“Assignment”

“International Business”

Submitted to: Sir Jehanzaib Akram

Submitted by: Raviha Khalid (LCM-3534)

Ayesha Rasheed (LCM-3498)

Rabia Iqbal (LCM-3532)

Rimsha (LCM-3535)

Class: BBA- V (Section-A)

Date: 26 April 2020

“National University of Modern Languages

Lahore”
PRODUCT MODIFICATION
An adjustment made to an existing product, usually made for greater
appeal or functionality. A modification may include a change to
a product's shape, adding a feature or improving its performance.
Often a product modification is accompanied by a change in
packaging.
E.g.
Coca cola has invented diet coke, Zero coke

FACTORS OF PRODUCT MODIFICATION

Factors encouraging product modification for multinational firms are following.

 Physical Factors
 Market Factors
 Legal Factors

Physical Factors

 Climate
 Living conditions
 Compatibility with locally produced items
 Transport situation
 The uses to which the items might be put in different
markets
 Literacy and technical skills of users
 Consumer care facilities
Market Factors

 National consumer taste

 Nature and extent of competition
 Desirability of foreign images for products
 Preferred package size
 Consumer buying habits
 Income levels (poor countries might need low quality products)

Legal Factors

 Technical standards
 Patent laws
 Packaging requirements
 Local content rules
 Health and safety regulations
 Consumer production laws
 High tariffs that encourage potential local manufacture.

Reasons for Product Modification

Followings are the some of the most common reasons or objectives requiring a multinational
company to make one or more changes in its product mix:

1. Market Demand
2. Competition
3. Attraction of New Customers
4. Utilizing Excess Production Capacity
5. Expansion of Markets in New Territory
6. Reducing Financial Risks
 7. Improving Image or Goodwill
8. Effective Marketing

1. Market Demand:
 To absorb changes in demand of the products, marketer changes its product mix. Demand
changes due to a large number of factors, such as technology, demographic variables,
competitions, development of new products, change in fashion, custom, attributes, and
many other such reasons.
 In order to satisfy changing needs and wants of existing customers, the company opts for
various changes in its product mix. Company fails to reflect market demand in product
mix may not survive in a long run.

2. Competition:
 It is a powerful cause leading to product mix modification. Company formulates product
mix to respond competitors strongly.
 Minor or major changes in product mix are made to prevent, remove, or to fight with
competitors. Company changes its product mix to offer more competitive advantages and
prove the superiority of products over competitors through product differentiation.

3. Attraction of New Customers:

 When company wants to increase number of customers, it has to cater the needs and
wants of new customers.
 Existing product mix may not be capable to meet the expectations of new segments. It
has to add new product lines or new varieties in its existing product lines to attract new
customers.

4. Utilizing Excess Production Capacity:

 Sometimes, company prefers to alter product mix to utilize excess production capacity.
  By adding new products or varieties, a company can utilize its plant resources capacities.
Optimum utilization of production capacity improves profitability.

5. Expansion of Market in New Territory:

 When company plans to expand geographically, it has to modify its present product mix.
In different geographical areas, consumer needs and wants are different.
 Therefore, company has to improve existing products or add more varieties to match
products with new territories.

6. Reducing Financial Risk:

 Reducing level of financial risk is also one of the strong reasons leading to change in
product mix.
 Looking at the future market trend, a company changes its product mix to exploit
emerging opportunities or to face challenges, or both.
 To reduce financial risks, a company may opt for eliminating less profitable product lines
or items within existing lines; may add low-price products to survive in recession; or may
reduce product varieties to reduce capital investment and costs.

7. Improving Image and Goodwill:

 Company can establish image and reputation in the market through changing product mix
over time.
 By introducing high-price prestigious products, adding new varieties, latest modes, etc.,
company can create a good image in the market. Similarly, it can serve lower income
groups by offering low-price prestigious products.

1. Effective Marketing:

 In some cases, a company prefers to change product mix to utilize sales force,
warehouses, transportation facilities, distribution network, etc. But, it changes as long as
the changes have favorable effect on its marketing performance.
  Such changes may be in terms of expansion, contraction, or improvements of product
mix.

PRODUCT MODIFICATION STRATEGIES

An adjustment in one or more of a product's characteristic. It is most likely to be

employed in the maturity stage of the product life cycle to give a brand a competitive
advantage. Product line extensions represent new sizes, flavors, or packaging. This
approach to altering a product mix entails less risk than developing a new product
There are three major ways of product modification, i.e. quality modifications, functional
modifications, and style modifications
.

1. Quality Modifications:

These are changes that relate to a product's dependability and durability and usually are
executed by alterations in the materials or production process employed. Reducing a
product's quality may allow an organization to lower the price and direct the item at a
larger target market.
The quality of a product may give a firm an advantage over competing brands and may
allow the firm to charge a higher price because of increased quality. Or the firm may be
forced to charge more because of higher costs to achieve the increased quality.

