Chapter 10
International Product and Service Strategies
LEARNING OBJECTIVES
After studying this chapter students should be able to:
• Evaluate the stages of international product life cycle and locus of operations and
target markets at each stage.
CHAPTER SPOTLIGHTS
• The International Product Life Cycle consists of four stages: Product Introduction
Stage, Growth Stage, Maturity Stage, and Decline. In the first stages, product
strategies focus on consumers in high-income countries; during maturity and
beyond, the focus is on consumers in middle- and low-income countries.
• International Product and Service Mix Management: The international product and
service mix, or the assortment of offerings that the company offers to international
target consumers, can be described using three dimensions: length, width, and
depth.
CHAPTER OVERVIEW
This chapter introduces the international product life cycle, identifying the challenges of
coordination across markets of different development levels at every stage of the life
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CHAPTER OUTLINE
10-1 International Product Life Cycle (IPLC): The product life cycle illustrates a
10-1a Product Introduction Stage: A product is high-income in industrialized countries,
10-1b Growth Stage: Characterized by increasing competition as new product variants
are offered to the market. At the end of this stage, competing manufacturers agree
10-1c Maturity Stage: Longest stage, characterized by slowdown in sales growth and by
leveling in profits due to intense price competition. Manufacturing is rapidly
10-1d Decline Stage: Product is losing ground to new product alternatives and profits
10-2 Managing the International Product and Service Mix: The product mix is the
complete assortment of the products that a company offers to its target
international consumers. The dimensions of the product mix follow.
10-2a Length: Total number of brands in the product mix.
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10-3a Generating New Product Ideas: Ideas are sought using different strategies, from
focusing on the needs and wants of the consumers to focusing on the product
itself. Some of the common sources of ideas are consumers, competitive analyses,
and additional sources such as channel members who are closer to the consumers
than the manufacturer.
1) Consumers: New product ideas can come from consumers in both the home-
10-3b Screening New Product Ideas: Product ideas that do no fit with the target
consumers as well as with the overall mission of the organization are screened
10-3c Developing and Evaluating Concepts: Companies attempt to understand how
10-3d Performing a Product Business Analysis: Includes calculating estimated project
10-3e Designing and Developing the Product: Product prototypes are developed; the
product acquires a name and a brand identity as the marketing mix is developed.
10-3f Test Marketing: Used in order to evaluate the reaction of the market to their
product. There are different approaches to test marketing:
1) Simulated Test Marketing: Not costly and does not give competition much
information about the product. Also helps to reduce risks related to marketing,
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10-3g Launching the Product Internationally: The launch has a great impact on later
10-4 Degree of Product/Service Newness: The extent to which a product or service is
new to the market. New products are classified in one of five categories: As a new
product to an existing market or company, a new product line, a new item in
10-5 Product Diffusion: the speed with which a product is adopted by consumers
worldwide is influenced by product factors and country (market) factors.
10-5a Product Factors: Attributes of an innovation likely to accelerate the rate of
adoption of a product are:
1) The relative advantage compared to competitive products.
10-5b Country (Market) Factors: New products tend to be adopted at different rates in
10-5c Consumer Adopters: Target consumers worldwide can be segmented based on the
manner in which they adopt new products. These segments are:
1) Innovators – risk takers who can afford to pay a higher price during the
introduction stage; constitute 2.5% of the total market, and they are primarily
consumers in high-income countries.
2) Early adopters – consumers who purchase the product early in the lifecycle
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4) Late majority – consumers with limited means that are likely to adopt
products only if they are popular and the risk associated with them is minimal;
KEY TERMS:
Continuous Innovation: Product innovation where there is no disruption in consumption
patterns; such innovations involve product alterations such as new flavors or new
products that are improvements over the old offerings.
Designing and Developing the Product: Developing product prototypes and giving the
product a name, a brand identity, and a marketing mix; a step in the new product
development process.
Developing and Evaluating Concepts: Determining how consumers will perceive and
use a new product; a step in the new product deveopmen process.
Generating New Product Ideas: Seeking ideas using different strategies as the first step
in the new product development process.
Growth Stage: The stage of the international product life cycle characterized by
increasing competition and rapid product adoption by the target market.
Innovation: A product new to the world.
Innovators: Risk takers who can afford to pay the higher purchase price charged by
Lag Countries: Countries where a product or service is adopted after already being
introduced in lead countries.
Laggards: Consumers who are the last to adopt new product and do so only in late
maturity because they are risk averse and very conservative in their spending; they
account for 16% of the total market.
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New Item in an Existing Product Line: A new brand that the company offers to the
market in an existing product line.
New Line: A new product category offered by the company.
New Product to Existing Company: A new product that the company offers to the
market; the product competes with similar competitor offerings.
Product Mix: The complete assortment of products that a company offers to its target
international consumers.
Product Width: The total number of product lines that a company offers to its target
international consumers.
Radical Innovations: The creation of new industries or new standards of management,
manufacturing, and servicing that represent fundamental changes for consumers,
entailing departures from established consumption.
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DISCUSSION QUESTIONS:
1) Describe the international product life cycle and the activities involved in
developed and developing countries.
The international product life cycle theory states that firms from developed
countries engage in domestic production in the early stage of product life cycle,
2) What are the activities involved at each stage of the new product development
process? Where are most new products developed?
The first step in new product development process is the generation of new
product ideas. The sources for ideas include consumers, competitive analyses, and other
sources such as company employees, consultants. During the screening of new product
ideas, the firm eliminates product ideas that do not fit with the target consumers or with
3) Many products are advertised in the United States as “new and improved.”
What does this description mean in terms of new product classifications?
4) Describe the differences between lead and lag countries in terms of adoption
status and adoption rate.
Lead countries are countries where the product or service is first introduced and
True/False
Multiple Choice
1. B
CASE 10-1
Campina, Naturally
1. Perform a product mix analysis for Campina. Calculate product length,
width by examining only the product categories that the company carries.
Campina’s four major product categories are indulgence products, daily essentials,
functional products and ingredients. However, due to increased demand for convenience,
innovation, and value-added nutrition, Campina has expanded its product width to offer
2. Comment on the product consistency across the different lines. Is product
consistency important for a dairy company? What do all the lines have in
common – in addition to Campina ownership?
Product consistency is crucial in the dairy industry, especially in a mature and saturated
market such as the European Union. Nearly all customers of dairy products are repeat
buyers in some capacity, whether it is through brand or product type. As a result, the
customers will come to know a product very well and have certain expectations for it. If
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