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EXTEND, ADAPT, CREATE: STRATEGIC ALTERNATIVES IN GLOBAL
MARKETING
(Learning Objective #5)
To capitalize on opportunities outside the home country, company managers must devise and
implement appropriate marketing programs. Depending on organizational objectives and market
needs, a particular program may consist of extension strategies, adaptation strategies, or a
combination of the two.
The following strategies are possibilities:
An extension strategy that calls for offering a product virtually unchanged (i.e.,
“extending” it) in markets outside the home country.
An adaptation strategy involves changing elements of design, function, or packaging in
response to needs or conditions in particular country markets.
Product invention entails developing new products “from the ground up” with the world
market in mind.
Laws and regulations in different countries frequently lead to obligatory product design
adaptations. This may be seen most clearly in Europe, where one impetus for the creation of the
single market was the desire to dismantle regulatory and legal barriers that prevented pan-
European sales of standardized products.
In the food industry, for example, there were 200 legal and regulatory barriers to cross-border
trade within the EU in 10 food categories. Among these were prohibitions or taxes on products
with certain ingredients and different packaging and labeling laws. As these barriers are
dismantled there will be less need to adapt product designs and many companies will be able to
create standardized “Euro-products.”
The extension/adaptation/creation decision is one of the most fundamental issues addressed by a
company's global marketing strategy.
Although it pertains to all elements of the marketing mix, extension/adaptation is of particular
importance in product and communications decisions.
Earlier in the chapter, Table 10-1 displayed product and brand strategic options in matrix form.
Figure 10-3 expands on those options: All aspects of promotion and communication—not just
branding—are considered.
Companies in the international, global, and transnational stages of development all employ
extension strategies. The critical difference is one of execution and mind-set.
In an international company, the extension strategy reflects an ethnocentric orientation and the
assumption that all markets are alike.
A multinational company utilizes the adaptation strategy because of its polycentric orientation
and the assumption that all markets are different.
The geocentric orientation of managers and executives in a global company has sensitized them
to actual, rather than assumed, differences between markets.
Strategy 1: Product-Communication Extension (dual extension)
Many companies employ product-communication extension as a strategy when pursuing
global market opportunities.
Under the right conditions, this is the easiest product marketing strategy; it can be the most
profitable one as well.
Companies pursuing this strategy sell the same product with virtually no adaptation, using the
same advertising and promotional appeals used domestically, in two or more country markets or
segments.
Strategy 2: Product Extension/Communication Adaptation
In some instances, a product or brand can be successfully extended to multiple country markets
with some modifications of the communication strategy.
Research may have revealed that consumer perceptions about one or more aspects of the value
proposition are different from country to country. It may also turn out that a product fills a
different need, appeals to a different segment, or serves a different function in a particular county
or region.
Whatever the reason, extending the product while adapting the marketing communication
program may be the key to market success.
The appeal of the product extension-communication adaptation strategy is it’s relatively low
cost of implementation.
Marketers of premium American bourbon brands such as Wild Turkey have found that images of
Delta blues music, New Orleans, and Route 66 appeal to upscale drinkers outside the United
States. However, images that stress bourbon's rustic, backwoods origins do not appeal to
Americans.
Jägermeister is an example of product transformation: The same physical product ends up
serving a different function or use than that for which it was originally designed or created.
Strategy 3: Product Adaptation-Communication Extension
A third approach to global product planning is to adapt the product to local use or preference
conditions while extending, without minimal change, the basic home-market communication
strategy or brand name.
This third strategy option is known as product adaptation-communication extension.
A new Cadillac model, the BLS, built in Sweden, is 6 inches shorter than the current CTS and a
four cylinder engine is standard.
Kraft’s experience with Oreos in China is an example of changing from a product extension to
product adaption strategy.
Strategy 4: Product-Communication Adaptation (dual adaptation)
A company may also utilize the product-communication adaptation (dual adaptation)
strategy. As the name implies, both the product and one or more promotional elements are
adapted for a particular country or region.
The four alternatives are not mutually exclusive. A company can simultaneously utilize different
product/communication strategies in different parts of the world.
Nike’s “bad boy” image is at odds with ingrained Chinese values, and the price of their shoes
was out of line with average Chinese household incomes, so Nike adapted both their advertising
and pricing programs.
Strategy 5: Innovation
Extension and adaptation strategies are effective approaches to many but
not all global market opportunities.
For example, they do not respond to markets where there is a need but not
the purchasing power to buy either the existing or adapted product.
Global companies are likely to encounter this situation when targeting
consumers in India, China, and other emerging markets.
