What is the nature of new product
introduction strategies of multinational
corporations, large, medium, and small
enterprises ?
Based on data on 237 product/brand
launches collected from four business
periodicals between January 1991 and July
1992, this article by Abraham Koshy and
Anna Angel focuses on this issue.
Abraham Koshy is Associate Professor in the
Marketing Area of the Indian Institute of
Management, Ahmedabad and Anna Angel was
a research assistant in the same area at the time
of writing this paper.
Successful organizations all over the world recognize
that new product introductions are sine qua non for their
survival and growth. Research studies indicate that
early entrants in the market enjoy several advantages
over late entrants, especially in obtaining a significant
market position (Sands, 1979; Urban ct al. 1986). The
need for a proactive product introduction strategy becomes
more critical due to the dynamic nature of
product markets and the intensifying competitive situation.
Despite its importance, however, different types of
organizations are seen to adopt different strategic posture
with regard to new product introductions. Studies
which examine this phenomenon, namely, new
product introduction strategies of organizations, have
been scanty in the Indian context. Since, in India, different
types of organizations categorized on the basis of
either the size or its association with international corporations
have been functioning under varying
regulatory policies of the government, this issue becomes
more relevant and interesting.
Objectives
This study, therefore, is an attempt to specifically focus
on the nature of new product introduction strategies of
different types of organizations, namely, multinational
corporations (MNCs), large organizations, medium
enterprises, and small scale firms.
We examine this aspect with regard to different
types of products in the consumer products category.
This will help us better understand the differences, if
any, in new product introduction strategies either due
to the differences in the types of organizations or due to
the nature of products.
Definition of New Product
The term new product has been used in different contexts
with differing meanings. It can refer to a product
concept totally new to the market or to a product new
to the company which introduces the product, although
similar products may already be existing in the market
(Crawford, 1979). We, therefore, need to clarify the
Vol.19, No. 2, April-June 1994 21
meaning of the term new product in the context of this
study. Booz, Allen, and Hamilton survey (1982) classifies
new products into six categories. These are :
• Products which are new to the world.
• New product lines which allow a company to enter
an established market for the first time.
• Additions to existing product lines which supple
ment a company's established product lines.
• Improvements in the existing products in order to
replace existing ones.
• Repositioning of existing products.
• New products that provide performance at lower
cost to customers.
From the above classification, it is clear that the
term new products can refer to original products, improved
products, modified products, and new brands
(Kotler, 1992, p 311). This definition views new products
essentially from the point of view of a company;
all those products which a company introduces, be it a
relaunch or repositioning, new brand, or even a
pioneering product, are considered as new products. In
our study also, we follow this broad definition.
Strategies for Product Introduction
The definition of a new product covers a wide spectrum
of product introduction. However, in the present study,
we are concerned with the strategy of new product
introduction and, therefore, we classified all the new
products introduced by organizations into four strategy
categories:
• relaunch/repositioning strategy
• brand/line extension strategy
• new brand strategy
• new product strategy.
In essence, this classification also views new
product introduction from the point of view of firms,
but the logic of strategy forms the basis of the classification.
For a detailed discussion of these strategies, see
Box.
Box : A Discussion on Four Strategy Categories
Relaunch and Repositioning Strategy
When a brand continues to remain in the market for a long
stretch of time without any change in its qualities such as
basic formulations and features, core benefits, packaging,
etc. there is a high tendency for the brand to suffer from
brand fatigue. The boredom that consumers are likely to feel
about the brand may be one of the factors for brand fatigue
and this is aggravated when competitors offer products with
better features, packaging, more salient core benefits, etc.
This also implies that the original position that the brand
might have occupied in the minds of consumers either gets
altered or the salience of the original position becomes less
important. This invariably leads to low brand patronage and
high brand switching. The generally accepted practices to
revitalize an existing brand/product are relaunching and
repositioning.
A product is considered to be relaunched when some
changes are made with regard to packaging and other physical
aspects of the product (such as colour, size, perfume, etc.)
along with appropriate changes in the advertising and communication
strategy. Repositioning, on the other hand, entails
appropriate changes in the marketing mix elements so
that the perception of the product in the minds of the consumers
is altered. Repositioning also involves redefining
target segments and/or altering the benefits offered by the
product along with appropriate changes in the relevant
marketing mix elements. Though this definition may give
the impression that there is no difference between relaunching
and repositioning, there are subtle distinctions.
Relaunching a product need not necessarily involve
repositioning. For example, when an existing brand of detergent
powder or a toilet soap is relaunched as a "new improved"
brand, it may not result in repositioning the brand
as there is no redefinition of target segment and /or altering
the intended benefits to consumers. But repositioning involves
changes in some or all the elements of marketing mix
consistent with the changes in benefits communicated to
consumers vis-a-vis the competing brands or some specific
need configuration of consumers. By and large, however,
existing brands are mostly relaunched with an explicit intention
of repositioning. In our study, we have clubbed together
relaunch and repositioning exercises. In addition, we have
also included some products which were reintroduced after
its initial launch and were subsequently withdrawn in the
same classificatory group.
Brand/Line Extension Strategy
Brands are considered to be one of the most valuable assets
of a company (Aaker, 1991, 1992). Therefore, in markets
which are highly competitive and in situations where the
Box Contd.
22 Vikalpa
cost of introducing new brands is high, brand extension
strategy is considered to be cost- effective and viable (Tauber,
1981,1988; Aaker, 1990). The basic approach in brand extension
is to leverage the equity of existing brands which are
well established in the market to introduce new products.
Tauber (1981) makes a distinction between line extensions
and brand extensions. Line extensions represent new sizes,
new flavours, etc. of the same brand whereas brand extensions
(sometimes also known as franchise extensions) refer
to the strategy wherein the brand name familiar to the consumers
is used to introduce a product in a different product
category. However, some minor variations in the product for
the purpose of variety such as colour or perfume cannot be
referred to as line extensions. For example. Lux, a brand of
toilet soap of Hindustan Lever, is available in different colour
shades, but these are not considered as line extensions. However,
International Lux by the same company is a line extension.
