WTO & Trade Issues - International Product Policy.pptx

International Product Policy and Planning

An Introduction
• One of the fundamental decisions for successful international marketing relates to product policy
and planning. It can be argued that product decisions are probably the most crucial as the
product is the very epitome of marketing planning.
• Errors in product decisions can include the imposition of a global standardised product where it
is inapplicable and the attempt to sell products into a country without cognisance of cultural
adaptation needs.
• An international marketer has the option of exporting the home market product to foreign
markets, adapting the home market product to meet the needs of the foreign customers more
closely, or developing new products to meet the specific needs of the customers in foreign
markets.
• The selection process needs a careful analysis of the foreign market needs, appraisal of the
market opportunity and detailed product planning.
• Many product decisions lie between the two extremes i.e. whether to sell globally
standardised or adapted products.
Source: Secondary Sources on Google

What is a Product?
• Put simply, a product is a bundle of utilities. To be more concise, a product can be defined as a
collection of physical, service and symbolic attributes which yield satisfaction or benefits to a
user or buyer.
• A product is a combination of physical attributes say, size and shape, and subjective attributes
say image or quality. A customer purchases on both dimensions. It is increasingly important that
the product fulfils the image which the producer is wishing to project.
• A product's physical properties are characterised the same the world over. They can be
convenience or shopping goods or durables and non-durables; however; one can classify
products according to their degree of potential for global marketing:
 Local products - seen as only suitable in one single market.
 International products - seen as having extension potential into other markets.
 Multinational products - products adapted to the perceived unique characteristics of national
markets.
 Global products - products designed to meet global segments.

INTERNATIONAL PRODUCT LIFE CYCLE
International product life cycle discusses the consumption pattern of the product in many countries.
This concept explains that the products pass through several stages of the product life cycle.
The, product is innovated in country, usually a developed country, to satisfy the needs of the
consumers.
The innovator country wants to exploit the technological breakthrough and start marketing the
products in foreign country.
Gradually foreign country also starts production and becomes efficient in producing those
commodities.
As a result, the innovator country starts losing its export market and finds the import of that
product advantageous. In this way, the innovator country becomes the importer of the products.

• Export strength is evident by innovator country:
Products are normally innovated in the developed countries because they possess the resources
to do so. The firms have the technological know how and sufficient capital to invest on the
research and development activities. The need of adaptation and modification also forces the
production activities to be located near the market to respond quickly to the changes.
The customers are affluent in the developed countries who may prefer to buy the new products.
Thus, the manufactures are attracted to produce the goods in the developed country. The goods
are marketed in the home country.
After meeting the demand of the home country, the manufacturers start exploring foreign
markets and exporting goods to them. This phase exhibits the introduction and growth stage of
the product life cycle.

• Foreign Production Starts:
The importing firms in the middle income country realise the demand potential of the product in
the home market. The manufacturers also become familiar in producing the goods. The growing
demand of the products attracts the attention of many firms. They are tempted to start
production in their country and gradually start exporting to the low income countries. The large
production in the middle income country reduces the export from the innovating country. This
shows the maturity stage of product life cycle where the production activities' start shifting
from innovating country to other countries.
• Foreign production becomes competitive in export market:
The firms in low income country also realise the demand potential in the domestic market. They
start producing the products in their home country by exploiting cheap labour. They gain
expertise in manufacturing the commodity. They become more efficient in producing the goods
due to low cost of production. Gradually they start exporting the goods to other countries. The
export from this country replaces the export base of innovating country, whose export has
been already declining. This exhibits the declining stage of product life cycle for the innovator
country. In this stage, the product gets widely disseminated and other countries start imitating
the product. This is the third phase of product life cycle where the products start becoming
standardized.

