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CHAPTER PRODUCT DECISION VU THN ngocvth@uel.edu.vn Content Product policy Standardization vs adaptation Packaging Brand image Introduction • Options across product mix • Global v local branding a major decision • Rationalisation in MNEs – reducing number of brands • Global brands - transcend countries and culture to create strong relationships with consumers in multiple countries • Rise of emerging market brands • Complex decision-making Product policy 1.1 product planning and development 1.2 product strategy Should the company keep a commitment to its existing product mix as the products reach maturity? How strongly should the firm follow a strategy of new product acquisition/innovation? What are the organizational requirements for following each of the above approaches? 1.1 Product planning and development Product Component Model The physical product core; The product package; Support services A product (or service) is “the sum of all the physical and psychological satisfactions that the buyer (or user) receives as a result of the purchase and/or use of a product” 1.2 Product planning and development Forms of product development: new product development or addition; changes in existing products; finding new uses for existing products; product elimination 1.2 Product planning and development 1.2.1 New product • export domestic products (is easy to implement, at least initially, and may represent a relatively low-cost approach) • acquire a firm (has products for which there are potential or existing overseas markets) • copying products (developed successfully by others) • internal product development (an evolutionary process consisting of a number of stages) Internal development of new products • location of R&D facilities of firms; • the process of screening new product ideas; • the diffusion of new product innovations; • quality management New product decision process 1.2.1.1 Location of R&D Home market firms Host market firms Worldwide market firms Important criteria for considering an overseas R&D location Proximity to operations Availability of universities Proximity to markets Concept of overseas operations as full-scale business entities Availability of pockets of skills in particular technical areas Access to foreign scientific and technical communities Availability of adequate infrastructure and universities Important criteria for not considering overseas R&D locations Products sold in the developing countries are not sophisticated Lack of qualified scientists and engineers Economics of centralized R&D Increasing costs of doing R&D overseas Economics of centralized R&D Economics of centralized R&D Difficulties in assembling R&D teams Important criteria for considering overseas R&D locations “Fashion is more and more global It doesn’t belong anymore to the French Or even to the Italians I’m a global person: I spend two months in Como [in the Italian Alps], one month in Milan, two months in Miami I just don’t think any longer in terms of nationality Calvin Klein is American, [but he] makes things in Italy The French houses all have English designers now, and women are going global” Example Product Adaptation Sony TV McDonald’s Levi jeans Coca-Cola KFC Market requirements and product characteristics Voltage, broadcast standard Menu, décor of restaurant Size mix, fabric, cut Brand name (China), package Menu Packaging V – Visibility : the package must be easily distinguished from the visual competition I – Information : the package must quickly communicate the nature of its contents E – Emotional impact : the design must create favorable impressions in the mind of the consumer W – Workability : the package must function as protection and must also be efficient in home use 3.1 The benefits of standardization in packaging 01 Reduction of dimensions to a few standard sizes facilitates the machine packing of merchandise 02 Standardized package sizes reduce inventory investment in packaging materials, and facilitate mass production of the fewer types of packages and shipping boxes 03 Standardization permits full utilization of storage space at the factory and all levels of distribution 04 Uniform package dimensions permit a balanced format for display and for self-service selling 05 Standardized sizes simplify, expedite, and cut the cost of handling and shipping Brand image “A brand is anything that identifies a seller’s goods or services and distinguishes them from others” “A trademark is a brand, or part of a brand, which is protected (in that others may not use it) by law” A brand indicates: - the origin of the product - the assurance of quality; - warranty Brand equity 4.1 Country of Origin Effect Country-of-origin effect (COE ) can be defined as any influence that the country of manufacture, assembly, or design has on a consumer’s positive or negative perception of a product • Country of design and manufacture play a role • Brand name can convey origin perceptions • May communicate positive or negative perception of product based on cultural stereotypes • Can provide a cue when unfamiliar with brand • Some countries associated with specific products French Perfume/ Swiss Watches/ German cars/ Italian shoes/ French fashion/ etc 4.2 Branding decisions • selecting a good brand • determining how many brands should be in the company’s product line Factors bearing brands decisions • customer needs • distribution and promotion methods to be used • competitive market structure • economies of scale in production and distribution • legal constraints • operational structures Private label? Single market, multiple brands? Multiple markets & local brands? 4.3 Local Branding CULTURAL BARRIERS - name has unfortunate meaning in linguistic or cultural context - Pronunciation difficult e.g Kellogg’s Frosted Flakes and Cocoa Krispies difficult to say in Brazil’ ASPECTS - In LDC’s domestic products may be viewed as inferior - In developed countries domestic products have positive perception - May enable international brands to compete successfully with cheaper local brands - Problems of anti-western or anti-American feeling? 4.4 Global Branding - Long term international brand (mostly US?) exploiting a universal heritage e.g McDonalds - New products developed with a global consumer in mind - World-wide recognition - Consistent identity with consumers across world - 1/3 revenue from foreign markets (Interbrand, 2015) - Global nature and international concept (Business Week) 4.4 Global Branding TOP GLOBAL BRANDS 2021 4.4 Global Branding DRIVING FORCES Economic developments Media - Universally available mass media - Satellite offers limitless channel capacity for non-culture specific programmes and advertisements Internet - Previously localised cultures receive images representing beliefs and attitudes from all over the world - Social Media 4.4 Global Branding ADVANTAGES “Most global brands have been invented by Western companies for Western consumers Emerging-market consumers are very different.” (Silvester, 2011) • Economies of scale – development costs over large volumes • Higher level of visibility – easier to build brand awareness • Capitalise on media overlap • Prestige factor • NB Brand equity might vary from country to country 4.5 Critical Issues These values can be embodied in products or corporations or individuals Brands must hold same values in whichever markets they are available Consumers must feel that they are not dealing with an unapproachable big brother “Consumers may feel more empathy toward a name they know, rather than a faceless, sterile global brand.” (Marketing, 2009) SUMMARY - A wide range of product decisions - Can be applied to all or part of the to be made product mix e.g global brand and - Standardisation vs adaptation a adapted product major issue in product decisions - Relatively few, but growing number - Continuum rather than extremes of truly global brands ? For export packaging and branding considerations, discuss how language may be significant, particularly to the multimarket exporters