Similarly, Cinthol Lime and Cinthol Cologne refer to
line extensions in the toilet soap category whereas Cinthol
Talcum Powder refers to brand extension. In our study, we
have considered line extension and brand extension in the
same classificatory group.
It may be worthwhile to note one difference in the
strategic connotation of line extension and brand extension.
Line extension refers to introducing variations of the same
brand and this helps the company in occupying various slots
available in the market for the same product. In other words,
this helps the company to protect its flanks in the same
product market. In brand extension, on the other hand, the
equity of a well known brand is leveraged to obtain a
headstart in a different product line. Therefore, in relative
terms, line extension tends to be more defensive in nature
whereas brand extension is a more offensive strategy. Both
these strategies are used by organizations successfully and
frequently. For example, a study of 7,000 products introduced
in 1970s in the supermarkets of US revealed that two
thirds of the most successful products numbering 93 were
line extensions (Tauber, 1988). In another study which examined
120 to 175 new brands that were introduced each
year from 1977 to 1988 in the US supermarkets, approximately
40 per cent were brand extensions (Aaker, 1990).
New Brand Strategy
When an organization introduces a product with a new
brand name in a category where the organization already has
a market position, then this is termed as new product
strategy. For example, Le Sancy introduced by Hindustan
Lever is considered as a new brand for our study purpose.
At this juncture, we need to clarify the essential difference
between new brand strategy and line extension strategy. The
basic purpose of both these strategies is similar: Either
through new brands or through line extensions, a company
protects its flanks from competitive inroads. However, line
extensions revolve around the base of the brand equity and
therefore the extended brand in the same line carries with it
one or more base properties of the mother brand. As a
consequence, by and large, the inter-segment distance between
the extended brand in the same line is unlikely to be
significant. Each new brand, on the other hand, caters to a
specific need of the market segment and hence the inter-segment
distance between different brands of the same company
in the same product category is likely to be greater. In
other words, line ex tensions tend to occupy niches within the
broad product-market segment whereas new brands tend to
serve somewhat different product-markets. Therefore, the
purpose of line extensions is to consolidate the company's
position in the chosen product-market while the new brands
help in consolidating the company's position in the chosen
product line.
New Product Strategy
When an organization introduces a product with a new
brand name in a category in which the company does not
havea market position, then we refer to this as a hew product
strategy. The term new product also refers to a product new
to the market, sometimes referred to as pioneering new
product. Although we intended to include such products in
our study, subsequently we did not find any product in our
sample which was new to the market. Therefore, only those
products which were new to the company constituted this
classificatory category. Introducing a new product points
towards the propensity of the organization to create market
positions in less familiar arenas and is, therefore, more
strategic in nature than line extensions or new brand introductions.
Methodology
The data on new product introduction were collected
from the section on new product/brand launches published
in periodicals such as Business India, Business
World, Advertising & Marketing (A&M), and the Brand
Equity feature pf Economic Times between the period
January 1991 and July 1992. The data were nominal in
nature and contained details such as brand names of
products, names of companies which launched the
products, nature of launch, etc. The base source contained
information on new products in the consumer as
well as industrial products categories. However, since
less than 15 per cent of the products mentioned in this
source pertained to industrial products category, we
excluded this category in our study as this would not
be representative of new products introductions in the
industrial product category.
While collecting data, we did not include very specialized
products intended for narrowly defined seg-
Vol. 19, No. 2, April-June 1994 23
merits (for example, an in-house journal or a. journal by
a club or an association), although the data were available.
Since the data were collected from more than one
periodical, care was taken to avoid duplication of information.
After editing, we obtained data on 237 products
in the consumer products category.
For the purpose of analysis, the organizations
which introduced the products were classified into four
categories such as MNCs, large organizations, medium
enterprises, and small scale industries. In many cases,
the type of organization which introduced the product
was mentioned in the base source of the data itself.
However, in the case of those organizations whose
category was not mentioned, we followed the annual
sales turnover for classification based on size and also
the extent of association with multinational organizations.
Thus, all those organizations which have significant
shareholding and/or close association with a
multinational firm (reflected either in the company
name or brand names) were classified under MNCs.
Organizations whose annual sales turnover was above
Rs 100 crore were classified as large organizations, between
Rs 20 crore and Rs 100 crore as medium
enterprises, and below Rs 20 crore as small scale industries.
For consistency, this definition was extended
to even those organizations whose category was mentioned
in the original data source. In all, the data on new
product introduction pertained to 151 organizations.
All organizations, except 14 for which classificatory
details were not available, were grouped into these four
categories and the group of 14 organizations was classified
under 'not known' category.
Categorization of the sample into four product introduction
strategy categories such as relaunch/ repositioning,
brand/line extensions, new brands, and new
product was done by the authors based on their prior
understanding of and familiarity with the market situation.
Questions such as whether the organization has a
presence in the product category, whether similar
brands exist in the market, and whether the same brand
existed earlier helped in categorizing the sample correctly.
Type of Products Introduced
The sample of 237 products introduced represented a
wide range of products in consumer product category
(see Table 1). Of the total sample, consumer nondurable
products accounted for 68.7 per cent (163
products) and the remaining 74 products (31.3 per cent)
were consumer durables. A higher share of the consumer
non-durable products in the total new product
introductions reflects partly the level of new product
activity; the consumer non-durables market appears to
be more active than the consumer durables market. This
is mainly due to the fact that in the consumer nondurable
category, on an average, each organization introduced
a larger number of products than those in the
durable products category. Thus, in the consumer nondurable
category, a total of 95 organizations introduced
163 products with an average of 1.7 products per organization
whereas in the durable products category,
56 organizations introduced 74 products with an
average of 1.3 products per company. This difference
could also be due to the fact that in relative terms, in the
durable products category, proportionately a larger
number of firms appear to be equally active whereas in
the non-durable products category, some firms appear
to be more active than others in introducing more
products.
