism.
 Successful marketers can
respond by developing
environmentally safe products
and communicating their
environmental contributions.
 The Economic Environment
 The economic environment includes factors and
trends related to income levels and the production
of goods and services.
 Economic trends in different parts of the world can
affect marketing activities in other parts of the
world.
 The gross domestic product (GDP) represents
the total size of a country’s economy measured in
the amount of goods and services produced.
The Political/Legal Environment
 The political/legal environment encompasses factors and
trends related to governmental activities and specific laws and
regulations that affect marketing practice.

Global
Trends

Political
Legal
Environment
Regulation Legislation
 Global Political Trends

 In today’s world economy, international political

events greatly affect marketing activities. For example
the impact of the war on terrorism on the travel and
security industries.
 A second important political trend is movement
toward free trade and away from protectionism.
Studies show that countries with the freest trade have
the highest GDP growth.
Legislation
 Regulations and Regulatory Agencies
 Most legislation in the United States is enforced through
regulations developed by a variety of agencies, and
marketers must often work with regulatory authorities at
the federal, state, and local levels.
 The Technological Environment
 The technological environment includes
factors and trends related to innovations
that affect the development of new
products or the marketing process.
 These technological trends can provide
opportunities for new product development,
affect how marketing activities are
performed, or both.
 The Competitive Environment
 The competitive environment consists of all the
organizations that attempt to serve similar customers.

Brand The most direct competition, offering the

Competitors same types of products as competing firms.
For example, Nike is a brand competitor of
Reebok as both companies manufacture
shoes.

Product Offer different types of products to satisfy

Competitors the same general need. Domino’s Pizza,
McDonald’s, and Kentucky Fried Chicken
are product competitors.
 The Institutional Environment
 The institutional environment consists of all the
organizations involved in marketing products and services.

Market
Retailers
Research Firms

Advertising Suppliers

Wholesalers Customers
The Future
 The only certainty about the future is that
it will be uncertain, and change will occur
at an increasing rate.
 It will also be more complex.
 Businesses and consumers now must
operate in an era of terrorism and lack of
trust.
 Planning for Global Markets
Planning
Planning is
is aa systematized
systematized way
way of
of relating
relating to
to the
the future
future
•• It
It isis an
an attempt
attempt to to manage
manage the
the effects
effects of
of external,
external, uncontrollable
uncontrollable
factors
factors on on the
the firm’s
firm’s strengths,
strengths, weaknesses,
weaknesses, objectives,
objectives, and
and goals
goals to
to
attain
attain aa desired
desired end
end

•• Structurally,
Structurally, planning
planning may
may bebe viewed
viewed as as
(1)
(1) corporate,
corporate, (2)
(2) strategic,
strategic, or
or (3)
(3) tactical
tactical

•• International
International corporate
corporate planning
planning isis essentially
essentially long
long term,
term,
incorporating
incorporating generalized
generalized goals
goals for
for the
the enterprise
enterprise asas aa whole
whole
•• Strategic
Strategic planning
planning isis conducted
conducted atat the
the highest
highest levels
levels of
of management
management
and
and deals
deals with
with products,
products, capital,
capital, and
and research,
research, and
and long-
long- and
and short-
short-
term
term goals
goals of
of the
the company
company
•• Tactical
Tactical planning,
planning, or
or market
market planning,
planning, pertains
pertains to
to specific
specific actions
actions and
and
to
to the
the allocation
allocation of
of resources
resources used
used to
to implement
implement strategic
strategic planning
planning
goals
goals in
in specific
specific markets
markets
 The Planning Process
•• Planning,
Planning, which
which offers
offers aa systematic
systematic guide
guide to
to planning
planning for
for the
the multinational
multinational
firm
firm operating
operating in
in several
several countries,
countries, includes
includes the
the following
following 44 phases:
phases:

