Chapter 10 – Products and Services for Consumers Discussion Questions 1. Define the following terms and show their significance to international marketing: Product diffusionInnovation Product Component ModelGreen marketing QualityHomologation Global brands 1. Debate the issue of global versus adapted products for the international market. A recurring debate exists relative to product planning and focuses on the question of standardized products marketed worldwide versus differentiated products adapted or even redesigned for each culturally unique market.

Those with a strong production and unit cost orientation advocate standardization and others, perhaps more culturally sensitive, propose the policy of a different product for each market. The issue cannot be resolved with a simple either/or decision. Cost revenue analyses need to be done and decisions made in the hard, cold lights of profitability. There is no question that significant cost savings can be realized from having standardized products, packages, brand names, and promotional messages but this makes sense only if there is adequate demand for the standardized products: costs must be balanced with demand.

On the other hand, if the cost of an individualized product when evaluated against price/demand characteristics within a market exceeds potential profit, then it is ridiculous not to consider other alternatives including not marketing the product at all. To differentiate for the sake of differentiation is no solution, and realistic business practice requires a company to strive for uniformity in its marketing mix whenever and wherever possible. Economies of production, better planning, more effective control, and better use of creative managerial personnel are all advantages of standardization. 2.

Define the country-of-origin effect and give examples. Country of Origin Effect (COE) can be defined as any influence that country-of-manufacturer has on a consumer’s positive or negative perception of a product. Today a company competing in global markets will manufacture products worldwide and, when the customer is aware of the country of origin, there is the possibility that the place of manufacture will affect product/brand image. Some examples are French wines, German beer, Swiss watches, Cuban cigars, and Irish woolens are some positive COEs. A negative COE is an automobile from Yugoslavia (the Yugo). 3.

The text discusses stereotypes, ethnocentrism, degree of economic development, and fads as the basis for generalizations about country-of-origin effect on product perception. Explain each and give an example. The country, the type of product, and the image of the company and its brands all influence whether or not the country of origin will engender a positive or negative reaction. There are a variety of generalizations that can be made about country of origin effects on products and brands. Consumers tend to have stereotypes about products and countries that have been formed by experience, hearsay, and myth.

Following are some of the more frequently cited generalizations. Consumers have broad but somewhat vague stereotypes about specific countries and specific product categories that they judge “best”: English tea, French perfume, Chinese silk, Italian leather, Japanese electronics, Jamaican rum, and, so on. Stereotyping of this nature is typically product specific and may not extend to other categories of products from these countries. Ethnocentrism can also have country of origin effect; feelings of national pride, the “buy American” effect among members, for example, can influence attitudes toward foreign products.

Honda, which manufactures one of their models almost entirely in the United States, recognizes this phenomenon and points out how many component parts are made in America in some of their advertisements. On the other hand, others have a stereotype of Japan as producing the “best” automobiles. A recent study found that U. S. automobile producers may suffer comparatively tarnished in-country images regardless of whether they actually produce superior products. Countries are also stereotyped on the basis of whether they are industrialized, in the process of industrializing or less-developed.

These stereotypes are less country-product specific; they are more a perception of the quality of goods in general produced within the country. Industrialized countries have the highest quality image, and there is generally a bias against products from developing countries. Within groups of countries grouped by economic development there are variations of image. For example, one study of COE between Mexico and Taiwan found that a microwave oven manufactured in Mexico was perceived as significantly more risky than an oven made in Taiwan.

However, for jeans there was no difference in perception between the two countries. One might generalize that the more technical the product, the less positive is the perception of one manufactured in a less-developed or newly industrializing country. There is also the tendency to favor foreign made products over domestic made in less developed countries. Not all foreign products fare equally well since consumers in developing countries have stereotypes about the quality of foreign made products even from industrialized countries.

