International Products Management Chapter V PRODUCTS Products

International Products Management Chapter V

PRODUCTS Products are viewed as ‘carrier of satisfaction’ to customers from marketers. -- A Product is a bundle of physical, psychological, tangible and /or intangible benefits that provides satisfaction (or utilities) to customer from needs and want. -- Today’s potential customers are continually thinking of newer ways and means of satisfying their wants emanating out of needs. 2/9/2018 -- For example, nowadays, people are taking to newer items like burger, pizzas, corn-flakes etc. to appease hunger in place of items used before. -- These are in addition to the list of Products that can deliver satisfaction to customers in the nation. Presentation by Prof. H. Ganguly 2

-- Think of the dimensions that a marketer has to attend to provide satisfaction to customers from any need say ‘want of hunger’ in so many countries of world. -- Obviously, the number of items that marketer shall have to arrange to satisfy varying wants of customers in all these nations is going to multiply in geometric proportion. -- It leads to a type of ‘Product Proliferation’ in international and global marketing in which number of brands to satisfy the same need is continually on the rise. -- So, international and global marketers are to be vigilant in innovating products continually so that they can keep the customers tied to their brand company. 2/9/2018 Presentation by Prof. H. Ganguly 3

Quality of Products and Green Marketing -- In most global markets, cost and quality of products are two most important criteria by which purchases are made. -- The same holds true for industrial and business products. -- With changing trends in economic and cultural factors, quality is emerging as the deciding factor in buying. Quality has two dimensions viz. * Market-perceived Quality and * Performance Quality 2/9/2018 -- A customers’ perception of ‘quality-product’ is more in line with what the market thinks as quality product. -- Whereas, ‘Performance-quality’ is something that is built into the product. Presentation by Prof. H. Ganguly 4

Green Marketing and Product Development -- Couple of decades back, environment friendliness was a fad but now most of the developed world is very serious about pollution and its adverse effects on environment. -- So ‘Green Movement’ is trying to create awareness about importance of maintaining good ecological balance. -- It had its effect on marketing too, particularly in US, Europe and Japan, companies are to follow tenets of Green Marketing so as to follow national rules and regulations. -- Green Marketing is a broad movement that identifies and sets right effects of different types of marketing activities and products on environment. 2/9/2018 Presentation by Prof. H. Ganguly 5

-- Green Marketing affects ‘Product Development’ in two areas viz. a) Meeting consumer demands for environment friendly products like automobiles, power generation equipments, non-carbon emitting manufacturing units etc. and b) Controlling output of solid waste from packaging and other similar components. -- European Commission has implemented guidelines for ecolabeling in 1992, under which a product is evaluated on all significant environmental effects throughout its life from manufacturing to disposal. -- A detergent marketed to be biodegradable and non-polluting would be judged friendly, based upon its effect when discharged into the environment. -- In some developed nations, distributors are responsible for taking back all packaging, packing and other waste material. 2/9/2018 Presentation by Prof. H. Ganguly 6

Components of Product 1. Core Product -- The physical attributes of product that provides wantsatisfaction i. e. the prime function desired by customers is called Core product. It is the outcome of technology, design and other functional features. -- For example, the primary function that a customer looks forward to in an automobile is transportation which is the Core product. Generally ‘Core products’ are produced in factories or field. 2/9/2018 -- In international marketing, core product or primary function expected out of same product may vary e. g. in developed nations ‘bicycles’ are used for fun, fitness, sports etc. whereas in developing nations these are used mainly as Presentation by Prof. H. Ganguly 7 vehicle for transportation.

2. Tangible Product -- The physical form in which the product is offered to customers is called tangible product. -- Tangible products carry characteristics of quality level, style, packaging, specific features, may have brand name e. g. Colgate Total Tooth Paste, Dabur’s Honey etc. -- In international marketing, tangible products are to be modified to suit packaging, labeling and other requirements of host country customers. . 3. Augmented Product -- Depending upon want of customers in global markets, suitable features or additional benefits are provided with products like home delivery, credit facilities, warranty, spares, guarantees etc. With these services and features, it is called 2/9/2018 Presentation by Prof. H. Ganguly 8 augmented product.

