The International Product Mix

1.1. Product Planning and Product Development

Dear learner, it is the considered view of many that though product is only one of the
controllable variables and there are other variables such as price, distribution and promotion in
marketing, product decisions are more basic than decisions in respect of other variables. This is
because a product, which is “good” which effectively meets customer requirements, is known to
reduce, to a great extent, problems in areas pertaining to other variables such as pricing,
distribution, promotion, etc. On the other hand a poorly conceived product in terms of market
requirement, adds to the problems in other decision areas.

What is a Product?

The first question for which the correct answer has to be found by the producer is; what is a
product? Is it physical attributes like shape, dimension, components, form, etc. or services? The
product may be defined as a bundle of utilities or satisfaction. It refers to the total offering by the
marketer. It may be physical dimension, characteristics, services, etc. Thus, the successes of the
company in the policy depends on how far it is able to understand the customer requirements in a
product in terms of its various attributes, and second, on how it is able to adjust its capabilities
and resources, on the one hand, and to the complex of these variables, on the other.

Standardization Verses Adaptation

There is a recurring debate about product planning and development that focuses on the question
of standardized or global products marketed worldwide versus differentiated products adapted, or
even redesigned for each culturally unique market. A firm may begin exporting the products it
sells in the domestic market. Alternatively, it may recognize the significant difference in
customer needs, conditions of product use, etc., and may plan for exporting different products or
product versions to meet the specific needs of each of its different products or product versions
to meet the specific needs of each of its different global market segments. In the latter case, the
exporting firm would thus offer a large product mix. Given the relative merits and demerits of
each of the available options, the basic question on international product policy relates to
whether the exporting firm should standardize or adapt the product for the export market. Let us
learn them in detail.
Standardization refers to offering a common product on a worldwide basis.

Underlying arguments offered by the proponents of standardized products is the premise that
global communications and other worldwide socializing forces have fostered a homogenization
of tastes, needs, and values in a significant sector of the population across all cultures. This has
resulted in a large global market with similar needs and wants that demands the same reasonably
priced products of good quality and reliability.

In support of this argument, a study made found that products targeted for urban markets in less-
developed countries needed few changes from products sold to urban markets in developed
countries. Modern products usually fit into life-styles of urban consumers wherever they are.
Other studies identify a commonality of preferences among populating segments across
countries. For instance, families in New York need the same dishwashers as families in Paris,
and families in Rome make similar demands on a washing machine as do families in Toledo.

Although recognizing some cultural variations, advocates of standardization believe that price,
quality, and reliability will offset any differential advantage of a culturally adapted product.
Product standardization leads to production economies and other savings that permit profits at
prices that make a product attractive to the global market. Economies of production, better
planning, more effective control, and better use of creative managerial personnel, savings on
common costs of research and development, product and package design, high cost of
adaptation, universal image etc. are the advantages of standardization. Such standardization can
result in significant cost savings but it makes sense only when there is adequate demand for the
standardized product.

To the contrary those who hold the opposing view i.e., adaptation, stress that the economic,
social, cultural, political and legal environment vary from country to country. This requires
making changes in the product to satisfy the local needs. Moreover, customization of product is
one of the important marketing strategies to succeed in the international market. Factors such as
the following and their implications influence the exporting firms’ decision in favor of product
adaptations and extreme cases even for new product development. These factors and their
implications on the product design are shown in table 4.1.

Table 4.1: Factors influencing product adaptation

 Factor Implication for product design

Customer Orientation

(purchasing power, habit preferences, soico- Product range, size, brand name/mark, label,
cultural characteristics, literacy and education package color and instructions.
levels),

Stage of market development

(Availability of infrastructure support Product form, packing, product

facilities, level of technical skills and simplification, change in tolerances, service
maintenance). after-sale.

Legal Consideration

(Patent safety standards, commercial terms, Brand name/mark, label, language,

control requirements). measurement units and sizes, instructions, and
packaging.

Climatic conditions and physical

Environment Packaging protections, package size, and
(Hot, cold climate, plains, hilly areas, living product storage.
environment in home, etc.).

While the listed factors explain the scene of global product adaptation, the extent of product
adaptation is governed by cost-benefit accruing to the exporting firm, the state of competitors in
the host country market, and the nature of the product- mere adaptation is needed in consumer
non-durable goods for reason of varying tastes and preferences of consumer than in durable and
industrial goods. Some illustrations of product adaptations are: McDonaldd’s sell cheese burgers
in Australia to one segment of the market as a low-calorie diet food. Electrical system of 220-
volt for European market and 110-volt for North America. Coca-cola Corporation did not use the
brand name in China as Chainese translation of “Coca-Cola” means phonetically “bit the wax
tadpole”. Instead, it chose an idiomatic brand name meaning, “pleasure in the mount”.
The issue between these two extremes cannot be resolved with a simple either/or decision
because the prudent position probably lies somewhere in the middle. Most astute marketers
concede that there are definable segments across country markets with some commonalty of
product preferences and that substantial efficiencies can be attained by standardizing, but they
also recognize there may be cultural differences that remain important. The key issue is not
whether to adapt or standardize, but how much adaptation is necessary and at what point a
product can be standardized.