When potential customers have limited purchasing power, a company may
need to develop an entirely new product designed to address the market
opportunity at a price point that is within the reach of the potential customer.
The converse is also true: Companies in low-income countries that have
achieved local success may have to go beyond mere adaptation by “raising
the bar” and bringing product designs up to world-class standards if they are
to succeed in high-income countries.
Innovation is a demanding but potentially rewarding product strategy for reaching mass markets
in less-developed countries as well as important market segments in industrialized countries.
The winners in global competition are the companies that can develop products offering the most
benefits, which in turn create the greatest value for buyers anywhere in the world.
In some instances, value is not defined in terms of performance, but rather in terms of customer
perception.
How to Choose a Strategy
Most companies seek product-communications strategies that optimize company profits over the
long term.
Which strategy for global markets best achieves this goal? There is no one answer to this
question.
Managers run the risk of committing two types of errors regarding product and communication
decisions.
1. To fall victim to the "not invented here" (NIH) syndrome, ignoring decisions made by
subsidiary or affiliate managers.
2. To impose policies upon all affiliate companies on the assumption that what is right for
customers in the home market must also be right for customers everywhere.
INNOVATION, ENTREPRENEURSHIP, AND THE GLOBAL STARTUP
Elon Musk
Elon Musk is an entrepreneur. He has developed several innovative products and services, created new
brands, and started companies to market his creations. By applying the basic tools and principles of modern
marketing, Musk has achieved remarkable success.
His interest in environmentalism and sustainability led him to cofound Tesla Motors. The Fremont,
California-based company manufactures and markets luxury sedans powered by lithium-ion batteries.
The current $ 118,000 sticker price in China reflects a 25% import duty plus value-added taxes. Beijing has
set a goal of 5 million electric cars on the road by 2020.Sensing an opportunity, Musk plans to build a
factory in China so that Tesla buyers will be eligible for tax credits on domestically produced electric
vehicles.
Musk is building a network of charging stations for Tesla owners. To date, there are 135 Supercharger
stations in the United States, 105 in the United Kingdom, and 38 in Asia.
To sum up, the choice of product-communication strategy in global marketing is a function of three key
factors:
1. The product itself, defined in terms of the function or need it serves;
2. The market, defined in terms of the conditions under which the product is used, the
preferences of potential customers, and the consumer’s ability and willingness to buy;
and
3. The adaptation and manufacturing costs to the company considering these product-
communication approaches.
NEW PRODUCTS IN GLOBAL MARKETING
(Learning Objective #6)
The four strategic options described in the matrix (Figure 10-3) do not necessarily represent the
best possible responses to global market opportunities.
In today’s dynamic, competitive market environment, many companies realize that continuous
development and introduction of new products are keys to survival and growth. That is the point
of Strategy 5, product invention.
Identifying New-Product Ideas
The product may be an entirely new invention or innovation that requires a significant amount of
learning on the part of users. When such products are successful, they create new markets and
new consumption patterns that literally represent a break with the past; they are sometimes called
discontinuous innovations.
An intermediate category of newness is less disruptive and requires less learning on the part of
consumers; such products are called dynamically continuous innovations. Products that
embody this level of innovation share certain features with earlier generations while
incorporating new features that offer added value such as a substantial improvement in
performance or greater convenience.
Most new products fall into a third category, continuous innovation. Such products are typically
“new and improved” versions of existing ones and require less R&D expenditure to develop than
dynamically continuous innovations. Continuous innovations cause minimal disruptions of
existing consumption patterns and require the lease amount of learning on the part of buyers.
Consumer packaged goods companies and food marketers rely heavily on continuous innovation
when rolling out new products. These often take the form of line extensions such as new sizes,
flavors, and low-fat versions (see Figure 10-4).
New-Product Development
A major driver for the development of global products is the cost of product R&D. As
competition intensifies, companies discover they can reduce the cost of R&D for a product by
developing a global product design. Often the goal of new product development is to create a
single platform, or core product design element or component that can be quickly and cheaply
adapted to various country markets.
Even automobiles are now are being designed with global markets in mind. The Ford Focus and
GM’s minivan are two recent examples.
Durability and quality are important product characteristics that must be appropriate for the
proposed market.
The International New Product Department
As noted previously, a high volume of information (ow is required to scan
adequately for new product opportunities, and considerable effort is
subsequently required to screen these opportunities to identify candidates
for product development. The best organizational design for addressing
these requirements is a new-product department. Managers in such a
department engage in several activities.
