Product Attributes and Market Adaptation in International Business

Posted on Dec 7, 2024 in Economy

Product Attributes and Dimensions

In any company, the product is something that is produced or sold in the market. However, from a more market-oriented perspective, the product is not only a series of physical and technical characteristics, but rather a set of utilities that the client appreciates. Generally, a company does not sell a single product but a set of them, which is called a portfolio or range of products. A range of products can be composed of one or more lines of products.

A product line is a set of homogeneous products or a number of products with common characteristics that constitute a group within the same category. The scale of a portfolio or range of products is measured by the number of different lines within it. The depth is the number of models, sizes, and varieties that are offered within each product line. The length is defined as the total number of product references manufactured or sold by the company.

Material Elements

The material elements are the physical, chemical, or technical aspects of the product, i.e., its composition, design, and quality. These properties will be determined by the needs and demands of customers, the productive capacity of the company, and market impositions. The technical requirements imposed by the government of each country are taken into account in the composition of products. While the objective of the technical requirements is to protect consumers, the approval and certification of products is the official recognition of quality standards according to standards. These certificates are awarded by prestigious organizations.

Certification is a very important business case when trying to convince the client that a product with an appropriate level of quality is being offered. This is the basic objective of ISO-9000. In Spain, AENOR (Spanish Association for Standardization and Certification) was appointed by Order of the Ministry of Industry and Energy, February 26, 1986, in accordance with Royal Decree 1614/1985, as an entity to develop standardization and certification activities. It was recognized as a standards body to act as a certification institution by Royal Decree 2200/1995, in development of Law 21/1992, of Industry.

AENOR’s commitment is:

Develop technical standards with the participation of all stakeholders and assist in promoting the Spanish contribution to the development of European and international standards.
Certify products, services, and companies (systems), giving them a competitive differential value that helps to promote trade and cooperation internationally.
Align management to customer satisfaction and active participation of our people, with criteria of total quality management and results to ensure competitive development.
Promote the dissemination of a culture that identifies us as a support to those who seek excellence.

External Elements: Packaging and Labeling

In the creation of packaging, five aspects must be considered: protection, promotion and information, size, and shape.

A) Protection: Protection needs vary from one country to another depending on:

Weather: A warm and humid climate will require different packaging from a dry and cold climate.
Transportation system and distribution channels: Products transported to distant countries with poor transport infrastructure need more durable packaging.
Regulations: Binding regulations in the country of import and export specify the characteristics, composition, dimensions, and packing system.

B) Promotion and Information: In promotional aspects, consumer habits, tastes, attitudes, and other cultural conditions of each market should be considered. For example, yellow is associated with disease in Asia, and red is the color of luck in China.

The colors used in the packaging material, and especially in the container, are of great importance in promoting the product.
Information on storage conditions, maintenance, load form, and fragility of contents must be included.
A design adapted for each market or a standard one for all must be chosen.

C) Size and Shape: An important aspect is the size of the container, which usually depends on the level of consumer income. Shopping frequency (daily/weekly) is also important. In countries where the hypermarket system is highly developed, shopping is spaced out, so it is advisable to increase the size of the containers or the number of products per package.

Market preferences should be analyzed because, in many cases, it is not necessary to modify the existing package. In other cases, the costs of creating a new package or adjustments to the packaging machinery for each market should be considered. If different packaging is needed, production costs would rise in excess. If lower production costs are desired, shapes, sizes, and materials should be standardized. Adaptation of colors, logos, or symbols can be achieved with low external costs. A good example of an international standard container is the glass bottle of Coca-Cola, known to all consumers of the product worldwide.

An increasingly important aspect is environmental impact, which is why many companies are using recycled materials for packaging their products.

Labeling

The labeling of export products is affected by three different elements: language, local laws, and consumer information.

1) Language: If the label contains essential information for the use of the product, the language of the consumer must be used. In many markets, it is mandatory that the information on the label is printed in the local language. One possibility, if the information is not very extensive, is to use several languages covering groups of countries. In Eastern Europe, where imported products are highly appreciated, exporters sometimes use a bilingual label, with the language of the destination and origin country, or English.

2) Legislation: Labeling legislation varies considerably from one country to another. In general, regulations require that the label contains information on the country of origin, manufacturer’s name, weight, content descriptions, ingredients, and special information about additives and chemicals used.

3) Information and Promotion: The label also provides an avenue of communication with the customer. The manufacturer may use it to stimulate the purchase and facilitate the use of the product, thereby increasing consumer satisfaction. The label may contain information about product usage and promotional claims such as price deals, prizes, raffles, etc.

Intangible Items: Trademark and Trade Name

Brands are more important in the marketing of consumer products than for industrial products or services. When a company moves into the international arena, decisions about brands and names become increasingly important because of their value in international markets.

