Page 138 - DMGT547_INTERNATIONAL_MARKETING

Unit 7: Product Strategy for International Markets

7.7 Trade-off Strategy Notes

“A trade-off means that more of one thing necessitates less of another”. Trade-offs occur when
activities are incompatible and arise for three reasons:

1. A company known for delivering one kind of value may lack credibility and confuse
customers or undermine its own reputation by delivering another kind of value or
attempting to deliver two inconsistent things at the same time.
2. Trade-offs arises from activities themselves. Different positions require different product
configurations, different equipment, different employee behaviour, different skills, and
different management systems. In general, value is destroyed if an activity is over designed
or under designed.

3. Trade-offs arises from limits on internal coordination and control. By choosing to compete
in one way and not the other, management is making its organizational priorities clear. In
contrast, companies that tries to be all things to all customers, often risk confusion amongst
its employees, who then attempt to make day-to-day operating decisions without a clear
framework.
Moreover, trade-offs create the need for choice and protect against repositioners and straddlers.
Thus, strategy can also be defined as making trade-offs in competing. The essence of strategy is
choosing what not the do.

7.8 IPLC

The international product life cycle is a theoretical model describing how an industry evolves
over time and across national borders. This theory also charts the development of a company’s
marketing program when competing on both domestic and foreign fronts. International
product life cycle concepts combine economic principles, such as market development and
economies of scale, with product life cycle marketing and other standard business models.
The four primary elements of the international product life cycle theory are: the structure of the
demand for the product, manufacturing, international competition and marketing strategy, and
the marketing strategy of the company that invented or innovated the product. These elements
are categorized depending on the product’s stage in the traditional product life cycle.
Introduction, growth, maturity, and decline are the stages of the basic product life cycle.

During the introduction stage, the product is new and not completely understood by most
consumers. Customers that do understand the product may be willing to pay a higher price for
a cutting-edge good or service. Production is dependent on skilled laborers producing in short
runs with rapidly changing manufacturing methods. The innovator markets mostly domestically,
occasionally branching out to sell the product to consumers in other developed countries.
International competition is usually nonexistent during the introduction stage, but during the
growth stage competitors in developed markets begin to copy the product and sell domestically.
These competitors may also branch out and begin exporting, often starting with the county that
initially innovated the product. The growth stage is also marked by an emerging product standard
based on mass production. Price wars often begin as the innovator breaks into an increasing
amount of developed countries, introducing the product to new and untapped markets.

At some point, the product enters the maturity stage of the international product life cycle and
even the global marketplace becomes saturated, meaning that almost everyone who would buy
the product has bought it, either from the innovating company or one of its competitors.
Businesses compete for the remaining consumers through lowered prices and
advanced product features.

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