4.

GLOBAL MARKETING MIX

A product can be defined as a collection of physical, psychological, service, and symbolic attributes that
collectively yield satisfaction or benefits, to a buyer or user. Products that are marketed include physical
goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.
The following components are an integral part of the product.

• Core Component: It refers to the core benefit or problem solving services offered by the product.

• Packaging Component: It includes the features, quality, design, packaging, branding, and other
attributes integral to a product’s core benefit.

• Augmented Component: It includes the support services and other augmented components, such as
warranties, guarantees, and after sales service.

Classification of Products for Global Marketing

A product’s physical properties are characterized the same the world over. They can be convenience or
shopping goods or durables and nondurables; however, one can classify products according to their
degree of potential for global marketing:
1. Local products - seen as only suitable in one single market.

2. International products - seen as having extension potential into other markets.

3. Multinational products - products adapted to the perceived unique characteristics of national

markets.

4. Global products - products designed to meet global segments

Identification of Products for International Market

Firms carry out preliminary screening, that is, identification of markets and products by conducting
market research. A poorly conceived product invites marketing failures. For example Big names of
transnational food companies like Kellogg’s, Pizza Hut, McDonald’s, and Domino’s. Pizzas have all run
into trouble in the Indian market at one point of time or the other.

The common mistakes that these firms made were:

• Gross overestimation of spending patterns of the consumers: Despite the ability to buy products, the
customers in South Asia are very cautious and selective when spending. They look for value for money in
their purchase decisions far more than their Western counterparts do.

• Gross overestimation of the strength of their transnational brands: These MNCs estimated and
perceived their brand image very high in the international markets and the globalization of markets was
considered to be a very potent factor for getting a large number of customers for their products, as
happened in African and other East Asian countries.

• Gross underestimation of the strength of ethnic Indian products: As Indian food is traditionally
prepared on a small scale, and mass manufacturing and organized mass-marketing of Indian products
was missing, it was wrongly estimated by these multinationals that the food products manufactured by
the multinationals would change the traditional eating habits of the Indian consumers. They failed to
recognize the variety and strength of ethnic Indian foods.

Developing Products for International Markets

Various approaches followed for developing products for international markets are as follows.

• Ethnocentric Approach: This approach is based on the assumption that consumer needs and market
conditions are more or less homogeneous in international markets as a result of globalization. A firm
markets its products developed for the home market with little adaptation. However, the ethnocentric
approach does not always lead to maximization of market share and profits in international markets
since the local competitors are in a relatively better position to satisfy consumers’ needs.

• Polycentric Approach: An international firm is aware of the fact that each country market is
significantly different from the other. It therefore adopts separate approaches for different markets. In a
polycentric approach products are developed separately for different markets to suit local marketing
conditions.

• Regiocentric Approach: Once an international firm establishes itself in various markets the world over,
it attempts to consolidate its gains and tries to ascertain product similarity within market clusters.
Generally, such market clusters are based on geographical and psychic proximity.
• Geocentric Approach: Instead of extending the domestic products into international markets, a firm
tries to identify similarities in consumption patterns that can be targeted with a standard product
around the world. In a geocentric approach to product development, there is a high degree of
centralization and coordination of marketing and production activities resulting in higher economies of
scale in the various constituents of the marketing mix.

Standardization Vs Adaptation in International Markets

A firm operating in international markets has to make a crucial decision, whether to sell a uniform
product across countries or customize the product to meet different market requirements. Although no
readymade solution can be suggested for the decision to standardize or adapt the product, in
international markets, firms are required to carry out a careful cost-benefit analysis before arriving at a
decision.

For example: The leading fast food giant McDonald’s serves a variety of customized products in different
markets to satisfy customers’ needs and expectations It serves hamburgers in the US, chicken tatsuta,
teriyaki chicken, and teriyaki Mc Burger in Japan, and has replaced its traditional Big Mac with the
Maharaja Mac in India. Despite its image of a family restaurant, McDonald’ serves beer as well as
McCroissants in Germany

Product Standardization

Product standardization refers to the process of marketing a product in overseas markets with little
change except for some cosmetic changes, such as modified packaging and labelling. The benefits
associated with using standardized products in international markets include the following:

• Catering to customers globally • Projecting a global product image

• Cost savings in terms of economies of scale in production

• Designing and monitoring various components of marketing mix economically

• Facilitating the development of a product as a global brand.