Phase
Phase 1:
1: Preliminary
Preliminary Analysis
Analysis
and
and Screening
Screening –– Matching
Matching  The answers to three major
Company
Company and
and Country
Country Needs
Needs questions are sought in Phase 2:
Phase
(a) Are there identifiable market
Phase 2:2: Adapting
Adapting the
the
Marketing
Marketing Mix
Mix to
to Target
Target
segments that allow for common
Markets
Markets marketing mix tactics across
countries?
Phase
Phase 3:
3: Developing
Developing the
the (b) Which cultural/environmental
Marketing
Marketing Plan
Plan adaptations are necessary for
successful acceptance of the
marketing mix?
Phase
Phase 4:
4: Implementation
Implementation (c) Will adaptation costs allow
and
and Control
Control profitable market entry?
The planning process illustrated in Exhibit 11.1 below offers a systematic guide to
planning for the multinational firm operating in several countries
Global companies and
marketing strategies
Type of Type of
Global Company Marketing Strategy

Extension of its
International Firm home country
marketing strategy

Multi-domestic
Multinational marketing strategy
Firm

Global marketing
Transnational Firm strategy
Global consumers
…customer groups living in many
countries or regions of the world who
have similar needs or seek similar
features and benefits from products and
services.
Cultural diversity
 Values
 Why doesn’t McDonald’s sell hamburgers in India?

 Customs
 Why were 3M executives perplexed concerning
lukewarm sales of Scotch-Brite floor cleaner in the
Philippines?
 Gifts vs. bribes
Cultural diversity
 Cultural symbols
 Numbers
 Semiotics

 Language
Cultural ethnocentricity
 The tendency to view one’s own values,
customs, symbols and language as
superior to another’s
 Consumer ethnocentrism holds that it is
inappropriate to buy other countries’
products and services
Economic considerations
 Stage of development
 Infrastructure
 Consumer purchasing power
 Political-regulatory climate
 Alternative global market
entry strategies
High
Amount of a
firm’s financial
commitment, •
risk, marketing
control, and
profit potential •
• •
Low
Exporting Licensing Joint Direct
Venture Ownership
Market Entry Strategies
Market Entry Strategies

 Exporting:
 Indirect: working through independent
international marketing intermediaries.
 Direct: company handles its own exports.
 Market Entry Strategies
 Joint Venturing:
 Joining with foreign companies to produce or
market products or services.
 Approaches:
 Licensing
 Contract manufacturing
 Management contracting
 Joint ownership
 Joint Ownership

KFC entered Japan through a joint ownership venture

with Japanese conglomerate Mitsubishi.
Market Entry Strategies
 Direct Investment:
 The development of foreign-based
assembly or manufacturing facilities.
 This approach has both advantages and
disadvantages.
Deciding on the Global Marketing Program
 Standardized Marketing Mix:
 Selling largely the same products and using
the same marketing approaches worldwide.
 Adapted Marketing Mix:
 Producer adjusts the marketing mix
elements to each target market, bearing
more costs but hoping for a larger market
share and return.
Factors Favoring Standardization
 Economies in R & D

 Economies in production

 Economies in marketing

 Control of marketing programs

 “Shrinking” of world marketplace

Factors Favoring Adaptation
 Differing use conditions

 Government & regulatory influences

 Differing buyer behavior patterns

 Local initiative & motivation in implementation

 Adherence to the marketing concept

Marketing Mix Adaptation

In India, McDonald’s serves chicken, fish, and vegetable burgers,

and the Maharaja Mac—two all-mutton patties, special sauce,
lettuce, cheese, pickles, onions, on a sesame-seed bun.
 Product and Promotion
Same Product Adapt Product Create New Product

