CHAPTER 11
PRODUCT MANAGEMENT AND GLOBAL BRANDS
Chapter Outline
A. Product Variables
1. Standardization versus Adaptation
2. Factors Affecting Adaptation
B. The Market Environment
1. Government Regulations
C. Product Characteristics
1. Product Constituents and Content
2. Branding
D. Company Considerations
E. Global Product Development
1. The Product Development Process
2. The Location of R&D Activities
Chapter Objectives
This chapter discusses the complex combination of tangible and intangible elements that
distinguishes goods from other products or services. It further explains the importance of
designing, modifying, or developing a product to meet the needs of a regional or global basis. The
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Suggestions for Teaching
The best starting point for the product adaptation discussion is to address the issue of what a
product really is (“what is the company selling?). Next, the international dimension can be
brought in by initiating a debate on: standardization versus adaptation. It is important to bring up
Although regimented discussions based on a list may not be the most exciting way to conduct a
class discussion, the instructor may approach this class by using a two-dimensional matrix in
which the factors affecting product-adaptation decisions (from Exhibit 11.2) are on one of the
dimensions and products or product categories are on the other. Students might suggest products
before the class during which this chapter is to be discussed or they can be assigned by the
instructor. Products for discussion can be from the various product classes; e.g., convenience,
shopping, specialty, industrial, services, etc. One has to be careful, however, since consumer
products’ classification, especially, are in the eye of the beholder, and the beholders have their
own cultural baggage with them.
Counterfeiting has become a familiar topic through substantial press coverage in the recent past.
The key is to impress on students that the phenomenon is no longer the laughing matter that it
was when counterfeits were only bogus jeans, watches, and luggage. Material is available from
Chapter Summary
A. Product Variables
The core of a firm’s international operations is a product or service. This product or
service can be defined as the complex combination of tangible and intangible elements
that distinguishes it from the other entities in the marketplace, as shown in Exhibit 11.1.
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1. Standardization versus Adaptation
A firm has four basic alternatives in approaching international markets:
• selling the product as is in the international marketplace
2. Factors Affecting Adaptation
In deciding the form in which the product is to be marketed abroad, the firm
should consider three sets of factors:
1. Government Regulations
Government regulations often present the most stringent requirements. They are
probably the single most important factor contributing to product adaptation and,
2. Nontariff Barriers
Nontariff barriers include product standards, testing or approval procedures,
3. Customer Characteristics, Expectations, and Preferences
The characteristics and behavior of intended customer groups are an important
factor influencing the product adaptation decision. Product decisions of
consumer-product marketers are especially affected by local behavior, tastes,
attitudes, and traditions.
Three groups of factors determine cultural and psychological specificity in
relation to products and services:
4. Economic Development
Management must take into account the present stage of economic development
of the overseas market. As a country’s economy advances, buyers are in a better
5. Competitive Offerings
Monitoring competitors’ product features, as well as determining what has to be
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6. Climate and Geography
Climate and geography will usually have an effect on the total product offering:
C. Product Characteristics
The inherent characteristics of products and the benefits they provide to consumers in the
various markets make certain products good candidates for standardization, others not.
1. Product Constituents and Content
The international marketer must make sure products do not contain ingredients
2. Branding
Brand names convey the image of the product or service. Brands are one of the
most easily standardized items in the product offering. The brand name is the
vocalizable part of the brand, the brand mark the nonvocalizable part. The term
3. Packaging
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Packaging will vary as a function of transportation mode, transit conditions, and
length of time in transit. Packaging serves three major functions: protection,
promotion, and user convenience:
• Protection: Because of the longer time that products spend in channels of
distribution, firms in the international marketplace have had to use more
4. Appearance
Adaptations in product styling, color, size, and other appearance features are
5. Method of Operation or Usage
The product as it is offered in the domestic market may not be operable in the
6. Quality
Many Western exporters must emphasize quality in their strategies because they
7. Service
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When a product sold overseas requires repairs, parts, or service, the problem of
8. Country-of-Origin Effects
The country of origin of a product, typically communicated by the phrase “Made
D. Company Considerations
In addition to the need to cater to market differences and to compete effectively with
others in these markets, the role of product adaptation is also to reach internal goals more
effectively.