Out of the sample of 163 products in the nondurable
category, food and beverages accounted for
nearly 30 per cent (70 products) of the total sample; the
products ranged from packed food items, new brands
of vanaspati and edible oils, etc. to branded tea, coffee,
other hot and cold beverages, liquors, etc. Personal
hygiene products such as shampoos, toilet soap, facial
creams, make-up base, shaving products, and other
toiletries accounted for another 21 per cent (50
products). An interesting product category in this
group was the health care products such as vitamin
preparations, "vitalizing" tonics and tablets, energy restorers,
etc. which accounted for about 8 per cent of the
total sample (19 products). The remaining 24 products
(10 per cent of the total sample) in the non-durable
category comprised of fabric care products (newer
forms of detergent concentrates leading the pack), baby
care products, household hygiene products (room
freshners, toilet cleaners, insect repellents, etc) and
other similar products.
The largest product group in the consumer durable
category was home appliances constituting about 10
per cent (24 products) of the total sample of products
introduced. This group included products such as
washing machines, kitchen mixies, refrigerators,
geysers, etc. Entertainment electronics which included
newer models of colour televisions, VCRs, music systems,
and other such items constituted approximately
5 per cent of the total sample of products. All other
consumer durables such as two-wheelers, bicycles,
wrist watches, and cordless telephones constituted
about 17 per cent (39 products) of the total sample.
Activity Levels of Different Types of
Organizations in Product Introduction
As noted earlier, organizations in our study have been
classified into four categories, namely MNCs, large Organizations,
medium enterprises, and small scale industries.
Of the total sample of 151 organizations which
introduced 237 products, the highest number of
products was introduced by 35 large organizations accounting
for nearly 27 per cent of the sample (63
products) (see Table 2). This was followed by small
scale industries wherein 41 organizations introduced 56
products (23.6 per cent of the sample'), and medium
enterprises wherein 36 organizations introduced 53
products (22.4 per cent). The 25 MNCs in the sample
accounted for the smallest share of about 20 per cent (47
products) of the products introduced.
Although, as noted above, the MNCs accounted for
only 20 per cent of the total product introduction, the
number of products introduced per organization was
highest in this category. On an average, each of the
MNCs introduced 1.9 products, whereas it was lowest
among small scale industries (1.4 products per organization).
In fact, the number of products introduced
per organization declines proportionately as the size of
the organization reduces. Thus, on an average, the number
of products introduced per large organization was
1.8 whereas for medium enterprises it was 1.5. Thus, the
difference in the number of products introduced per
organization gives the impression that the size of the
organization or its association with international
players is directly related to the propensity of the organization
to introduce products; larger organizations
and MNCs tend to be more active by introducing more
products per organization. However, in order to obtain
A more realistic picture, we need to examine the proportion
of firms belonging to different categories which
introduced varying number of products. Table 3 gives
these details.
From Table 3, we can draw two interesting inferences.
First, we find that one MNC introduced 10 products
while one large organization, 7 products. If we re-calculate
the number of products introduced per organization
after eliminating these two extreme cases, we find
that the number of products introduced per organization
is not significantly different across different types
of organizations. Thus, after excluding the extreme
cases, we find that, on an average, the number of
products introduced per organization was 1.5 in the
case of MNCs and 1.6 in the case of large organizations.
This pattern is not significantly different from that of
medium enterprises or small scale firms where it was
1.5 and 1.4 products per organization respectively.
Therefore, we find that there is no significant difference
across different types of organizations in their propensity
to introduce new products. Alternatively stated,
evidence does not suggest that either the size of the
organization or its association with international companies
is a significant determinant of an organization's
activity levels regarding product introductions. Second,
we also obtain an insight into the product introduction
strategies of different types of organizations. Of the
sample of 25 MNCs, 68 per cent introduced only one
product and another 16 per cent introduced two
products. This pattern was not significantly different
from that of medium enterprises where 68 per cent of
the firms in this group introduced one product and
another 19 per cent, two products. In the case of large
organizations, proportionately smaller number of firms
(54 per cent) introduced one product but a larger
proportion (28 per cent) introduced two products. A
significant difference, however, was observed in the
case of small scale firms. About 76 per cent of the
organizations in this category introduced only one
product and 17 per cent, two products. If we consider
the proportion of firms introducing one or two
products, 93 per cent of small scale organizations fall in
this category whereas only 84 per cent of MNCs, 82 per
cent of large organizations, and 87 per cent of medium
enterprises belong to the group of firms introducing one
or two products. The conclusion that we can draw from
this pattern is that a predominant number of small scale
firms tends to follow a single product strategy whereas
MNCs, large organizations, and to a lesser extent,
medium enterprises tend to follow multi-product or
multi-brand strategy.
Type of Products Introduced by Different
Organizations
On an aggregate basis, we had noted that about 69 per
cent out of the sample of 237 products belonged to the
consumer non-durable category and the remaining 31
per cent to the consumer durable products category. It
would be interesting to examine if there are any significant
differences among various types of organizations
with regard to the nature of product introduction.
In Table 4, we give the proportion of products belonging
to different product categories introduced by different
types of organizations.
From Table 4, two inferences appear to be most
striking. First, a significantly higher proportion of
products introduced by MNCs belong to the consumer
non-durable category (85 per cent) and only about 15
per cent belong to the consumer durable products
category. This is in contrast to the scenario in large
organizations and medium enterprises, where consumer
non-durables constituted about 67 per cent and
60 per cent of the portfolio of new products respectively.
In fact, the proportion of consumer non-durables
introduced by large and medium enterprises was lower
than the proportion of non-durables in the new product
portfolio of small scale organizations. Within the consumer
non-durable category, MNCs appear to be
strongest in the personal hygiene product group consisting
of products such as toilet soaps, toothpastes,
shampoo, skin care products, etc. About 34 per cent of
the products introduced by MNCs belong to this group.
Even in food and beverage categories, MNCs have a
significant presence (about 28 per cent of product introductions)
although large, medium, and small
enterprises have a higher proportion of products in this
category.