2. Functional Modifications: 

Changes that affect a product's versatility, effectiveness, convenience, or safety are called
functional modifications. They usually require redesigning the product.
Functional modifications can make a product useful to more people, which enlarges the
market for it. This type of change can place a product in a favorable competitive position
by providing benefits not offered by competing items. Functional modifications can also
help an organization to achieve and maintain a progressive image.
3. Style Modifications: 

Style modifications are directed at changing the sensory appeal of a product by altering
its taste, texture, sound, smell, or visual characteristics. Since a buyer's purchase decision
is affected by how the product looks, smells, tastes, feels, or sounds, a style modification
may have a definite impact on purchases.
Through style modifications a firm can differentiate its product from competing brands
and perhaps gain a sizable market share for this unique product. The major drawback in
using style modifications is that their value is determined subjectively. Although a firm
may modify a product to improve the product's style, customers may find the modified
product to be less appealing.

4. Packaging Improvement Strategy

It is a strategy in which the packaging of the product is changed. These improvements
may be necessary due to the development of new techniques of packaging or due to the
defect of present packaging of the product; or due to the suggestions for changes made by
consumers.

ADVANTAGES OF PRODUCT MODIFICATION STRATEGIES

 Keeping Pace. 
In a world where game-changing technologies are introduced more quickly than most
consumers can keep up with them, a product line that stays the same over time may come to
seem tired and stale. A product development strategy helps your business keep pace with
the changing times, appealing to customers who get bored with always seeing the same
offerings.
 Seizing Opportunities. 
As consumer tastes and interests evolve, a product development strategy can help your
business leverage opportunities to market to these new preferences. If your efforts are
successful and you correctly read upcoming trends, you put your company in the position of
potentially sparking a fad or riding the wave of one that has already been set in motion.

 Providing Opportunities. 
Your business will have an easier time attracting and keeping talent if you build a
reputation as an operation where creative individuals have the space to innovate. Building a
strong and vital team not only puts you in a strong position to develop and introduce
exciting new products, it also gives you personnel who can approach day to day challenges
with fresh eyes.

 Being Newsworthy. 
Media coverage garners more attention for your business than advertising dollars can buy.
If you have a strong product development strategy and you introduce new offerings that
people want to hear about, reporters and bloggers will be eager to help spread the word.

DISADVANTAGES OF PRODUCT MODIFICATION STRATEGIES

 Riskiness. 
It's safer to stick with something that you and your customers already know than to venture
into untested territory. New products come with a world of uncertainty, from ironing out
unfamiliar production processes to introducing customers to offerings that they may or may
not want. If your product development strategy isn't successful, your company will need to
absorb the investment you've made without returns to offset the expenditures.

 Extra Cost. 
A product market and development strategy can be expensive, especially if you are
thorough and invest in processes such as market research and advertising. Even if your new
 offerings are eventually successful, you will still be faced with considerable expenses
before your new products bring in any significant revenue.

 Evolving Markets. 
Although new product development is a proactive response to a continually changing
landscape of customer tastes, those same tastes will continue to evolve even as you're
developing your new products. Things that interest customers when you begin the product
development process may no longer seem as exciting by the time you're ready to take your
new product to market.

 Competition 

At the same time your business is scrambling to come up with the next exciting product that
your customers will embrace, your competition is also working hard to solve the same
problems. It's sometimes not enough to come up with something innovative you may also
need to get it to market before someone else does. Failure to do so may make all your hard
work irrelevant

IMPORTANCE OF PRODUCT MODIFICATION

 So your product or service becomes well known around the area it is based.

 So you increase your sales renewal rate.

 Catering to customer needs therefore building up a good reputation.
 Help increase sales.
 Increase in variety and choice.
 Gain competitive advantage over rivals.

EXAMPLES OF PRODUCT MODIFICATION

1. H. J. Heinz
Food Company, H. J. Heinz adapts its products to match local preferences. Because some
Indians will not eat garlic and onion, for example, Heinz offers them a version of its signature
ketchup that does not include these two ingredients.

2. Microsoft
Microsoft, for example, offers the same software programs around the world but adjusts
the programs to match local languages.
3. Procter & Gamble
Similarly, consumer goods maker Procter & Gamble attempts to gain efficiency by
creating global brands whenever possible. Global strategies also can be very effective for
firms whose product or service is largely hidden from the customer’s view, such as
silicon chip maker Intel. For such firms, variance in local preferences is not very
important.
4. McDonald’s and KFC
For example, large fast-food chains such as McDonald’s and KFC rely on the same brand
names and the same core menu items around the world. These firms make some
concessions to local tastes too. In France, for example, wine can be purchased at
McDonald’s. This approach makes sense for McDonald’s because wine is a central
element of French diets.