A survey of consumers in the Czech Republic found that 72 percent of Japanese products were considered to be of the highest quality, German goods followed with 51%, Swiss goods with 48%, Czech goods with 32% and, last, the United States with 29%. One final generalization about COE involves fads that often surround products from particular countries or regions in the world. These fads are more often product specific and generally involve goods that are themselves faddish in nature.

European consumers are apparently enamored with a host of American made products ranging from Jeep Cherokees, Budweiser beer, and Jim Beam bourbon, to Boise sound systems. In the 1970s and 80s there was a backlash against anything American, but, in the 1990s, American is in. In China, anything Western seems to be the fad. If it is Western it is in demand even at prices three and four times higher than domestic products. In most cases such fads wane after a few years as some new fad takes over. 4. Discuss product alternatives and the three marketing strategies: domestic market extension, multidomestic market, and global market strategies.

The marketer has at least three viable alternatives when entering a new market: (1) sell the same product presently sold in the home market (Domestic Market Extension Strategy); (2) adapt existing products to the tastes and specific needs in each new country market (Multi Domestic Market Strategy); or (3) develop a standardized product for all markets (Global Market Strategy. ) An important issue in choosing which alternative to use is whether or not a company is starting from scratch (i. e. , no existing products to market abroad), or whether it has products already established in various country markets.

For a company starting fresh, the prudent alternative is to develop a global product. If the company has several products that have evolved over time in various foreign markets, then the task is one of repositioning the existing products into a global product. 5. Discuss the different promotional/product strategies available to an international marketer. The marketer has at least three viable alternatives when entering a new market: he can (1) sell the same product he presently sells elsewhere, (2) individualize existing products to the tastes and specific needs of the new country, or (3) develop a totally new product.

These three basic alternatives, when combined with promotional effort, can be developed into five different product strategies available to the international marketer. First, a company can sell the same product using the same promotional message worldwide as Pepsi-Cola and the Coca-Cola company do. A second version is to sell the same product but with promotions featuring different use patterns, for example, garden power equipment designed for United States home use but sold as agricultural equipment in underdeveloped countries.

A third strategy involves altering the basic physical features of the product to meet local environmental needs but promoting the product to fill the same use patterns as are prevalent in the domestic market. Detergents redesigned to function in cold water but still promoted to get clothes clean is an example of this strategy. The fourth strategy requires both a change in the product to meet different use patterns and a change in the promotional message accompanying it.

For example, the fifth strategy is one of investing or developing a totally new product rather than adapting an existing one. This is less frequently done, but as companies move into less developed markets and seek greater economic penetration into these markets it becomes more prevalent. As examples, the Coca Cola Company has developed Saci, a protein fortified beverage to sell in foreign countries as a diet supplement; and Ford and General Motors are experimenting with a “bare bones” Model T type truck to sell in developing countries.

The success of any of these strategies depends upon the product and the fundamental need it fulfills, its characteristics and their perception within the culture, and finally, the associated costs of each program. 6. Assume you are deciding to “go international” and outline the steps you would take to help you decide on a product line. Library research project. 7. Products can be adapted physically and culturally for foreign markets. Discuss. Products can be adapted to a new culture in a variety of ways ranging from simple package changes to total redesign in the physical product.

Some need for change becomes obvious with relatively little analysis. For example, a cursory analysis of a country will uncover the need to require electrical goods if it uses a different voltage system, or to indicate product simplification when the local level of technologies is not high, or the need for a color change if the present color violates local taboos, etc. Most such superficial changes can be spotted by looking at product use patterns, the economy, and other related culture elements. One international scholar has categorized these changes into thirteen environmental factors listed below.

Each is quickly detected and requires only basic changes to bring the product in line with a culture. Environmental FactorDesign Change Level of technical skillsProduct simplification Level of labor costAutomation or manualization of product Level of literacyRemarking and simplification of product Level of incomeQuality and price change Level of interest ratesQuality and price change (investment in high quality might not be financially desirable Level of maintenanceChange in tolerances Climatic differencesProduct adaptation

Isolation (heavy repair difficult and expensive)Product simplification and reliability improvement Differences in standardsRecalibration of product and resizing The suggested changes are primarily concerned with the price and physical or mechanical properties of a product. Such product characteristics certainly can impede effective use of a product within another culture, but more subtle differences within a culture require other kinds of changes that must be resolved before a product gains acceptance.

