Internationalization and the Dynamics of Product Adaptation—An Empirical Investigation

Abstract

Firms competing in foreign markets can choose to make no changes to the physical product and packaging, called a product standardization policy, which keeps costs low. The main drawback of such a policy is that the product might not satisfy customers. Conversely, firms may choose to modify, or to adapt, the physical characteristics or attributes of a product and its packaging to fit the needs and desires of consumers in different countries better, but this increases development, manufacturing, marketing, packaging, and distribution costs. Though product adaptation is a core aspect of customizing an export market offering, little research has investigated modifying the physical product and packaging. To be successful, an adapted product must add sufficient incremental revenue (through increased sales due to better satisfying customer needs and wants relative to competitive product offerings) such that the additional manufacturing and marketing costs that result from adapting the product are recovered. In this article, a model of the product adaptation process is developed. Using mail surveys, information is gathered from managers in 239 U.S. organizations and 302 South Korean organizations, all of which export products. The goal was to understand better the motivation of firms to adapt their products for export markets as well as the performance implications of adapting products. Furthermore, the model was tested in these two countries to determine if the model is robust and to uncover differences between the United States and South Korea. Using structural equation modeling to analyze the data, a positive association was found between the level of product adaptation and profitability at the project level. Second, U.S. firms appear to be more reactive when adapting products for export markets, doing so when laws and regulations in the export market mandate changes relative to the U.S. market. Conversely, South Korean firms appear to be more proactive and to adapt products even when not required by the governments of export markets. Third, greater international product adaptation is linked to a more responsive marketing organization with customer‐focused practices. Fourth, while a positive link was expected between business unit experience and the extent of international product adaptation, inconsistent results were found between the two country samples. For U.S. firms, it was found that greater experience in international business and product design capability is linked to a higher level of international product adaptation. For South Korean firms, however, a negative relationship was found. Greater international product adaptation occurred with less international business and product design experience. These findings are discussed, and areas for future research are noted.

Customer orientation on new product activities and performance from the contract manufacturer’s viewpoint

“…The ability of a firm to improve its offerings to create advantage in the competitive market is critical for success and NPD capabilities (Autio et al, 2000). Previous NPD literature has supported the notion that firms learn and receive knowledge from their customers in the NPD process (Koufteros et al, 2005) and require knowledge from internal and external sources in the product-design process (Calantone, Cavusgil, Schmidt & Shin, 2004). Firms that build a customer-oriented organization and have NPD capabilities respond well to acquiring the latest knowledge and intelligence (Kohli & Jaworski, 1990) and can obtain additional knowledge or information from the customer side to improve their product development capability.…”

Smes Marketing Mix: Examining Influencing Factors for Its Successful Management

“…This might be due to the fact that the SME"s entrepreneurs normally characterise the organisation structure and marketing planning [15]. Another message found in most studies is that consistency in effective communication and coherence in Standardization is an important marketing mix related factor [16,95]. It is clearly evidenced that SMEs show an increasing interest in clearly communicating standardised marketing mix related factors, leading to a coherence Standardization of marketing programmes [55].…”

The Role of the Global Marketer in Market Segmentation, Product Design Decisions and Global Brands Success

“…Many products or commodities come somewhere in between the range of adaptation and standardisation extremes. Product adaptation is described as the extent to which the material features or elements of a product including its packaging vary from country to country (Calantone, Cavusgil, Schmidt & Shin, 2004). Standardization, on the other hand, refers to the principle of selling essentially the same product in all markets.…”