The second important inference that can be drawn
from Table 4 is the noticeable presence of medium
enterprises in consumer durable category-about 40
per cent of the products introduced belong to this
product group. This is suggestive of the relative
strength of medium enterprises in the durable products
category. A chi square test performed on the data (base
Table 4) suggests that at 10 per cent probability level,
there is a significant association- between the type of
products introduced and the type of organization ,
Therefore, the pattern of product introduction we observe
is suggestive of the new product activity levels in
different product categories by different organizations.
Thus, the MNCs tend to focus more actively on the
consumer non-durable category, more so on the personal
hygiene products group, whereas medium
enterprises tend to be more active in the consumer
durable product category. When we examine the share
of different types of organizations in product introduction
across various product groups, we find that large
and medium firms have contributed equally in the food
and beverages product group as well as in the consumer
durable product group, It appears that edible oils, packed
foods, beverages, washing machines, kitchen mixies,
wrist watches, and refrigerators are the preferred
products of large and medium firms whereas soaps,
shampoos, toothpastes, and such other toiletries seem
to be preferred by MNCs. The small firms appear to be
stronger in health tonics, vitalizing tablets, geysers, insect
repellants, and similar products,
Product Strategies of Various Types of
Organizations
In order to discern the nature of new product strategies
adopted by various types of organizations, we classified
product introduction strategies into four
categories, namely, relaunch or repositioning, brand or
line extension strategy, new brand strategy, and new
product strategy. For different types of firms, we
analysed the number of product launches belonging to
these four strategy categories. In the following sub-sections,
we discuss the salient findings.
Relaunch/Repositioning Strategy
Out of the sample of 237 products, only 17 (i.e. 7 per
cent) introductions involved relaunch and repositioning
(see Table 5). As a strategy, repositioning/relaunch
received the least priority from organizations. In fact,
only 3 out of 47 products introduced by MNCs aiid 11
per cent each of product introduction by large as well
as medium enterprises were relaunch/repositioning
exercises. For small scale firms, relaunch/ reposi-tioning
was negligible (only 1 product out of 56 launches).
The above pattern suggests the tendency of organizations
to prefer different product introduction
strategies rather than relaunch/repositioning. Perhaps,
organizations may be finding it more profitable to introduce
new brands or new products rather than diverting
energies to merely revitalize the existing brands.
Brand/Line Extension Strategy
Our study indicates that brand/line extensions have
been used by organizations as a significant strategy for
product introduction (see Table 5). About 35 per cent of
the products introduced (83 products out of a total of
237) belonged to this strategy category. The more interesting
pattern, however, is the variations across different
types of organizations in using .brand/line
extensions. For MNCs, brand/line extensions have
emerged as the most important product introduction
strategy; about 51 per cent of the products introduced
by MNCs were brand/line extensions. Even large organizations
show considerable dependence on
brand/line extensions in product introductions, although
to a lesser degree when compared with MNCs.
In the case of large organizations, about 44 per cent of
the product introductions were brand/line extensions.
The dependence of medium enterprises, on the other
hand, was even lesser than that of large organizations;
only about 34 per cent of the products introduced by
them belonged to this strategy category. For small scale
firms, brand extensions constituted only 14 per cent of
product introduction.
The pattern which emerges from the above analysis
confirms the commonly held a priori notions. MNCs
which not only have a significant presence in the consumer
products category but also own well-known
brand names, as a matter of logic, have depended more
on brand or line extensions. Given the need for protecting
their market position, MNCs have adopted both the
offensive strategy of brand extensions as well as the
defensive strategy of line extensions to a greater extent
than the other types of organizations. The presence of
strong brand names has also facilitated adoption of this
strategy. In the case of large organizations also, a relatively
higher dependence on brand/line extensions
than medium enterprises is a reflection of the portfolio
of stronger brand names that they possess. The same
logic applies in the case of medium and small
enterprises as well. The extent to which an organization
emphasizes brand/line extension strategies depends
on the size of the organization's portfolio of strong
brand names; the higher the number of strong brand
names, the greater will be the dependence on
brand/line extensions by organizations. Only about 14
per cent of the products introduced by the small scale
firms were brand or line extensions, as opposed to 51
per cent by MNCs, 44 per cent by large firms, and 34 per
cent by medium enterprises.
New Brand Strategy
In our study, the largest number of products that were
introduced were new brands; they constituted about 45
per cent of total product introduction (Table 5). The
relative share of new brands in product introduction,
however, varied across different types of organizations.
For the small scale units, new brands constituted the
highest proportion of product introduction (about 55
per cent) whereas for large and medium enterprises, the
proportion of new brands in product introduction was
43 and 42 per cent respectively. For the MNCs, on a
relative basis, new brands received lesser emphasis
than brand/line extensions constituting about 34 per
cent of their product introduction.
The pattern discussed above indicates that new
brand strategy receives far greater attention from small
firms; large firms tend to depend somewhat equally on
brand / line extensions as well as on new brand strategy,
and MNCs tend to rely heavily on brand/line extensions.
This pattern also suggests that introduction of
new brands is an important growth avenue for small
firms and .to a lesser degree, for large and medium
enterprises. In order to extend brand names, organizations
first need to build brands and emphasizing introduction
of new brands probably will help achieve this
purpose in the long run.
New Product Strategy
In our study, new products constituted only 13 per cent
of the products introduced (Table 6). The highest number
of new products were introduced by small scale
firms (16 out of a total of 56 products), and the large
industries accounted for the lowest number (only one
out of 63 products). MNCs introduced a higher number
of new products than large organizations (about 9 per
cent), but this was lower than the proportion of new
products introduced by medium enterprises (13 per
cent).
A chi square test carried out on the data (base—
Table 5) suggests that at 10 per cent probability level,
there is a close association between types of organization
and their product strategies . Thus, new products
as well as new brands constituted the most significant
elements of small scale firms' product strategy accounting
for about 84 per cent of their product introduction.
