12 Pages, Grade: 2
1. Market environment
2. Product characteristics
The core of a firm’s international operations is a product or service. This can be defined as the complex of tangible and intangible elements that distinguishes it from the other entities in the marketplace (Czinkota, Rinkainen, 1995: 262). Product can be defined as: “it’s a bundle of satisfactions (or utilities) the buyer receives. This includes its form, taste, colour, odour and texture; how it functions in use; the package; the label; the warranty; manufacturer’s and retailer’s servicing; the confidence or prestige enjoyed by the brand; the manufacturer’s reputation; the country of origin; and any other symbolic utility received from the possession or use of the goods” (Cateora, Graham, 1999: 355-356). The success of the firm depends on how it’s possible to differentiate from other competitors. But the key factors of success can vary from one country to another country. Therefore for the firm it is important to choose the right strategy between the product adaptation and product standardisation. Product adaptation means that the firm adapts the product to the local markets. It is the process of modifying products for different countries and regions or designing new products for foreign markets. Product standardisation means that the firm sells and advertises a standardized product in the international context. But which strategy is the better one? In the following the author wants to explain the different advantages and disadvantages and work out, which strategy is the best for certain situations because it depends on the situation which strategy is better.
As mentioned above the products are the factor which is introduced into a new market. There are different types of products regarding the target group (Global Agricultural Marketing Management, chapter 8):
1) local products - seen as only suitable in one single market.
2) international products - seen as having extension potential into other markets.
3) multinational products - products adapted to the perceived unique characteristics of national markets.
4) global products - products designed to meet global segments.
There are also different ways to introduce new products into a new market. They will be mentioned in the following but not further explained because it would extend the scope of this paper too much. The different ways are: Exporting, Foreign Licensing, Joint venture, Wholly owned subsidiary, Turnkey, Management contracts (Kahler, Kramer, 1977: 74).
In general the factors encouraging standardisation are (Global Agricultural Marketing Management, chapter 8):
1)economies of scale in production, marketing and R&D (reduced stock and development costs)
2)consumer mobility - the more consumers travel the more is the demand
4)image, for example "Japanese", "made in".
The most important advantage of standardisation is the cost saving in compartments like Research and Development, marketing and production. In the compartment of Research and Development the forces and financial resources can be focused on one product without having the problem to adapt the product to the different cultures. So this department is able to work more effectively without having really high costs. In the marketing department it is the same: the focus is on one product and the work can be aligned on one campaign for the product. The marketing approaches like branding, packaging, etc. are standardized and make the market more unified. In the production there is a high cost saving because of the use of the same technology, same infrastructures. The firm must not adapt the equipment to local needs because it is selling the same product in other markets. The world is becoming more homogenized and the number of firms which use the strategy of product standardization is increasing, but still the strategy depends on which product is marketed and where they are marketed. Also a main point is that today quality is the most important point and standardising quality could be through the international Quality management tools (e.g. ISO 9000). Today it is easier to standardize quality and to guarantee quality in the international context.
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