Same Product Product

Promotion Extension Adaptation Product
Strategy Strategy Invention
Strategy
Communication Dual
Adapt adaptation Adaptation
Promotion strategy Strategy
 Global Product Strategies
 Straight Product Extension:
 Marketing a product in a foreign market
without any change.
 Product Adaptation:
 Adapting a product to meet local conditions or
wants in foreign markets.
 Product Invention:
 Creating new products or services for foreign
markets.
PRODUCT PROFILE
 Product characteristics
 Inherent features of the product
 Packaging and labeling characteristics
 Protects the product
 Communicates information
 Promotes the product
 Service characteristics
 Information and advice (pre- and post-sale)
 Product repairs and upgrades (durable goods)
FACTORS IN PRODUCT ADAPTATION
 Internal company considerations
 Human and financial resource constraints
 Costs of developing and producing distinct
products
 Customer considerations
 Customer preferences (example: GMOs)
 Economic situation of customers (example: farm
machinery)
 The total size of the market
FACTORS IN PRODUCT ADAPTATION
(continued)
 Competitive considerations
 Degree of competition in target market
 Exploiting gaps in competitors’ product lines
 Legal and regulatory considerations
 Sanitary and phytosanitary standards
 Tariff and nontariff barriers (example: milk
components)
 Bottom line: is adaptation profitable, and how
long will it take for it to become profitable?
PRODUCT LINE PLANNING
 Deciding on the right individual product for a
market is only one part of the story
 Need to decide what family of products should
be offered
 The foreign product line is often smaller than
the U.S. product line because of financial and
market limitations
 Starting out with a limited product line in a
foreign market provides a way to test the
market before expanding
PACKAGING AND
LABELING
 Protection of the product
 Climate control
 Transportation and handling
 Packaging usually needs to be more durable for export
 Shelf life
 Size of the package
 Pillsbury uses packages with 6-to-8 servings in
developing countries, while 2-serving packages are
most popular in North America
 2-liter bottles of Coke were too large for the
compartments in most refrigerators in Spain
PACKAGING AND
LABELING (continued)
 Legal Constraints
 Packaging recycling requirements
 Consumer information requirements (food labels)
 Multilingual labeling requirements
 Canada (French and English)
 Belgium (French and Flemish)
 Finland (Finnish and Swedish)
 Promotion of the product
 Brand image
 Distinguish product from the competition
 Colgate Goes to China

Using aggressive promotional and educational programs, Colgate has

expanded its market share from 7% to 35% in less than a decade.
PLACE
 Distribution choices are the least
flexible choices in the marketing mix
 International challenges
 Lack of familiarity with distribution
channels
 Use of intermediaries means relinquishing
control
 Global Promotion Strategies
 Can use a standardized theme globally,
but may have to make adjustments for
language or cultural differences.
 Communication Adaptation:
 Fully adapting an advertising message for
local markets.
 Changes may have to be made due to
media availability.
PROMOTION
 Promotion mix includes
 Advertising
 Personal selling
 Publicity
 Sales promotions
 Mix will depend on
 Target audience
 Company objectives
 Product or service being marketed
 Resources available
 INTERNATIONAL ADVERTISING
 Media strategy
 Which media reach your target market? May be much different from
the U.S.
 Media regulations vary by country
 Promotional message
 Why would the target consumer buy the product? Emphasize those
attributes
 How is the product positioned? Ads should be consistent with
positioning
 Rational versus emotional appeals
 Be very sensitive to cultural considerations
 INTERNATIONAL ADVERTISING
(continued)
 Ad literacy of target audience
 Is audience used to connecting ad images and ad messages?
 Annual per capita spending on advertising varies
tremendously by country and region:
 United States: $153
 Canada: $64
 Europe: $43 Statistics: ad spending per
 Latin America: $5 capita by top 100 marketers in
2006
 Asia and Pacific: $4
Sources: Advertising Age and
 Middle East: $2 Population Reference Bureau
 Africa: 80¢
ADDITIONAL PROMOTION TOOLS
 Personal selling – often used…
 In early stages of international expansion
 For high-cost products
 For industrial goods (example: an ingredient)
 Publicity/Public Relations
 To earn public understanding and acceptance
 Anticipate or counter criticisms
 Portray as good citizens of host country
 SALES PROMOTIONS