Whether product adaptation is worth the cost involved depends on the firm’s ability to
E. Global Product Development
Product development is at the heart of the global marketing process. New products should
be developed, or old ones modified, to cater to new or changing customer needs on a
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1. The Product Development Process
The product development process begins with idea generation. Ideas may come
from within the company—from the research and development staff, sales
personnel, or almost anyone who becomes involved in the company’s efforts.
Customers provide the best source of ideas for new products. Many new
Exhibit 11.5 summarizes the activities of a typical global program management.
The managing unit of such a program has prime responsibility for accomplishing
the following objectives:
• Single-point worldwide technical development and design of a new
The affected units have prime responsibility for achieving the following
objectives:
• Identification of unique requirements to be incorporated in the product
Firms using worldwide product management are better able to develop products
that can be quickly introduced into any market. In general, the length of the lag
between product development and its market introduction will depend on:
• the product involved, with industrial products having shorter lags
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2. The Location of R&D Activities
Unlike in the past, a significant number of companies have started using foreign–
based resources to improve their ability to compete internationally. Investments
for R&D abroad are made for four general reasons:
• To aid technology transfer from parent to subsidiary
3. The Organization of Global Product Development
The product-development activity is undertaken by specific teams, whose task is
to subject new products to tough scrutiny at specified points in the development
cycle to eliminate weak products before too much is invested in them and to
4. The Testing of New Product Concepts
The final stages of the product-development process involve testing the product
in terms of both its performance and its projected market acceptance. Depending
on the product, testing procedures range from reliability tests in the pilot plant to
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5. The Global Product Launch
A global product launch means introducing a product into countries in three or
more regions within a narrow time frame. This requires a number of measures:
• The country managers should be involved in the first stage of product
A successfully executed global launch offers several benefits:
• It permits the company to showcase its technology in all major markets
at the same time.
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F. Managing the Brand Portfolio
Branding is one of the major beneficiaries of a well-conducted portfolio analysis. Brands
are important because they shape customer decisions and, ultimately, create economic
value.
1. Brand Strategy Decisions
Global brands help marketers to create consistency and impact. Consumers all
over the world associate global brands with three characteristics and evaluate
their performance on them when making purchase decisions:
• Global brands carry a strong quality signal suggested by their success
There are three main implications for the marketing manager to consider:
• Don’t hide globality. Given the benefits of globality, marketers should
not be shy in communicating this feature of a brand.
Branding is an integral part of the overall identity management of the firm. The
role of headquarters, strategic business unit management, global teams, or global
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The brand portfolio needs to be periodically and regularly assessed. A number of
global marketers are focusing their attention on “A” brands with the greatest
growth potential. However, before disposing of a brand, managers need to assess
it in terms of current sales, loyalty, potential, and trends. Three approaches for
purely local brands may work:
2. Private Brand Policies
The emergence of strong intermediaries has led to the significant increase in
private-brand goods, that is, the intermediaries’ own branded products or “store
brands.” Two general approaches have been used:
Beyond just offering products, many retailers are focusing on a broader
approach. Some are focusing on the design of their private-brand products to
provide a uniform image, while others are providing premium private-brand
products.
With the increasing opportunities in the private-brand categories, the marketing
manager will have to make critical strategic choices, which are summarized in
G. Product Counterfeiting
Counterfeit goods are any goods bearing an unauthorized representation of a trademark,
patented invention, or copyrighted work that is legally protected in the country where it is
marketed. The practice of product counterfeiting has spread to high-technology products
and services from the traditionally counterfeited products: high-visibility, strong-brand-
name consumer goods.