Most products are adapted to some degree, even those traditionally held up as examples of
standardization. Although the substantial portion of its product is standardized worldwide,
McDonald’s, a known fast food producer, includes vegetarian and lamb burgers in its India
stores to accommodate dietary and religious restrictions, and wine and beer in European stores.
Pepsi cola is said to reformulate its diet cola to be sweeter and more syrupy, and changed its
name from Diet Pepsi max to appeal to international markets where the idea of “diet” is often
shunned and a sweeter taste is preferred.

Even if different products are necessary to satisfy local needs, it does not exclude a standardized
approach. A fully standardized product may not be appropriate, but some efficiency through
standardizing certain aspects of the product may be achieved. Although complete standardization
could not be achieved, standardizing the platform (the core product) and customizing other
features to meet local preferences may attain efficiencies.

As companies gain more experience with the idea of global markets, the approach is likely to be
standardize where possible and adapt where necessary. To benefit from standardization as much
as possible and still provide for local cultural differences, companies are using an approach to
product development that allows such flexibility.

The idea is to develop a core platform containing the essential technology, and then base
variations on this platform. For example, Sony of Japan has used this approach for its walkman.
The basic walkman platform gives Sony the flexibility to adjust production rapidly to shifts in
market preference. It is interesting to speculate on the possibilities of using this approach for
standardizing the refrigerators discussed above.

Going even further to ensure that products meet the needs of local market regions and maintain
maximum benefits of globalization, companies are establishing research and development
centers within regions, to identify important product trends that can be incorporated into their
product lines. After the product concept is developed, then the product is offered to all units for
adaptation to local testes.

Neither to differentiate for the sake of differentiation nor adaptation for the sake of adaptation is
not a solution. Realistic business practice requires that a company strive for uniformity in its
marketing mix whenever and wherever possible, while recognizing that cultural differences may
demand some accommodation if the product is to be competitive. Later in the unit, various ways
of screening products to determine the extent of necessary adaptation will be discussed.

International Product Life Cycle

Dear learner you have learnt the concept of product life cycle which is important for product
planning in the pervious marketing courses. The different stages of life cycle may be managed in
such a way that the product attaining the maturity or declining stages may be introduced in
foreign market. Based on efficient use of factors of production in a particular country, the
product may be exported or imported among different countries. Let us learn the international
product life cycle in detail.

International product life cycle discusses the consumption pattern of the product in many
countries. This concept explains that the products pass through several stages of the product life
cycle. The product is innovated in country usually in a developed country to satisfy the needs of
the consumers. The innovator country wants to exploit the technological breakthrough and starts
marketing the products in foreign country. Gradually foreign country starts production and
becomes efficient in producing those commodities. As a result, the innovator country starts
losing its export market and finds the import of the product advantageous. In this way, the
innovator country becomes the importer of the products. Terpstra and Satayhy(2001) have
identified four phases in the international product life cycle. Let us learn them.

1) Export strength is evident by innovator country: Products are normally innovated in the
developed countries because they possess the resources to do so. The firms have the
technological knowhow and sufficient capital to invest on the research and development
activities. The need of adaptation and modification also forces the production activities to be
located near the market to respond quickly towards the changes. The customers are affluent in
the developed countries that may prefer to buy the new products. Thus, the manufacturers are
attracted to produce the goods in the developed country. The goods are marketed in the home
country after meeting exporting goods to them. This phase exhibits the introduction and growth
stage of the product life cycle.

2) Foreign production starts: The importing firms in the middle income country realize the
demand potential of the product on the home market. The manufacturers also become familiar in
producing the goods. The growing demand of the products attracts the attention of many firms.
They are tempted to start production in their country and gradually start exporting to the low
income country. The large production in the middle income country reduces the export from the
innovating country. This shows the maturity stage of product life cycle where the production
activities start shifting from innovating country to other countries.

3) Foreign production becomes competitive in export market: The firms in low income
country also realize the demand potential in the domestic market. They start producing the
products in their home country by exporting cheap labor. They gain expertise in manufacturing
the commodity. They become more efficient in producing the goods due to low cost of
production. Gradually they start exporting the goods to other countries. The export from this
country replaces the export base of innovating country, whose export has been already declining.
This exhibits the declining stage of product life cycle for the innovator country. In this stage, the
product gets widely disseminated and other countries starts imitating the product. This is the
third phase of product life cycle where the products starts becoming standardized.

4) Import competition begins: The producers in the low income importing country gain
sufficient experience in producing and marketing the product. They attain the economies of scale
and gradually become more efficient than the innovator country. At this stage, the innovator
country finds the import from this country advantageous. Hence, the innovator country finally
becomes the importer of that product. In this stage of the product life cycle the product becomes
completely standardized.