Products for International Markets : -- Generally the PEST environmental factors vary from nation to nation. So the same product, may not deliver satisfaction to customer in all nations. -- So before initiating international marketing, suitable ‘market research’ is undertaken to identify expectation of customers in full. -- Companies use different approaches to develop products for International markets : a) Ethnocentric approach -- Company markets its home country product with little or no adaptation in host countries under assumption that consumers’ wants and ‘market conditions’ are the same in every country, called ethnocentric approach. 2/9/2018 Presentation by Prof. H. Ganguly 9

b) Polycentric Approach -- Company recognises that ‘want’ of customers vary from nation to nation , so it develops and produces to suit host country wants and marketing conditions called polycentric approach. -- For example, Mc. Donald’s serve customised products in nations like hamburgers in U. S. , Mc. Alutikki in India, Kiwiburger in New Zealand, Mc. Arabia burgers in Arab nations to satisfy customers; thereby achieve higher market share and profitability. c) Regiocentric Approach -- The company goes for similar products in markets with geographic and psychic proximity after establishing its brand image in vicinity. It helps to achieve economy of scale with Hub-country benefits as in case of Nokia, Ford Ikon etc. , 2/9/2018 Presentation by Prof. H. Ganguly 10

d) Geocentric Approach -- Company studies similarity in consumption pattern around nations, develop and produce for universal marketing. For example, ‘Walkman sets by Sony’; ‘Heavy-duty earthmoving equipments by Caterpillar’, ‘Harley-Davidson’ Motorcycles etc. produced in one country but consumed worldwide. -- Geocentric products yield greater benefit of ‘economy of scale’ through co-ordination of marketing mix elements. -- But geocentric approach calls for very precise coordination in manufacturing and marketing to be successful. 2/9/2018 Presentation by Prof. H. Ganguly 11

Products and Brands in International Markets -- Most of the companies start their operation in home-country with single or a small range of products. Gradually it expands into various countries and product-range also expands. Accordingly, products are classified as : 1. Local Product -- When products of a company are available only at a town or region of country, it is called Local Product , e. g. Katraj’s milk, Bhelpuri of Juhu beach etc. 2. National product -- When popularity and patronage of local products expand into length and breadth of country, it becomes National Product e. g. Dabur Honey, Lizzat Papad, Maruti cars (in 1989) etc. 2/9/2018 Presentation by Prof. H. Ganguly 12

3. International Product -- When acceptance of national products go beyond national borders into one or more countries abroad, it is called International Product. For example, Tata steel, Maruti cars, Mc. Donald’s burger etc. -- The company is providing satisfaction to customers abroad by developing and marketing products suitably and profitably through JVs, associate companies or themselves. 2/9/2018 4. Global Product -- Products that satisfy customers demands and wants at most of the markets in all continents are called Global Products e. g. Coca-Cola, Pepsi, Xerox, Sony’s Walkman etc. -- Global products create same or similar perception in minds of customers globally through universal positioning. Presentation by Prof. H. Ganguly 13

-- Global products require huge investments in R. & D. and revenue generated by them is also substantial when accepted. -- It should be understood that global products are different to global brands. A global product may not be marketed in all nations under same name. -- Secondly, perception about the product may also vary from nation to nation. 5. Global Brand -- A brand is a perception created in mind of consumers, who ascribe certain beliefs and values associated with product through its brand name. -- A brand is a valuable asset of a company. When the brand is identified by customers in different nations, the company earns profit; and customers gain satisfaction. 2/9/2018 Presentation by Prof. H. Ganguly 14

-- A global brand is created through worldwide use of same name, term, sign, symbol, design or combination thereof ; intended to identify goods and services of the company and differentiate from that of competitors. -- A global brand is marketed as per same strategic principles in every part of world with same ‘positioning and marketing approach’ though marketing mix may vary. -- Today’s top Global Brands are Coca-Cola, Microsoft, IBM, GE, Ford, Disney, Intel, Mc. Donald’s, AT&T & Marlboro. 6. Private Brand -- Many companies are getting products manufactured as per their specification from outside parties, the company only markets those. These are called Private Brands. -- ‘Private brands’ owned by major retailers are fast becoming threats to manufacturer’s brands worldwide. 2/9/2018 Presentation by Prof. H. Ganguly 15

-- Private Brands are beneficial to all concerned, e. g. * Retailers get greater margin, thereby private brands get greater shelf-exposure and in-store promotion. * Consumers get premium products at lower price. * Marketers are required to innovate regularly in this competitive scenario, beside pricing products competitively. Country-of-Origin Effect -- Brands are external cues to performance, quality, taste, design, value, prestige etc. -- The brands may convey either a positive or negative message about the product. Many factors are responsible for this good or bad image of the brand. -- One such element that influences brand-image is country of its manufacture. Consumers have impression of nations and good-quality products e. g. France and perfumes, China and 2/9/2018 Presentation by Prof. H. Ganguly 16 silk, Japan and electronic items etc.