The major factors that favour product standardization for international markets include:

a) High Level of Technology Intensity: Products with high technology content are marketed as
standardized products to maintain uniform international standards and reduce confusion across
international markets. Besides; using standard specification promotes product compatibility
internationally. For example, computer servers, micro and macro processors, VAN (value added
networks), etc. are marketed worldwide as standard products.

b) Formidable Adaptation Costs: Nature of product and market size determines the cost of adaptation,
which might be too ‘high to recover. A number of foreign books and motion pictures are sold as
standardized products worldwide. Only a few books written in a foreign context are adapted due to
prohibitive adoption costs, which are difficult to recover.

c) Convergence of Customer Needs Worldwide: Customers in diverse country markets increasingly

show convergence of their needs and preferences resulting in growing psychographic market segments
across the borders. It has resulted in an increase in demand for similar goods across the world. Products
such as Levi’s jeans, MTV, McDonald’s have gained popularity among international consumers due to
the growing convergence of customer needs worldwide. Besides, the rapid growth of transport and
telecommunications has also resulted in an increase in transnational travel among people who exhibit
similar tastes and preferences across markets.

Product Adaptation

Making changes in a product in response to the needs of the target market is termed product
adaptation or customization. In view of local consumption requirements, a product for the international
markets is often customized. Adaptation of a product may vary from major modifications in the product
itself to its packaging, logo, or brand name. A thorough market research needs to be conducted so as to
identify the customers’ requirements in the target market.

For example-Red bull cans in North American market is designed in red, silver and blue colours.
According to the local culture in North America, red colour is perceived as a symbol of action and
courage, whereas blue colour is associated with youth and dynamism. Red bull in Chinese market, on
the other hand is designed in gold and red colours, because gold colour represents wealth and
happiness in China and red is associated with good luck.

Customizing products for international markets offers a number of benefits including the following:

• It enables a firm to tap markets, which are not accessible due to mandatory requirements.

• It fulfils the needs and expectations of customers in different cultures and environments.

• It helps in gaining market share.

• It increases sales leading to economies of scale.

Mandatory factors influencing product adaptation in international markets

Customizing products includes product modifications that a firm has to carry out in international
markets not as a matter of choice but as a compulsion. The major factors influencing product
modification are as follows:

a) Government Regulations: A firm may have to adapt its products in various markets due to
government regulations. Different countries have different quality norms and a marketer is required to
follow them before entering an international market. For example, approval by the FDA (Food and Drug
Administration) is needed for marketing a food or pharmaceutical product in the US.

b) Standards for Electric Current: The electrical current standards also vary from country to country. In
India, electric current of 220 volts at a frequency of 50 Hz is used, while in the US it is 110-120 volts at a
frequency of 60 Hz. Therefore, electric equipment should be modified for use in the target market
depending on the country’s electricity standards

c) Operating Systems: Differences in operating systems affect product design, which needs to be
adapted to suit the target market. In India, China, the UK, Singapore, Pakistan, UAE, and Tanzania
televisions operate on phone alternating lines (PAL) while in the United States, Japan, Philippines, and
South Korea they work on national television systems committee (NTSC) standards. However, in France,
Vietnam, Russia, and Mauritius televisions operate on (SECAM). Therefore, a television operating on PAL
in India is unsuitable for countries with different operating systems such as the US, Japan, and France.
Therefore, for marketing televisions in countries with incompatible operating systems, suitable
adaptations are mandatory.

d) Measurement Systems: Different systems of measurement also affect product design. India follows
the metric system with kilogram, metre, and litre as measurement units. However, the US follows the
imperial system of measurement using pound, feet, and gallon. Therefore, the packaging size, weights,
and measures of products need to be modified depending upon the measurement system followed in
the target market.

e) Packaging and Labelling Regulations: Each country prescribes separate regulations for packaging and
labelling, which have to be adhered to by an international marketing firm.

Voluntary factors influencing product adaptation in international markets

The major factors influencing product adaptation by exporters in the international market are as
follows:

a) Consumer Demographics: The physical attributes of the consumers also require product modification.
The Chinese and most East Asians are smaller in size while Europeans and Germans are generally taller.
The features and attributes of consumer products such as readymade garments, undergarments, beds,
and bed sheets differ significantly between markets depending on the consumer demographics

b) Culture: Cultural factors also affect products decisions for international markets. In India and other
South Asian countries, ghee (clarified butter) is the most important milk product’ and sells at a premium
price. Besides, ghee is used in the preparation of a variety of Indian sweets and other dishes. Islam
prohibits the consumption of pork. Therefore, in Islamic countries no pork is sold. In India, McDonald’s
sells neither beef nor pork since Hindus and Muslims comprise a major chunk of the population. Besides,
all Muslims are expected to consume halal meat. Therefore, restaurants and hotels in the Islamic
countries prominently highlight in their marketing communication the fact that they serve only halal
meat

c) Local Customs and Traditions: The local traditions significantly affect consumption patterns and
habits in international markets. Apparently, India is a huge potential market for Western food and
music. But India has got a large variety of traditional food items, which have got their intrinsic strengths
and popularity. The food habits of India differ widely ranging from chhole bhature (deep fried bread
with gram) in Punjab; kachori and jalebi in Uttar Pradesh, choorma dal bati in Rajasthan, dhokla, phapda,
and khakri in Gujarat, a wide variety of jalpan including mishthi doi and sondesh preparations in eastern
India.

d) Price: Low-income countries are highly sensitive to price, which constitutes the most significant
determinant of a purchase decision. The level of sophistication of buyers in adopting new products and
processes also varies among countries. On a seven point scale, buyers in developed markets, such as the
US, Hong Kong and the UK, actively seek the latest products, technologies, and processes as compared
to buyers in Angola, Mozambique and Bangladesh who are slow to adopt new products and processes.

