Fundamentals of Global Strategy Chapter 6 Globalizing the Value Proposition

Chapter the Value Proposition Managers sometimes assume that what works in their home country will work just as well in another part of the world . They take the same product , the same advertising campaign , even the same brand names and packaging , and expect instant success . The result in most cases is failure . Why ?

Because the assumption that one approach works everywhere fails to consider the complex mosaic of differences that exists between countries and cultures . Of course , marketing a standardized product with the same positioning and communications strategy around the purest form of considerable attraction because of its and simplicity . It is also extremely dangerous , however . Simply assuming that foreign customers will respond positively to an existing product can lead to costly failure . Consider the following classic examples of failure had to withdraw its bottle in Spain after discovering that few Spaniards owned refrigerators with large enough compartments to accommodate it . General Foods squandered millions trying to introduce packaged cake mixes to Japanese consumers . The company failed to note that only of Japanese homes were equipped with ovens . General Foods Tang initially failed in France because it was positioned as a substitute for orange juice at breakfast . The French drink little orange juice and almost none at breakfast . With a few exceptions , the idea of an identical , fully standardized global value proposition is a myth , and few industries are truly global . How to adapt a value proposition in the most effective manner is therefore a key strategic issue . URL books 121

Value Proposition Adaptation Decisions Value proposition adaptation deals with a whole range of issues , ranging from the quality and appearance of products to materials , processing , production equipment , packaging , and style . A product may have to be adapted to meet the physical , social , or mandatory requirements of a new market . It may have to be modified to conform to government regulations or to operate effectively in geographic and climatic conditions . Or it may be redesigned or repackaged to meet the diverse buyer preferences or conditions . A product size and packaging may also have to be modified to facilitate shipment or to conform to possible differences in engineering or design standards in a country or in regional markets . Other dimensions of value proposition adaptation include changes in brand name , color , size , taste , design , style , features , materials , warranties , service , technological sophistication , and performance . The need for some changes , such as accommodating different electricity requirements , will be obvious . Others may require analysis of societal customs and cultures , the local economy , technological sophistication of people living in the country , customers purchasing power , and purchasing behavior . Legal , economic , political , technological , and climatic requirements of a country market may all dictate some level of localization or adaptation . As tariff barriers ( tariffs , duties , and quotas ) are gradually reduced around the world in accordance with World Trade Organization ( rules , other barriers , such as product standards , are . For example , consider regulations for food additives . Many of the United States generally recognized as safe ( GRAS ) additives are banned today in foreign countries . In marketing abroad , documentation is important not only for the amount of additive but also for its source , and often additives must be listed on the label of ingredients . As a result , product labeling and packaging must often be adapted to comply with another country legal and environmental requirements . Many kinds of equipment must be engineered in the metric system for integration with other pieces of equipment or for compliance with the standards of a given country . The United States is virtually alone in its adherence to a nonmetric system , and that compete successfully in the global market have found metric measurement to be an important detail in selling to overseas customers . URL books 122

Even instruction or maintenance manuals , for example , should be made available in centimeters , weights in grams or kilos , and temperatures in degrees Celsius . Many products must be adapted to local geographic and climatic conditions . Factors such as topography , humidity , and energy costs can affect the performance of a product or even define its use in a foreign market . The cost of petroleum products , along with a country infrastructure , for example , may mandate the need to develop products with a greater level of energy . Hot , dusty climates of countries in the Middle East and other emerging markets may force automakers to adapt automobiles with different types of filters and clutch systems than those used in North America , Japan , and European countries . Even shampoo and cosmetic product makers have to chemically reformulate their products to make them more suited for people living in hot , humid climates . The availability , performance , and level of sophistication of a commercial infrastructure will also warrant a need for adaptation or localization of products . For example , a company may decide not to market its line of frozen food items in countries where retailers do not have adequate freezer space . Instead , it may choose to develop dehydrated products for such markets . Size of packaging , material used in packaging , and service , and warranties may have to be adapted in view of the scope and level of service provided by the distribution structure in the country markets targeted . In the event that servicing facilities are conspicuous by their absence , companies may need to offer simpler , more robust products in overseas markets to reduce the need for maintenance and repairs . Differences in buyer preferences are also major drivers behind value proposition adaptation . Local customs , such as religion or the use of leisure time , may affect market acceptance . The sensory impact of a product , such as taste or its visual impression , may also be a critical factor . The Japanese consumer desire for beautiful packaging , for example , has led many US . companies to redesign cartons and packages specifically for this market . At the same time , to make purchasing marketed consumer products more affordable in lesser developed countries , makers of products such URL books 123