In simple words, the theory of international product life cycle brings out that advanced
(initiating) countries play the innovative role in new product development. Latter for reasons of
comparative advantage or factor endowments and costs, such a product moves over to other
developed countries of middle income countries and ultimately gets produced and exported by
less developed countries.
The International product life cycle theory presents the following implications for international
product planners:

- Innovative products carry significant export potential;

- The marketer whose products face declining sales in one foreign market may find another
foreign market with encouraging demand for his product; and

- Innovative products improve the staying power of the international firm.

Product Development

Product development is an important way of satisfying the growing requirements of the

customers. The company should always try for “product development”. This means that even if
the sales turn over of the company’s product(s) in a market is reasonable, the firm should not
become complacent, but should be constantly looking for opportunities to improve the items in
terms of customer perception. In other words, the company should accept the premise that there
is always scope for improvement and be continuously attempting to make the product more and
more “knowledge intensive”.

Product development does not necessarily imply technical/quality improvement: it may mean
changes in quality, or making alternations in terms of size, shape, color, design, packaging,
branding, labeling, etc.

One of the biggest advantages of product development is that it offers, at least, a temporary
monopoly to a firm, which can be taken advantage of by the company for widening profit
margins. It must be realized by the firm that competitors will always be making attempts to copy
a successful product. If a company is continuously undertaking product development, the
competitors will find it difficult to keep pace with their “me too” products because, by the time
the competent firm succeeds in copying the company’s original product, the company would
have come out an improved version of the product.

Product development is not, and cannot be uniform for all types of products, all companies, all
times and under all circumstances. Hence, it would be very difficult to suggest any successful
formulas for product development. Each firm should decide, on its own, its road to product
development taking in to account the strengths and weaknesses and the opportunities and threats
in the environment in which it has to operate. Let us discuss a useful frame of reference for a step
by step process in product development in a hypothetical firm.

Idea Generation: The initial step in product development process as in many cases is collection
of new ideas. It should be the endeavor of the firm not only to look for opportunities to collect
new ideas but also, if possible, positively encourage new ideas through a formal set up within the
company. Ideas can come from any source within and from outside. Tthe possible sources of
product ideas could be competitors, suppliers, sales forces, distributors.

Idea Evaluation: All new ideas that are generated must be carefully evaluated from a number of
angles and discussed with as many different interests as possible with the objective of exploring
the possibility of converting the ideas into successful products. At this stage, some ideas may be
totally rejected, some may be accepted with modifications and some others may find acceptance
in to.

Engineering development: During the next stage the technical people, i.e., the engineering
department must work on converting the approved ideas into an improved product. At this stage
there are possibilities of failure in the sense that attempts to produce the product may not
succeed. It is also quite likely that some modifications need to be made in the ideas to suit the
realities of the manufacturing process.

Test Marketing: Once the engineering department comes out with the sample of the
new/improved product, it should be test marketed. Test marketing is selling the product under
conditions in a market which, to the extent possible, reflects the conditions likely to prevail in the
target market at the time of commercial sales. In a simple word, a new tangible product may be
given to a sample of people to use in their households (in the case of consumer goods) or their
organization (a business good). Results including sales and repeat purchases are monitored by
the company that developed the product.

Commercialization: Test marketing is the last stage where the company still has time to decide
as to whether any more modifications are required in the product or it can go ahead with
commercial production or altogether drop the idea. Once it is decided to go ahead with
commercial production, the firm may initiate action in this regard. Thus commercialization is a
stage where full-scale production and marketing programs are planned and finally, implemented.

1.2. Quality Products

Global competition is placing new emphasis on some basic tenets of business. It is reducing time
frames and focusing on the importance of quality, completive prices, and innovative products.
The power in the marketplace is shifting from a seller’s market to customers, who have more
choices because there are more companies competing for their attention. More competition,
more choices put more power in the hands of the customer, and drive the need for quality. Today
the customer knows what is best, cheapest, and best quality. It is the customer who defines
quality in terms of his or her needs and resources.

Certain countries products, like Japanese and American products have always been among the
world’s best, but competition is challenging them to make even better products. In most global
markets the cost and quality of a product are among the most important criteria by which
purchases are made. For consumer and industrial products alike, the reason often given for
preferring one product brand to another is better quality at a competitive price. Quality, as a
competitive tool, is not new to the business world but many people believe that it is the deciding
factor in world markets. However, we must be clear about what we mean by quality.

Quality can be defined on two dimensions: market-perceived quality and performance quality.
Both are important concepts but consumer perception of a quality product often has more to do
with market-perceived quality than performance quality. Take, for example, an airline’s delivery
of quality. If viewed internally from the firm’s perspective (performance quality), an airline has
achieved quality conformance with a safe flight and landing. But because the consumer expects
performance quality to be a given, quality to the consumer is more than compliance (a safe flight
and landing). Rather, cost, timely service, frequency of flights, comfortable seating, and
performance of airline personnel from check-in to baggage claim are all part of the customer’s
experience that is perceived as being of good or poor quality.

