Global Products

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Global Products

  1. 1. Global Products
  2. 2. Definition <ul><li>Global Products are standardized products with a common brand name, with uniform features in all countries </li></ul><ul><ul><li>Eg: Gillette, Benetton Sweaters </li></ul></ul><ul><li>Regional products & regional brands are unique to a particular region. </li></ul><ul><ul><li>E.g: P&G’s Ariel, Honda’s City etc </li></ul></ul><ul><li>Regional products are latently global. They may become global as more customers know about it </li></ul><ul><li>Marketing Global products is lot more complex than selling Regional Products </li></ul>
  3. 3. Advantages of Standardization <ul><li>For many products standardization is inevitable </li></ul><ul><ul><li>Uniform need for the product – Steel, Metals </li></ul></ul><ul><ul><li>Economies of Scale & Scope. Benefit from a large market </li></ul></ul><ul><li>Key Benefits </li></ul><ul><ul><li>Cost Reduction – Economies of scale & scope </li></ul></ul><ul><ul><li>Improved Quality </li></ul></ul><ul><ul><li>Enhanced Customer Preference </li></ul></ul><ul><ul><li>Global Customers </li></ul></ul><ul><ul><li>Global Market Segments </li></ul></ul>
  4. 4. Drawbacks of Standardization <ul><li>Off-Target or Wrong positioning in some countries </li></ul><ul><ul><li>Customers may have different needs </li></ul></ul><ul><ul><li>Market segmentation is not always identical across cultures </li></ul></ul><ul><li>Lack of Uniqueness – Customers want to differentiate themselves with unique things </li></ul><ul><li>Vulnerable to Trade Barriers – Global products need free trade </li></ul><ul><li>Strong Local Competitors – Local competitors are better at adapting to local needs, making a global products vulnerable </li></ul>
  5. 5. Extent of Standardization <ul><li>In reality 100% standardization is rare </li></ul><ul><li>Some features have to be localized </li></ul><ul><ul><li>Packaging, pricing etc </li></ul></ul><ul><li>Only the “Core Product” which acts as the foundation is standardized </li></ul><ul><li>All additional features are standardized in varying degrees to meet local tastes </li></ul><ul><ul><li>E.g : Coca-Cola </li></ul></ul><ul><li>Standardization can involve use of Modular design </li></ul>
  6. 6. Factors Favoring Localization <ul><li>Cultural Demands – Local Tastes & preferences </li></ul><ul><ul><li>Even a “Globally standardized” product needs to be localized </li></ul></ul><ul><li>Compatibility Requirements </li></ul><ul><ul><li>Government Rules </li></ul></ul><ul><ul><li>Local Climate & weather </li></ul></ul><ul><ul><li>Local Technology standards </li></ul></ul>
  7. 7. Pitfalls of Standardization <ul><li>Five Common Reasons why Standardized products fail </li></ul><ul><li>Insufficient Market Research </li></ul><ul><li>Over-Standardization </li></ul><ul><li>Rigid Implementation </li></ul><ul><li>Narrow Vision </li></ul><ul><li>Poor Follow-up </li></ul>
  8. 8. Insufficient Market Research <ul><li>Insufficient Market Research leads to assumed market similarities, wrong demand estimations </li></ul><ul><li>Local subsidiaries may become disenchanted </li></ul><ul><li>Non-Acceptance of the product in local markets </li></ul>
  9. 9. Over-Standardization <ul><li>A standard Product is assumed to be used in a standard way irrespective of the local preferences. </li></ul><ul><li>This leads to: </li></ul><ul><ul><li>Poor product positioning </li></ul></ul><ul><ul><li>Wrong market segmentation </li></ul></ul><ul><li>Standard product may need localized marketing efforts </li></ul>
  10. 10. Rigid Implementation <ul><li>A standardized marketing program is not always beneficial </li></ul><ul><li>Often Head-Quarters drives the standardization of all efforts and fails to notice local tastes and ignores better ideas from subsidiaries </li></ul><ul><li>Standardized strategies increases overall sales growth but lowers ROI & ROA </li></ul>
  11. 11. Narrow Vision <ul><li>Increased Standardization leads to a myopic view of the local markets </li></ul><ul><li>Local subsidiaries fail to learn from other subsidiaries of the parent </li></ul><ul><li>Knowledge sharing and knowledge transfer becomes limited, leading to duplication of efforts, lost opportunities & profits </li></ul>