as razor blades , cigarettes , chewing gum , pens , and candy bars repackage them in small , single units rather than multiple units prevalent in the developed and more advanced economies . Expectations about product guarantees may also vary from country to country depending on the level of development , competitive practices , and degree of activism by consumer groups local standards of production quality and prevalent product usage patterns . Strong warranties may be required to break into a new market , especially if the company is an unknown supplier . In other cases , warranties similar to those in the home country market may not be expected . As a general rule , packaging design should be based on customer needs . For industrial products , packaging is primarily functional and should needs for storage , transportation , protection , preservation , reuse , and so on . For consumer products , packaging has additional functionality and should be protective , informative , appealing , conform to legal requirements , and buying habits ( Americans tend to shop less frequently than Europeans , so larger sizes are more popular in the United States ) In analyzing adaptation requirements , careful attention to cultural the target customers in the home country ( country of origin ) and those in the host country is extremely important . The greater the cultural differences between the two target markets , the greater the need for adaptation . Cultural considerations and customs may branding , labeling , and package considerations . Certain colors used on labels and packages may be found unattractive or offensive . Red , for example , stands for good luck and fortune in China and parts of Africa aggression , danger , or warning in Europe , America , Australia , and New Zealand masculinity in parts of Europe mourning ( dark red ) in the Ivory Coast and death in Turkey . Blue denotes immortality in Iran , while purple denotes mourning in Brazil and is a symbol of expense in some Asian cultures . Green is associated with high tech in Japan , luck in the Middle East , connotes death in South America and countries with dense jungle areas , and is a forbidden color in Indonesia . Yellow is associated with femininity in the United States and many other countries but denotes mourning in Mexico and strength and reliability in Saudi Arabia . Finally , black is used to signal mourning , as well as style and elegance , in most Western nations , but it stands for trust and quality in China , while URL books 124

symbol for cleanliness and purity in the mourning in Japan and some other Far Eastern nations . A country standard of living and the target market purchasing power can also determine whether a company needs to modify its value proposition . The level of income , the level of education , and the availability of energy are all factors that help predict the acceptance of a product in a foreign market . In countries with a lower level of purchasing power , a manufacturer may a market for sophisticated product models or products that are obsolete in developed nations . Certain technology products are inappropriate in some countries , not only because of their cost but also because of their function . For example , a computerized , industrial washing machine might replace workers in a country where employment is a high priority . In addition , these products may need a level of servicing that is unavailable in some countries . When potential customers have limited purchasing power , companies may need to develop an entirely new product designed to address the market opportunity at a price point that is within the reach of a potential target market . Conversely , companies in countries that have achieved local success may it necessary to adopt an strategy whereby the product may have to be designed to meet standards . Kraft Oreo Cookies in China 11 Kraft Oreo has long been the cookie in the market , but the company had to reinvent it to make it sell in China . Unlike their American counterparts , Oreo cookies sold in China are long , thin , layered , and coated in chocolate . were introduced in 1912 in the United States , but it was not until 1996 that Kraft introduced to Chinese consumers . After more than years of sales , the company embarked on a complete makeover . Research had shown , among other , that traditional were too sweet for Chinese tastes and that packages of 14 priced at 72 cents were too expensive . In response , Kraft developed and tested 20 prototypes of with Chinese consumers before settling on a new formula it also introduced packages containing fewer for just 29 cents . URL books 125

