Product and Branding decisions for Foreign Markets
The international marketing mix consists of 4 Ps viz.
Product & Branding Decision
A product is something both tangible and intangible. The tangible products can be described in terms of physical attributes like shape, dimension, components, form, color etc.
The intangible products include various services like merchant banking, mutual funds, insurance, consultancy, air travel etc. However, sometimes both tangible and intangible are combined to give a total product.
The global markets must see the total product which includes tangible and intangible.
The study of product in the international market includes:
- Product Development
- Product Life-cycle
- Branding Decisions
- Packaging Decisions
Market Segmentation: The main purpose of the market segmentation is to satisfy the customer needs more precisely. Market segmentation helps to enter the foreign markets in a phased manner
Product Positioning: Product positioning attempts to occupy an appealing space in a consumer’s mind in relation to the space occupied by other competitive products.
Product Adoption: Product to be adopted in a foreign market must demonstrate Five factors.
(1) Relative advantage over existing alternatives.
(2) Products cleanliness and sanitation are accepted in rich countries.
(3) Compatible with local customs and habits:
(4) Observism: If the product is used publicly the others can observe the product.
(5) Complexity: If the product’s qualities are difficult to understand then other product has slow market acceptance.
INTERNATIONAL PRODUCT LIFE CYCLE
International product life cycle model is based on empirical actual pattern of trade. This model explains the relationship among the product life cycle trade and investment.
International product life cycle model explains:
(1) High-income, mass-consumption countries initially export, and later import the product as they lose their export markets.
(2) Later, the other advanced countries shift from an importing country to an exporting country.
(3) After some time, even the less developed countries shift from the status of importing country.
(1) New products are initially introduced in high-income countries/markets as the latter offer high potential demand
(2) Initially products are produced where they are sold.
(3) Mostly product inventions take place in high-income countries.
(4) Entrepreneurs in middle-income countries take the advantage of low cost of labor and other factors of production in the production of the new products.
(5) Market stabilizes when the product reaches maturity, the design, technology and markets stabilize.
(6) Production from low income countries displaces the production of the high income countries due to the cost advantage.
(7) Companies of high-income countries shift to low-income countries to take the advantage of low cost factors of production.
(8) These companies gain the ownership and control over the production of low-income countries.
(9) The producers of low-income countries produce and sell higher volumes due to the low cost of production and price. Further, these producers also export in higher volumes due to heavy demand, consequent upon low cost of factors.
(10) Low-income countries export to high-income countries and compete with the industries of high income countries who enjoyed monopoly at the initial stage of the cycle.
(11) With this stage, cycle completes its turn. Textiles is an example of this cycle. This product has gone through the complete cycle for the investing country (UK), other developed countries and finally the developing countries. Similarly, electronics industry passed through all the stages. This product shifted from USA to Japan to Korea to India.
Stages of International Product Life Cycle
(1) Stage Zero: Local Innovation: The product in this stage is a familiar product in the local market. Product innovations take place mostly due to the changing wants of the local people.
(2) Stage 1: Overseas Innovation: After a product is successful in the domestic market, the producer desires exporting it to the foreign markets due to excess production compared to its demand in the domestic country.
(3) Stage 2: Maturity: The development of the product reaches the peak stage even in foreign markets. The producer modifies it and develops it based on taste and preference of the customers in foreign markets. The producer exports the products even to less developed countries in this stage.
(4) Stage 3: Worldwide Imitation: The local manufacturers in various foreign countries start to imitate the popular foreign products. They modify those products slightly based on the local needs and produce the same at less cost and sell them at cheaper prices.
(5) Stage 4: Reversal: Competitive advantage of innovative or original manufacturer disappears at this1stage as producers in many foreign countries imitate the product, develop it further and produce it at less cost. This stage also results in product standardization and competitive disadvantage. The product at this stage does not have to be either capital intensive or technology intensive, but it becomes labour intensive – a strong competitive advantage possessed by developing countries.
International Branding Decision
A trademark in USA according to the Lauham Trademark Act, 1947, “includes
any word, name, symbol or device or any combination thereof adopted and used by manufacturer or merchant to identify his goods, and distinguish them from those manufactured or sold by others.”
Generic or No Brand: The first decision regarding branding is whether to brand or not. The trend towards non-branding products is increasing world-wide. In fact, the scales of non-branded products is increasing particularly in retail stores. The increase in demand for non-brand products is due to the availability of these products at less price. In addition, non-brand products are available – In a number of sizes and models.
Branded Products: Most of the global companies go for branding. The customers of different countries find it easy to identify the branded products and they are aware of the ingredients and utility of the branded products. For example” the customers throughout the world are aware of the products of Colgate-Palmolive, Pepsi or Coke etc. The global company can get better price and profits through branded products.
Private Brand: Most of the exporting companies go for dealer’s brand or private brand. The advantages of private branding include: easy in giving dealer’s acceptance, possibility of getting larger market share, less promotional expenses etc. Private branding is more appropriate for the small companies who export to various foreign countries.
Manufacturer’s Brand: The manufacturer sells the products in his own brand. The advantages of manufacturer’s brand include: better control of products and features, better price due to more price in electricity, retention of brand loyalty and better bargaining power.
Single Brand: The global company go for a single brand for all its exports to the same country (or Single Brand): The advantages of single brand in single market include: better impact on marketing, permitting more focused marketing, brand receives full attention, reduction in cost of promotion etc.
Multiple Brands: The marketing conditions and the features of the customers vary widely from one region to the other, in the same country. Therefore, the exporter uses multiple branding decisions in such cases. Multiple branding enables the exporter to meet the needs of all segments. The other advantages of multiple branding include: creation of excitement among employees, gaining of more shelf space, avoidance of negative connotation of existing brand etc.
Local Brands: Global companies have started widely using the local brands in order to give the impression of cultural compatibility of the local market. The advantages of local branding include: elimination of difficulty in pronunciation, elimination of negative connotations, avoidance of taxation on international brand etc.
World Wide Brand/Global Brand: Exporters normally go for global brand. The advantages of global brand include: reduction of advertising costs, elimination of brand confusion, better marketing impact and focus, status for prestigious brands and for well-known designs etc.
Strategies for Branding Decisions
(1) If the product has production consistency and salient attributes which can be differentiated, then it would be better for the manufacturer to go for branding otherwise better to sell the product without any brand.
(2) If the manufacturer is least dependent person, it would be feasible to go for the manufacturer’s own brand otherwise, it would be feasible to go for a private brand.
(3) If there are intermarket differences like demographic and psychological, it would be feasible for having a local brand. Otherwise, it would be better to go for global brand.
(4) If there are intermarket differences like demographic and psychological, it would be feasible for multiband. Otherwise it would be feasible to go for single brand.