CHAPTER 5

PRODUCT DECISION

VU THN
ngocvth@[Link]
 1. Product policy
2. Standardization vs adaptation
Content
3. Packaging
4. 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
 1 Product policy
(1) product planning and development
(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 Dimensions of a product

1. The physical product core;

2. The product package;
3. Auxiliary 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
1.2.1 New product

• export domestic products (is easy to

implement, at least initially, and may
represent a relatively low-cost approach)
Forms of product development:
• acquire a firm (has products for which there
1. new product development or addition; are potential or existing overseas markets)
2. changes in existing products;
3. finding new uses for existing products; • copying products (developed successfully by
4. product elimination. 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

[Link] Location of R&D

Home market firms Host market firms Worldwide market firms

Important criteria 1. Proximity to operations 1. Proximity to markets 1. Availability of pockets of skills

for considering an 2. Availability of universities 2. Concept of overseas in particular technical areas
overseas R&D operations as full-scale 2. Access to foreign scientific and
location business entities technical communities
3. Availability of adequate
infrastructure and universities

Important criteria 1. Products sold in the developing 1. Increasing costs of doing 1. Economics of centralized R&D
for not considering countries are not sophisticated R&D overseas 2. Difficulties in assembling R&D
overseas R&D 2. Lack of qualified scientists and 2. Economics of centralized teams
locations engineers R&D
3. Economics of centralized R&D

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”
[Link] Screening ideas

Conjunctive model uses all evaluative criteria. The product, in order to proceed for further consideration, must
meet or exceed a minimum value for each of the criteria used.

Disjunctive model based on accepting a product that exceeds specified levels on one or a few key criteria,
regardless of its score on the others.

Lexicographic model based on ranking the evaluation criteria in terms of their perceived importance. New
product ideas are compared criterion by criterion until there is a superior idea. This may occur after the first
criterion or after many criteria.

Linear compensatory model assigns differential importance weights to each criterion and then determines a
summated evaluation score for each product. Further analysis is conducted either on all products exceeding a
minimum score or the one product scoring highest. This is perhaps the most widely used approach.
[Link] Innovation and diffusion of products

The center-for-global The local-for-local The local-for-global The global-for-global

innovation process innovation process innovation process innovation process

The parent company/ - created and - emerge as local-for- - created by pooling

a central facility (the implemented by a local innovations, are the resources and
corporate R&D national subsidiary subsequently found to capabilities of many
laboratory) – creates entirely at the local be applicable in different
a new product for level multiple locations, and organizational units to
worldwide use - all tasks are all are diffused to other an emerging global
carried out within the organizational units opportunity.
subsidiary within the multinational
corporation
[Link] Quality management

ISO 9000
● minimize harmful effects on the
● the customer’s quality
environment caused by its activities,
requirements;
● applicable regulatory
● continual improvement of its
requirements, while aiming to
environmental performance.
● enhance customer satisfaction;
● achieve continual improvement of
its performance in pursuit of these
objectives.
ISO 14000
1.2.2 Changes in existing products

Extend PLC by making modifications (standardization or adaptation)

1.2.3 Finding new uses for existing products

● Is there a related application (e.g., an insecticide for ants may be used for bees in Latin
America)?
● A product sold to women may be sold to men and vice versa (such as deodorants).
● Can the product be used differently when used with another product (e.g., an after-shave lotion
used as a pre-shave lotion with an electric razor)?
● Consumer products may have an industrial market and vice versa (such as garden tractors).
● Does the nature of attributes and/or ingredients suggest new uses (e.g., the light weight and
strength of balsa wood)?
1.2.4 Product elimination

- deleting ‘old’ or weak products

(disproportionately greater or lesser
percentage of sales and profits)
- when to withdraw it from foreign
markets and, further, when to
eliminate it from the company’s
product line.
- the set of strategies for the
synchronization of old product
deletion with entry of a new product
is known as product phasing
The phasing continuity matrix
1.3 Product portfolio

BCG portfolio matrix

 2. Standardization vs adaptation

Reasons for standardization or adaptation (research produced)

Market requirements and product characteristics
 Example
Product Adaptation

Sony TV Voltage, broadcast standard

McDonald’s Menu, décor of restaurant
Levi jeans Size mix, fabric, cut
Coca-Cola Brand name (China), package
KFC Menu
 3. 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.
 4 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
 4.1 Country of Origin Effect
• 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 Private label?
• determining how many brands should Single market, multiple brands?
be in the company’s product line. Multiple markets & local brands?
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.
 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)

1. Amazon — brand value: $683,852 million

2. Apple — brand value: $611,997 million
TOP GLOBAL BRANDS 2021
3. Google — brand value: $457,998 million
4. Microsoft — brand value: $410,271 million
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
• Economies of scale –
“Most global brands have been invented by development costs over large
Western companies for Western consumers.
volumes
Emerging-market consumers are very
different.” (Silvester, 2011) • 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

1
These values can be embodied in products or
corporations or individuals

2
Brands must hold same values in whichever markets
they are available

3
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 - Can be applied to all or part of

decisions to be made the product mix e.g. global brand
- Standardisation v adaptation a and adapted product
major issue in product decisions - Relatively few, but growing
- Continuum rather than 2 number of truly global brands
extremes
 ?
For export packaging and branding considerations, discuss
how language may be significant, particularly to the
multimarket exporters.
THANK YOU