Page 340 - Introduction to Business

314 PART 3 Marketing

Firms that are selling products to international markets have to decide whether
standardization strategy Using the they want to use a standardization or an adaptation strategy. A standardization
same product mix for international and strategy means using the same product mix (design, package, warranty, brand
domestic markets
name, etc.) in overseas markets as in domestic markets. This strategy has a number
of advantages, including not having to develop a new product mix and holding
adaptation strategy Using a different down R&D, production, and marketing costs. An adaptation strategy offers a dif-
product mix for products sold ferent product mix to the various international markets than what is employed in
internationally than those sold
domestically the domestic market. Unlike the standardization strategy, it recognizes the needs
and desires of consumers in those countries, but is more costly because higher
R&D, production, and marketing costs are required to develop and market a variety
of products.

reality Scan the international articles in the most recent issues of Fortune,
CH ECK Business Week, and Forbes. Are any of the companies pursuing a
standardization or adaptation strategy?
A major decision is the number of products to produce and market. This decision
product width The number of different involves both width and depth dimensions. Product width refers to the number of dif-
product lines a company is marketing ferent lines, whereas product depth is the number of specific products (or brands)
product depth The number of specific within each product line. Procter & Gamble has a number of product lines (width),
products or brands within a product line
including laundry and cleaning products, personal care, food, industrial, and medical.
Some of these have relatively few brands (depth). At one time, there were only eight
brands in the food line (Crisco, Crisco Oil, Jif, Pringles, etc.), but there were 22 in the
personal care line (Coast, Ivory, Lava, Zest, Scope, Secret, Crest, Bounty, Pampers, etc.).

LEARNING OBJECTIVE 4
Discuss the concept of brand equity and why it is important.

Companies are trying hard to maximize their brand equity, that is, the value or
brand equity The monetary value or
worth of a brand worth of their brands. Campbell Soup, Coca-Cola, General Electric, General
Motors, Kellogg, Kodak, and Sara Lee are examples. Benefits from greater brand
equity include improved balance sheets, better awareness of brands by consumers,
company performance exceeding that of the stock market, above-average prof-
itability and cash flows, and higher prices received when a company is sold to or
acquired by another. Examples include Rolls Royce selling its brand name to Volk-
swagen for $66 million, General Electric getting additional annual revenues of $10
billion, and Rank Hovis McDougall reducing its debt ratio and, thus, having the
capital needed to acquire Nabisco’s British cereal operations.
What factors make up brand equity? Usually, past and projected future profits
are emphasized. In predicting a brand’s future profits, companies will use a variety
of market and product measures. For example, brands that have higher market
shares, are in a market experiencing rapid growth, have high levels of customer loy-
alty, and enjoy high levels of customer satisfaction are likely to be very profitable in
years to come.

reality Which companies do you believe have the highest level of brand
CH ECK equity? Search the Internet under “brand equity” and find the most
recent estimates of companies’ brand equities. How well did you do?

Developing New Products
Why Develop New Products? Software giant Microsoft brought out Win-
dows XP, a computer operating system that makes it easier to organize music files

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