This document discusses developing new products for global markets. It outlines 5 strategic options for introducing products into foreign markets: extension, adaptation, invention, standardization, and global products. It also discusses developing a global product using strategies like global product development and modularity. The document outlines the new product development process and various sources for new product development, including head office, lead markets, subsidiaries, and acquisitions. Finally, it discusses introducing new products to global markets, including concepts testing, test marketing, and determining optimal market entry timing.

1. StudsPlanet
Leading Education consultant in India
www.StudsPlanet.com

2. CHAPTER 11CHAPTER 11
DEVELOPING NEW
PRODUCTS FOR
GLOBAL MARKETS
Group members:
Denise Caesar
Debbie Goodman
Delicia John
Roxanne Risbrooke

3. CHAPTER OUTLINECHAPTER OUTLINE
1. Introducing products
into foreign markets
2. Developing a global
product
3. New product
development processes
for Global markets
4. Introducing new
products to global
markets

4. DEFINITIONSDEFINITIONS
PRODUCTS – Anything that can be offered to
a market for attention, acquisition, use or
consumption that might satisfy a want or
need. It includes physical objects, services,
places, organizations, ideas and people.
GLOBAL MARKETING - A total
commitment to international
marketing, in which a company applies
its assets, experience and products to
develop and maintain
marketing strategies on a global scale.

5. What are new products?What are new products?
New product line
Addition to product line
Repositioning to new market segments
Improvements/revisions
Cost reductions
Source: Booz, Allen & Hamilton

6. 1. INTRODUCING PRODUCTS INTO
FOREIGN MARKETS
STRATEGIC OPTIONS
1. EXTENSION STRATEGY –
Same approach as home market
2. ADAPTATION STRATEGY -
Makes changes to fit new market requirements
3. INVENTION STRATEGY -
Entirely new approach is developed for
the new market

7. STRATEGIC OPTIONS
4. STANDARDIZATON –
Same product, all markets
5. GLOBAL PRODUCTS -
Only some aspects of the product is
standardized

8. Product Strategy Communications Strategy Highlight
1. Extension Extension Standardized product with same
communications strategy across the
globe.
- 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
OPTION 1.
PRODUCT EXTENSION – COMMUNICATION EXTENSION

9. Product Strategy Communications Strategy Highlight
1. Extension Adaptation Standardized product with different
communications strategies across the
globe.
- Cost effective because
communications adaptation is
less expensive than the tailoring
product to a local market.
- Can be used for consumer type
products eg. Bicycles
OPTION 2.
PRODUCT EXTENSION – COMMUNICATION ADAPTATION

10. Product Strategy Communications Strategy Highlight
1. Adaptation Extension Changes made to the product, same
communications strategy across the
globe.
- Product formulations are changed
without consumers knowing it. E.g.
detergents
- Entails research, development
expenses and tooling costs.
- Do not allow for economies of scale
to the extent possible under an product
extension strategy
- savings can be realized from the
creation of a single communications
strategy
OPTION 3.
PRODUCT ADAPTATION - COMMUNICATION EXTENSION

11. Product Strategy Communications Strategy Highlight
1. Adaptation Adaptation Dual adaptation:
Changes made to the product, changes
made to communications strategy
- Recognizes the socio-cultural
differences from country to country
-To make this option profitable, the
foreign market or markets need to be
of sufficient volume
- Calls for extensive research and
development expenses and tooling
costs
OPTION 4.
PRODUCT ADAPTATION - COMMUNICATION ADAPTATION

12. Product Strategy Communications Strategy Highlight
1. Invention Develop new communications 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
OPTION 5.
PRODUCT INVENTION

13. STANDARDIZATION VS ADAPTATIONSTANDARDIZATION VS ADAPTATION
Factors encouraging product standardization:
Economies of Scale in:
Production
Marketing/communications
Research & Development
Stock Holding

14. STANDARDIZATION VS ADAPTATION CONTINUEDSTANDARDIZATION VS ADAPTATION CONTINUED
 Easier management and control i.e.
familiarity
 Homogeneity of markets, in other words
markets available without adaptation e.g.
denim jeans
 Cultural insensitivity (except industrial and
agricultural products)
 Where “made in” image is important to a
product’s perceived value e.g. France for
perfumes, Sheffield for stainless steel

15. STANDARDIZATION VS ADAPTATION CONTINUEDSTANDARDIZATION VS ADAPTATION CONTINUED
 For a firm selling a small proportion of its output
overseas, the incremental costs may exceed the
incremental sales value
 Consumer mobility for travellers/tourists for
example standardization is expected in certain
products:
 Camera film
 Hotel Chains

16. STANDARDIZATION VS ADAPTATION CONTINUEDSTANDARDIZATION VS ADAPTATION CONTINUED
Factors encouraging adaptation/modification
Mandatory Modification:
 Normally involves either adaptation to comply
with government requirements or
 Unavoidable technical changes
 Example: Car manufacturer