INTERNATIONAL PRODUCT LIFE CYCLE (IPLC)
• Import Competition begins:
The producers in the low income importing country gain sufficient experience in producing and
marketing the products. They attain the economies of scale and gradually become more efficient
than the innovator country. At this stage, the innovator country finds the import from this
country advantageous. Hence, the innovator country finally becomes the importer of that
product. In this fourth stage of product life cycle the product becomes completely standardized.
Pattern of International Product Life Cycle:
Innovating Country Stage Other Developed Countries Or
Middle Income Countries
Less Developed Countries
Production Early Imports Late Imports
Exports Production Production
Imports Exports (Large volume declining to
small volume)
Exports (Small volume rising to large
volume)

INTERNATIONAL PRODUCT POLICY
• A firm's product policy reflects its marketing orientation. Following the framework of IPLC, a firm
may begin exporting the products it sells in the domestic market.
• Alternatively, it may recognise the significant differences in customer needs, conditions of
product use, etc., and may plan for exporting different products or product versions to meet the
specific needs of each of its different global market segments. In the latter case, the exporting
firm would thus offer a large product mix.
• The other option available to exporting firms is to develop a new product for the export markets.
This new product may be the result of the firm's own R&D acquisition or joint venture with a
business partner in the host country.
• Interesting examples, here, include Coca-Cola Corporation which having entered Japan in 1958
had added Fanta and Sprite by 1970 and still later introduced fruit drink products, carbonated
orange fruit drinks and also potato chips which were not even sold by the company in its US
market. An International marketer may use one of the following five strategies:

An International marketer may use one of the following five strategies:
• Product communications extension
This strategy is very low cost and merely takes the same product and communication strategy
into other markets. However it can be risky if mis-judgments are made. For example CPC
International believed the US consumer would take to dry soups, which dominate the European
market. It did not work
• Extended product- communications adaptation
If the product basically fits the different needs or segments of a market it may need an
adjustment in marketing communication only. Again this is a low cost strategy, but different
product functions have to be identified and a suitable communications mix developed.
• Product adaptation - communications extension
The product is adapted to fit usage conditions but the communication may stays the same. The
assumption. is that the product will serve the same function in foreign markets under different
usage conditions

An International marketer may use one of the following five strategies:
• Product adaptation - communications adaptation
Both product and communication strategies need attention to fit the peculiar need of the
market.
• Product invention
This need a totally new idea to fit the exclusive conditions of the market. This development costs
may be high, but the advantages are also very high. This choice of strategy depends on the most
appropriate product/market analysis and is a function of the product itself defined in terms of
the function or need it serves, the market defined in terms of the conditions under which the
product is used, the preferences of the potential customers and the ability to buy the product in
question, and the costs of adaptation and manufacture to the company considering these
product- communications approaches.

Standardisation vs Adaptation
• Most product decisions fall in between the spectrum of "standardisation" to "adaptation"
extremes. Changes in design are subject to cultural pressures.
• The more culture-bound the product is, for example food, the more adaptation is necessary.
• In India for example the multinationals like PizzaHut and Mcdonalds catering to Indian tastebuds
have launched Masala Tikka Burgers and Paneer Pizzas. Similarly when Indian companies cater to
the foreign markets, they launch foods which are bland.
• However, the advantages of economies of scale in production and marketing ; savings on
common costs of R&D, product and package design; consumer mobility; and universal image
make a strong case for product standardisation across different export markets.
Let’s Understand Standardisation and Adaptation in detail!!

• Product Standardisation: Product standardization refers to the process of maintaining uniformity
of products and services sold in different markets or in other words setting identical
characteristics for a particular good or a service.
For an example, if a particular company comes up with the decision of standardizing the product
then the product is being manufactured using the same materials, same processes and even sold
under the same name. Nut and bolt industry is an example of industry using standardised
products
• Advantages of Product Standardisation:
 To the Organization:
 Reduction in cost – In the standardization, an identical product is produced using the same
materials and processes etc. So that the materials can be purchased in bulk quantities and
this will lead to have discounts in purchasing. At the same time, this will cause less wastages
in material usage as well and reduces the cost.
 Production efficiency – When the product that we are currently producing is being
uniformed, the production process becomes efficient due to enabling factors such as mass
production, specialization of labour, automation of the processes of production

• Advantages of Product Standardisation:
 To the Organization:
 Well established and well-strengthened brand – When an identical product is being available
in different markets it helps the organization to establish and strengthen the brand.
 Increase in production – When the differences among products are reduced the production
of the company can be easily increased.
 To the Consumers:
 Customers are enabled to choose the exact product that they want – When the differences
among the products are reduced then the customers are not required to confuse as to which
product or service to buy. So that they can choose the exact product without any confusion.
 Can obtain a high-quality product – When the products are standardized consumers can
obtain relatively a high-quality product.
 Better living standards – When the consumers are capable of consuming high-quality
products at lower costs their living standards gradually increases.