Internal cultural variations may require product adaptation that hinges more on the product’s conflict with norms, values, and behavior patterns than on its physical or mechanical aspects. For example, introduction of a new product into a culture that does not perceive a need for such an item can conflict with established norms, locally accepted values can be upset by trying to introduce personal care items into a culture that prefers body functions remain very private and assuming too high a level of sophistication in product usage may overlook ocal behavior patterns. 8. What are the three major components of a product? Discuss their importance to product adaptation. The three major components of a product are: (1) its core, the physical product and all its functional features; (2) the packaging component that includes the physical package in which the product is presented, as well as the brand name, trademark, styling and design features, price and quality levels; (3) the support services component, which completes the product buyers receive and from which the bundle of satisfactions received are derived.

This support services component includes repair and maintenance services, installation, delivery, warranty, spare parts, training and instructions, credit, and any other services related to the use and purchase of the product. The importance of each component, as well as the perceived component attributes are functions of culture. What may be desirable in one culture may be unimportant in another. A product is, in a large part, a cultural phenomenon; that is, culture determines the individual’s perception of what a product is and what satisfaction that product provides.

Therefore, in developing products for international markets, adaptation of that bundle of utilities or satisfaction received may be necessary to bring the product in line with the culture’s needs. Such adaptation may require changes of any one or all of the product components as defined above. 9. How can the knowledge of the diffusion of innovations help a product manager plan his international investments?

Knowledge of the diffusion of innovation provides the international marketer with several important pieces of information; for example, a knowledge of the concept may provide the marketer with an estimate of the time it will take before his innovation would be accepted by a culture, and therefore help him decide whether or not to make the necessary investment. It can also give him insights into how to accelerate the rate of acceptance of his product and the steps that he as a marketer can take to eliminate some of the “newness” thereby gaining more rapid acceptance of his product.

In preparing characteristics of innovations study of the new product, he or she might determine a product profile which could be extremely useful as a model for planning product strategy. By analyzing the product in terms of those attributes which contribute to its newness (or innovativeness) the marketer’s attention is focused on those factors which give rise to resistance; thus, the marketer can estimate the possible rate of adoption and perhaps effect the rate of adoption of an innovation by changing its characteristics through physical modifications, advertising, and/or sales promotion efforts. 10.

Old products (that is, old to the U. S. market) may be innovations in a foreign market. Discuss fully. It is important for the marketer to appreciate that a product which has gained acceptance and is now at the top or perhaps even in the declining stage of the product life cycle, may be perceived in another culture as a new and, in fact, very innovative product. The marketer must guard against assuming that an “old hat” in one market which has achieved acceptance after many years of exposure and learning and adaptation on the part of the culture toward the product can be transferred to another culture with its learned acceptance intact.

In fact, the “old hat” may be so outside the experience of the new market that the marketer will have to start at the beginning of the assimilation process. 11. “. . . If the product sells in Dallas, it will sell in Tokyo or Berlin. ” Comment. Basically, the needs and hence the demand for a product are the same in all markets. Similarities in wants are universal and, as income increases, practically everyone desires the “good life. The important aspect to consider is that in crossing one culture to another, separate characteristics of nationality and stages of economic and industrial development determine consumer behavior to a great extent. Hence, each group’s interpretation of the “good life” as reflected in consumer behavior relates heavily to cultural heritage. Thus, the statement can be very wrong and represents an attitude which has frequently led to international market failures. 13. How can a country with a per capita GNP of $100 be a potential market for consumer goods?