Product Standardisation vs. Adaptation -- Generally, international firms attempt to project a uniform ‘product-image’ across global markets with very little or no changes in different markets. -- Changes made are in features like packaging, labeling or augmentation like credit, home-delivery etc. -- Industrial products and services are mostly insensitive to cross-country preferences. So are marketed as standardised. Product Standardisation -- When a firm markets a product in international markets with very little change it is referred to as standardised product. 2/9/2018 Presentation by Prof. H. Ganguly 17

Benefits of Standardisation 1. Helps in building global product and global brand image. 2. Satisfies need of customers globally. 3. Achieves lower cost of manufacture through economy of scale 4. Reduced cost of marketing mix elements. Factors that influence ‘Product Standardisation’ are A. High level of Technology Intensity : -- Hi-Tech products are best marketed with uniform specification to avoid confusion; -- High cost of putting up plants and developing skilled manpower in countries may be avoided and -- Providing spares, after-sales service etc. become convenient and economical. 2/9/2018 Presentation by Prof. H. Ganguly 18

B. Prohibitive Adaptation costs : -- Cost of adaptation of products from market to market may be very high, difficult to recover in small markets C. Worldwide ‘Convergence of Customer’s Needs’ : -- Convergence in profile of customers, their taste, needs, preference are taking place due to improvement in travel, transportation, communication; increases acceptability of standardised products like Levi’s Jeans, Café Coffee Day, KFC etc D. Country of Origin Effect : -- Perception of countries as origin of sophisticated products like Switzerland for watches, Germany for heavy machineries, France for perfumes, India for software, China for computer hardware etc. make those as more favourable source of standardised products. 2/9/2018 Presentation by Prof. H. Ganguly 19

Product Adaptation -- Making changes in products to suit needs of target markets is called Product Adaptation or Customisation. 1. Product Adaptation becomes necessary due to : * Cross-border variation in physical conditions like climate, logistics supports, per capita income etc. * Variation in culture manifested in customer’s taste, perception, buying behaviour, consumption etc. * Variation in levels of competition and competitive strategies adopted by international players in target markets. 2. Product Adaptation becomes mandatory due to different regulations regarding packaging, labeling, standards like electric voltage, operating systems viz. PAL, NTSC etc. Keeping these in mind, international marketers carry out costbenefit analysis before finalising Product Strategy. 2/9/2018 Presentation by Prof. H. Ganguly 20

International Product Life-Cycle (IPLC) The commercial products pass through distinctly different phases in their journey between appearing and fading out from commercial scene. It is called Product Life-Cycle, in which the phases are introduction, growth, maturity and decline. The products follow a sequence of similar life-stages in international marketing too : (i) A product is innovated by a developed nation and marketed in their home-country having HIGH per-capita income – gives rise to its “Product Life-Cycle (PLC) in home country”. [Figure (a)] (ii) When the product reaches “maturity’ or “decline” stage in home-country, it introduces in other developed or developing countries through exports from innovating 2/9/2018 Presentation by Prof. H. Ganguly 21 country. [Figure (b)]

(iii) As competition increases in host countries, manufacturing of the product is initiated in host countries to cut costs. (iv) When competition increases to peak in innovating company, manufacture is discontinued and the product is imported from developing or under-developed countries to enjoy cost-advantage till the product is discontinued. [Figure (c)] International Product Strategy Based upon objectives and resources available, international marketing firms focus upon Competition, Geographic expansion, Product Strengthening and Promotion to form their international product strategy. 2/9/2018 Presentation by Prof. H. Ganguly 22

Product - Promotion Strategy In international marketing, generally following alternatives are adopted : 1. Straight Extension -- In host nations where need pattern and condition of product usage are same as home country, straight or dual extension i. e. same product as in home country with minor or no change in product and promotion strategy is used in host markets too like Coca-Cola, Lux Toilet Soap etc. 2. Product Adaptation – Promotion Extension -- In markets where product functions and needs are different e. g. bicycles in low income nations are used for transportation but in developed nations for recreation and physical fitness; so product is adapted to fulfill needs but promotion strategy is 2/9/2018 Presentation by be with 23 extended, if required may. Prof. H. Ganguly minor change.

3. Dual Adaptation Clothing in low-income nations is used to cover body whereas in high income nations for enhancing personality. Therefore, the product and promotion both are adapted. 4. Developing New Products -- Basic purpose of a product is to satisfy customers in a manner superior to competitors, e. g. hand-powered radios or washing machines in rural areas of Africa and India where power supply is erratic meets customers’ needs more satisfactorily. -- In this case a new product altogether needs to be developed for satisfactory marketing. 2/9/2018 Presentation by Prof. H. Ganguly 24

International Branding -- If there were no identifying name, mark or symbol on products, how difficult shall it be to buy the same product again? It is known that the first major purpose that ‘brand’ serves is to differentiate products of one producer from the other. -- -- But more than that a Brand is a value indicator. -- Calling a pair of trousers as Jeans, signify the intangible benefits like ruggedness, durability and low-cost of maintenance of the pair that customer gets. -- But when the same pair is branded as Levi’s Jeans, additional intangible traits like youthfulness, rebelliousness, free, strong and “different from others” (i. e. feeling of being hatke) get associated to the product in minds of youth in India and abroad. This is how branding adds value to products. 2/9/2018 Presentation by Prof. H. Ganguly 25