For example, considering the number of air miles flown daily, the airline industry is almost
approaching zero defects in quality conformance yet who will say that customer satisfaction is
anywhere near perfection? These market-perceived quality attributes are embedded in the total
product, that is, the physical or core product and all the additional features the consumer expects.

In a competitive marketplace where the market has choices, most consumers expect performance
quality to be given. Naturally if the product does not perform up to standards, it will be rejected.
When there are alternative products, all of which meet performance quality standards, the
product chosen is the one that meets market-perceived quality attributes.

Maintaining performance quality is critical, but frequently a product that leaves the factory at
performance quality is damaged as it passes through the distribution chain. This is a special
problem for many global brands where production is distant from the market and/or control of
the product is lost because of the distribution system within the market. In short, quality is not
just desirable, it is essential for success in today’s competitive global market, and the decision to
standardize or adapt a product is crucial in delivering quality.

1.3 Global brands

Hand in hand with global products are global brands. A global brand is defined as the worldwide
use of a name, term, sign, symbol, design, or combination thereof intended to identify goods or
services of one seller and to differentiate them from those of competitors. Much like the
experience with global products, there is no single answer to the question of either or not to
establish global brands. There is, however, little question of the importance of a brand name.

A successful brand is the most valuable resource a company has. The brand name encompasses
the years of advertising, good will, quality evaluation, product experience and the other
beneficial attributes the market associates with the product. Brand image is at the very core of
business identity and strategy. Customers everywhere respond to images, myths, and metaphors
that help them define their personal and national identities within a global context of world
culture and product benefits. Global brands play an important role in that process. The value of
Kodak, Sony, Coca-Cola, McDonald’s, Toyota, and Marlboro is indisputable. One estimate of
the value of Coca-Cola, the world’s most valuable brand, places it at over $35 billion. Naturally,
companies with such strong brands strive to use those brands globally. Even for products that
must be adapted to local market conditions, global brands can be successfully used.

A global brand gives a company a uniform worldwide image that enhances efficiency and cost
savings when introducing other products associated with the brand name, but not all companies
believe a single global approach is the best. Some companies like Kodak, Coca-Cola, and
Caterpillar use the same brands worldwide, while other multinationals such as Nestle and Gillette
have some brands that are promoted worldwide and others that are country specific.
Companies that already have successful country-specific brand names must balance the benefits
of a global brand against the risk of losing the benefits of an established brand. The cost of
reestablishing the same level of brand preference and market share for the global brand that the
local brand has must be offset against the long-term cost savings and benefits of having only one
brand name worldwide. In those markets where the global brand is unknown, many companies
are buying local brands of products that consumers want and revamping, repackaging, and
finally relaunching them with a new image.

Multinationals must also consider a rise in nationalistic pride that occurs in some countries and
impacts on brands. In India, for example, an international company, Unilever, considers it critical
that its brands, such as surf detergent Lux and Lifebuoy soaps, are viewed as Indian brands. Just
as is the case with products, the answer to the question of when to go global with a brand is, “It
depends-the market dictates.” Use global brands where possible and national brands where
necessary.

As discussed earlier, brands are used as external cues to taste, design, performance, quality,
value, prestige, and so forth. In other words, the consumer associates the value of the product
with the brand. The brand can convey either a positive or a negative message about the product
to the consumer and is affected by past advertising and promotion, product reputation, and
product evaluation and experience. In short, many factors affect brand image. On factor that is of
great concern to multinational companies that manufacture worldwide is the country-of-origin
effect on the market’s perception of the product.

Country-of-origin effect (COE) can be defined as any influence that the country of manufacture
has on a consumer’s positive or negative perception of a product. Today a company competing in
global markets will manufacture products worldwide and, when the customer becomes aware of
the country of origin, there is the possibility that the place of manufacture will affect
product/brand image.

The country, the type of product, and the image of the company and its brands influence whether
or not the country of origin will engender a positive or negative reaction. There are a variety of
generalizations that can be made about country-of-origin effects on products and brands.
Consumers tend to have stereotypes about products and countries that have been formed by
experience, hearsay, and myth. The following are some of the more frequently cited
generalization.

Consumers have broad but somewhat vague stereotypes about specific countries and specific
product categories that they judge “best”. English tea, French perfume, Chinese silk, Italian
leather, Japanese electronics, Jamaican rum, and so on. Stereotyping of this nature is typically
product specific and may not extend to other categories of products from these countries.

Countries are also stereotyped on the basis of whether they are industrialized, in the process of
industrializing, or developing. These stereotypes are less country-product specific; they are more
a perception of the quality of goods in general produced within the country. Industrialized
countries have the highest quality image, and there is generally a bias against products from
developing countries.