17. STANDARDIZATION VS ADAPTATION CONTINUEDSTANDARDIZATION VS ADAPTATION CONTINUED
Legal requirements can include:
 Specified exhaust emission levels (HSE Laws &
strict emission standards)
 Local components (economic law)
 Technical requirements such as:
 Modification of heating/cooling systems for
different climates
 Engine modification to use locally available fuels

18. Discretionary Modifications:Discretionary Modifications:
 This is called for to make the product more appealing in different
markets. It is as a result of differing customer needs, preferences
and tastes that market research, customer feedback among others
may reveal.
 Levels of customer purchasing power – low incomes makes
cheaper version of product more appealing in some less developed
countries
 Levels of education and technical sophistication – ease of use may
be a crucial factor in decision-making
 Standards of maintenance/repair facilities – simpler more robust
versions may be needed

19. 2. DEVELOPING A GLOBAL2. DEVELOPING A GLOBAL
PRODUCTPRODUCT
In order to remain competitive, firms
often have to reduce their costs. Usually
the production of standardize products
provides cost advantage, however this
strategy is not as common. Many firms
now employ new strategies:
1. Global Product Development strategy
2. Modularity

20. A portion of the final product is
standardized. However, the design retains
some flexibility so that the end product
can be tailored to the needs of individual
markets.
- This represents a move to standardize as
much as possible those areas involving
common components or parts.
The Global Product Development Strategy

21. Modularity
This process involved the development of
standard modules that can easily be connected
with other standard modules to increase the
variety of products.
E.g General Motors has established a modular product
architecture for all its global automobile products. Future GM
cars will be designed using combination of components from 70
different body modules and about a hundred major mechanical
components (e.g. Engines, power trains, and suspension
systems)
The Global Product Development
Strategy

22. 3. NEW PRODUCT DEVELOPMENT3. NEW PRODUCT DEVELOPMENT
PROCESSES FOR GLOBAL MARKETSPROCESSES FOR GLOBAL MARKETS
Developing new products or services for global
markets poses unique challenges.
To combat these challenges, the international
firm can assign development responsibilities to
any one of its international subsidiaries. The
success however will depend on how well the
firm marshals its resources on a global scale to
develop new products for foreign markets.

23. Steps in New ProductSteps in New Product
Development processDevelopment process
Idea Generation
Idea Screening
Concept Development & Testing
Marketing Strategy Development
Business Analysis
Small Batch Prototype Development
Product Development & Testing
Test Marketing
Commercialization / Launch

24. Sources of New ProductSources of New Product
DevelopmentDevelopment
1. Head office
2. Lead markets
3. Subsidiaries
4. Purchasing research and development
5. Importing new product technology
6. Acquisitions
7. Joint ventures
8. Alliances
9. Consortia

25. Sources of New Product Development #1Sources of New Product Development #1
The organization of Head Office-SponsoredThe organization of Head Office-Sponsored
Research and DevelopmentResearch and Development
Research and development for the introduction of
new products is originally conducted in
centralized facilities in the firm’s domestic
market.
The largest portion of research and development
monies spent by international firms goes to
support efforts in domestically located facilities.
Initial introduction at home is followed by a
phase-in introduction to the company’s foreign
markets.

26. Reasons for Head Office-sponsored Approach:
1. R&D is centralized so there is an integrative
strategy with regards to product development.
To achieve this there must be frequent contacts
and interfacing between R&D facilities and the
company’s main office.
2. To minimize duplication
3. For the effective and efficient utilization of
scarce research funds
4. To capitalize on the firm’s experience in their
domestic market.
The organization of Head Office-
Sponsored Research and Development

27. Sources of New Product Development #2
International Leads Markets and Research and
Development
 The lead market is a market whose level of
development exceeds that of the market in other
countries worldwide and whose developments tend to
set a pattern for other countries.
 Lead markets are not restricted to technological
developments as embodied in product hardware.
 Lead market advantage based on superior design,
advanced features, function and quality, production
processes, patterns in consumer demand, methods
of marketing. (Any phase of the operation is subject
to lead market influence)

28. Sources of New Product Development #3Sources of New Product Development #3
The Role of Foreign Subsidiaries in ResearchThe Role of Foreign Subsidiaries in Research
DevelopmentDevelopment
Subsidiaries
o Subsidiaries may assume R&D function if products require
some adaptation to a local market
o Foreign subsidiaries of international firms rarely play an active
role in the R&D unless they have manufacturing responsibilities
and capabilities
o Sales subsidiaries provide central organization with feedback
on product adjustments or adaptation, but generally their
participation does not go beyond the generation of ideas.
o A subsidiary located in a lead market is in a better position to
observe developments and to accommodate new demands and
can therefore act as an effective “listening post”

29. Roles of involvement for the subsidiary:Roles of involvement for the subsidiary:
Strategic leader role:
 With responsibility for developing a new range of products to be
used by the entire company. This role will be handled by a highly
competent subsidiary in a market of strategic importance.
Contributor:
 This role would be assumed by a subsidiary in a distinct area and
the subsidiary will adapt some products in smaller though important
markets
Implementer:
These are smaller subsidiaries located in less strategic markets that
act as implementers of the overall strategy without making a major
contribution to either technology or strategy

30. Sources of New Product Development #4Sources of New Product Development #4
Purchasing Research and Development fromPurchasing Research and Development from
Foreign CountriesForeign Countries
A company may acquire material or information
from independent outside sources that have
acquired lead market status.
How?
 Literature published in lead markets
 Regular visits to foreign countries
 Trade fairs
 Management contact with lead markets
These are admittedly ad hoc measure though.

