ENTRY INTO A FOREIGN MARKET
In introducing a product in a foreign market, the, marketer must decide whether to use standardization strategy or adapt the product. The following are some factors that would affect choice of product introduction to a foreign market using the two concepts above.
Product adaptation is a marketing strategy whereby new products are based on modification or some improvement on existing or competing products, and not on pioneering innovations. In this case a product can be locally produced but has to be modified to suit different needs of different markets. This strategy can be seen to offer potential market penetration and profitability.
Product standardization on the other hand is an international business strategy for using the same product, advertising, distribution channels and other elements of marketing mix in all the countries.
When planning to enter (a) foreign market(s), the company need to consider whether or not its current products will meet the needs of the foreign target market. After all, this market is likely to have a totally different environment that it will need to come to terms with. This environment may have socio-cultural, legal, economic, technical and even geographic differences from the domestic market that the company is familiar with. The market research investigations are necessary to provide the company with a good idea as to what product strategy it needs to follow.
Factors to consider when choosing whichever strategy:
Financial capabilities of the firm: Product standardization results in economies of scale. This can be appropriate when the firm financial capabilities are low. This results in lower costs of production and enables the producers to offer higher quality products to its customers.
Product adaptation is a costly exercise, requires huge recourses outlay, and should be evaluated on a cost-benefit analysis. If the company is able to do so and still make profit, it is easier to penetrate into the market using this strategy.
Global name of the firm: If the name of a company is well known globally, it will not have many problems to standardize its products. For instance, Gillette is a brand of Procter & Gamble and uses same advertising, distribution and same product and advertising campaign world over. In that case, a company can standardize.
A company may have to adapt if the name of the company is not known at all I the target market. This will help the company gain ground faster.
Target market size: When the target market is relatively small, the company may choose to standardize the product since it s relative cheaper to do so. In the other case, a small and a limited market may not be worth adapting the product considering it is a costly affair. If the company through research feels that it will still make profits with adaptation, it should go for it.
Consumer Mobility: Product standardization will be the ideal situation if the company consumers are relatively mobile and would want to find their favorite products wherever they go to. This is the case of coca cola. It is the same formula and package in all the countries.
Product adaptation will be well placed when the customers are less mobile and the customers are a special case all together.
Host government requirements: If the host government doesn’t mind standardized products, then it can be an ideal strategy.
Some government policies require the product to be of certain standards, certain size, packaging, condition, moisture etc. In that case, the firm has no choice but to adapt or leave the market. In Kenya, certain standards have to be met before goods are allowed into the country by Kenya Bureau of Standards (KEBS).
Physical Environment: major differences in physical environment between the local and host country may find it difficult to sell a standardized product. In that case, product adaptation is required in order to sell and make profits i such countries.
Major Cultural and social differences: this calls for product adaptation if there are major differences in target countries. It can be a problem to sell a standardized product in such countries.