First, they ensure that all relevant information sources are continuously
tapped for new-product ideas. Second, they screen these ideas to identify
candidates for investigation. Third, they investigate and analyze selected
new-product ideas. Finally, they ensure that the organization commits
resources to the most promising new-product candidates and is continuously
involved in an orderly program of new-product introduction and development
on a worldwide basis.
With the enormous number of possible new products, most companies establish screening grids
in order to focus on those ideas that are most appropriate for investigation. The following
questions are relevant to this task:
1. How big is the market for this product at various prices?
2. What are the likely competitive moves in response to our activity with this product?
3. Can we market the product through our existing structure? If not, what changes will
be required, and what costs will be incurred to make the changes?
4. Given estimates of potential demand for this product at specified prices and estimated
levels of competition, can we source the product at a cost that will yield an adequate
profit?
5. Does this product fit our strategic development plan? (a) Is the product consistent
with our overall goals and objectives? (b) Is the product consistent with our available
resources? (c) Is the product consistent with our management structure? (d) Does the
product have adequate global potential?
Testing New Products
The major lesson of new-product introduction outside the home market has been that whenever a
product interacts with human, mechanical, or chemical elements, there is the potential for a
surprising and unexpected incompatibility.
Because virtually every product matches this description, it is important to test a product under
actual market conditions before proceeding with full-scale introduction. A test does not
necessarily involve a full scale test-marketing effort. It may be simply observing the actual use of
the product in the target market.
Failure to assess actual use conditions can lead to big surprises.
TEACHING TOOLS AND EXERCISES
Additional Case:
“Nanosolar, Inc.” Thomas Steenburgh; Alison Berkley Wagonfeld. HBS 510037.
Video:
This video discusses how McDonalds blends a global and local strategy. It discusses why a local
strategy is needed in different markets, for example they would not offer burgers in countries that
do not eat beef, and there are kosher entrees in Israel, etc.
Link: http://www.youtube.com/watch?v=v6coDUDCJ10&feature=related
Activity: Students should be preparing or presenting their Cultural-Economic Analysis and
Marketing Plan for their country and product as outlined in Chapter 1.
Movie: Assign your students the movie Cool Runnings. Cool Runnings concerns the Jamaican
bobsled team that competed in the 1988 Winter Olympics. The film is both entertaining and
provides a nice unique look at branding.
Internet Exercice: Go to Business Week (www.businessweek.com) and compare and contrast
the Top 100 Global Brands for 2009 and 2008.
What brands have shifted positions? Speculate on why brands shift global positioning in 1 year’s
time frame. Which brands are you familiar with, which ones are you not?
Go to the Johnson & Johnson website to see the value of the consumer goods giant’s brand
equity. How many different brands does Johnson & Johnson have? What are the company’s
global markets? www.jnj.com
Small Group Activity: In small groups, take a new product idea and carry the new product
through a new product development process for the global marketplace. You may have to use
your imagination in certain phases. When you have finished, analyze your effort. Do you think
your product has a chance of success? What factors would be critical to the success of the
product? What additional information do you need to be able to make the idea work? Where
would you get the information?
Written Exercise: List 10 of your favorite brand names. Which are global brands? What do you
like about the product and/brand name? What do you dislike? What image does the brand have in
your mind? How loyal are you toward the brand? Students can write a short paper and share their
answers with the class.
SUGGESTED READING
Books
Aacker, David. Building Strong Brands. New York: Free Press, 1996.
Aacker, David and Erich Joachimsthaler. Brand Leadership. New York: Free Press, 2000.
Kuczmarski, Thomas D. Managing New Products: The Power of Innovation. Englewood Cliffs,
New Jersey: Prentice-Hall, Inc., 1992.
Macrae, Chris. World Class Brands. Reading, Mass.: Addison-Wesley, 1991.
Temporal, Paul. Branding in Asia: The Creation, Development, and Management of Asian
Brands for the Global Market. New York: John Wiley & Sons, 2000.
Yip, George. Total Global Strategy. Englewood Cliffs, NJ: Prentice Hall, 1992.
Articles
Aacker, David A., and Erich Joachimsthaler. “The Lure of Global Branding.” Harvard Business
Review 77, no. 6 (November-December 1999), pp. 137-144.
Alden, Dana L., Jan-Benedict Steenkamp, and Rajeev Batra. “Brand Positioning through
Advertising in Asia, North America, and Europe: The Role of Global Consumer Culture.”
Journal of Marketing 63, no. 1 (January 1999), pp. 75-87.
Buil, Isabel, Chernatony, Leslie, Hem, Leif. “Brand Extension Strategies: Perceived Fit, Brand
Type, and Cultural Influences”. European Journal of Marketing. 2009. v 43. issue 11/12.
pp. 1300-1324.