  12. 12. Poor Follow-up <ul><li>Launching Standard Global products world wide is a complex task </li></ul><ul><li>Often firms do a poor job on following up on efforts and results from other subsidiaries </li></ul><ul><li>Local Subsidiaries may not have the required resources to support the global product </li></ul>
  13. 13. Challenges of Global Products <ul><li>Its difficult to maintain a global product line </li></ul><ul><ul><li>History : Existing local products </li></ul></ul><ul><ul><li>M&A: Integration of product lines is tough </li></ul></ul><ul><ul><li>Local Preferences differ </li></ul></ul><ul><ul><li>Distribution Channels are different </li></ul></ul><ul><ul><li>Manufacturing Capacity Constrains </li></ul></ul><ul><li>Colgate has been quite successful in developing a long line of global products </li></ul>
  14. 14. Globalizing New Products <ul><li>Successful New products can be Globalized if the factors for its success can be Globalized </li></ul><ul><li>Often times factors for a products success in not clearly understood </li></ul><ul><ul><li>More than 50% of global new products fail </li></ul></ul><ul><ul><li>Market orientation & commitment of senior management is a must </li></ul></ul><ul><ul><li>Asian markets need a higher level of technological sophistication, marketing synergies and longer commitment </li></ul></ul>
  15. 15. New Product Success Factors <ul><li>Some of the common success factors are: </li></ul><ul><ul><li>Relative Product Advantage – Advantage over existing alternatives </li></ul></ul><ul><ul><li>Synergy with the existing products </li></ul></ul><ul><ul><li>Degree to with the new product is innovative </li></ul></ul><ul><ul><li>Market orientation & Management Commitment </li></ul></ul><ul><ul><li>Intensity of competitive reaction. If more number of competitors react, lesser is the chance of success </li></ul></ul><ul><ul><li>Compatibility of the new product with existing infrastructure </li></ul></ul>
  16. 16. Speed of Diffusion <ul><li>Speed at which a new product is introduced into other countries is termed Speed of Diffusion </li></ul><ul><li>Speed of Diffusion depends on: </li></ul><ul><ul><li>Relative Advantage </li></ul></ul><ul><ul><li>Compatibility with existing systems </li></ul></ul><ul><ul><li>Complexity – How easy is it to use? </li></ul></ul><ul><ul><li>Trailability – How easy is it to try a new product </li></ul></ul><ul><ul><li>Observability – Ability of potential customers to observe the benefits of the new product </li></ul></ul><ul><ul><li>Cosmopolitianism - Hetrogeneity slows down product adaptation </li></ul></ul>
  17. 17. Global Brand Management <ul><li>Global Brands needs Global brand management </li></ul><ul><li>Brand has Brand value and Brand Equity </li></ul><ul><ul><li>Coca-Cola brand is worth $69 Billion </li></ul></ul><ul><ul><li>Intel Brand is worth $35 Billion </li></ul></ul><ul><li>Brand Equity is the present value of the net revenues the brand can be expected to generate over time </li></ul><ul><li>Brand Equity depends on intangibles like </li></ul><ul><ul><li>Awareness, Knowledge, attractiveness – Brand Stature </li></ul></ul><ul><ul><li>Differentiation, Relevance – Brand Vitality </li></ul></ul><ul><li>Brand Value is off-books but affects how Brands are managed </li></ul>
  18. 18. Advantages of Global Brand <ul><li>Demand Spillover </li></ul><ul><ul><li>Marketing efforts in one country can create demand on other countries. TV, Internet etc </li></ul></ul><ul><li>Global Customers </li></ul><ul><ul><li>Global customers often demand a globally standardized products </li></ul></ul><ul><li>Scale Economies </li></ul><ul><ul><li>Global Advertising, Standardized packaging can cut costs </li></ul></ul>
  19. 19. Brand Portfolio <ul><li>Consumer goods makers usually have a portfolio of few global brands and several local Brands </li></ul><ul><li>Less than 10% of brands are global </li></ul><ul><li>In 2001, Study by ACNielson found only 43 global brands in consumer packaged goods </li></ul><ul><li>Typically Brands are managed in a Brand Hierarchy, Global/Corporate brand at the top and local brand next </li></ul><ul><ul><li>E.g: Honda Accord, Intel Pentium, Sony Vega TV </li></ul></ul><ul><li>Global Brands are managed by the parent. Local brands are managed by subsidiaries </li></ul><ul><li>Brand Extensions is done to introduce a new product </li></ul>