• Disadvantages of Product Standardisation:
 Stagnation – When the organization keeps producing a uniform product for a long time then it
will cause the organization to remain in the same place in the industry. This is not good for an
organization since the rivals can take advantages of this. So while trying to standardize the
products they need to make changes to the products as the environment changes.
 Communication failures – As the time goes the demand of the consumers can be changed and
in such situations, organizations will still try to maintain the consistency without looking at the
changes of demand of the consumers. This will make bad consequences on the organizations’
survival.
 Less choices to consumers – Since the product is a standardized one, the consumers do not
have a wide range of choices.

• Product Adaptation: This is a strategy mostly used by Multi-National Companies(MNCs). This
product adaption refers to the process of modifying the existing products in order to reach to
each market. There are several product adaption strategies that an entity can use such as
product, target market, package and design, ingredients, language, culture, religion etc.
That means in terms of target markets, packaging and designs, ingredients, languages, culture
and etc the organizations need to come up with different ways so that they can cater different
markets in a way where the customer needs and requirements are addressed.
For Example: The way the Red bull product is being sold in China and North America are
different from one another. Because the label of the Red bull which is being sold in North
America consist of red and silver for which the red bull stands for action and the silver
background stands for the youth spirituality and spirit. Whereas in China the label is in red and
gold for which the red colour stands for good luck and the gold colour stands for wealth and
happiness.

• Product Adaptation
Another Example is Dove shampoo. To Islamic countries they use a girl with a scarf and to the
other countries which are not Islamic, a girl without a scarf is used.

• Product Adaptation:
There are mainly two types of product adaption methods.
 Mandatory Adaption – Adapting the products to a particular country’s local requirements so
that the legal and physical operations can be done by the company in the respective country.
Eg: left hand driving in the UK
 Local non mandatory adaption – Adapting a product with the intention of giving the consumers
the chance to consume a better quality product which is not a legal requirement.
• Conclusion: Both standardization and the product adaption has its own advantages and
disadvantages. As managers when choosing a strategy we always need to make sure to choose a
strategy in a way where the negative effects are minimized and the positives are maximized.

New Product Development (NPD)
• New product is defined as a product for which the company needs a new marketing, and in
which the substantial changes are conveyed but excludes any changes that may require simple
promotions.
• To make NPD effective, there should be a coordination between the manufacturing, engineering,
research and development (R&D), marketing, finance and purchasing departments.
• Marketing department first has to make an assessment about new product, and then a cross-
functional team created for the new product has to come into the scene for development of new
product

New Product Development (NPD) STAGES

PD completes in eight stages. At the end of each stage, business should make a decision, continue
to the next stage, leave to develop products or look for extra information
Stage 1: Generation of new product ideas
To initiate a new product development, first, there has to be an idea beforehand to create it. A lot
of ideas are generated till the business finds the most suitable ones. Businesses use internal sources
like R&D department, external sources like customers and competitors and other sources like
seminars, universities, investors, etc. to generate ideas for new product development. It was shown
in a survey including 750 interviews of CEOs in global businesses that 41% of new product ideas
were generated by employees, 36% of ideas were generated by customers and only 14% of ideas
were generated by R&D department.

Stage 2: Screening and evaluation of ideas
At this stage, all generated ideas in Stage 1 are screened and evaluated to limit ideas to a
manageable number including most useful ideas in order to ease new product development process
in later stages and reduce costs and time spent for not useful ideas.
Firstly, all ideas are screened to distinguish more useful ideas from less useful ones.
Secondly, three questions that are involved in new product screening framework created by a
marketing expert are applied to selected ideas. These questions are defined in a sum as R-W-W
(‘real, win, worth doing’), and business must give all these questions ‘yes’ answers:
 Is it real? Is there a need that will force customers to buy it?
 Can we win? Does it provide a considerable benefit for the business? Are there enough
resources to make new product successful?
 Is it worth doing? Is this product compatible with the business’s growth strategy?