 Covers all promotions except for advertising, personal

selling, and publicity
 Includes:
 Coupons
 Free samples
 Consumer education
 Product demonstrations
 Point-of-purchase materials
 Discounts
 Direct mail
 Prizes and giveaways
 Channels of distribution

Seller’s Channels
Channels
Seller International Within Final
Marketing Between
Foreign Consumer
Headquarters Nations
Nations
 Deciding on the Global Marketing Organization

 Organize an export department

 Create international divisions
 Geographical organizations
 World product groups
 International subsidiaries
 Become a global organization
 Global Pricing Strategies
 Possible approaches include:
 Charge a uniform price all around the world.
 Charge what consumers in each country will pay.
 Use a standard markup of costs everywhere.
 International prices tend to be higher than
domestic prices because of price escalation.
 Companies may become guilty of dumping –a
foreign subsidiary charges less than its costs or
less than it charges in its home market.
PRICE
 Pricing situations
 Export pricing
 Foreign market pricing (production abroad)
 Pricing strategies
 Cost-based strategies
 Demand-based strategies
 Eclectic strategies based on short- and long-
term company goals
COST-BASED STRATEGIES: EXPORTING

 Standard worldwide pricing

 Price is based on average fixed, variable,
and export-related production costs
 Dual pricing
 Export price is based on marginal costs
rather than average costs
 Constitutes dumping (an example of cost
dumping)
COST-BASED STRATEGIES: PRODUCING ABROAD

 Standard within-market pricing

 Price in each market in based on average
fixed and variable production costs in that
market
 With either exporting or producing
abroad, cost-based strategies may be
out of alignment with market conditions
 DEMAND-BASED PRICING STRATEGIES
 Price discrimination
 Charge different prices in different markets
 Can do with exporting or producing abroad
 A type of dumping when applied to exports
(price dumping)
 How does it work?
 Lower prices in market segments with more price-elastic
demands, higher prices in segments with less price-
elastic demands
 If price differences are too large, run into
transshipment (smuggling) problems
ECLECTIC STRATEGIES BASED ON…
 Short- and long-term company goals
 Profitability
 Market share
 Production costs
 Demand-side considerations
 Competitive considerations
Pricing strategy
Companies face many problems in setting their
international prices.
 competitive, political, and legal constraints

 economic factors

 dumping: product sold in a foreign country

below domestic price or below cost

 gray marketing: (parallel importing) products

sold through unauthorized channels of

distribution
International Pricing

Twelve European Union countries have adopted the euro as a

common currency, creating “pricing transparency” and forcing
companies to harmonize their prices throughout Europe.
Growth of Global markets
 Global markets are growing increasingly
important due to advances in communication
and technology
 Some products can have global consumers
 Decisions to take while entering markets in
other countries
 Be very careful while developing your
communication and branding strategies!
What are new products?
 New product line
 Addition to product line
 Repositioning to new market segments
 Improvements/revisions
 Cost reductions

Source: Booz, Allen & Hamilton

 1. INTRODUCING PRODUCTS INTO
FOREIGN MARKETS

STRATEGIC OPTIONS

1. EXTENSION STRATEGY –
Same approach as home market

2. ADAPTATION STRATEGY -
Makes changes to fit new market requirements

3. INVENTION STRATEGY -
Entirely new approach is developed for
the new market
 STRATEGIC OPTIONS

4. STANDARDIZATON –
Same product, all markets

5. GLOBAL PRODUCTS -
Only some aspects of the product is standardized
 OPTION 1.
PRODUCT EXTENSION – COMMUNICATION EXTENSION

Product Strategy Communications Strategy Highlight

1. Extension Extension Standardized product with same
communications strategy across the
globe.

- This strategy is Cost effective

- Allows for greater economies of
scale
- Rarely used for consumer type
products except soft drink and some
luxury type goods
-Used mainly for industrial type
products
 OPTION 2.
PRODUCT EXTENSION – COMMUNICATION ADAPTATION