In Russia, for example, it is said that the world is divided into two kinds of products: “ours” and
“imported.” Russians prefer fresh, homegrown food products but imported clothing and
manufactured items. Companies hoping to win loyalty by producing in Russia might have been
unhappily surprised as consumers remain cool towards locally produced items. For Russians,
country-or-origin is more important than brand name as an indicator of quality. It is said that
South Korean electronics have difficulty in convincing Russians that they are as good as
Japanese.

One might generalize that the more technical the product, the less positive is the perception of
one manufactured in a less-developed or newly industrializing country. There is also the
tendency to favor foreign-made products over domestic-made in less-developed countries like
our county, Ethiopia. Foreign products do not charge equally well since consumers in developing
countries have stereotypes about the quality of foreign made products even from industrialized
countries. A survey of consumers in the Czech Republic found that 72 percent of Japanese
products were considered to be of the highest quality, German goods followed with 51 percent,
Swiss goods with 48 percent, Czech goods with 32 percent, and the United States with 29
percent.

One final generalization about COE involves fads that often surround products from particular
countries or regions in the world. These fads are most often product specific and generally
involve goods that are faddish in nature. In china, for example, anything that seems western to
be the fad. If it is western, it is in demand even at prices three and four times higher than
domestic products.

There are exceptions to the generalizations presented here but it is important to recognize that
country of origin can affect a product or brand’s image. Further, not every consumer is sensitive
to a product’s country of origin. A finding in a certain study shows that more knowledgeable
consumers are more sensitive to a product’s COE than less knowledgeable. The multinational
company needs to take this factor into consideration in product development and marketing
strategy since a negative country stereotype can be detrimental to a product’s success unless
overcome with effective marketing.

Once the market gains experience with a product, negative stereotypes can be overcome. It is
said that nothing would seem less plausible than selling chopsticks made in Chile to Japan, but it
happened. It took years for a Chilean company to overcome doubts about the quality of its
product, but persistence invitations to Japanese to visit the Chilean poplar forests that provide the
wood for the chopsticks, and a quality product finally overcame doubt; now the company cannot
meet the demand for chopsticks.

Country stereotyping can be overcome with good marketing. To maintain market share, global
brands will have to be priced competitively and provide real consumer value. Global marketers
must examine the adequacy of their brand strategies in light of such competition. This may make
cost and efficiency benefits of global brands even more appealing.

1.4. Products and Culture

To appreciate the complexity of standardized versus adapted products, one needs to understand
how cultural influences are interwoven with the perceived value and importance that a market
places on a product. A product is more than a physical item; it is a bundle of satisfactions (or
utilities) the buyer receives. This includes its form, taste, color, odor, and texture, how it
functions in use, the package, the label, the warranty, manufacturer’s reputation, the country of
origin, and any other symbolic utility received from the possession or use of the goods. In short,
the market relates to more than a product’s physical form and primary function.

The values and customs within a culture impute much of the importance of these other benefits.
In other words, a product is the sum of the physical and psychological satisfactions it provides to
the user.
Its physical attributes generally are required to create the primary function of the product. The
primary function of an automobile, for example, is move passengers from point A to point B.
This ability requires a motor, transmission, and other physical features to achieve its primary
purpose. The physical features or primary function of an automobile are generally in demand in
all cultures where there is a desire to move from one point to another other than by foot or
animal power. Few changes to the physical attributes of a product are required when moving
from one culture to another. However, an automobile has a bundle of psychological features as
important in providing consumer satisfaction as its physical features. Within a specific culture,
other automobile features (Color, size, design, brand name, price) have little to do with its
primary function, the movement from point A to B, but do add value to the satisfaction received.

The meaning and value imputed to the psychological attributes of a product can vary among
cultures and are perceived as negative or positive. To maximize the bundle of satisfactions
received and to create positive product attributes rather than negative attitude, adaptation of the
nonphysical features of a product may be necessary.

Adaptation may require changes of any one or all of the psychological aspects of a product. A
close study of the meaning of product shows to what extent the culture determines an
individual’s perception of what a product is and what satisfaction that product provides.

The adoption of some products by consumers can be affected as much by how product concept
conflicts with norms, values, and behavior patterns as by its physical or mechanical attributes. A
novelty always comes up against a closely integrated cultural pattern, and it is primarily this
determines whether, when, how, and in what form it gets adopted. For instance, it was said that,
it has been difficult to introduce insurance into Moslem countries because the pious could claim
that it partook of both usury and gambling, both explicitly vetoed in the Koran. The Japanese
have always found all body jewelry repugnant. The Scots have a resistance to pork and all its
associated products, apparently from days long ago when such taboos were decided by
fundamentalist interpretations of the bible.

