Published by MBA Skool Team, Last Updated: May 16, 2020
What is Global Product?
Global products are those products that are marketed internationally under the same brand name, features and specifications across countries. Global products are different from regional products or brands, which are specific to a particular region.
Importance of Global Products
One of the main advantages of global products is the achievement of economies of scale on the basis of production, i.e., it becomes easier and the per unit cost required to produce the product decreases, as the number increases. Economies of scope can also be achieved. Global brand recognition is another advantage. Positioning a global product is a complex task. The promotion & global marketing strategies that are used for such products should ideally remain more or less similar across all regions. This could prove to a problem, since customers of different regions might have different needs. Different Government rules and regulations in different countries also may force these companies to slightly tweak the features of the global product. While developing these marketing strategies, another thing that has to be kept in mind is the culture and other politically sensitive issues for different regions. In reality, some features such as the packaging may be localized to suit the particular region. Global products may also face tough competition from local competitors.
Those products which are produced in one country but sold in other countries under the same brand name are called International products or global products. These products are marketed internationally.
Advantages of Global Products
Some benefits of international products for a business are:
1. Economies of Scale- When a global firm is producing global products to meet domestic as well as international demand, large quantity of goods have to be produced through increased capacity. When goods are produced in bulk, the cost of manufacturing per unit product reduces. This is known as the Economies of Scale. Hence firms are willing to increase production and expand across territories.
2. Economies of Scope- When brands produce different kinds of products (which is required to capture international markets), the overall cost is lower than what they would bear if the products are produced separately. This is because separate product lines use much of the same resources. This an effective cost-cutting measure. Hence, firms diversify their product portfolio because of varying choices across regions and the economies of scope concept.
3. Global brand recognition- Firms, as they grow in popularity in the domestic market, tend to diversify and expand. When they market and sell their products abroad, they draw brand recognition and increased goodwill for the company. The global products help company acquire global recognition.
Challenges of Global Products
Some challenges faced by companies in driving global products are:
1. Huge capital requirement- Expansion requires building capacity and drawing huge sum of investments. The capital requirement is large and hence pose a major challenge for businesses. Transforming business processes, investing in fixed assets, managing operations and increasing workforce are some of the key challenges.
2. Managing International business- Positioning of international products is a complex task. The complexity lies in the fact that the same product may have different varieties and compositions to meet choices and preferences of customers in different geographical regions. The legal regulations and financial condition may need tweaking with the product features and marketing accordingly.
3. Foreign companies face serious competition from local players in terms of price. And in price-sensitive markets, this becomes highly important.
Example of Global Products
Apple is an American company which produces its products in China. India imports Apple products. For India, Apple products are global products. On the other hands, there are domestic products which are produced and sold in the same country or region.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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