For the company, having a brand known by consumers offers security and bargaining power to pressure for discounts on many occasions. Product differentiation is often associated with brand image. Thus, in markets where competition has a strong brand or trade name, the entry of new products will be very difficult.

International trademark policy covers issues such as the selection of international brands, the decision to use a single global brand or adapt the brand to foreign markets, the use of own or other brands, and trademark registration and piracy.

Types of Brands

The same trademark can be used in all markets (global brand), different brands according to market characteristics (local brands), or distributor brands (white labels). The evaluation of the advantages and disadvantages of using global, local, or white brands will lead to a decision.

1) Global Brands: The main advantage of using the same name or trademark in the international market lies in the resulting economies of scale, owing to greater standardization in the rest of the marketing mix variables, including promotional activities and advertising. An additional benefit of using global brands is that consumers around the world more easily identify the product, even if they are in another country. Using a global brand means less cost to the company and higher profits from international media promotions.

2) Local Brands: The difficulty of finding trademarks or trade names that have the same appeal and are equally suitable in all foreign markets is one reason for the use of local brands. In some cases, a company chooses a local brand, aiming not to mention the country of origin of the product when the exterior image is negative or there is a general opposition to foreign products.

3) White Labels: The exporting company has the option of marketing its products under the brand of its distributor or retailer. This is a growing option, especially in consumer products. The main advantage for the exporter is cost savings from promoting an unknown brand in that market and the speed of obtaining benefits from an existing brand. The distributor offers a strong brand in the market. However, there are other aspects to consider. The company loses control over local marketing, and the direct relationship with consumers is lost.

Trademark Protection

Trademark protection is a very important aspect to consider. The registration process and legislation varies from country to country, so it is advisable to contact legal experts in the field. Large corporations often have their trademark and trade name registered in virtually all world markets. The need to register trademarks is to prevent another company from marketing its products under the same brand.

Therefore, the EU has adopted the Community Trademark Register. Companies wishing to participate in the Community market do not have to register their trademarks in each of the Member States, as they may apply for registration at the European Office for Harmonization in the Internal Market, based in Alicante. Thus, through a single application, a single office, and a single fee, a brand can be registered in the entire EU territory. The protection expires after five years if the mark has not been used by the holder and must be renewed after ten years. However, two important issues should be highlighted: the degree of protection of this record may differ among EU countries, and once the application for registration is made, it must be approved by all EU countries, which can be a difficult barrier to overcome.

Country of Origin

Consumers value the product or service offered by the company not only by its appearance, price, and quality. The or product’s country of origin also affects their purchasing decisions (e.g., Japanese and German cars are highly valued). That assessment, whether positive or negative, can change over time and be different for each market.

Warranty

Warranty is used as an advantage when there are suspicions about the product’s quality. Increased product protection through greater security is a promotional tool that should accommodate local needs.

Pre- and After-Sales Services

A company that exports and offers good pre- and after-sales service is more competitive than one that does not offer it or has incomplete service. The greater the technical complexity of a product, the greater the requirement in this regard.

Product Life Cycle

The product life cycle is a concept of great importance in the marketing process since the behavior of the market situation and competitive environment change over the time in which the product is sold.

Introductory Phase: In the product introduction phase, competitors are often few or even nonexistent. The price of the product at this stage is generally high because it is a new product.
Growth Phase: At this stage, sales increase rapidly. It is the take-off stage of the product. Profits also grow rapidly and reach their highest point at the end of this stage. Competition, attracted by business opportunities, intensifies in this phase. Hence, outlets increase, and new distribution channels open. The number of product versions increases, and performance improves. The price, though still high, begins to decline.
Maturity Stage: In the maturity stage, demand levels off. Sales continue to rise, and there comes a time when they start to descend. Demand only occurs for replenishment of the product and the creation of new families among consumers. As a result of declining sales, profits begin to decline, stocks rise, production capacity exceeds demand, and weaker competitors begin to disappear. The mature phase is the longest in the life cycle of most products on the market. Its duration may be extended further if strategies are carried out to improve the product, find new uses for it, or attract new users. Prices begin to decrease as competition becomes very intense at this time. The differences between products become more subtle, and the product has more associated services.
Decline Phase: In the last phase, sales and profits are significantly reduced and are likely to disappear. The industry is reduced. Production is concentrated in a few companies, which offer a smaller variety of products. Prices stabilize and may even rise due to the disappearance of competitors. This may be due to several reasons: technological advances, changes in consumer tastes and fashions, loss of competitiveness, alternative products that are cheaper, more durable, safer, and with better benefits, etc.

Several factors will influence the final decision to withdraw or keep the product longer on the market. The company may extend the product life cycle if it gets redesigned, finds new uses for it, or attracts new consumers. The expected withdrawal of competitors could make the product remain profitable on the market for additional time. But finally, the product will eventually disappear.