When analyzing a product for a second market, the extent of required adaptation required
depends on cultural differences in product use and perception between the market where the
product was originally developed for and the new market. The greater these cultural difference
between the two markets, the greater the extent of adaptation that may be necessary.
The problems of adapting a product to sell abroad are similar to those associated with the
introduction of a new product at home. Products are not measured solely by their physical
specifications. The nature of the new product is in what it does to and for the customer-to habits,
tastes, and patterns of life.

What significance, outside the intended use, might a product have in a different culture? When
product acceptance requires changes in patterns of life, habits, tastes, the understanding of new
ideas, acceptance of the difficult to believe, or the acquisition of completely new tastes or habits,
special emphasis must be used to overcome natural resistance to change.

Innovative Products and Adaptation

An important first step in adapting a product to a foreign market is to determine the degree of
newness perceived by the intended market. How people react to newness and how new a product
is to a market must be understood. In evaluating the newness of a product, the international
marketer must be aware of that many products successful in a certain country, having reached the
maturity or even decline stage in their life cycles, may be perceived as new in another country or
culture and, thus, must be treated as innovations. From a sociological viewpoint, any idea
perceived as new by a group of people is an innovation.

Whether or not a group accepts an innovation and the time it takes to do so depends on its
characteristics. Products which are new to the social system are innovations, and knowledge
about the diffusion (i.e., the process by which innovation spreads) of innovation is helpful in
developing a successful product strategy. Marketing strategies can guide and control to a
considerable extent of the rate and extent of new product diffusion because successful new
product diffusion is dependent on the ability to communicate relevant product information and
new product attributes.

Diffusions of innovation

The goal of a foreign marketer is to gain product acceptance by the largest number of consumers
in the market in the shortest span of time. However, new products are not always readily
accepted by a culture: indeed, they often meet resistance. Although they may ultimately be
accepted, the time it takes for a culture to lean new ways to learn to accept a new product, is of
critical importance to the marketer since planning reflects time frame for investment and
profitability.
Solutions to the problems of whether or not the probable rate of acceptance can be predicted
before committing resources and, more critically, if the probable rate of acceptance is too slow,
whether it can be accelerated from examining the work done in diffusion research. A diffusion
research is a research on the process by innovations spread to the members of a social system.

Knowledge of the process may provide the foreign marketer with the ability to assess (lie time it
takes) for a product to diffuse-before it is necessary to make a financial commitment. It also
focuses the marketer’s attention on features of a product that provoke resistance, thereby
providing an opportunity to minimize resistance and hasten product acceptance.

At least three extraneous variables affect the rate of diffusion of an object, the degree of
perceived newness, the perceived attributes of the innovation and the method used to
communicate the idea. Each variable has a bearing on consumer reaction to a new product and
the time needed for acceptance. An understanding of these variables can produce better product
strategies for the international marketer.

As perceived by the market, varying degrees of newness categorize all new products. Within
each category, numerous reactions affect the rate of diffusion. In giving a name to these
categories, one might think of (1) congruent innovations, (2) continuous innovations, (3),
dynamically continuous innovations, and (4) discontinuous innovations.

A congruent innovation is actually not an innovation at all because it causes absolutely no

disruption of established consumption patterns. It is where the market perceives no newness,
such as cane sugar versus beet sugar.

A continuous innovation has the least disruptive influence on established consumption patterns.
Alteration of a product is almost involved rather than the creation of a new product. Generally
the alterations result in better use patterns perceived improvement in the satisfaction derived
from its use. Examples include toothpaste, disposable razors, and flavors in coffee.

A dramatically continuous innovation has more disruptive effects than a continuous innovation,
although it generally does not involve new consumption patterns. It may mean the creation of a
new product or considerable alteration of an existing one designed to fulfill new needs arising
from changes in life-styles or new expectations brought by change. It is generally disruptive and
therefore resisted because old patterns of behavior must change if consumers are to accept and
perceive the value of the dynamically continuous innovation. Examples include electric
toothbrushes, electric hair curlers, central air-conditioning, cellular telephones, and freeze-dried
foods.

Finally, a discontinuous innovation involves the establishment of new consumption patterns and
the creation of previously unknown products. It introduces an idea or behavior pattern where
there was none before. Example includes television, the computer, the internet, ATMs (automatic
teller machines), and microwave ovens.

The extent of a product’s diffusion and its rate of diffusion are partly functions of the particular
product’s attributes. Each innovation has characteristics by which it can be described, and each
person’s perception of these characteristics can be utilized in explaining the differences in
perceived newness of an innovation. The adjustment of these attributes or product adaptation can
lead to changes in consumer perception and thus to altered rates of diffusion. Emphasis given to
product adaptation for local cultural norms and the overall brand image created age critical
marketing decision areas.

Analysis of characteristics of innovation

The more innovative a product is perceived to be, the more difficult it is to gain market
acceptance. However, the perception of innovation can often be changed if the marketer
understands the perceptual framework of the consumer.

