Global Marketing Strategy

Product Development

Product design & development is an activity where the potential to globalize needs to be examined carefully. A globally standardized product can be made efficiently at a low cost but may end up pleasing few customers. On the other hand, customized products targeted at different markets across the world may be too expensive. The trick, as in the case of other value chain activities is to identify those elements of the product which can be standardized across markets and those which need to be customized.

Japanese companies such as Sony and Matsushita have been quite successful in marketing standardized versions of their consumer electronics products. These companies had limited resources during their early days of globalization and identified features which were universally popular among customers across the world. Global economies of scale helped them to price their products competitively. At the same time, these companies laid great emphasis on quality. As a result, as their products, even without frills, began to appeal to customers. Many of Sony’s consumer electronics products are highly standardized except for the parts that meet national electrical standards.

Canon offers the interesting example of a Japanese company that took into account global considerations while developing a new product. In its domestic market, customer requirements were quite different. Photocopiers in Japan were expected to copy all sizes of paper. Canon felt that the designing around the requirements of the US, the largest market for photocopiers in the world made sense. In the process, the company deliberately overlooked some of the features required by the Japanese market, to keep its development costs under control.

In the case of industrial products, standardization may become unavoidable if global customers coordinate globally their purchases. This seems to be true in the PC industry and companies such as Dell are taking full advantage of this trend. This is likely to accentuate further, as companies increasingly feel the compelling need to coordinate their corporate information systems on a global scale. MNCs often choose to replicate the computer system in their headquarters to minimize the costs involved in writing new programs and training staff.

In industries characterised by high product development costs and great risk of technological obsolescence, there is a great motivation for developing globally standardized products and services. By serving large markets, costs can be quickly recovered. Even in the food industry, where tastes are largely local, companies are looking for opportunities to standardize. Even if identical offerings cannot be made in different markets, companies are developing a core product with minor customization, such as a different blend of coffee, to appeal to local tastes.

In a globalized economy, there is pressure on companies to improve efficiencies by offering standard products to the extent possible. There are pitfalls however to be avoided. Customer preferences vary across countries. Let us say all these are carefully taken note of and some �average’ preference arrived at. Based on this, if a company develops a new product, it may well and up pleasing no one. As Kenichi Ohmae has remarked in his book, �The Borderless World’: “When it comes to product strategy, managing in a borderless economy doesn’t mean managing by averages. It doesn’t mean that all tastes run together into one amorphous mass of universal appeal. And it doesn’t mean that the appeal of operating globally removes the obligation to localize products. The lure of a universal product is a false allure.”

Some products of course tend to be more global than the others. These include cameras, watches, pocket calculators, premium priced fashion goods and luxury automobiles. In the case of many industrial products, purchase decisions are normally taken on the basis of performance characteristics. Considerable scope exists for standardization that can cut costs. However, even for these products, local customization may be required in engineering, installation, sales, service and financing schemes. In the case of financial services, institutional products tend to be more global than the retail ones.

Consider a product like cars. Traditionally, car manufacturers have developed hundreds of models to meet the needs of different markets without exploring the possibilities that exist for standardization. Proliferation of models has resulted in unused capacities and inefficiencies. In the global automobile industry today, substantial excess capacity exists. Under these circumstances, car manufacturers