But Kraft did not stop there . The research team had also picked up on China growing thirst for milk , which Kraft had not considered before . It noted that increased milk demand in China and other developing markets was a contributing factor to higher milk prices around the world . This put pressure on food manufacturers like Kraft , whose biggest business is cheese , but it also spelled opportunity . Kraft began a grassroots marketing campaign to educate Chinese consumers about the American tradition of pairing milk with cookies . The company created an Oreo apprentice program at 30 Chinese universities that drew student applications . Three hundred were accepted and trained as ambassadors . Some of them rode around Beijing on bicycles , outfitted with wheel covers resembling , and handed out cookies to more than consumers . Others organized basketball games to reinforce the idea of dunking cookies in milk . Television commercials showed kids twisting apart Oreo cookies , licking the cream center , and dipping the chocolate cookie halves into glasses of milk . Still , Kraft realized it needed to do more than just tweak its recipe to capture a bigger share of the Chinese biscuit market . China segment was growing faster than the traditional cookie segment , and Kraft needed to catch up to rival SA , the worlds largest food company , which had introduced wafers there in 1998 . So Kraft decided this market opportunity was big enough to justify a complete remake of the Oreo itself and , departing from longstanding corporate policy for the time , created an Oreo that looked almost nothing like the original . The new Chinese Oreo consisted of four layers of crispy wafer filled with vanilla and chocolate cream , coated in chocolate . To ensure that the chocolate product could be shipped across the country , could withstand the cold climate in the north and the hot , humid weather in the south , and would still melt in the mouth , the company had to develop a new proprietary handling process . Kraft adaptation efforts paid off . In 2006 , Oreo wafer sticks became the biscuit in China , outpacing , a biscuit brand made by the Chinese company Dali . The new also outsell traditional ( round ) in China . They also have created opportunities for further aggregation and product innovation . Kraft now sells the wafers elsewhere in Asia , as well as in Australia and Canada , and URL books 0792 . 125

the company has introduced another new product in China wafer rolls , a wafer lined with cream . The hollow cookie can be used as a straw through which to drink milk . This success encouraged Kraft to empower managers in other businesses around the globe . For example , to take advantage of the European preference for dark chocolate , Kraft introduced dark chocolate in Germany under its brand . Research showed that Russian consumers like premium instant coffee , so Kraft positioned its Carte coffee as an upscale brand . And in the Philippines , where iced tea is popular , Kraft launched Tang . As Kraft experience shows , successful global marketing and branding is rooted in a careful blend of aggregation , adaptation , and arbitrage strategies that is tailored to the specific needs and preferences of a particular region or country . Jargon ( 2008 , May ) URL books 127

Adaptation or Aggregation The Value Proposition Globalization Matrix A useful construct for analyzing the need to adapt the offer and message ( positioning ) dimensions is the value proposition globalization matrix shown in Figure The Value Proposition Globalization Matrix , which illustrates four generic global strategies . A pure aggregation approach ( also sometimes referred to as a global marketing mix strategy ) under which both the offer and the message are the same . An approach characterized by an identical offer ( aggregation ) but different positioning ( message adaptation ) around the world ( also called a global offer strategy ) An approach under which the offer might be different in various parts of the world ( product adaptation ) but where the message is the same ( message aggregation also referred to as a global message strategy ) A global change strategy under which both the offer and the message are adapted to local market circumstances Figure The ' The Offer Same Different Same Global Global Mix Message The Message Global Global Different Offer Change URL books 128

Global mix or pure aggregation strategies are relatively rare because only a few industries are truly global in all respects . They apply ( a ) when a product usage patterns and brand potential are homogeneous on a global scale , when scale and scope cost advantages substantially outweigh the of partial or full adaptation , and ( when competitive circumstances are such that a term , sustainable advantage can be secured using a standardized approach . The best examples are found in industrial product categories such as basic electronic components or certain commodity markets . Global offer strategies are feasible when the same offer can be advantageously positioned differently in different parts of the world . There are several reasons for considering differential positioning . When costs associated with the offer are high , when key core offered are identical , and when there are natural market boundaries , adapting the message for stronger local advantage is tempting . Although such strategies increase local promotional budgets , they give country managers a degree of in positioning the product or service for maximum local advantage . The primary disadvantage associated with this type of strategy is that it could be difficult to sustain or even dangerous in the long term as customers become increasingly global in their outlook and confused by the different messages in different parts of the world . Branding in China Check into a Four Points Hotel by in Shanghai and you will get all the perks of a quality international hotel a free Internet connection , several restaurants , a parlor , and an assortment of moon cakes , a Chinese delicacy . All this for 80 a night , about 20 less than the average cost of a room in Shanghai . For travelers who associate the brand with plastic ice buckets and polyester bedspreads in the United States , this may come as a surprise . Like Buick , Kentucky Fried Chicken ( and Pizza Hut , is one of those American names that , to some , seems past its prime at home , but it is still popular and growing abroad . The hotel brand has particular cachet in China , going back to 1985 , when it opened the Great Wall Hotel Beijing . Local developers still compete to partner with URL books 129