Counterfeiting problems occur in three ways and, depending on the origin of the products
and where they are marketed, require different courses of action:
• Problems originating in the United States can be resolved through
The first task in fighting intellectual property violation is to use patent applications or
registration of trademarks or mask works (for semiconductors). However, rights granted
by a patent, trademark, copyright, or mask work registration in the United States confer
no protection in a foreign country.
close contact with the government and the various agencies charged with helping them.
Key Terms
Core product: Product or service in its simplest, generic state; other tangible and augmented features
may be added to distinguish a core product or service from its competitors.
Augmented features: Elements added to a core product or service that serve to distinguish it from
competing products or services.
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Brand: Name, term, symbol, sign, or design used by a firm to differentiate its offerings from those of
its competitors.
Lead users: Companies, organizations, or individuals who are ahead of trends or have needs that go
beyond what is available at the present time.
Open innovation: Also known as crowdsourcing; involves solving key problems with the help of
diverse sources of innovation including employees, customers, partners, and the world’s largest
problem-solving marketplace.
vantage point.
The vitality lab: Provides a directional gauge of the initiative’s potential in a real-world
environment, with real consumers making real purchases.
Global brands: Brands that reach the world’s megamarkets and are perceived as the same brand
by consumers and internal constituents.
Questions for Discussion
1. Are standards like those promoted by the International Organization for Standardization
(see www.iso.org) a hindrance or an opportunity for exporters?
Standards like those promoted by the International Organization for Standardization may
act as either a hindrance or an opportunity for exporters depending on the circumstances.
2. How can marketers satisfy the Four Rs of environmentally correct practice? See, for
example, the approaches proposed by the Duales System Deutschland (www.gruener-
punkt.de).
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The Four Rs of redesign, reduce, recycle, and reuse are very much a part of marketers’
activities. For example, in the various auto shows in the year 2000, the majority of the
3. The software industry is the hardest hit by piracy. Using the Web site of the Business
Software Alliance (www.bsa.org), assess how this problem is being tackled.
Software piracy is the unauthorized copying or distribution of copyrighted software. This
can be done by copying, downloading, sharing, selling, or installing multiple copies onto
(which includes education and technological development to make abuse more difficult).
4. What factors should be considered when deciding on the location of research and
development facilities?
Factors which contribute to a firm’s decision to locate the R&D in the domestic market:
• economies of scale and the avoidance of set-up costs in a foreign market
Factors leading to the decision to locate R&D in foreign markets:
• aid technology transfer from parent to subsidiary
• geographical proximity to emerging markets
In today’s environment, more and more products are developed as a joint endeavor of
multiple sites. For example, Whirlpool developed a super-efficient, chlorofluorocarbon–
free refrigerator by using insulation technology from the European operation, compressor
technology from Brazil, and manufacturing and design expertise from the U.S. affiliates.
5. What are the benefits of a coordinated global product launch? What factors will have to
be taken into consideration before the actual launch?
A global product launch means introducing a product into countries in three or more
regions within a narrow time frame. A successfully executed global launch benefits the
6. Argue for and against the use of the corporate name in global branding.
Consumers associate global brands with certain characteristics including quality, status,
and market credibility. A marketer who uses a corporate name for branding its product
has to satisfy all these characteristics. If the company fails to meet the expected standards
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Internet Exercises
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1. The elements that make up a truly innovative company are many: a focused innovation
strategy, a winning overall business strategy, deep customer insight, great talent, and the
right set of capabilities to achieve successful execution. How do those key goals and
attributes aid and abet the efforts of companies in each strategy to develop the capabilities
they need to succeed? (See www.strategy-business.com/article/11404?gko=dfbfc.)
2. Using the list of the world’s leading brands (available at http://www.interbrand.com),
evaluate why certain brands place high, some lower.
Brands are usually ranked (high or low) according to the extent to which they influence the
consumer’s behavior. Brands usually place high as a function of the industry they are in and