Product Strategy Communications Strategy Highlight

1. Extension Adaptation Standardized product with different
communications strategies across the
globe.

- Cost effective because

communications adaptation is
less expensive than the tailoring
product to a local market.
- Can be used for consumer type
products eg. Bicycles
 OPTION 3.
PRODUCT ADAPTATION - COMMUNICATION EXTENSION

Product Strategy Communications Strategy Highlight

1. Adaptation Extension Changes made to the product, same
communications strategy across the
globe.
- Product formulations are changed
without consumers knowing it. E.g.
detergents
- Entails research, development
expenses and tooling costs.
- Do not allow for economies of scale
to the extent possible under an product
extension strategy
- savings can be realized from the
creation of a single communications
strategy
 OPTION 4.
PRODUCT ADAPTATION - COMMUNICATION ADAPTATION

Product Strategy Communications Strategy Highlight

1. Adaptation Adaptation Dual adaptation:
Changes made to the product, changes
made to communications strategy

- Recognizes the socio-cultural

differences from country to country
-To make this option profitable, the
foreign market or markets need to be
of sufficient volume
- Calls for extensive research and
development expenses and tooling
costs
 OPTION 5.
PRODUCT INVENTION

Product Strategy Communications Strategy Highlight

1. Invention Develop new communications Usually redesigning of an original
product at a lower level of
complexity.

- Recognizes the socio-cultural

and economic differences from
country to country

-Leads to more purchases as a result

of the reinvention of the product
STANDARDIZATION VS ADAPTATION

Factors encouraging product standardization:

Economies of Scale in:
 Production

 Marketing/communications

 Research & Development

 Stock Holding
STANDARDIZATION VS ADAPTATION CONTINUED

 Easier management and control i.e.

familiarity
 Homogeneity of markets, in other words
markets available without adaptation e.g. denim
jeans
 Cultural insensitivity (except industrial
and agricultural products)
 Where “made in” image is important to a
product’s perceived value e.g. France for
perfumes, Sheffield for stainless steel
STANDARDIZATION VS ADAPTATION CONTINUED

 For a firm selling a small proportion of its output

overseas, the incremental costs may exceed the
incremental sales value
 Consumer mobility for travellers/tourists for
example standardization is expected in certain
products:
 Camera film
 Hotel Chains
STANDARDIZATION VS ADAPTATION CONTINUED

Factors encouraging adaptation/modification

Mandatory Modification:
 Normally involves either adaptation to comply

with government requirements or

 Unavoidable technical changes

 Example: Car manufacturer

STANDARDIZATION VS ADAPTATION CONTINUED

Legal requirements can include:

 Specified exhaust emission levels (HSE Laws &

strict emission standards)

 Local components (economic law)

 Technical requirements such as:

 Modification of heating/cooling systems for

different climates
 Engine modification to use locally available fuels
Discretionary Modifications:

 This is called for to make the product more appealing in different

markets. It is as a result of differing customer needs, preferences and
tastes that market research, customer feedback among others may
reveal.

 Levels of customer purchasing power – low incomes makes cheaper

version of product more appealing in some less developed countries

 Levels of education and technical sophistication – ease of use may be

a crucial factor in decision-making

 Standards of maintenance/repair facilities – simpler more robust

versions may be needed
2. DEVELOPING A GLOBAL PRODUCT
 In order to remain competitive, firms often
have to reduce their costs. Usually the
production of standardize products provides
cost advantage, however this strategy is not
as common. Many firms now employ new
strategies:
1. Global Product Development strategy
2. Modularity
The Global Product Development Strategy

A portion of the final product is standardized.

However, the design retains some flexibility
so that the end product can be tailored to the
needs of individual markets.

- This represents a move to standardize as

much as possible those areas involving
common components or parts.
 The Global Product Development Strategy

 Modularity
This process involved the development of standard
modules that can easily be connected with other
standard modules to increase the variety of products.