But, for MNCs and large organizations, brand/line extensions
and new brands accounted for 85 per cent and
87 per cent respectively of the products introduced. For
medium enterprises, although new products formed a
higher proportion of product introductions than MNCs
and large organizations, brand/line extensions as well
as new brands still accounted for about 76 per cent of
product introduction. For small scale firms, and to a
lesser degree medium enterprises, introducing new
brands to consolidate their existing product lines and
introducing new products to enter new lines appear to
be the significant strategy whereas for MNCs and large
firms, protecting their flanks through line extensions,
leveraging brands in new lines for competitive advantage,
and product line consolidation through new
brand introduction appear to be the strategy route.
Product Strategy in Different Product
Categories
An analysis of product strategies with respect to different
product categories indicates some differences
across consumer non-durables and consumer durables
(see Table 6). One significant difference that can be
observed is the proportion of new products introduced
in the consumer durable products category; about 23
per cent of the products introduced in durable products
category were new products whereas in non-durables,
it constituted only about 8 per cent. We can also note
that the proportion of new brands introduced in consumer
non-durables as well as durables categories was'
similar (45 per cent each). This, in other words, means
that about 68 per cent of product introduction in'
durable product category were constituted by new
brands and new products while in non-durable
category, new brands and new products constituted
only about 52 per cent. The proportion of brand/line
extensions was relatively higher in consumer nondurable
category (37 per cent as opposed to 31 per cent
in durable category). In addition to this, about 10 per
cent of products introduced in non-durable category
were relaunch or repositioning exercises whereas in
durables, this exercise accounted for a negligible
proportion. A chi square test carried out on this data
(base — Table 6) suggests a significant relationship
between product category and product introduction
strategy . Thus, in durable products, more firms are
entering the market arena with products new to the
firms while the non-durable category is witnessing a
higher proportion of relaunches, repositioning, and
brand/line extensions. Perhaps this also indicates that
in durables, at least some product-markets are evolving
into more competitive ones with the entry of new
players in the field. But, in the non-durable category,
existing players seem to be more active.
When we analyse product strategies in the two
sub-groups of consumer non-durables, we find that
new brands constituted 56 per cent of product introduction
in food and beverages whereas in the personal
hygiene product group, only 38 per cent accounted for
new brands. The latter also witnessed a higher propor-
Vol. 19, No. 2, April-June 1994 29
tion of brand/line extensions (42 per cent) and
relaunch/repositioning exercises (18 per cent) than
food and beverages product group (30 per cent and 7
per cent respectively). This indicates a trend whereby a
larger number of new brands are being introduced in
food and beverage categories while the existing players
are consolidating their presence through brand/line
extensions and relaunch/repositioning exercises in personal
hygiene products. Interestingly, new products
constitute only a small proportion of product introduction
in both these product groups.
Launch Strategies
While introducing a new product to the market, organizations
either launch the product nationally or in a
limited geographical area. Several factors such as the
relative newness of the product, competitive situation,
marketing infrastructure of the organization, etc.
govern the nature of launch of the products. In our
study, we could gather information on the nature of
launch pertaining to 182 out of 237 products. The
original data source had mentioned whether the
product was launched nationally or whether it was
launched in different zones or regions or metro cities or
in important cities. Since the definition of regions or
zones or even important cities could not be discerned
from the original data source, we categorized the nature
of the launch into two categories only, namely, national
launch and regional/zonal/metros/cities launch. In
Table 7 we give the launch strategies categorized into
these two groups with respect to different types of
organizations.
From Table 8, we can note that, on an aggregate
basis, only 40 per cent of the products were launched
nationally; the remaining 60 per cent launches were
confined to regions, zones, metro cities or other important
cities. We can also infer from this table that the
proportion of national launches was higher for large
organizations (about 51 per cent) and MNCs (45 per
cent), somewhat lower for medium enterprises (about
40 per cent) and low for small scale firms (28 per cent).
Although, based on this pattern, one would expect that
the size of the firm (which points towards the level of
marketing infrastructure that the firm possesses such as
extent and coverage of distribution, size of the field
sales force, number of branch/regional offices, etc), is
likely to influence the nature of the launch followed by
the organizations, a chi square test performed on this
data do not show any significant association between
launch strategies and type of organization . However,
for further insight, we analysed whether the nature of
the product has any relationship with the type of
launch. In Table 8, we give the kind of product launches
with respect to different product categories.
The interesting point that emerges from Table 8 is
the difference in the launch strategy with respect to
different type of products. First, a higher proportion of
consumer durable products was launched nationally
(57 per cent); in the non-durable products category,
only 31 per cent products were national launches.
Second, within the non-durable products category, only
a lesser proportion of food and beverages products was
launched nationally (26 per cent) when compared with
personal hygiene products which had a higher proportion
of national launches (50 per cent). Even within the
miscellaneous consumer non-durables, insect repellents
were the main candidates for national launches.
From this analysis, it appears that the nature of a
product is an important factor which mediates the type
of launch; products which tend to have variations in
preferences and habits across geographical regions (for
example, food and beverages which have regional
preferences due to taste and habits or consumer
durables which have lesser variations in consumer
preferences across geographical areas) tend to be
launched initially in limited geographical areas. When
a chi square test was carried out on this data, it was seen
that at 10 per cent probability level, there is indeed a
significant relationship between product categories and
nature of product launches . This suggests that it is the
nature of the product more than the nature of the organization
which mediates the type of product
launches.
Conclusions
The study of 237 product introductions comes up with
several interesting findings. On the one hand, we find
that consumer non-durables account for a higher
proportion of products introduced mainly due to a
higher average number of products introduced per organization.
On the other hand, consumer durable
product category is characterized by a large number of
players, each introducing on an average lesser number
of products than the firms in the consumer non-durable
category.
We also find variations in the pattern of product
introduction strategies followed by different types of
organizations. Although some researchers argue that it
is easier for large firms to introduce new products when
compared to smaller ones (Gatigna et al. 1990), our
study indicates that various types of organizations exhibit
somewhat similar propensity to introduce new
products. But we also find that a higher proportion of
MNCs and large organizations tend to follow multiproduct
or/and multi-brand strategies as opposed to
small scale firms and to a lesser degree medium
enterprises which tend to follow single product or
single brand strategies.