parent Hotels Resorts develop new properties . In the near future , the company will have more rooms in Shanghai than it does in New York . Like many other companies experiencing pressure at home , sees China as one of its best hopes for growth . The company , which also owns the upscale Regis , and Le brands , expects much of this growth will come from outlying regions . Big cities such as Beijing now have plenty of rooms , thanks in part to the Olympics , but there is growing demand for accommodation in and cities such as and . Lower construction costs and inexpensive labor mean the company Chinese hotel owners can offer guests a lot more than comparably priced properties . In recent years , the focus in China has shifted from international travelers to Chinese consumers . now asks its hotel staff to greet guests in Mandarin instead of English , which was long used to convey a sense of prestige . Many of its hotels do not label their fourth as such because four is considered an unlucky number . is not alone in recognizing the potential of the Chinese market . International hopes to increase its China presence by 50 , to 61 hotels by 2014 . And InterContinental Hotels Group , parent of Holiday Inn , plans to double the 118 hotels it has in China over the next years . One major perk can offer over local competitors is its extensive global network and loyalty perks . More than 40 of its Chinese business comes through its program , and Chinese membership in the program is increasing rapidly . But local customers are not particularly focused on accruing points to earn a free stay . They are more interested in status , using points to get room upgrades , a free breakfast , or anything that accords them conspicuous VIP treatment . Among other things , the preferred guest system allows staffers to see people titles immediately . That makes it easier to give better rooms to managers than the subordinates they are traveling with and to greet them first when a party arrives . After a long period in which paid more attention to its hipper and brands , the company has recently been remodeling its . Among mainland Chinese travelers , the URL books 0797 ?

130 name has continued to exude an aura of international class . While that is helpful for domestic Chinese business , the real potential will only be realized when they start to travel . The company goal is to lock in the loyalty of mainland customers so they will stay at a when they travel abroad . Indeed , if the experience with Japanese tourists in the is any guide , could be looking at 100 million or more outbound trips from China . Global message strategies use the same message worldwide but allow for local adaptation of the offer . for example , is positioned virtually identical worldwide , but it serves vegetarian food in India and wine in France . The primary motivation behind this type of strategy is the enormous power behind a global brand . In industries in which customers increasingly develop similar expectations , aspirations , and values in which customers are highly mobile and in which the cost of product or service adaptation is fairly low , leveraging the global brand potential represented by one message worldwide often outweighs the possible disadvantages associated with factors such as higher local research and development ( costs . As with strategies , however , global message strategies can be risky in the long customers might not elsewhere what they expect and regularly experience at home . This could lead to confusion or even alienation . Abroad 21 is synonymous with chicken . It has to be because chicken is its product . One of the more recent offers the company around the the marinated hot and crispy chicken that is and crunchy on the outside , and soft and juicy on the In India , offers a regular Pepsi with this at just 39 rupees . But also made sure not to alienate the vegetarian Bangalore , you can be vegetarian and yet eat at . Why ?

percent of the Indian population is vegetarian , and in such as Delhi and Mumbai , the number is almost 50 . Therefore , offers a wide range of vegetarian products , such as the tangy , Paneer Tikka Wrap Roll , Veg Lite Burger , Veg Crispy Burger . There are munchies such as the crisp golden veg fingers and crunchy golden fries served with tangy sauces . You can combine the veg fingers with steaming , peppery rice and a spice curry . The mayonnaise and sauces do not have egg in them . URL books 131

