Factors affecting international product design

Factors affecting international product design

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Article ID: iaor1999532
Country: United Kingdom
Volume: 48
Issue: 11
Start Page Number: 1131
End Page Number: 1143
Publication Date: Nov 1997
Journal: Journal of the Operational Research Society
Authors: ,
Keywords: marketing
Abstract:

In this paper we examine the impact of changes of such factors as tariffs/import cost, exchange rate, and unit savings derived from economies of scale, on the product design of four international strategies which are characterised by two dimensions. The first dimension describes whether the company offers a standardised or a customised product. The second indicates whether the company centralises its production to a single facility in one country or decentralises its production to facilities located in each country. To address the above issue, we present a model that has elements from marketing and manufacturing. For the case where the product has one attribute, we show that when tariffs/import cost decrease, an international enterprise should respond by enhancing the features of its products. Similarly, the product features should be enhanced when the exchange rate increases or the unit savings derived from economies of scale increases. Numerical examples indicate that an international enterprise should change its production configuration from decentralised to centralised, in environments of high tariffs/import cost. Furthermore, an international enterprise should change its product policies from customised to standardised when the savings derived from economies of scale are high, and the exchange rate increases.

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