Extension strategies are employed by companies in the international, global, and transnational stages of development. The critical difference is one of execution and mind-set. In an international company, for example, the extension strategy reflects an ethnocentric orientation and the assumption that all markets are alike. A global company such as Gillette does not fall victim to such assumptions; the company’s geocentric orientation allows it to thoroughly understand its markets and consciously take advantage of similarities in world markets. Likewise, a multinational company utilizes the adaptation strategy because of its polycentric orientation and the assumptionthat all markets are different. By contrast, the geocentric orientation of managers and executives in a global company has sensitized them to actual, rather than assumed, differences between markets.Strategy 1: common for B2BStrategy 2: low-cost because the product is unchanged, communication is adaptedStrategy 3: Cadillac wants to sell 20,000 autos outside the United States by 2010; will adapt to local market requirementsStrategy 4: Combines local market conditions recognized in Strategies 2 and 3
3 elements of the product or service Standardisation The core product Adaptation benefit or service Image Perceived Benefits value Performance Quality Brand name Features Attributes Design Packaging Size and colour variants After-sales service Marketing Guarantees support services InstallationAdaptation Delivery
Fundamental Questions To what extent are our products suitable for international markets? If we must change the product, what should these changes be?
International product life cycle Sales Domestic Market market Market A B Market C Market D Time
International product strategies(Van Mesdag) Sell What You have Got (SWYG) Sell What people Actually Buy (SWAB) Sell the same thing globally, disregarding national frontiers (GLOB)
Global Product Strategies Extension—offering product virtually unchanged in markets outside of home country Adaptation—changing elements of design, function, and packaging according to needs of different country markets• Invention—developing new products for the world market
Product/communication strategies Product Standard Adapt New Straight Product Extension Standard Adaptation One product, only one message Product Promotion invention Promotion Adaptation Dual Adapt only adaptationSource: Source: adapted from Keegan, 1995.
STRATEGIC ALTERNATIVES AVAILABLE One product, One message worldwide Product Extension-Communications Adaptation Product Adaptation-Communications Extension Dual Adaptation Product Invention
Standardized product with same communications strategy across the globe. i.e Product Extension This strategy is Cost effective Allows for greater economies of scale Rarely used for consumer type products except soft drink and some luxury type goods Used mainly for industrial type products
2.Product Extension-Communications Adaptation Use conditions are similar or identical but the product fulfills a different need or serves a different function. Cost effective because communications adaptation is less expensive than the tailoring product to a local market. Can be used for consumer type products E.g Motorcycles & Bicycles Serve the purpose of recreation in U.S but provide basic transportation in many foreign countries.
3.Product Adaptation-Communications Extension Changes made to the product, same communications strategy across the globe To extend without changing the basic communication strategy developed for home market. Assumes that the product will serve the same function in foreign markets under different use conditions. Product formulations are changed without consumers knowing it Electrical Appliances, Detergents
4. Dual Adaptation - Changes made to the product, changes made to communications strategy When there is difference in environmental conditions of use and in the function which a product serves Combination of marketing conditions of strategies 2and 3.
*Kellogg’s ‘dual adaptation’ for Indian market
5. Invention - Usually redesigning of an original product at a lower level of complexity. Recognizes the socio-cultural and economic differences from country to country Leads to more purchases as a result of the reinvention of the product
Standardization versus Adaptation Global Standardization: standardization of products across markets and standardization of the marketing mix worldwide Addresses needs of global consumers (homogeneous consumer groups sharing similar interests and product/ brand preferences) Allows for global branding – using the same brand name, logo, image, and positioning everywhere in the world
Standardization versus Adaptation, Mandatory Adaptation: Adapting products to local requirements so that they can legally and physically operate in the respective countries – for example: Left-hand driving in the United Kingdom Local Non-Mandatory Adaptation: Adapting a product to better meet the needs of the local market, or developing new brands for individual local markets, even though such adaptation is not required
Factors encouraging standardisation Economies of scale production R&D Marketing Reduced inventory costs Reduced component costs Cost of investment Reducing trade barriers Where ‘made in’/‘designed by’ is important
Reasons for adaptation Cultural factors Usage factors Differing consumer purchasing power Level of local technical skills Local taxation policies Effect of different market entry methods Legal standards Tariffs Technical Specifications Climate
How to Choose a Strategy Two errors that management makes in choosing a strategy NIH (not invented here) syndrome means managers ignore the advancements of subsidiaries overseas Managers impose policies upon subsidiaries because they assume what is right for customers in one market is right in every market 10-18
Failure of New Product Development• Tariff and non-tariff barriers• Subsidies given to local competitors• Cultural insensitivity• Poor planning• Lack of unique selling proposition• Product deficiencies• Top management approach