What kinds of goods would probably be in demand? Discuss. A country with a low GNP can have a large demand for consumer goods because of the need that exists for certain products and because there are no production facilities or very limited ones within the country. India, for example, has a per capita income of $58/year, yet its imports were about $2. 4 billion in 1963. The type of goods that likely are in demand are the more basic type of consumer goods, such as clothing or basic housing needs. 14. Discuss the four types of innovations.

Give examples of the products which would be considered by the U. S. market as one type of innovation but a different type in another market. Support your choice. There are four types of innovations: (1) Congruent innovation, (2) continuous innovation, (3) dynamically continuous innovation, and (4) discontinuous innovation. A congruent innovation is actually no innovation at all because it causes absolutely no disruption of established consumption patterns. Some products do fit this category; the best example would be an exact duplicate of an already existing product.

A continuous innovation has the next least disruptive influence on established consumption patterns. Alternative of a product is almost always involved, rather than the creation of a new product. An example may be fluoride toothpaste and menthol cigarettes, etc. A dynamically continuous innovation has more disruptive effects than a continuous innovation, although it still does not generally involve new consumption patterns. It may mean the creation of a new product or considerable alternation of an existing one. Examples would include such items as electric toothbrushes, electric haircurlers, and the Mustang automobile.

A discontinuous innovation involves the establishment of a new consumption pattern and the creation of previously unknown products. Examples might include such items as a television, the computer, and the automobile. In any one of these situations a single product may range from being a congruent innovation to a discontinuous innovation. For example, in the United States another small car would either be considered a continuous or a congruent innovation, whereas the same automobile in a very underdeveloped country that has no automobiles would be a discontinuous innovation. 5. Discuss the characteristics of an innovation which can account for differential diffusion rates. The characteristics of an innovation which can account for differential diffusion rates are: (1) relative advantage, (2) compatibility, (3) complexity, (4) trialability, and (5) observability. Relative advantage is the degree to which an innovation is better than the products it replaces or with which it competes. Compatibility is concerned with how consistent a product is with existing value and behavior patterns.

Complexity refers to how difficult it is to understand and use the new product. Trialability is the degree to which a product may be tried, on a limited basis, without complete commitment to the product. And, observability refers to the ease with which the results of an innovation may be communicated to others. 16. Discuss “environmentally friendly” products and product development. Germany has a strict Eco-labeling program to identify, for the concerned consumer, products that have a lesser negative impact on the environment than similar products.

Under German law, a manufacturer is permitted to display a logo, called the “Blue Angel,” on all products that comply with certain criteria that make it environmentally friendly. More than 3,200 products in 58 product categories have been examined and given the Blue Angel logo. While it is difficult to judge the commercial value of a Blue Angel designation, manufacturers are seeking the eco-label for their products in response to growing consumer demand for environmentally friendly products.

Similar national labels are under discussion in France, Denmark, the Netherlands and the United Kingdom. The EC Commission issued guidelines for eco-labeling that became operational in October 1992. Under the EC directive, a product is evaluated on all significant environmental effects throughout its life cycle, from manufacturing to disposal, a cradle-to-grave approach. Companies will be encouraged to continuously update their environmental technology because eco-labels will be granted for only a limited period.

As more environmentally friendly products come onto the market, the standards will become tougher, and products that have not been improved will lose their eco-label. The “Blue Angel” and similar eco-labels are awarded on the basis of a product’s environmental friendliness, that is, how “friendly” when used and when its residue is released into the environment. A detergent formulated to be bio-degradable and not pollute would be judged more friendly than a detergent whose formulation would be harmful when discharged.

Aerosol propellants that do not deplete the ozone layer are another example of environmentally friendly products. No country’s laws yet require products to carry an “eco-label” to be sold. The designation that a product is “environmentally friendly” is voluntary and its environmental success depends on the consumer selecting the “eco-friendly” product. However, laws that mandate systems to control solid waste management, while voluntary in one sense, do carry penalties in that consumers may not select their products.