  20. 20. Brand Globalization Potential <ul><li>Not all local brands can become global. Here’s a checklist to see the brand fit: </li></ul><ul><ul><li>Does the brand name make sense outside the country? </li></ul></ul><ul><ul><li>Does the brand suggest a country association? </li></ul></ul><ul><ul><li>Can the brand name registered abroad? </li></ul></ul><ul><ul><li>Is there synergy with existing Global Brands? </li></ul></ul><ul><ul><li>Can a new Global Brand be Justified? </li></ul></ul><ul><ul><li>Does the regional brand offer tough competition to global brands in that region? </li></ul></ul>
  21. 21. Implementing Global Brand <ul><li>Implementing a globalization strategy raises few issues: </li></ul><ul><li>In the globalization product based involving product entry into new markets? </li></ul><ul><li>Is the product category unique to the company? </li></ul><ul><li>Can the local brand names be replaced with a global brand name? </li></ul><ul><li>E.g: Nokia brands all its telecom products as Nokia, even replacing brand names of acquired companies </li></ul>
  22. 22. Implementing Global Brand <ul><li>Can Local Brands be replaced without affecting market share? </li></ul><ul><li>E.g: Electrolux maintains a host of local brands to retain its local customers </li></ul><ul><li>Does replacing a local brand has a significant impact on the product? </li></ul><ul><ul><li>E.g: Budweiser in Europe, Thumbs up in India </li></ul></ul><ul><li>Does replacing a local brand affect the local competitiveness in the local market? </li></ul><ul><ul><li>Local Brands tend to be strongly associated with local culture & offers a higher competitiveness than global brands </li></ul></ul>
  23. 23. Top Global Brands <ul><li>Coca Cola </li></ul><ul><li>Sony </li></ul><ul><li>Mercedes-Benz </li></ul><ul><li>Kodak </li></ul><ul><li>Disney </li></ul><ul><li>Nestle </li></ul><ul><li>Toyota </li></ul><ul><li>McDonald’s </li></ul><ul><li>IBM </li></ul><ul><li>Pepsi-Cola </li></ul><ul><li>Rolls-Royce </li></ul><ul><li>Honda </li></ul><ul><li>Panasonic </li></ul><ul><li>Levi’s </li></ul><ul><li>Kleenex </li></ul><ul><li>Ford </li></ul><ul><li>Volkswagen </li></ul><ul><li>Kellogg’s </li></ul><ul><li>Porsche </li></ul>
  24. 24. Replacing Local Brands <ul><li>Several standard brand Changeover tactics are: </li></ul><ul><li>Fade-in/fade-out : Global brand is first associated with the local brand then the local brand is slowly faded out </li></ul><ul><li>Endorsement Branding : Use a strong local brand to introduce a global brand </li></ul><ul><ul><li>Eg: Acura by Honda </li></ul></ul><ul><li>Double Branding : Local-Global brands or Old-New brand together </li></ul><ul><li>Summary Axing : Simply drop a local brand & introduce a Global Brand </li></ul>
  25. 25. Counterfeit Products <ul><li>Strong & Successful Global brand names attracts counterfeiters. </li></ul><ul><li>Counterfeit product is more common in high end fashion products </li></ul><ul><ul><li>Eg: Gucci, Ray-Ban etc </li></ul></ul><ul><li>Counterfeit or fake products are now seen in chemicals, computers etc </li></ul><ul><li>Extensive, sustained operation is needed to fight fake goods, often government help is needed </li></ul>
  26. 26. Closing Thoughts <ul><li>Globalization involves global products and global brand names </li></ul><ul><li>Global products is standardized to an extent to gain economies of scale & scope but localized to meet local requirements </li></ul><ul><li>Global Brands are few in number and require global scale brand management </li></ul><ul><li>New Global brands can be developed with substantial effort & commitment </li></ul><ul><li>Changing local Brand names is not easy & requires extensive resources </li></ul><ul><li>Counterfeit products is a major threat to established Brand names </li></ul>

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