E.g General Motors has established a modular product architecture for

all its global automobile products. Future GM cars will be designed
using combination of components from 70 different body modules and
about a hundred major mechanical components (e.g. Engines, power
trains, and suspension systems)
3. NEW PRODUCT DEVELOPMENT
PROCESSES FOR GLOBAL MARKETS
 Developing new products or services for global
markets poses unique challenges.

To combat these challenges, the international firm

can assign development responsibilities to any one of
its international subsidiaries. The success however
will depend on how well the firm marshals its
resources on a global scale to develop new products
for foreign markets.
Steps in New Product
Development process
 Idea Generation
 Idea Screening
 Concept Development & Testing
 Marketing Strategy Development
 Business Analysis
 Small Batch Prototype Development
 Product Development & Testing
 Test Marketing
 Commercialization / Launch
Sources of New Product Development
1. Head office
2. Lead markets
3. Subsidiaries
4. Purchasing research and development
5. Importing new product technology
6. Acquisitions
7. Joint ventures
8. Alliances
9. Consortia
Sources of New Product Development #1
The organization of Head Office-Sponsored
Research and Development

 Research and development for the introduction of

new products is originally conducted in centralized
facilities in the firm’s domestic market.
 The largest portion of research and development
monies spent by international firms goes to support
efforts in domestically located facilities.
 Initial introduction at home is followed by a phase-in
introduction to the company’s foreign markets.
The organization of Head Office-Sponsored
Research and Development

Reasons for Head Office-sponsored Approach:

1. R&D is centralized so there is an integrative
strategy with regards to product development. To
achieve this there must be frequent contacts and
interfacing between R&D facilities and the company’s
main office.
2. To minimize duplication
3. For the effective and efficient utilization of scarce
research funds
4. To capitalize on the firm’s experience in their
domestic market.
Sources of New Product Development #2
International Leads Markets and Research and
Development

 The lead market is a market whose level of

development exceeds that of the market in other
countries worldwide and whose developments tend
to set a pattern for other countries.
 Lead markets are not restricted to technological
developments as embodied in product hardware.
 Lead market advantage based on superior design,
advanced features, function and quality, production
processes, patterns in consumer demand, methods of
marketing. (Any phase of the operation is subject to
lead market influence)
Sources of New Product Development #3
The Role of Foreign Subsidiaries in Research
Development

Subsidiaries
o   Subsidiaries may assume R&D function if products require some
adaptation to a local market
o   Foreign subsidiaries of international firms rarely play an active role in
the R&D unless they have manufacturing responsibilities and
capabilities
o   Sales subsidiaries provide central organization with feedback on
product adjustments or adaptation, but generally their participation
does not go beyond the generation of ideas.
o   A subsidiary located in a lead market is in a better position to observe
developments and to accommodate new demands and can therefore act
as an effective “listening post”
Roles of involvement for the subsidiary:
Strategic leader role:
 With responsibility for developing a new range of products to be used by
the entire company. This role will be handled by a highly competent
subsidiary in a market of strategic importance.

Contributor:
 This role would be assumed by a subsidiary in a distinct area and the
subsidiary will adapt some products in smaller though important markets

Implementer:
These are smaller subsidiaries located in less strategic markets that act as
implementers of the overall strategy without making a major
contribution to either technology or strategy
Sources of New Product Development #4
Purchasing Research and Development from
Foreign Countries

A company may acquire material or information from

independent outside sources that have acquired lead
market status.
How?
 Literature published in lead markets
 Regular visits to foreign countries
 Trade fairs
 Management contact with lead markets

These are admittedly ad hoc measure though.

Sources of New Product Development #5
Importing as a Source of New Products

Some companies import finished products directly

from a foreign firm to supplement their product lines.