-- So, it may be said, Branding is a process of value-addition rational or emotional; which actually may or may not be there in product or service. -- But the customer perceives brand’s value as REAL. -- This perception acts as competitive advantage over other players. -- In today’s increased physical movement of customers around the globe, Brands and Brand images forge emotional relationships between customers and products to facilitate buying decision easy in international markets. -- The imprint left behind by a brand in consumer’s mind is called Brand Image. -- Obviously, the manner in which a brand is perceived, 2/9/2018 26 determines its Brand. Presentation by which differs between customers. Image Prof. H. Ganguly

Brand Equity -- David Aakar defines Brand Equity as the net asset or liability value linked to the brand. -- The interdependent conponents of brand equity are : * Brand Loyalty * Perceived Quality * Brand Association * Brand Awareness * Other assets and liabilities * Brand Loyalty -- Is the attachment that a customer has to the brand. It indicates how likely that a customer shall stick to the brand when there is a price rise or change in product-feature. * Perceived Quality -- A customers’ perception as to how a brand meets with his/her overall expectation. 2/9/2018 Presentation by Prof. H. Ganguly 27

* Brand Association – Anything that links memory of customer with a brand is called brand association e. g. Hyundai car with Sharukh Khan or ‘freshness of breadth’ with Close-up Tooth Paste. * Brand Awareness -- Ability of potential buyers to recognise or recall a brand as member of a product-category is called Brand Awareness. * Other Assets & Liabilities -- Other entities like brand name, symbol, logo, colour combination, aesthetics, package etc. can enhance or reduce brand equity. Brand Personality -- The sum of tangible and non-tangible entities cited above, constitute Personality of a brand like human beings. -- Brand Personality distinguishes one brand from another. 2/9/2018 Presentation by Prof. H. Ganguly 28

Brand Positioning -- It is the process of creating a distinct image of the brand in minds of customers and prospective customers. -- It is generally carried out by emphasising the characteristics of brand that makes it different from competitors’ brand. Brand Extension -- The process of extending a brand into other categories or segments -- related or unrelated is called Brand extension. * Category-related extension as in case of Lifebouy Soap to Lifebouy Hand Wash. * Image-related extension like Old Spice After-Shave Lotion to Shaving Cream, Pond’s Dreamflower Talc to Pond’s Hand Crème etc. 2/9/2018 Presentation by Prof. H. Ganguly 29

Global Branding Strategies -- Successful branding of global products require that a) the firm innovate a product different from that of competitors to fulfill customers’ needs and b) develop a differentiated perception among customers and prospective customers in target markets. -- Product Perception develops in customers’ mind out of i) Product features -- in contrast to competitors’ ii) Price and iii) Marketing communication & promotion -- The firm undertakes market research in target countries to gather necessary information in deciding the strategies. 2/9/2018 Presentation by Prof. H. Ganguly 30

1. Branding by Product Designs The firm develops the product in a manner to provide greater satisfaction from needs and wants to customers. For example, Suzuki in 1980 s entered Indian market with fuel-efficient Maruti-800 automobiles. 2. Branding by Customer Attributes The same product may fulfill different customer needs in different markets, e. g. in less developed nations, an automobile provides ‘status symbol’ to many customers, whereas in developed nations it is considered as a ‘necessity’. So communication and promotion is undertaken accordingly. 3. Branding by Quality Attributes Customers in different nations associate varying value on products depending upon its tangible and intangible features 2/9/2018 31 against price, e. g. Presentation by Prof. H. Ganguly BMW cars. Mercedes Benz,

4. Branding by Customer Perception Customer preference ofshape, size, colour, taste etc. may varyfrom nation to nation, the product is accordingly developed and branded. For example, Coca-Cola and Pepsi market their products also in PET bottles up to 2 lt. packs in India, in place of 24 glass bottle crates elsewhere. 5. Technology Compatible Branding Products are developed and marketed in nations depending up on prevailing technology e. g. , Mobile handsets, TV sets, electrical gadgets are made to prevailing technology in nations. 6. Statutory Provision driven Branding Statutory provisions may vary between nations like right or left hand drive automobiles calls for suitable branding of 2/9/2018 Presentation by Prof. H. Ganguly 32 products.

Brands -- Acquisition and Divestment -- Product or service brands are assets of the company, generated through prolonged R&D efforts followed by marketing communication and promotion to bring about awareness and acceptance of the produce at substantial investment. -- As customer preference changes and the brand goes to ‘Decline’ stage of PLC, company repositions, withdraws or divests the brand. -- In Divestment of brands, the company gives right to use the brand permanently or for a period to another company for a consideration. -- Recently, Abbott Laboratories acquired consumer product brands from Nicholas Piramal Ltd. 2/9/2018 Presentation by Prof. H. Ganguly 33 ------