Buzzell, Robert D. “Can You Standardize Multinational Marketing?” Harvard Business Review
(November-December, 1968), pp.102-113.
Chao, Paul. “Impact of Country-of-Origin Dimensions on Product Quality and Design Quality
Perceptions.” Journal of Business Research 42, no. 1 (May 1998), pp. 1-6.
Cordell, Victor V. “Effects of Consumer Preferences for Foreign Sourced Products.” Journal of
International Business Studies 23, no. 2 (Second Quarter 1992), pp. 251-270.
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Foscht, Thomas, Maloles III, Cesar, Swoboda, Bernhard, Morschett, Dirk, sinha, Indrajit. “The
Impact of Culture on Brand Perceptions: A Six-Nation Study.” Journal of Product &
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Ewing, Michael, Julie Napoli, and Leyland Pitt. “Managing Southeast Asian Brands in the
Global Economy.” Business Horizons 44, no. 3 (May-June 2001), pp. 52-58.
Henthorne, Tony L. “Consumers’ Perceptions of Quality as Related to Automobiles.” Akron
Business and Economic Review 17, no. 4 (Winter 1986), 98-107.
Joachimsthaler, Erich, and David A. Aacker, “Building Brands Without Mass Media.” Harvard
Business Review (January-February 1997), pp. 39+.
_____, Ilkka A. Ronkainen and Michael R. Czinkota. “Negative Country-of-Origin Effects: The
Case of the New Russia.” Journal of International Business Studies 25, no. 1 (First
Quarter 1994), pp. 157-176.
Kohli, Chiranjeev, Rajneesh Sure, and Mrugank Thako. “Creating Effective Logos: Insights from
Theory and Practice.” Business Horizons 45, no. 3 (May/June 2002), pp. 58-64.
Moskowitz, Howard R., and Samuel Rabino. “Sensory Segmentation: An Organizing Principle
for International Product Concept Generation.” Journal of Global Marketing 8, no. 1
(1994), pp. 73-94.
Roth, Martin S., and Jean B. Romeo. “Matching Product Category and Country Image
Perceptions: A Framework for Managing Country-of-Origin Effects.” Journal of
International Business Studies 23, no. 3 (Third Quarter 1992), pp. 477-498.
Samiee, Saeed. “Customer Evaluation of Products in a Global Market.” Journal of International
Business Studies 25, no. 3 (Third Quarter 1994), pp. 579-604.
Seaton, F. B., and H.A. Laskey. “Effects of Production Location on Perceived Automobile
Values.” Journal of Global Marketing 13, no. 1 (1999) pp. 71-85.
“The Best Global Brands.” Business Week (December 2009).
Schmitt, B "Selecting the right brand name: An examination of tacit and explicit linguistic
knowledge in name translations" Journal of Brand Management, 2012
Discusses branding techniques across different cultures and brand names.
Link: http://www.palgrave-journals.com/bm/journal/vaop/ncurrent/abs/bm201162a.html
Vrontis, Demetris, Thrassou, Alkins, Lamprianou, Iasonas. “International Marketing Adaption
Versus Standardisation of Multinational Companies”. International Marketing Review.
2009. v.26. issue: 4/5. pp. 477-500.
Wang, Guangping, Dou, Wenyu, Zhou, Nan. “Consumption Attitudes and Adoption of New
Consumer Products: A Contingency Approach”. European Journal of Marketing. 2008.
v 42. issue: 1/2. pp. 238-254.
Washburn, Judith H., Brian D. Till, and Randi Priluck. “Co-Branding: Brand Equity and Trial
Effects.” Journal of Consumer Marketing 17, no. 7 (2000), pp. 591-604.
Witt, Jerome, and C.P. Rao. “The Impact of Global Sourcing on Consumers: Country-of-Origin
Effects on Perceived Risk.” Journal of Global Marketing 6, no. 3 (1992), pp. 105-128.
"Foreign Firms' Brand Extensions in a Host Market: Strategic Factors in International Branding
Strategy" Yh Xie The Journal of Marketing Theory and Practice 2012.
This whole 67 page PDF is about branding and provides examples and cases of branding
strategies worldwide.
Link: http://www.ibscdc.org/case-catalogues/Marketing_Case_Studies_Catalogues.pdf
Zhang, Shi, and Bernd H. Schmitt. “Creating Local Brands in Multilingual International
Markets.” Journal of Marketing Research 38, no. 3 (August 2001), pp. 313-325.