While the vegetarian menu is unique to India because of the country distinct tastes , standard chicken products are also adapted to suit local tastes . For example , chicken strips are served with a local sauce , or the sauce of the wrap is changed to local tastes . Thus , tries to balance aggregation with adaptation standardization of those parts of the value offering that travel easily ( core products and positioning ) tailoring of standard chicken products with a different topping or sauce , and offering a vegetarian menu . This adaptation strategy is used in every country that serves the and European markets have a traditional menu based on chicken burgers and wraps , while Asian offerings like those in India are more experimental and adventurous and include rice meals , wraps , and sides . Global change strategies a best fit approach and are by far the most common . As we have seen , for most products , some form of adaptation of both the offer and the message is necessary . Differences in a product usage patterns , sought , brand image , competitive structures , distribution channels , and governmental and other regulations all dictate some form of local adaptation . Corporate factors also play a role . Companies that have achieved a global reach through acquisition , for example , often prefer to leverage local brand names , distribution systems , and suppliers rather than embark on a risky global approach . As the markets they serve and the company become more global , selective standardization of the message and the offer itself can become more attractive . Targeting Muslim Customers 31 Muslims often experience culture shock while staying in Western hotels . travelers in bikinis , and loud music , among other things , embarrass Muslim travelers . That is no longer necessary . A growing number of hotels has started to cater to Muslim travelers . In one , the in white leather , brick , and glass , with a small quiet . Men in and veiled women mingle with Westerners who are sometimes discreetly reminded to respect local customs . are stocked not with alcohol but with Red Bull , Pepsi , and the malt drink Barbican . URL books 132

Buying Muslim used to mean avoiding pork and alcohol and getting your meat from a halal butcher , who slaughtered in accordance with Islamic principles . But the halal food market has exploded in the past decade and is now worth an estimated 632 billion annually , according to the Halal Journal , a magazine . That amounts to about 16 of the entire global food industry . Throw in the finance sector and the myriad of other products and , real estate , hotels , fashion , insurance , for comply with Islamic law and the teachings of the , and the sector is worth well over trillion a year . Seeking to tap that huge market , multinationals like , and have expanded their offerings and now control an estimated 90 of the global halal market . Governments in Asia and the Middle East are pouring millions into efforts to become regional halal hubs , providing manufacturing centers and halal logistics to maintain product purity during shipping and storage . The intense competition has created some interesting partnerships in unusual places . Most of Saudi Arabia chicken is raised in Brazil , which means Brazilian suppliers had to build elaborate halal slaughtering facilities . in New Zealand , the world biggest exporter of halal lamb , have hosted delegations from Iran and Malaysia . And the Netherlands , keen to exploit role as Europe biggest port , has built halal warehouses so that imported halal goods are not stored next to pork or alcohol . It is not just about food . Major drug companies now sell halal vitamins free of the and other animal derivatives that some Islamic scholars say make mainstream products haram , or unlawful . The company produces synthetic material to avoid using animal bone , while Malaysian and Cuban scientists are collaborating on a halal meningitis vaccine . For Muslim women concerned about products containing alcohol or lipsticks that use animal fats , a few cosmetics are creating halal makeup lines . The growing Islamic industry is trying to win customers . Investors are attracted by Islamic banking more conservative approach Islamic law forbids banks from charging interest ( though customers pay fees ) and many scholars discourage investment in excessively leveraged companies . Though it currently accounts for just of the global market , the Islamic industry value is URL books 0797 ?

133 growing at around 15 a year , and it could reach trillion in years , according to a 2008 report from Moody Investors Service . and ( 2009 , September ) Power ( 2009 , June ) URL books 134 Combining Aggregation and Adaptation Global Product Platforms One way around the between creating global efficiencies and adapting to local requirements and preferences is to design a global product or communication platform that can be adapted efficiently to different markets . This approach to global product design has become particularly popular in the automobile industry . One of the first world car platforms was introduced by Ford in 1981 . The Ford Escort was assembled simultaneously in three United States , Germany , and the United parts produced in 10 countries . The and European models were distinctly different but shared standardized engines , transmissions , and ancillary systems for heating , air conditioning , wheels , and seats , thereby saving the company millions of dollars in engineering and development costs . Creating the Perfect Fit New Imagine the challenge of being an engineer these days , and picture one of the hugest men you large , American male weighing about 275 . Now consider a petite woman , and throw in someone with pain . Your challenge design a single seat that comfortably accommodates each of these physically and physiologically diverse individuals , not just for a few minutes but for a drive . Welcome to the global automotive design challenge . While the economic pressures to standardize are becoming stronger , car buyers are getting more diverse , more distressed , and more demanding of power adjustments and other amenities . Seat developers are responding they are using more versatile materials , new engineering techniques , digital technologies , and novel designs to make sitting in a car as , or even more , comfortable as sitting in your living room . This concern for comfort is relatively new hard benches were the standard during the industry earliest days . Even into the , most cars and trucks had simple bench seating in both the front and rear of the automobile . Automotive seat design only became a crucial discipline during the last generation as books 135