The international product life cycle (IPLC)

The international product lifecycle (IPL) is an abstract model briefing how a company evolves over time
and across national borders. This theory shows the development of a company’s marketing program on
both domestic and foreign platforms. International product lifecycle includes economic principles and
standards like market development and economies of scale, with product lifecycle marketing and other
standard business models.

The four key elements of the international product lifecycle theory are −

 The layout of the demand for the product

 Manufacturing the product
 Competitions in international market
 Marketing strategy

The marketing strategy of a company is responsible for inventing or innovating any new product or idea.
These elements are classified based on the product’s stage in the traditional product lifecycle. These
stages are introduction, growth, maturity, saturation, and decline.

IPL Stages

The lifecycle of a product is based on sales volume, introduction and growth. These remain constant for
marketing internationally and involves the effects of outsourcing and foreign production. The different
stages of the lifecycle of a product in the international market are given below −

Stage one (Introduction)

In this stage, a new product is launched in a target market where the intended consumers are not well
aware of its presence. Customers who acknowledge the presence of the product may be willing to pay a
higher price in the greed to acquire high quality goods or services. With this consistent change in
manufacturing methods, production completely relies on skilled laborers.

Competition at international level is absent during the introduction stage of the international product
lifecycle. Competition comes into picture during the growth stage, when developed markets start
copying the product and sell it in the domestic market. These competitors may also transform from
being importers to exporters to the same country that once introduced the product.

Stage two (Growth)

An effectively marketed product meets the requirements in its target market. The exporter of the
product conducts market surveys, analyze and identify the market size and composition. In this stage,
the competition is still low. Sales volume grows rapidly in the growth stage. This stage of the product
lifecycle is marked by fluctuating increase in prices, high profits and promotion of the product on a huge
scale.

Stage three (Maturity)

In this level of the product lifecycle, the level of product demand and sales volumes increase slowly.
Duplicate products are reported in foreign markets marking a decline in export sales. In order to
maintain market share and accompany sales, the original exporter reduces prices. There is a decrease in
profit margins, but the business remains tempting as sales volumes soar high.
Stage four (Saturation)

In this level, the sales of the product reach the peak and there is no further possibility for further
increase. This stage is characterized by Saturation of sales. (at the early part of this stage sales remain
stable then it starts falling). The sales continue until substitutes enter into the market. Marketer must
try to develop new and alternative uses of product.

Stage five (Decline)

This is the final stage of the product lifecycle. In this stage sales volumes decrease and many such
products are removed or their usage is discontinued. The economies of other countries that have
developed similar and better products than the original one export their products to the original
exporter's home market. This has a negative impact on the sales and price structure of the original
product. The original exporter can play a safe game by selling the remaining products at discontinued
items prices.

LABELLING, PACKAGING AND PRODUCT WARRANTIES AND SERVICES

Labelling: Like in the branding decision, the informational and promotional contents of the product label
are influenced as well by the legal requirements as by the exporting firm's product and promotion
policy. Labelling not only serves to express the contents of the product, but maybe promotional. For
example the EU is now putting very stringent regulations in force on labelling, even to the degree that
the pesticides and insecticides used in horticultural produce have to be listed. This could be very
demanding for producers, especially small scale ones, where production techniques may not be
standardised. Government labelling regulations vary from country to country. Labels may have to be
multilingual, especially if the product is a world brand. Translation could be a problem with many words
being translated with difficulty. Again labelling is expensive, and in promotion terms non-standard labels
are more expensive than standard ones.

Packaging: A package as simple as it may look, is influenced in its design, material, shape and weight by
a large number of factors. Packaging serves many purposes. It protects the product from damage, which
could be incurred in handling and transportation and also has a promotional aspect. It can be very
expensive. 'Size, unit type, weight and volume are very important in packaging. For aircraft cargo the;
package needs to be light but strong, for sea cargo containers are often the best form. The customer
may also decide the best form of packaging. Costs of packaging have always to be weighed against the
advantage gained by it.

Product Warranty and Services: A warranty is a guarantee on the product performance as stipulated by
the manufacturer. In other words, it defines the manufacturer's liability in the case of non-performance,
or under-performance of the product. Other than compliance with the legal requirements of the host
country, product warranties and service constitute an integral part of the added value of the product
offered in international markets. As such, it must be one-up on the competitors.