Trade of the Global Company

Theodore Levitt (Philip Kotlar, 2000) postulated that corporations that try to sell standardized or global products across diverse global markets are better able to tap in their core competencies and reduce costs through standardization not only of the product but also of the distribution channels and promotional activities.
Such a strategy, that Keegan calls Straight Extension1, indeed works with consumer electronics including household goods like washing machines, TV sets, music systems, etc. This straight extension involves introducing exactly the same product in a new market (region or country), using the same promotional and distributional strategy that is being used at home. As such, a truly global product is possible to nurture and maintain in a variety of different world regions.
Microsoft had introduced X-Box 360 to three different regions – North America, Europe, and Japan, in November last year. (Planet Xbox 360 News, 2nd Feb 2006) The product is aimed at those between 15 and 35 years of age, having disposable incomes, and interested in technology. Microsoft was able to recognize this segment (that spans over three very different continents) and come up with a standardized product and promotional activity to sell it globally.
Similarly, the recent introduction of Apple’s iPod Nano (Apple.com, and NonStopMac.com) has displayed the proliferation of a global culture that appears to have the hip, trendy, and financially affluent people as its members. This ultra slim and attractive product has caught the imagination of the people worldwide – and even given rise to terms like nanogasm (urbandictionary.com) – a word coined to mean the utter excitement caused by just thinking about the sleek and trendy iPod Nano.
However, there has been more failure than success stories, about how organizations lost millions when they adopted the Straight Extension approach and tried to barge in on the new markets’ sensibilities, disregarding the cultural and social nuances. For example, when Philips introduced its large capacity coffee makers in Japan, it found few takers, though Japanese liked coffee and drank it at home too. (Philip Kotler, 2000). It was soon discovered that as Japanese kitchens are smaller, and the Japanese culture is biased towards zero wastage and preservation of food, Philips coffee makers were not welcomed there. By reducing the size of the product, Philip was finally able to make profits in this market.
In India, where there is still the problem of regular electricity and water supply in even the bigger cities, IFB’s fully-automatic front-loading washing machines are not preferred, even by those who believe it to be superior to other brands and makes available in the local market.
As can be seen, by the above cases, there are many aspects that can prevent a product from becoming a global entity. It is almost impossible, and at times foolish, to foray into newer countries without factoring in the 4 C’s – the customer, the cost, the country, and the competition. An example of a firm that takes the local factors very seriously is of HSBC bank, which goes so far as to calls itself ‘the world’s local bank’.

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