Americans began to spend more and more time in their vehicles and as interior comfort and appointments became a major competitive issue . Federal regulations affect seat design only minimally , with the most important requirements focusing on . And there are distance requirements between the driver body and the steering wheel , an issue that can also be addressed with telescoping steering wheels and adjustable pedals . In the end , automakers must mainly make sure the seat design helps the car pass the governments standards . Consumers are far more demanding . Comfort and ergonomic functionality have become the focal points of seat design . Americans are getting bigger and heavier , and automakers try to design seats that can accommodate everyone from the smallest females to the largest males . This is not a simple feat , with the American man now weighing about 24 more than decades ago . At the same time , while women in general also have gotten larger , the of immigrants from Asia actually kept the overall increase in the size of the American woman down to under over the last decades . And just as airlines and manufacturers have had to respond to wider by making seats bigger , auto companies are also faced with having to squeeze bigger people into cabins that are getting smaller as gas prices rise . At the same time , seats must secure tiny drivers and allow them to see clearly over the steering wheel and reach the accelerator and brake pedals . The aging of the American population poses special . Younger demographics like their seats harder , but baby boomers and older customers are used to a soft seat . Whether this is best is not important , despite the fact that more and more consumers are carrying maladies of aging into their cars , including back pain , aching knees , and a general decline in the basic nimbleness required to get in and out of an automobile . It is one thing to design a single seat that can accommodate the frames of the smallest to the largest Americans . Now add the globalization challenge . As automakers seek to vehicle platforms , their seats also have to be able to accommodate the diverse body proportions , size ranges , and consumer preferences of people around the world . URL books 0797 ?

136 For example , while Europeans prefer longer cushions , and Asians like shorter ones , Americans are somewhere in between . And in China , the second row must be as comfortable as the because as many as 40 of car owners have a driver , and the owners tend to sit in the right rear seat . Buss ( 2009 ) URL books 137

Combining Adaptation and Arbitrage Global Product Development Globalization pressures have changed the practice of product development ( in many industries in recent years . Rather than using a centralized or local model , companies are moving to a mode of global collaboration in which skilled development teams dispersed around the world collaborate to develop new products . Today , a majority of global corporations have engineering and development operations outside of their home region . China and India offer particularly attractive opportunities , Cisco , and Intel all have made major investments there . The old model was based on the premise that of teams to facilitate close collaboration among engineering , marketing , manufacturing , and functions was critical to effective product development . teams were thought to be more effective at concurrently executing the full range of activities involved , from understanding market and customer needs through conceptual and detailed design , testing , analysis , manufacturing engineering , and technical product support and engineering . Such concurrent practices were thought to result in better product designs , faster time to market , and production . They were generally located in corporate research and development centers , which maintained linkages to manufacturing sites and sales around the world . Today , best practice emphasizes a highly distributed , networked , and digitally supported development process . The resulting global product development process combines centralized functions with regionally distributed engineering and other development functions . It often involves outsourced engineering work as well as captive offshore engineering . The of this distributed model include greater engineering efficiency ( through utilization of ) access to technical expertise internationally , more global input to product design , and greater strategic . and ( 2006 ) URL books 138