31. Sources of New Product Development #5Sources of New Product Development #5
Importing as a Source of New ProductsImporting as a Source of New Products
Some companies import finished products
directly from a foreign firm to supplement
their product lines.
This is usually done in areas that do not
represent the core of the firm’s business and
technology, and is used to extend the product
offering.

32. Sources of New Product Development #6Sources of New Product Development #6
Acquisition as a Route to New ProductsAcquisition as a Route to New Products
Advantages:
Efficient, cost-effective way to create a new
product instead of trying to conceptualize, R&D
and launch new products from the ground up.
Overcomes the process of acquiring technological
experience
Establish supplier relationships
Circumvents need for large Advertising &
Promotional Budgets to gain visibility & brand
recognition

33. Sources of New Product Development #7Sources of New Product Development #7
Joint Ventures for New Product DevelopmentJoint Ventures for New Product Development
Usually pursued with technologically advanced
foreign company usually at lower costs
Good way to pursue an opportunity that is too
complex, uneconomical or risky for a single
organization to pursue alone
Provide entry into desirable foreign markets
when access is restricted by government
Used when opportunities in new industry require
broader range of competencies that any one
company can marshal

34. Sources of New Product Development #8Sources of New Product Development #8
Alliances for New Product DevelopmentAlliances for New Product Development
Companies are using alliances or the Consortium
Approach to share technology and R&D to gain
competitive advantage
Consortium Approach – member firms join in
working relationship without forming a new
entity. On completion of assigned task, member
firms are free to seek other relationships with
different firms.

35. 4. INTRODUCING NEW PRODUCTS TO GLOBAL4. INTRODUCING NEW PRODUCTS TO GLOBAL
MARKETSMARKETS
Once a product has been developed for
commercial introduction, the following decisions
need to be made:
- Test Marketing procedure
- The target country
- The timing or sequence of introduction into foreign
market
These decisions are influenced by sales potential.
Following careful analysis, a list of target countries is
developed, then the company will choose from among
several paths to the actual introduction in the target
country/countries.

36. Determining Introduction in target countriesDetermining Introduction in target countries
Concept Test
This involves presenting the product concept to appropriate
target consumers and getting their reactions. The
concepts can be presented symbolically or physically.
However the more the tested concepts resembles the final
product or experience, the more dependable concept
testing is.
In recent times, companies are also using virtual reality to
test product concepts. This entails the use of sensory
devices to stimulate reality.

37. Test MarketingTest Marketing
Test Market
The ultimate way to test a new consumer product is to
put it into full-blown test markets. The company
chooses a few representative cities, and the sales force
tries to sell the trade on carrying the product and giving
it good shelf exposure, full advertising and promotional
strategy, similar to the one use in the home market.
- Simulated Test Marketing
This entails finding 30 to 40 qualified shoppers and
questioning them about brand familiarity and
preference in a specific product category.

38. Test MarketingTest Marketing
- Controlled Test Marketing
In this method, the number of geographic
locations are tested. The product is delivered to
the participating stores and the product is placed
in a strategic position. Sales results will be
measured electronically through scanners at the
checkout.

39. Market-entry timing is critical. A company may
be faced with the challenge of trying to enter a
market with a new product and learns that a
competitor is nearing the end of its development
work. The company faces three choices:
First entry
Parallel entry
Late entry
Timing of New Product Introduction

40. Timing of New Product Introduction continuedTiming of New Product Introduction continued
First Entry
The first firm entering a market usually enjoys
first mover advantages of locking up key
distributors and customers while gaining the
reputation of product leader. If the product is
rushed before to market before it is thoroughly
debugged, the product can acquire a flawed
image.

41. Timing of New Product IntroductionTiming of New Product Introduction
ContinuedContinued
Parallel Entry
The firm might time its entry to coincide with the
competitor’s entry. The market may pay more attention
when two companies are advertising the new product.
Late Entry
The firm might delay its launch until after the competitor
has entered. The competitor will have borne the cost of
educating the market. The competitor’s product may
review faults the late entrant can avoid.

42. Timing of New Product Introduction continuedTiming of New Product Introduction continued
Timing decisions involves additional
considerations
- If the new product replaces an older
product, the company might delay the
introduction until the old product’s stock is
drawn down.
- If the product is highly seasonal, it might
be delayed until the right season arrives.