Analyzing the five characteristics of an innovation can assist in determining the rate of
acceptance or resistance of the market to a product including the product’s

Relative advantage (the perceived marginal value of the new product relative to the old);

Compatibility (its compatibility with acceptable behavior, norms, values, and so forth);

Complexity (the degree of complexity associated with product use)

Trial ability (the degree of economic and/or social risk associated with product use): and

Observability (the ease with which the product benefits can be communicated) affect the degree
of its acceptance or resistance.

In general, it can be postulated that the rate of diffusion is positively related to relative
advantage, compatibility, trial ability and observability, but negatively related to complexity.
By analyzing a product within these five dimensions, a marketer can often uncover perceptions
held by the market, which if left unchanged, would slow product acceptance. Conversely, if these
perceptions are identified and changed, the marketer may be able to accelerate product
acceptance.

The evaluator must remember it is the perception of product characteristics by the potential
adopter, not the marketer that is crucial to the evaluation. A market analyst’s self-reference
criterion (SRC) may cause a perceptual bias when interpreting the characteristics of a product.
Thus, instead of evaluating product characteristics from the foreign user’s frame of reference,
analyzing from the marketer’s frame of reference, leads to a misinterpretation of the cultural
importance.

Once the analysis has been made, some of the perceived newness or cause for resistance can be
minimized through skilful marketing. The more congruent product perceptions are with current
cultural values, the less resistance there will be and the more rapid product diffusion or
acceptance will be.

A product can often be modified physically to improve its relative advantage over competing
products, enhance its compatibility with cultural values, and even minimize its complexity. Its
relative advantage and compatibility also can be enhanced and some degree of complexity
reduced through advertising efforts. Small sizes, samples, packaging and product demonstrations
are all sales promotion efforts that can be sued to alter the characteristics of an innovative
product and accelerate its rate of adoption.

The marketer must recognize not only the degree of innovativeness a product possesses in
relation to each culture, but also marketing efforts relied an understanding of the importance of
innovativeness to product acceptance and adoption. One of the values of analyzing
characteristics of innovations is that it focuses on the efforts or the marketer issues that influence
the acceptance of a product concept. It is possible to accentuate the positive attributes of an
innovation, thus changing the market’s perception to a more positive and acceptable attitude.
1.5. Physical or Mandatory Requirements and Adaptations

A product may have to change in a number of ways to meet physical or mandatory requirements
of a new market, ranging from simple package changes to total redesign of the physical core
product. A study reaffirmed that mandatory adaptations were more frequently the reason for
product adaptation than adapting for cultural reasons. Some changes are obvious with relatively
little analysis: a cursory examination of a country will uncover the need to rewire electrical
goods for a different voltage system, simplify a product when the local level of technology is not
high or print multilingual labels where required by law.

Legal, economic, political, technological, and climatic requirements of the local marketplace
often dictate product adaptation. For example, during a period in India when the government was
very anti-foreign investment Pepsi-cola hanged its product name to Lehar-Pepsi (in Hindi lehar
means wave) to gain as much local support as possible. The name returned to Pepsi-Cola when
the political climate turned favorable. Laws that vary among countries usually set specific
package sizes and safety and quality standards to make a purchase more affordable in low-
income countries; the number of unit per package may have to be reduced from the typical
quantities offered in high-income countries.

Changes may also have to be made to accommodate climatic differences. For instance, it was
reported that the general motors’ of Canada, experienced major problems with several thousand
Chevrolet automobiles shipped to a Mideast country, it was quickly discovered they were unfit
for the hot, dusty climate. Supplementary air filters and different clutches had to be added to
adjust for the problem. Even crackers have to be packaged in tins for humid areas.

Product Alternatives

When a company plans to enter a market in another country, careful consideration must be given
to whether or not the present product lines will prove adequacy in the new culture. Will they sell
in quantities large enough and at prices high enough to be profitable? If not, what other
alternatives are available? The marketer has at least four viable alternatives when entering a new
market:

Sell the same product presently sold in the home market (domestic market extension strategy);
Adapt existing products to the tastes and specific needs in each new country market (multi-
domestic market strategy);

Develop a standardized product for all markets (global market strategy); or acquire local brands
and reintroduce.

An important issue in choosing which alternative to use is whether or not a company is starting
from scratch (i.e., no existing products to market abroad), whether it has products already
established in various country markets, or whether there are local products that can be more
efficiently developed for the local market than other alternatives.

For a company starting fresh, the prudent alternative is to develop a global product. If the
company has several products that have evolved over time in various foreign markets, then the
task is one of repositioning the existing products into global products. In some case, a company
encounters a market where local brands are established and the introduction of a company brand
would take too long and be more costly than acquiring the local brand.

The success of these alternatives depends on the product and the fundamental needs it fulfill, it’s
characteristics, perception within the culture, and the associated costs of each program. To know
that foreign markets are different and different product strategies may be needed is one thing; to
know when adaptation of your product line and marketing program is necessary is another, more
complicated problem.