Stage 3: Concept development and testing
After the most useful product ideas that are selected at Stage 2, product concepts will be
developed. The selected product ideas will be presented in a detailed and meaningful way as
product concepts.
Then, concept testing will be applied to the developed product concepts. At this test, the thoughts
of selected customer groups about new product concepts will be taken, and the product concept
that received the best score will be selected as a new product to be developed.
Stage 4: Marketing strategy
At this stage, a marketing strategy will be created for the selected concept. Marketing strategy is
created in three steps. These steps are: 1) Identify which market will new product concept be sold,
how much profit is targeted from new product concept and what are its planned value proposition,
sales and market share for the first few years. 2) Identify the price new product concept will be sold,
how it will be distributed in the market and what will marketing budget be for the first year. 3)
Identify how much new product concept will be sold in the long term, how much profit is targeted
from long-term sale and what will be long-term marketing mix strategy

Stage 5: Business strategy
Business strategy is created in two steps:
The first step is projection of new product concept sales. Sales can be projected by market research
and review of similar products’ sale numbers in the past. Then, business calculates risk by
estimating minimum and maximum sales. The second one is projection of cost and profit. All costs
involved in new product development such as investment, operation, marketing, R&D costs and
profits from sales of new product are estimated at this stage. Calculated numbers will indicate
financial attractiveness of new product.
If these projections are compatible with the business’s objectives, it will be moved to the next
stage.
Stage 6: Product development
A sample or samples of new product will be created by the R&D department of the business. Then,
samples will be tested to assess new product concept whether it is attractive for customers; it can
be produced at expected cost and time. Several tests are made to samples to ensure the safety,
attractiveness and effectiveness of new product concept; therefore, test process may take a while
to choose the most suitable sample. Businesses either do tests themselves or get a service from
another business.

Stage 7: Test marketing
At this stage, tests will be made to identify how marketing of new product concept must be
conducted for the best results before enduring costs for unsuitable marketing strategies. All
marketing elements such as new product concept’s target market, position in the market,
advertisement, distribution, packaging, costs, etc.
Marketing test provides businesses a suitable marketing strategy for new product concept to be
commercialized at the next stage. Passing marketing test and going to commercialization directly
may make business face with more than expected costs till the level of exceeding profit. Therefore,
it is crucial for the businesses to conduct marketing test before going for commercialization at the
next stage.
Stage 8: Commercialization
The first thing to be done at this stage is determining the time when new product concept will be
commercialized or introduced to the market. Then, at in which scale new product concept will be
introduced to the market, at a small scale such as a city, medium scale such as a region, or at a big
scale such as the national market, or the international market. Usually, most businesses prefer to
introduce new products into the market at small or medium scales and expand the market in the
process as introduction of new product at a big scale requires more capital, confidence and capacity
which only few businesses have. Source: Secondary Sources on Google

Product Mix
Product mix, also known as product assortment or product portfolio, refers to the complete set of
products and/or services offered by a firm. A product mix consists of product lines, which are
associated items that consumers tend to use together or think of as similar products or services.
Dimensions of Product Mix:
• Width: Width, also known as breadth, refers to the number of product lines offered by a
company. For example, Kellogg’s product lines consist of: (1) Ready-to-eat cereal, (2) Pastries
and breakfast snacks, (3) Crackers and cookies, and (4) Frozen/Organic/Natural goods
• Length: The product mix length is the total number of products or items in your company's
product mix. For example, EZ Tool has two product lines, hammers and wrenches. In the
hammer product line are claw hammers, ball peen hammers, sledge hammers, roofing
hammers and mallet hammers. The wrench line contains Allen wrenches, pipe wrenches,
ratchet wrenches, combination wrenches and adjustable wrenches
• Depth: Depth of a product mix pertains to the total number of variations for each product.
Variations can include size, flavour and any other distinguishing characteristic.