Standardization Versus Adaptation

A company can market its products with the same attributes or elements in all markets where it operates or adapt to the characteristics of each. These two positions are determined by the advantages of uniformity in the product strategy in all markets (standardization) or by the different needs and conditions (adaptation). The most significant reasons that favor a different strategy are:

Variables that Motivate Product Standardization

Economies of Scale in Production, Marketing, and Management: The clearest motivation is economies of scale in manufacturing processes. Making a standard product versus multiple products or products with any change in any of its elements is a cost savings. It also reduces procurement costs and R&D. On the other hand, standardization in the product facilitates the development of distribution and promotion policies.
Homogenization of Taste and Consumer Demand: Consumer behavior tends to become increasingly similar, regardless of the market, due to the greater fluidity of transport and telecommunications.
Consistent and Coherent Image Internationally: Marketing the same product in every market makes consumers more easily recognize the product. Consumers of standard products, who can make the purchase in several markets, will immediately recognize these products, which tends to foster loyalty to the article. This is the case with Kodak film and Gillette razor blades.
Industrial Products: The demands and needs of industrial customers tend to be more homogeneous than those of individual consumers, so industrial products are often traded in foreign markets in a standardized way, unlike what happens with consumer products.

Variables that Lead to Product Adaptation

Differences in Behavior and Consumer Demands: These situations have led to product adaptation, especially in companies with a wide market orientation. The equipment of German and Japanese cars is very different, as German consumers were more interested in the safety aspects of the equipment inside the vehicle, for example.
Differences in Conditions of Use: Although the product provides the same function in different markets, the terms of use may vary significantly. Certain advanced technology equipment may only be sold in countries with good technical support. Another factor to consider is climate constraints. For example, pottery sold in Nordic countries should be resistant to cold temperatures if used for exterior linings and coatings. Consumer knowledge and education level is also a factor. In Northern European countries, there is a much more developed environmental concern than in Southern countries. This attitude may stem the flow of products considered harmful to the environment, even though their sale has not had problems in other markets. Other factors that may influence product adaptation strategies are different consumer habits and lifestyles.
Local Regulations Affecting Product Composition: Governments of different countries may require that products meet certain technical or quality requirements. Regulatory requirements may relate to any aspect of the product.

Product Mix/Market

The company must decide which product or product line to introduce in each market. Once a product line is chosen for a specific market, it must be decided whether to introduce the whole line with the variants sold in the domestic market or only a portion of these products. Factors that influence these decisions can be classified into internal and external, depending on the type of control exercised by the company over them.

Internal Factors

Internal factors that may affect the company are its objectives, resources, and forms of entry into foreign markets.

Company Objectives and Resources: The reasons a company may have to go to foreign markets are varied. These include risk diversification, better use of productive capacity, creating economies of scale, rapid growth, dealing with competition, etc. In other cases, internationalization may be due to the need to dispose of surplus that has not been sold in the domestic market. The company’s resources and infrastructure are direct determinants of the opportunity for entry of a product in foreign markets or the breadth of the product line. A company with limited resources can only access more accessible markets.
Forms of Entry into Foreign Markets: The company’s strategy for accessing foreign markets is an internal factor that will influence the decision of the product mix or product line/market. A company incorporated into a given market individually will have more freedom of choice in the variety of products it wants to enter. However, if accessed in collaboration with other companies, the variety of products in its line will be limited.

External Factors

External factors not controlled by the company include:

Consumer/Customer Demands: Demand includes the needs, tastes, conditions of use, and habits of consumers or potential customers. It will be influenced mainly by cultural and social values, as well as the image of the country of origin of the product.
Competition: The company will have to analyze the product line offered by various competitors in foreign markets where they want to operate. Sometimes they decide to enter foreign markets in complementary product lines to competition, and sometimes they enter in direct competition with other providers because they believe their product has a competitive advantage, either in quality, price, or marketing network.
International Product Life Cycle: In line with the theory of the international product life cycle, demand grows first in the country of origin and other markets of advanced industrial development. Subsequently, it arises in less developed markets. In principle, the company exports only surplus production. As demand consolidates in the country of origin, the company tends to extend its marketing and production processes to other markets in the process of growing demand, usually less developed countries in industrial and economic development. The different situations of the product cycle in foreign markets entail the introduction of different products and lines depending on the situation in each market cycle. Multinational Gillette sells double-edged razors in the Chinese market, which is in the growth phase, while this product is in decline in more developed markets.
Regulatory and Legal Requirements Concerning the Product: These are legal requirements (technical, health, environmental) on any of the product’s attributes. Also, tariffs, taxes, and other import barriers. Taken together, these factors will encourage or discourage the entry of a product in a given market.
Infrastructure and Distribution Channels in the Target Market: Existing distribution channels, infrastructure, transport, and communications, and, in general, any factor that supports the product policy will influence market opportunities in foreign markets.
Level of Economic Development: The product line that a company markets normally ranges from the simplest to the most sophisticated. The level of economic development of a market will also affect the selection of the product line to be introduced.