Evaluating a product for marketing in a country market requires a systematic method of

screening products to determine if there are cultural resistances to overcome and/or physical or
mandatory changes necessary for product acceptance. Only when the psychological (or cultural)
and physical dimensions of the product, as determined by the country market, are known can the
decision for adaptation be made.

Before entering a market, the international marketer can analyze the components of a product to
determine what features need to be adapted to ensure that the product meets both the market-
perceived quality and performance quality.

Analysis of Product Components

A product is multidimensional, and the sum of all its features determines the bundle of
satisfactions (utilities) received by the consumer. To identify all the possible ways a product may
be adapted to a new market; it helps to separate its many dimensions into three distinct
components. The components are core component, packaging component, and support services
component. These components includes all product’s tangible and intangible elements and
provide the bundle of utilities that the market receives from the use of the product.

A) The Core Component

The core component consists of the physical product- the platform that contains the essential
technology-and all its design and functional features. It is on the product platform that product
variations can be added or deleted to satisfy local differences.

Major adjustments in the platform aspect of the core component may be costly because a change
in the platform can affect product processes and thus require additional capital investment.
However, alterations in design, functional features, flavors, color, and other aspects can be made
to adapt the product to cultural variations.

Functional features can be added or eliminated depending on the market. In markets where hot
water is not commonly available washing machines have heaters as a functional feature. In other
markets, automatic soap and bleach dispensers may be eliminated to cut costs and/or to minimize
repair problems. The physical product and all its functional features should be examined as
potential candidates for adaptation.

B) Packaging Component

The packaging component includes style, features, packaging, labeling, trademarks, brand name,
quality, price, and all other aspects of a product’s package. As with the core component, the
importance of each of these elements in the eyes of the consumer depends on the need that the
product is designed to serve. Packaging components frequently require both discretionary and
mandatory changes. For example, some countries require labels to be printed in more than one
language, while others forbid the use of any foreign language.

Care must be taken to ensure that corporate trademarks and other parts of the packaging
component do not have unacceptable symbolic meanings. Particular attention should be given to
translations of brand names and colors used in packaging elements. The packaging component
may incorporate symbols, which convey an unintended meaning and thus must be changed. For
example, Yellow flowers used in another company as trademark were rejected in Mexico, where
a yellow flower symbolizes death or disrespect.

Package size and price have an important relationship in poor countries. Companies find that
they have to package in small units to bring the price in line with spending norms.

There are a countless reasons why a company might have to adapt a product’s package. For
example, a poorly packaged product conveys an impression of poor quality to the Japanese. It is
also important to determine if the packaging has other uses in the market. Size of the package is
also a factor that may make a difference to success in Japan. Soft drinks are sold in smaller-size
cans than in the United States to accommodate the smaller Japanese hand. In Japan, most food is
sold fresh or in clear packaging, while cans are considered as dirty.

Labeling law varies from country to country and does not seem to follow any predictable pattern.
In Saudi Arabia, for example, product names must be specific. Prices are required to be printed
on the labels in Venezuela, but in Chile it is illegal to put prices on labels or in any way suggest
retail prices. It was reported that Coca-Cola ran into a legal problem in Brazil with its Diet Coke
had to get special approval around this restriction, with the new Chinese labeling law, however,
food products must have their name, contents, and other specifics listed clearly in Chinese
printed directly on the package.

Marketers must examine each of the elements of the packaging component to be certain that this
part of the product conveys the appropriate meaning and value to a new market otherwise they
may be caught short. For example, a U.S. soft-drink company that incorporated six-pointed stars
as decoration on its package labels faced a severe problem from as Arab customers. It was only
when investigating weak sales did they find they had indecently offended some of their Arab
customers who interpreted the stars as symbolizing pro-sraeli sentiments.

C) Support Service Component

The support services component includes repair and maintenance, instructions, installation,
warranties, deliveries, and the availability of spare part. Otherwise many successful marketing
programs might ultimately fail if little attention is given to this product component.

In some countries, the concept of routine maintenance or preventive maintenance is not a part of
the culture. As a result, products may have to be adjusted to require less-frequent maintenance.
Literacy rates and educational levels of a country may require a firm to change product’s
instructions. A simple term in one country may be incomprehensible in another. It was said that
the Brazilians have successfully overcome low literacy and technical skills of users of the
sophisticated military tanks it sells to Third world countries. They include videocassette players
and videotapes with detailed repair instructions as part of the standard instruction package. They
also minimize spare parts problems by suing standardized, off-the-shelf parts available
throughout the world.

While it may seem obvious to translate all instructions into the language of the market, many
firms overlook such a basic point. “Danger,” or “Use No oil”, have little meaning to those parts
of the world unfamiliar with the English language.

The product component model can be a useful guide in examining adaptation requirements of
products destined for foreign markets. A product should be carefully evaluated on each of the
three components for mandatory and discretionary changes that may be needed.