A. Product and Service Offering and Brand Name
Allsmile brand toothpaste has been successful for the past five years operating under a decentralized multi-domestic strategy. Now, the market has reached maturity and the industry life cycle has peaked. Our previous strategy, during the period of market growth, is no longer the most cost efficient. As country managers, we have been given the challenge to standardize our global strategy in order to minimize total cost. By definition, a “global product” is a product with most features being uniform in all countries. Given that our product is toothpaste, the features we have the option to standardize are product size, texture, effect, brand name, packaging, price, advertisement, promotion, and distribution. Standardization is beneficial to lowering costs; however, it is also important to consider that sales numbers are often directly related to customer satisfaction of highly adapted products that target individual preferences. The cost benefits of standardization and adaptation are inversely related- the key is to find the point where combined costs are minimized.
In Country Manager, the Pan-Optic team is currently producing an economy size medium and large paste, a whitening medium paste, and a kids’ medium paste. In one market only the economy products are offered in the medium and large size and economy, white, and kids medium paste are offered in the second market. Since Pan-Optic has already incurred the cost associated with developing these products, we will continue to produce the 3 SKUs of the medium size and discontinue production of the large economy size. In addition, we will produce a healthy gel in the medium size. While adding a new product seems to be moving in the opposite direction of standardization, Pan-Optic is standardizing product size, which is in line with Allsmile’s new global strategy. These decisions are constrained by the mature market. Adaptation is often very beneficial in the mature life cycle stage of markets. All four medium sized SKUs will be available in each market. This results in a balancing of standardization and customization. With four available options, customers should find a product that closely meets their personal preferences. Also by only producing one size tube, Pan-Optic will begin to reap the benefits of economies of scale.
Allsmile should maintain its global brand name throughout all markets in order to maintain the new global standardization strategy. While global brand names do have disadvantages, such as competing with a strong local brand name, the Allsmile name can become a sustainable competitive advantage among smaller competitors in a mature market. The most advantageous benefit of a global brand name is that advertising can be leveraged across all markets. By marketing Allsmile as a family brand, Pan-Optic is increasing brand awareness and improving quality recognition. Allsmile’s global standardization of branding and advertising...