Combining Aggregation , Adaptation , and Arbitrage Global Innovation Many companies now have global supply chains and product development processes , but few have developed effective global innovation capabilities . Increasingly , however , technology access and innovation are becoming key global strategic drivers . This move from cost to growth and innovation is likely to continue as the center of gravity of economic activity shifts further to the East . To illustrate the advantages of a truly global innovation strategy , Santos and others cite the battle between , and Corporation in the cellular phone industry . was a pioneer in the technology , building on initial research from Bell Laboratories . But by focusing primarily on customers and solutions , it missed the market shift toward digital mobile technology and the global system for mobile ( communication , which became the standard in Europe . The company also failed to appreciate that consumers were rapidly developing different use patterns and preferences about product design , thereby rendering a strategy obsolete . A core competency in global ability to leverage new ideas all around the become a major source of global competitive advantage , as companies such as , SAP , and Starbucks demonstrate . They realize that the principal constraint on innovation performance is knowledge . Accessing a diverse set of sources of knowledge is therefore a key challenge and is critical to successful differentiation . Companies whose knowledge pool is the same as that of its competitors will likely develop uninspired me , too products access to a diversity of knowledge allows a company to move beyond incremental innovation to designs and breakthrough solutions . There is an interesting relationship between geography and . In Finland , for example , the high cost of installing and maintaining telephone lines in isolated places has spurred advances in radiotelephony . In Germany , cultural and political factors have encouraged the growth of a strong green movement , which in turn has generated a distinctive market and technical knowledge in recycling and renewable energy . production systems were pioneered in URL books 139

part because of high land costs there . Recognition of the role played by geography in innovation has prompted many companies to their perspective on the innovation process . For example , pharmaceutical companies such as AG and now realize that the knowledge they need extends far beyond traditional chemistry and therapeutics to include biotechnology and genetics . What is more , much of this new knowledge comes from sources other than the companies traditional labs in , Bristol , and in New Jersey , from places such as California , Tel , Cuba , or Singapore . For these companies , globalization of innovation processes is no longer has become imperative . Companies that their supply chains by accessing raw materials , components , or services from around the world are typically able to reduce the overall costs of their operations . Similarly , a side of global innovation is cost reduction . Consider , for example , how companies are now leveraging software programmers in Bangalore , India , aerospace in Russia , or designers in China to cut the costs of their innovation processes . To reap the of global innovation , companies must do three things . Prospect ( the relevant pockets of knowledge from around the world ) Assess ( decide on the optimal footprint for a particular innovation ) Mobilize ( use mechanisms to move distant knowledge without degrading it is , valuable new pockets of knowledge to spur well be the most challenging task . The process involves knowing what to look for , where to look for it , and how to tap into a promising source . Santos and colleagues cite the efforts of the cosmetics maker , in entering the market for fragrance products . Based in Japan , a country with a very limited tradition of perfume use , was initially unsure of the precise knowledge it needed to enter the fragrance business . But the company did know where to look for it . So it bought two exclusive beauty boutique chains in Paris , mainly as a way to experience , firsthand , the personal care demands of the most sophisticated customers of such products . It also hired the marketing manager of Yves Saint Laurent and built a plant in Gien , a town located in the French France leadership in that industry made the where fairly obvious to . URL books 140

The how had also become painfully clear because the company had previously in its efforts to develop perfumes in Japan . Those failures convinced executives that to access such complex rooted in local culture and combining customer information , aesthetics , and company had to immerse itself in the French environment and learn by doing . Having figured out the where and how , would gradually learn what knowledge it needed to succeed in the perfume business . Assessing new sources of innovation , that is , incorporating new knowledge into and optimizing an existing innovation network , is the second important challenge companies face . If a semiconductor manufacturer is developing a new chip set for mobile phones , for example , should it access technical and market knowledge from Silicon Valley , Austin , Seoul , Bangalore , Haifa , and Grenoble ?

Or should it restrict itself to just some of those sites ?

At first glance , determining the best footprint for innovation does not seem fundamentally different from the companies face in optimizing their global supply chains adding a new source might reduce the price or improve the quality of a required component , but more locations may also mean additional complexity and cost . Similarly , every time a company adds a source of knowledge to the innovation process , it might improve its chances of developing a novel product , but it also increases costs . Determining an optimal innovation footprint is more complicated , however , because the direct and indirect cost relationships are far more imprecise . Mobilizing the footprint , that is , integrating knowledge from different sources into a virtual melting pot from which new products or technologies can emerge , is the third challenge . To accomplish this , companies must bring the various pieces of ( technical ) knowledge that are scattered around the world together and provide a suitable organizational form for innovation efforts to . More importantly , they would have to add the more complex , contextual ( market ) knowledge to integrate the different pieces into an overall innovation blueprint . Success in Innovation Vicks Cough Syrup With Honey URL books 141