MNCs which are stronger in consumer nondurable
category tend to depend heavily on brand/line
extensions and to a lesser degree, on new brand introduction.
They protect their territory aggressively by
providing variety to customers through line extensions
and introducing new brands in the same line. They
leverage the established brands to obtain differential
advantage in new product lines. However, they appear
to be less aggressive in entering the not-so familiar
territories through introduction of new products. It has
been noted that MNCs obtain competitive advantage
over local firms by using intangible assets such as superior
technology, international brand name, marketing
expertise, etc. (Dunning, 1988). We also obtain some
support to this strategic posture which MNCs tend to
adopt, particularly leveraging brand equity to consolidate
their position in the chosen fields. But we do
not have strong evidence to suggest that the intangible
assets are exploited by them to enter new product
arenas.
The pattern of product introduction strategy followed
by large organizations is by and large similar to
that of MNCs lending support to the view that the
strategies of large local firms tend to resemble the
strategies of MNCs (Chong, 1973). However, large organizations,
when compared to MNCs, have a stronger
presence in consumer durable product category, show
lesser dependence on brand/line extensions, accord a
higher emphasis on new brand strategy, and exhibit an
equally weak posture with regard to introducing new
products.
The strategy of product introduction by medium
enterprises falls between that of their larger counterparts
and their smaller brethren. They are strong in
consumer durable products, try to get well entrenched
in their chosen lines by introducing new brands, and
show more aggressiveness than MNCs or large organizations
in entering new product categories through
new product introduction. At the same time, their dependence
on brand/line extensions is lower than that
of the large organizations. Given the nature of products
they are involved with and their resource base, a
predominant number of their products are launched in
limited geographical areas.
The small scale industries show an almost equal
propensity to introduce products when compared to
MNCs, large, and medium enterprises. They do not
have strong brand names to leverage and hence their
dependence on brand/line extensions tends to be low.
However, their inability to capitalize on equities of
mega brands is adequately compensated by a larger
number of new brand introduction and an aggressive
stance in entering new product categories through new
products. In fact, small scale firms account for the
highest proportion of new products that were introduced
and this ability to venture into uncharted territories
emerges as the greatest strength of small
enterprises. This conclusion supports the views that
small and medium sized firms are the main providers
of technological innovation and entrepreneurship (Kau
Ah Keng and Tan Soo Jinan, 1989) and the smaller firms
respond to market forces more rapidly than their larger
counterparts (Yaprak, 1985).
The pattern of product strategies of different types
of organizations suggests that the differential advantages
of larger organizations with better resource
base will come from their brand names whereas
medium enterprises will continue to be strong players
in markets which are less attractive to big players but
yet beyond the capabilities of small players. The small
firms, due to their entrepreneurial capabilities, will venture
into newer fields and derive growth from new
product introductions. But the critical requirement for
long-term success in markets which are becoming more
competitive is to develop strong brands in the chosen
fields and hence the need for investing in brand equity
for creating differential advantages must be recognized
by all marketers, irrespective of their size and past
performance.
Notes
1. All chi square analyses performed after suitable re-group
ing. X2 cal = 20.642; X2(.10,12) = 18.549; therefore significant
at 10% probability level.
2. X2cal - 25.8495; X2(.10,6) = 10.644; therefore significant at
10% probability level.
3. X2 cal = 24.979; X2 (.10,9) = 14.6837; therefore significant
at 10% probability level.
4. X2 cal = 7.2; X2 (.10,8) = 13.361; therefore not significant at
10% probability level.
5. X2 cal = 37.991; X2(.10,6) = 10.644; therefore significant at
10% probability level.
32 Vikalpa
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Chong, S J (1973). "Comparative Marketing Practices of
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Crawford, Merle C (1979). "New Product Failure Rates: Facts
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Dunning, J M (1988). "The Eclectic Paradigm of International
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_______(1988). "Brand Leverage: Strategies for Growth in a
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Vol. 19, No. 2, April-June 1994 33
introduction strategies of multinational
corporations, large, medium, and small
enterprises ?
Based on data on 237 product/brand
launches collected from four business
periodicals between January 1991 and July
1992, this article by Abraham Koshy and
Anna Angel focuses on this issue.
Abraham Koshy is Associate Professor in the
Marketing Area of the Indian Institute of
Management, Ahmedabad and Anna Angel was
a research assistant in the same area at the time
of writing this paper.
Successful organizations all over the world recognize
that new product introductions are sine qua non for their
survival and growth. Research studies indicate that
early entrants in the market enjoy several advantages
over late entrants, especially in obtaining a significant
market position (Sands, 1979; Urban ct al. 1986). The
need for a proactive product introduction strategy becomes
more critical due to the dynamic nature of
product markets and the intensifying competitive situation.
Despite its importance, however, different types of
organizations are seen to adopt different strategic posture
with regard to new product introductions. Studies
which examine this phenomenon, namely, new
product introduction strategies of organizations, have
been scanty in the Indian context. Since, in India, different
types of organizations categorized on the basis of
either the size or its association with international corporations
have been functioning under varying
regulatory policies of the government, this issue becomes
more relevant and interesting.
Objectives
This study, therefore, is an attempt to specifically focus
on the nature of new product introduction strategies of
different types of organizations, namely, multinational
corporations (MNCs), large organizations, medium
enterprises, and small scale firms.
We examine this aspect with regard to different
types of products in the consumer products category.
This will help us better understand the differences, if
any, in new product introduction strategies either due
to the differences in the types of organizations or due to
the nature of products.
Definition of New Product
The term new product has been used in different contexts
with differing meanings. It can refer to a product
concept totally new to the market or to a product new
to the company which introduces the product, although
similar products may already be existing in the market
(Crawford, 1979). We, therefore, need to clarify the
Vol.19, No. 2, April-June 1994 21
meaning of the term new product in the context of this
study. Booz, Allen, and Hamilton survey (1982) classifies
new products into six categories. These are :
• Products which are new to the world.
• New product lines which allow a company to enter
an established market for the first time.