This is usually done in areas that do not represent

the core of the firm’s business and technology, and
is used to extend the product offering.
Sources of New Product Development #6
Acquisition as a Route to New Products

Advantages:
 Efficient, cost-effective way to create a new product

instead of trying to conceptualize, R&D and launch

new products from the ground up.
 Overcomes the process of acquiring technological

experience
 Establish supplier relationships

 Circumvents need for large Advertising & Promotional

Budgets to gain visibility & brand recognition

Sources of New Product Development #7
Joint Ventures for New Product Development

 Usually pursued with technologically advanced

foreign company usually at lower costs
 Good way to pursue an opportunity that is too
complex, uneconomical or risky for a single
organization to pursue alone
 Provide entry into desirable foreign markets when
access is restricted by government
 Used when opportunities in new industry require
broader range of competencies that any one
company can marshal
Sources of New Product Development #8
Alliances for New Product Development

Companies are using alliances or the Consortium

Approach to share technology and R&D to gain
competitive advantage

Consortium Approach – member firms join in working

relationship without forming a new entity. On
completion of assigned task, member firms are free
to seek other relationships with different firms.
4. INTRODUCING NEW PRODUCTS TO GLOBAL
MARKETS

 Once a product has been developed for commercial

introduction, the following decisions need to be
made:

- Test Marketing procedure

- The target country
- The timing or sequence of introduction into foreign market

These decisions are influenced by sales potential. Following

careful analysis, a list of target countries is developed, then the
company will choose from among several paths to the actual
introduction in the target country/countries.
Determining Introduction in target countries

 Concept Test
This involves presenting the product concept to appropriate
target consumers and getting their reactions. The concepts can
be presented symbolically or physically. However the more the
tested concepts resembles the final product or experience, the
more dependable concept testing is.

In recent times, companies are also using virtual reality to test

product concepts. This entails the use of sensory devices to
stimulate reality.
Test Marketing

Test Market
The ultimate way to test a new consumer product is to put it
into full-blown test markets. The company chooses a few
representative cities, and the sales force tries to sell the trade
on carrying the product and giving it good shelf exposure, full
advertising and promotional strategy, similar to the one use in
the home market.

- Simulated Test Marketing

This entails finding 30 to 40 qualified shoppers and questioning
them about brand familiarity and preference in a specific
product category.
Test Marketing

- Controlled Test Marketing

In this method, the number of geographic locations
are tested. The product is delivered to the
participating stores and the product is placed in a
strategic position. Sales results will be measured
electronically through scanners at the checkout.
Timing of New Product Introduction

Market-entry timing is critical. A company may be

faced with the challenge of trying to enter a market
with a new product and learns that a competitor is
nearing the end of its development work. The
company faces three choices:

First entry
Parallel entry
Late entry
Timing of New Product Introduction continued

First Entry
The first firm entering a market usually enjoys first
mover advantages of locking up key distributors and
customers while gaining the reputation of product
leader. If the product is rushed before to market
before it is thoroughly debugged, the product can
acquire a flawed image.
Timing of New Product Introduction Continued

Parallel Entry
The firm might time its entry to coincide with the competitor’s
entry. The market may pay more attention when two
companies are advertising the new product.
Late Entry
The firm might delay its launch until after the competitor has
entered. The competitor will have borne the cost of educating
the market. The competitor’s product may review faults the
late entrant can avoid.
 Timing of New Product Introduction continued

Timing decisions involves additional

considerations

- If the new product replaces an older product, the

company might delay the introduction until the old
product’s stock is drawn down.
- If the product is highly seasonal, it might be
delayed until the right season arrives.
Challenges
 Huge Foreign indebtedness
 Unstable governments
 Foreign-exchange problems
 Foreign entry and government bureaucracy
 Tariffs and other trade barriers
 Corruption
 E-commerce---doesn’t offer complete solutions
 Technological pirating
 High cost of product and communication adaptations
 Global Integration Forces
Driving Forces
 Technology

 Culture

 Market Needs

 Costs

 Free Markets

 Economic Integration

 Peace

 Strategic Intent

 Management Vision, Strategy and Action

 Global Integration Forces
Restraining Forces
 Culture

 Market Differences

 Costs

 National Controls

 Nationalism

 Peace vs. War/ Stability

 Management Myopia

 Organization History

 Domestic Focus