Product Mix
Product Mix Example:

International Market Segmentation
Market segmentation is a marketing
strategy which involves separating a wide
target market into subsets of customers,
enterprises, or nations who have, or are
perceived to have, common requirements,
choices, and priorities, and then designing
and executing approaches to target them.
Market segmentation approaches are
basically used to identify the target clients,
and provide assisting data for marketing
plan components like positioning to get
certain marketing plan objectives.

The most common forms of market segmentation practices are as follows −
• Geographic Segmentation:
Segmentation according to geographic criterion that is nations, states, regions, countries, cities,
neighbour hoods, or postal codes. The geo-cluster strategy blends demographic information
with geographic data to discover a more precise or specific profile. For example, in rainy areas
dealers can easily sell raincoats, umbrellas and gumboots. In winter regions, one can sell warm
clothing.
A small business product store focuses on customers from the local neighbour hood, while a
larger departmental store focuses its marketing towards different localities in a larger city or
region. They neglect customers in other continents. This segmentation is very essential and is
marked as the initial step to international marketing, followed by demographic and
psychographic segmentation.

• Demographic Segmentation:
Segmentation on the basis of demography relies on variables like age, gender, occupation and
education level or according to perceived advantages which an item or service may provide.
An alternative of this strategy is called firmographic or character based segmentation. This
segmentation is widely used in business to business market. It’s estimated that 81% of business
to business dealers use this segmentation.
According to firmographic or character based segmentation, the target market is segmented
based on characteristics like size of the firm in terms of revenue or number of employees, sector
of business or location like place, country and region.
• Behavioural Segmentation:
This divides the market into groups based on their knowledge, attitudes, uses and responses to
the product. Many merchants assume that behaviour variables are the best beginning point for
building market segments.

• Psychographic Segmentation:
Psychographic segmentation calls for the division of market into segments based upon different
personality traits, values, attitudes, interests, and lifestyles of consumers. Psychographics uses
people’s lifestyle, their activities, interests as well as opinions to define a market segment.
Mass media has a dominating impact and effect on psychographic segmentation. To the
products promoted through mass media can be high engagement items or an item of high-end
luxury and thus, influences purchase decisions
• Occasional Segmentation:
Occasion segmentation is dividing the market into segments on the basis of the different
occasions when the buyers plan to buy the product or actually buy the product or use the
product. Some products are specifically meant for a particular time or day or event. Thus,
occasion segmentation helps identify the customers’ various reasons to buy a particular product
for a particular and thus boosts the sale of the product.

International Marketing Plan
Developing an International Marketing Plan:
• Planning involves where the organisation would like to be and how to get there, which involves
goal setting and strategy determination. As already pointed out earlier, the marketing plan must
be developed at two levels i.e. at the country level and the corporation level
• At the country level the marketing plan resembles any domestic marketing plan in the sense
that it lays down the strengths, weaknesses of the organisation and opportunities and threats
faced by it
• The international marketing plan is more than a mere integration of the country plans, for it
seeks to direct and co-ordinate the activities of the corporation on a global basis and at country
levels. This involves a number of variables viz:
 Knowledge of the market
 Knowledge of the product
 Knowledge of the marketing systems

Domestic vs International Planning:
Domestic Planning International Planning
Single language (generally) and Nationality Multilingual/multinational/multicultural
Factors
Relatively homogeneous market Fragmented and diverse markets
Data available, usually accurate and collection easy Data collection a large task requiring significantly higher
budgets and personnel allocation
Political Factors relatively unimportant Political Factors frequently vital
Relatively stable business environment Multiple environments, many of which are highly
unstable (but may be highly profitable)
Uniform financial climate Variety of financial climates ranging from conservative to
wildly inflationary
Single currency Currencies differing in stability and real value
Business “rules of the game” mature and understood Rules diverse, changeable and unclear
Management generally accustomed to sharing
responsibilities and using financial controls
Management frequently unautonomous and unfamiliar
with budgets and control

