Posted: December 2, 2012 |  AUTHOR: KEN FOX | CONTACT ME

 

We learn in international business to tailor one’s product or services to new international markets. Some companies have been more successful than others in doing this. Reasons for rejecting a product or service after entry are often multi-fold. It may reflect a combination of bad timing, not the right management, not the optimum product assortments or not addressing cultural issues before entering a new market. I’ve seen a number of retailers depart markets during the past few years, including:
1. Wal-Mart leaves Germany (85 stores) and South Korea (16 stores)
2. TESCO leaves Japan (129 stores)
3. Home Depot pulls 12 stores out of China
“Home Depot conceded that it misread the country’s appetite for do-it-yourself products.”
4. Best Buy leaves China (11 stores)
5. Mattel, Inc. closed its China based flagship (Barbie) store.

In contrast, a retailer like IKEA adapted to the Chinese market by letting Chinese families be entertained, even sleep in their stores (request my January 1, 2011 blog for more details). I’d like to think companies are getting smarter about entering new foreign markets, especially China, which is very different from Western Cultures (U.S. and European countries). In this blog I review some new entries created especially for or modified to maximize success in various Asian markets, mostly China.

Autos
1. Datsun-As mentioned in an earlier blog (August 2012), Carlos Goshen, CEO of Nissan-Renault, has announced his company will launch a $3,000+ car with the Datsun brand name in developing countries, such as Indonesia, Russia and India. While this idea may not be new, since the Tata Group (India) launched the Nano, a $2,500 mini car in India, the Datusn brand name enjoys unique brand equity strength over Nano.

2. MG-The MG Rover group (UK) sold the MG name in 2005 to a Chinese car company. That company later merged with another Chinese car company called Shanghai Automotive, known by its acronym, SAIC. An MG prototype was displayed at a recent Beijing auto show by SAIC. The relatively high brand awareness and mystique of the MG brand name may be more valuable than a new branded car launch, wherever it is made available.

MG Prototype Shown in Beijing

3. German auto maker Porsche was frustrated when not enough new wealthy Chinese were buying its cars. Subsequent Chinese learning helped the company to design a first time ever four-door sedan for this market. It was pointed out to company representatives that government officials and the wealthy Chinese do not drive, but have drivers instead. Thus, the four door sedan, called the Porsche Panerma was launched with improved rear seat comfort.

Cosmetics
4. Estee Lauder, to help feed the growing luxury skin care market in China, launched a product exclusively for the Chinese market. The first luxury Chinese skincare product is called Osaio (October 2012). The product was co-developed by a Lauder supplier in the U.S. and their Shanghai Asia Innovation Center.

Clothing and Shoes
One New York fashion Designer stated “Made in America” has a value in China almost the same way that Made in France or Made in Italy once had in the U.S.
5. Allen Edmonds, a U.S, upscale, men’s shoe manufacturer has created an exclusive line of men’s shoes for the Chinese market called “The Independence Collection.” Each shoe design or model is named after a signer of the U.S. Declaration of Independence.
Food
6. PEPSICO:
a. Frito Lay-Lays in China are called “Leshi,” which means happy things/happy moments. Frito Lay introduced a redesigned Lays Stax package for the China market. A plastic tray was designed and inserted inside the canister to allow “sharing, which is very common in China, and helps keep fingers clean.
b. Frito Lay launched rice and wheat chips especially for the Chinese market. Additional potato chip flavors offered for this market include: lychee, cool lemon, blueberry and cucumber, and crispy seafood.
c. Their Quaker division is working to launch an “easy to cook” Quaker Congee. The traditional method of preparing congee takes a while to boil water and cook the ingredients. The new Quaker product will allow Chinese consumers to eat an important breakfast in a shorter period of time.

d. Frito Lay has also learned that consumers in different parts of China have different tastes. Chinese consumers in Shanghai like sweeter snacks, while those living in the southern area prefer salty snacks, western Chinese like spicy flavors and those living in north China like meaty ones. This diversity of tastes represents a challenge and an opportunity for Frito Lay marketers and food scientists.

7. Kraft redesigned the type and size of their Oreos package, quantity offered and pricing to better satisfy the Chinese market. Traditional (U.S. made) Oreos were too sweet for the Chinese consumers. The original (i.e., same as U.S. size package) was too large and too expensive. Mothers and children did not know how to eat or dip these cookies in milk, or to separate the two chocolate wafers and lick the vanilla cream centers. After extensive testing, a reformulated Oreo was launched with a smaller and unique package, which is better to travel and stay fresh given the country’s large distances and changing weather. A newly launched advertising campaign also helped educate Chinese moms and children how to eat Oreos as we were brought up to do. Since then many new Oreo flavors for the Chinese market have been introduced, including: strawberry crème, double fruit, green tea ice cream and birthday cake.

Medical Device
8. French pharmaceutical giant, Sanofi, launched a low priced, re-usable insulin pen in India, called AllStar. It was specially designed for the Indian market. It represents a sleek new design and sophisticated technology. Sanofi spent three years developing the insulin pen, using their design teams in Germany, UK and India to “develop a product Made in India for India.” Sanofi claims the AllStar will “help improve insulin initiation and compliance.” India has the second highest number of diabetics in the world.

Final Comments
I’ve seen global companies which take the time and effort to learn about a country’s population, their culture, attitudes, behavior and beliefs, to benefit. The need to do this is exemplified by the Asian markets which represent sharp differences in population profiles, competition and supply chains. It is also interesting to observe companies which not only adapt to these varying cultures but also innovate. Examples include Tata Group’s introduction of the $2,500 Nano (lowest priced auto in the world), Sanofi’s launch of the AllStar, Kraft’s total over haul of Oreo’s for China’s market, and the redesigned four door, Porshe Panerma, for the wealthy Chinese who hire drivers.

References:
1. MG Returns…in China?, Wall Street Journal, May 5, 2012
2. Thinking Local Helps You Go Global, July 3, 2012, The Pao Principle
3. Made for China, October 3, 2012, The Pao Principle (Patricia Pao)
4. Local Innovation from Head to Toe, Interview with Tim Minges, Chairman, PEPSICO Greater China Region, Fortune China Magazine, (translated to English), date of issue not available
5. Home Depot Learns Chinese Prefer Do-It-for-Me, The Wall Street Journal, September 14, 2012
6. Sanofi Launches Reusable Insulin Pen AllStar in India, BioSpectrum.com, October 9, 2012

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©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

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