• Additions to existing product lines which supple
ment a company's established product lines.
• Improvements in the existing products in order to
replace existing ones.
• Repositioning of existing products.
• New products that provide performance at lower
cost to customers.
From the above classification, it is clear that the
term new products can refer to original products, improved
products, modified products, and new brands
(Kotler, 1992, p 311). This definition views new products
essentially from the point of view of a company;
all those products which a company introduces, be it a
relaunch or repositioning, new brand, or even a
pioneering product, are considered as new products. In
our study also, we follow this broad definition.
Strategies for Product Introduction
The definition of a new product covers a wide spectrum
of product introduction. However, in the present study,
we are concerned with the strategy of new product
introduction and, therefore, we classified all the new
products introduced by organizations into four strategy
categories:
• relaunch/repositioning strategy
• brand/line extension strategy
• new brand strategy
• new product strategy.
In essence, this classification also views new
product introduction from the point of view of firms,
but the logic of strategy forms the basis of the classification.
For a detailed discussion of these strategies, see
Box.
Box : A Discussion on Four Strategy Categories
Relaunch and Repositioning Strategy
When a brand continues to remain in the market for a long
stretch of time without any change in its qualities such as
basic formulations and features, core benefits, packaging,
etc. there is a high tendency for the brand to suffer from
brand fatigue. The boredom that consumers are likely to feel
about the brand may be one of the factors for brand fatigue
and this is aggravated when competitors offer products with
better features, packaging, more salient core benefits, etc.
This also implies that the original position that the brand
might have occupied in the minds of consumers either gets
altered or the salience of the original position becomes less
important. This invariably leads to low brand patronage and
high brand switching. The generally accepted practices to
revitalize an existing brand/product are relaunching and
repositioning.
A product is considered to be relaunched when some
changes are made with regard to packaging and other physical
aspects of the product (such as colour, size, perfume, etc.)
along with appropriate changes in the advertising and communication
strategy. Repositioning, on the other hand, entails
appropriate changes in the marketing mix elements so
that the perception of the product in the minds of the consumers
is altered. Repositioning also involves redefining
target segments and/or altering the benefits offered by the
product along with appropriate changes in the relevant
marketing mix elements. Though this definition may give
the impression that there is no difference between relaunching
and repositioning, there are subtle distinctions.
Relaunching a product need not necessarily involve
repositioning. For example, when an existing brand of detergent
powder or a toilet soap is relaunched as a "new improved"
brand, it may not result in repositioning the brand
as there is no redefinition of target segment and /or altering
the intended benefits to consumers. But repositioning involves
changes in some or all the elements of marketing mix
consistent with the changes in benefits communicated to
consumers vis-a-vis the competing brands or some specific
need configuration of consumers. By and large, however,
existing brands are mostly relaunched with an explicit intention
of repositioning. In our study, we have clubbed together
relaunch and repositioning exercises. In addition, we have
also included some products which were reintroduced after
its initial launch and were subsequently withdrawn in the
same classificatory group.
Brand/Line Extension Strategy
Brands are considered to be one of the most valuable assets
of a company (Aaker, 1991, 1992). Therefore, in markets
which are highly competitive and in situations where the
Box Contd.
22 Vikalpa
cost of introducing new brands is high, brand extension
strategy is considered to be cost- effective and viable (Tauber,
1981,1988; Aaker, 1990). The basic approach in brand extension
is to leverage the equity of existing brands which are
well established in the market to introduce new products.
Tauber (1981) makes a distinction between line extensions
and brand extensions. Line extensions represent new sizes,
new flavours, etc. of the same brand whereas brand extensions
(sometimes also known as franchise extensions) refer
to the strategy wherein the brand name familiar to the consumers
is used to introduce a product in a different product
category. However, some minor variations in the product for
the purpose of variety such as colour or perfume cannot be
referred to as line extensions. For example. Lux, a brand of
toilet soap of Hindustan Lever, is available in different colour
shades, but these are not considered as line extensions. However,
International Lux by the same company is a line extension.
Similarly, Cinthol Lime and Cinthol Cologne refer to
line extensions in the toilet soap category whereas Cinthol
Talcum Powder refers to brand extension. In our study, we
have considered line extension and brand extension in the
same classificatory group.
It may be worthwhile to note one difference in the
strategic connotation of line extension and brand extension.
Line extension refers to introducing variations of the same
brand and this helps the company in occupying various slots
available in the market for the same product. In other words,
this helps the company to protect its flanks in the same
product market. In brand extension, on the other hand, the
equity of a well known brand is leveraged to obtain a
headstart in a different product line. Therefore, in relative
terms, line extension tends to be more defensive in nature
whereas brand extension is a more offensive strategy. Both
these strategies are used by organizations successfully and
frequently. For example, a study of 7,000 products introduced
in 1970s in the supermarkets of US revealed that two
thirds of the most successful products numbering 93 were
line extensions (Tauber, 1988). In another study which examined
120 to 175 new brands that were introduced each
year from 1977 to 1988 in the US supermarkets, approximately
40 per cent were brand extensions (Aaker, 1990).
New Brand Strategy
When an organization introduces a product with a new
brand name in a category where the organization already has
a market position, then this is termed as new product
strategy. For example, Le Sancy introduced by Hindustan
Lever is considered as a new brand for our study purpose.
At this juncture, we need to clarify the essential difference
between new brand strategy and line extension strategy. The
basic purpose of both these strategies is similar: Either
through new brands or through line extensions, a company
protects its flanks from competitive inroads. However, line
extensions revolve around the base of the brand equity and
therefore the extended brand in the same line carries with it
one or more base properties of the mother brand. As a
consequence, by and large, the inter-segment distance between
the extended brand in the same line is unlikely to be
significant. Each new brand, on the other hand, caters to a
specific need of the market segment and hence the inter-segment
distance between different brands of the same company
in the same product category is likely to be greater. In
other words, line ex tensions tend to occupy niches within the
broad product-market segment whereas new brands tend to
serve somewhat different product-markets. Therefore, the
purpose of line extensions is to consolidate the company's
position in the chosen product-market while the new brands
help in consolidating the company's position in the chosen
product line.