Framework for International Marketing Planning:
Planning in the international context is a more difficult process, partly because there are many,
unknowns in this case. Any marketing plan consists of:
• Diagnosis of the situation
• Identification of corporate strengths and weaknesses as well as environmental opportunities,
and threats
• Definition of the objectives
• Forecasted estimates of sales, costs, profits
• Designing an appropriate marketing program base:' on objectives and estimates
• Deciding on the relevant appropriations for the plan

Strategic planning in the international marketing context comprises following decision areas:
• The commitment decision: Considering the resource position of the firm and its home market
situation, does the international market offer an attractive opportunity worth striving for?
• Area of Operation: Which country/countries present the most attractive alternative(s) as
potential target markets?
• Entry Mode and Operations Decision: What could be the most effective strategy for entering the
international markets and conducting the marketing operations?
• Marketing organisation decision : What is the best possible organisational arrangement of
facilities and personnel to enable the firm to have local flexibility and corporate control?
• Marketing Mix decision: Which possible combination of the marketing mix elements would be
most suitable for the given foreign market environment?

Marketing Plan Budget
How to Develop a Marketing Plan Budget
• Create a list of the different segments of your marketing efforts. Include research, testing,
creative production, communications and tracking
• Estimate the costs involved in gathering market research. Market research includes efforts such
as developing a customer profile and examining your competitors. Include administering surveys,
buying research studies and hiring a consultant
• Estimate the costs of testing different marketing strategies. Include product giveaways, focus
groups, creating different versions of your product, selling new items in limited locations and
follow-up surveys
• Estimate the costs of a communications campaign. Include the costs of creative design for
packaging, ads, websites and other collateral materials. Calculate the costs for your desired
media buys, such as print ads, website banners and TV and radio commercials. Include expenses
for direct mail, trade shows, public relations, contests, promotions and the cost of building and
maintaining a website

Marketing Plan Budget
How to Develop a Marketing Plan Budget
• Estimate the costs of tracking and monitoring your communications efforts. This might include
the purchase of a website statistics package, visiting retailers who sell your product or
conducting customer mail or telephone surveys.
• Add up the total estimated costs. Determine whether you can afford the total price of your
marketing plan. If not, review each category to see where you can cut back.
• Create a spending formula that ties your marketing budget to a percentage of sales. If your
marketing plan is working, then the more you sell with it, the more you should consider
spending on your marketing efforts. If your sales drop, a spending plan tied to sales will put in a
place a brake that will alert you to re-examine each aspect of your marketing plan.

International Marketing of Services
Introduction:
A product is an object, a device, a tangible thing; and a service is a deed, a performance, an effort.
This captures the essence of the difference between products and services. Services are a series of
deeds, processes and performances; hence tend to be more intangible, personalised, and custom-
made than products
Services Differentiated from Products:
We can identify four basic characteristics of services, that differentiate them from products:
• Intangibility: The most basic difference between goods and services is intangibility. Services are
performances or actions rather than objects. Therefore, they cannot be seen, felt, tasted, or
touched in the same manner that we can sense tangible goods
• Heterogeneity: It is often impossible to assure homogeneity and consistency in the service
provided by a seller, because services are performances rendered by human beings. Hence no
two services will be precisely alike. The service is performed and delivered by employees
(people), and people may differ in their performance from day to day or every hour to hour

Services Differentiated from Products:
• Simultaneous Production and Consumption: Most goods are produced first, then sold and
consumed while most services are sold first and then produced and consumed simultaneously.
For example, an automobile may be manufactured in Mumbai, shipped to Delhi, sold two
months later, and used over a period of years. However, for travel services, the ticket has to be
bought first and then the travel service has to be availed of.
• Perishability: Perishability refers to the fact that services cannot be saved or stored or resold or
returned. A seat on an airplane or in a restaurant, an hour of a lawyer's time or telephone line
capacity not used cannot be reclaimed and used or resold at a later time. This is in contrast to
goods that can be stored or resold another day, or even returned if the consumer is unhappy

International Marketing of Services Strategies
There are three basic strategies to enter the foreign markets in the services sector:

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