A new medicine from Vicks that has recently become popular in Switzerland is not as new as it seems . The product , Vicks Cough Syrup with Honey , is really just the latest incarnation of a product that Vicks parent company , Gamble ( initially created for consumers in Mexico and then trickled up to more markets . The term trickle up refers to a strategy of creating products for consumers in emerging markets and then them for customers . Until recently , consumers in the United States and Western Europe could afford the latest and greatest in everything . Now , with purchasing power dramatically reduced because of the global recession , budget items once again make up a growing portion of total sales in many product categories . is not the only multinational company using this strategy . Other practitioners of innovation include General Electric ( GE ) and . In early 2008 , GE Healthcare launched the MAC 400 , GE first portable Electrocardiograph ( that was designed in India for the local market there . The company simplified elements of its earlier , devices made for hospitals by shrinking its case to the size of a fax machine and removing features such as the keyboard and screen . The smaller MAC 400 costs only , versus for its predecessor . This innovation trickled back up again when GE Healthcare decided to sell the unit in Germany as well . offers inexpensive instant noodles in India and Pakistan under its brand . The line includes dried noodles that are engineered to taste as if they were fried , while they have a that is popular in South Asia . And researches how people in emerging nations share phones , such as the 1100 series of devices created for consumers . The company then uses the information as inspiration for new features for users . But what is unique about Honey Cough , as it is also called , is that it has moved around the globe in more than one direction . Honey Cough originated in 2003 in labs in , Venezuela , which creates products for all of Latin America . Market research revealed that Latin American shoppers tended to prefer homeopathic remedies for coughs and colds , so set out to create a medicine using natural honey rather than the artificial typically used . The company first introduced the syrup in Mexico , under the label , and then in other Latin American markets , including Brazil . URL books 0797 ?

142 deduced that the product would appeal to parts of the United States that have large Hispanic populations . In 2005 , the company rebranded it as Vicks for sale in California and Texas , at a price slightly less than Vicks mainstay product , Vicks Formula 44 . Within the first year of its release , the company boosted distribution to 27 more outlets . Figuring that natural ingredients could appeal to even wider groups , took the product to other markets where research indicated that homeopathic cold medicines are popular . In the past years , the company has been marketing the product in Britain , France , Germany , and Italy , as well as Switzerland , and plans to add other Western European countries to the roster . And Western Europe is not the last destination for iterations of Honey Cough . If current market research in the greater United States shows that mainstream American shoppers will buy Honey Cough , will repackage it and market it nationwide , not just as Vicks in Latino markets . Developing and marketing a new product for each nation or ethnic group can take half a decade . up innovation can reduce this time by several years , which explains its appeal . In each rollout , has needed to do little more than make adjustments for each nation health regulations . At a time when companies are looking to speed product offerings while dealing with shrinking budgets and consumers , experience with its Honey Cough line shows how an international product portfolio can be tapped quickly and is , if American companies learn how to go against the . Santos , and ( 2004 , Summer ) Santos , and ( 2004 , Summer ) 2009 , March 31 ) URL books 143

Points to Remember . Managers sometimes assume that what works in their home country will work just as well in another part of the world . The result in most cases is failure . Why ?

Because the assumption that one approach works everywhere fails to consider the complex mosaic of differences that exists between countries and cultures . With a few exceptions , the idea of an identical , fully standardized global value proposition is a myth , and few industries are truly global . How to adapt a value proposition in the most effective manner is therefore a key strategic issue . Value proposition adaptation deals with a whole range of issues , ranging from the quality and appearance of products to materials , processing , production equipment , packaging , and style . A useful construct for analyzing the need to adapt the product or service and message ( positioning ) dimensions is the value proposition globalization matrix . One way around the between creating global and adapting to local requirements and preferences is to design a global product or communication platform that can be adapted efficiently to different markets . Globalization pressures have changed the practice of product development in many industries in recent years . Today , a majority of global corporations have engineering and development operations outside of their home region . Many companies now have global supply chains and product development processes but few have developed effective global innovation capabilities . Increasingly , however , technology access and innovation are becoming key global strategic drivers . A core competency in global ability to leverage new ideas all around the become a major source of global competitive advantage . URL books , 144