Page 134 - DMGT547_INTERNATIONAL_MARKETING

Unit 7: Product Strategy for International Markets

In addition to ad hoc problems, which may be day to day or strategic, the parent may require a Notes
periodic review of the subsidiary’s plants. Product planning for established product lines and
plans for the development and marketing of new product lines would then be prepared by each
host country/geographic area and separately submitted to corporate management for approval.

Self Assessment

State whether the following statements are true or false:
5. It is very difficult to market a new product with little or no experience in the global
market.
6. Companies that wish to enter the global market should first define its business intent
based on objectives of the host country only.

7.4 Product Adoption vs Standardization

Following are the differential points between product adoption and standardization:

7.4.1 Product Adoption

Before breaking into the foreign market, marketers must consider factors that influence product
adoption. As explained by Diffusion Theory at least six factors have a bearing on the adoption
process: relative advantage, compatibility, trialability/divisibility, observability, complexity
and price. These factors are all perceptual and thus subjective in nature.
For a product to gain acceptance it must demonstrate its relative advantage over existing
alternatives. A product must also be compatible with local customs and habits. A freezer would
not find a ready market in Asia where people prefer fresh food. A new product should also be
compatible with consumers’ other belongings. If a new product requires replacement of those
other items that are still usable, product adoption becomes a costly preposition.
A new product has an advantage if it is being capable of divided and tested in small trial
quantities to determine its suitability and benefits. This is a product’s trialability/divisibility
factor. Disposable diapers and blue jeans lend themselves to trialability to rather well.
Observation of a product in public tends to encourage social acceptance and reinforcement
resulting in the products being adopted more rapidly and less resistance.
Complexity of a product or difficulty in understanding the product’s quality tends to slow its
market acceptance. This factor explains why ground coffee had a difficult time in making headway
to replace instant coffee in many countries.

7.4.2 Standardization

The strength of standardization in the production and distribution of products and services is in
its simplicity and cost. It is an easy process for executives to understand and implement and it is
cost effective also. If cost is the only factor being considered then standardization is clearly a
logical choice because economies of scale can operate to reduce production costs. Yet minimizing
production cost does not necessarily mean that profit increases will follow. Simplicity is not
always beneficial and costs are often confused with profits. Cost reductions do not automatically
lead to profit improvement and in fact the reverse may apply. By trying to control production
costs through standardization the product may become unsuitable for alternative markets. The
result may be that demand abroad will decline which leads to profit reduction. In some situations
cost control can be achieved but at the expense of overall profits. It is, therefore, prudent to

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