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.
Comments
Post a Comment