New Product Strategy
When an organization introduces a product with a new
brand name in a category in which the company does not
havea market position, then we refer to this as a hew product
strategy. The term new product also refers to a product new
to the market, sometimes referred to as pioneering new
product. Although we intended to include such products in
our study, subsequently we did not find any product in our
sample which was new to the market. Therefore, only those
products which were new to the company constituted this
classificatory category. Introducing a new product points
towards the propensity of the organization to create market
positions in less familiar arenas and is, therefore, more
strategic in nature than line extensions or new brand introductions.
Methodology
The data on new product introduction were collected
from the section on new product/brand launches published
in periodicals such as Business India, Business
World, Advertising & Marketing (A&M), and the Brand
Equity feature pf Economic Times between the period
January 1991 and July 1992. The data were nominal in
nature and contained details such as brand names of
products, names of companies which launched the
products, nature of launch, etc. The base source contained
information on new products in the consumer as
well as industrial products categories. However, since
less than 15 per cent of the products mentioned in this
source pertained to industrial products category, we
excluded this category in our study as this would not
be representative of new products introductions in the
industrial product category.
While collecting data, we did not include very specialized
products intended for narrowly defined seg-
Vol. 19, No. 2, April-June 1994 23
merits (for example, an in-house journal or a. journal by
a club or an association), although the data were available.
Since the data were collected from more than one
periodical, care was taken to avoid duplication of information.
After editing, we obtained data on 237 products
in the consumer products category.
For the purpose of analysis, the organizations
which introduced the products were classified into four
categories such as MNCs, large organizations, medium
enterprises, and small scale industries. In many cases,
the type of organization which introduced the product
was mentioned in the base source of the data itself.
However, in the case of those organizations whose
category was not mentioned, we followed the annual
sales turnover for classification based on size and also
the extent of association with multinational organizations.
Thus, all those organizations which have significant
shareholding and/or close association with a
multinational firm (reflected either in the company
name or brand names) were classified under MNCs.
Organizations whose annual sales turnover was above
Rs 100 crore were classified as large organizations, between
Rs 20 crore and Rs 100 crore as medium
enterprises, and below Rs 20 crore as small scale industries.
For consistency, this definition was extended
to even those organizations whose category was mentioned
in the original data source. In all, the data on new
product introduction pertained to 151 organizations.
All organizations, except 14 for which classificatory
details were not available, were grouped into these four
categories and the group of 14 organizations was classified
under 'not known' category.
Categorization of the sample into four product introduction
strategy categories such as relaunch/ repositioning,
brand/line extensions, new brands, and new
product was done by the authors based on their prior
understanding of and familiarity with the market situation.
Questions such as whether the organization has a
presence in the product category, whether similar
brands exist in the market, and whether the same brand
existed earlier helped in categorizing the sample correctly.
Type of Products Introduced
The sample of 237 products introduced represented a
wide range of products in consumer product category
(see Table 1). Of the total sample, consumer nondurable
products accounted for 68.7 per cent (163
products) and the remaining 74 products (31.3 per cent)
were consumer durables. A higher share of the consumer
non-durable products in the total new product
introductions reflects partly the level of new product
activity; the consumer non-durables market appears to
be more active than the consumer durables market. This
is mainly due to the fact that in the consumer nondurable
category, on an average, each organization introduced
a larger number of products than those in the
durable products category. Thus, in the consumer nondurable
category, a total of 95 organizations introduced
163 products with an average of 1.7 products per organization
whereas in the durable products category,
56 organizations introduced 74 products with an
average of 1.3 products per company. This difference
could also be due to the fact that in relative terms, in the
durable products category, proportionately a larger
number of firms appear to be equally active whereas in
the non-durable products category, some firms appear
to be more active than others in introducing more
products.
Out of the sample of 163 products in the nondurable
category, food and beverages accounted for
nearly 30 per cent (70 products) of the total sample; the
products ranged from packed food items, new brands
of vanaspati and edible oils, etc. to branded tea, coffee,
other hot and cold beverages, liquors, etc. Personal
hygiene products such as shampoos, toilet soap, facial
creams, make-up base, shaving products, and other
toiletries accounted for another 21 per cent (50
products). An interesting product category in this
group was the health care products such as vitamin
preparations, "vitalizing" tonics and tablets, energy restorers,
etc. which accounted for about 8 per cent of the
total sample (19 products). The remaining 24 products
(10 per cent of the total sample) in the non-durable
category comprised of fabric care products (newer
forms of detergent concentrates leading the pack), baby
care products, household hygiene products (room
freshners, toilet cleaners, insect repellents, etc) and
other similar products.
The largest product group in the consumer durable
category was home appliances constituting about 10
per cent (24 products) of the total sample of products
introduced. This group included products such as
washing machines, kitchen mixies, refrigerators,
geysers, etc. Entertainment electronics which included
newer models of colour televisions, VCRs, music systems,
and other such items constituted approximately
5 per cent of the total sample of products. All other
consumer durables such as two-wheelers, bicycles,
wrist watches, and cordless telephones constituted
about 17 per cent (39 products) of the total sample.
Activity Levels of Different Types of
Organizations in Product Introduction
As noted earlier, organizations in our study have been
classified into four categories, namely MNCs, large Organizations,
medium enterprises, and small scale industries.
Of the total sample of 151 organizations which
introduced 237 products, the highest number of
products was introduced by 35 large organizations accounting
for nearly 27 per cent of the sample (63
products) (see Table 2). This was followed by small
scale industries wherein 41 organizations introduced 56
products (23.6 per cent of the sample'), and medium
enterprises wherein 36 organizations introduced 53
products (22.4 per cent). The 25 MNCs in the sample
accounted for the smallest share of about 20 per cent (47
products) of the products introduced.
Although, as noted above, the MNCs accounted for
only 20 per cent of the total product introduction, the
number of products introduced per organization was
highest in this category. On an average, each of the
MNCs introduced 1.9 products, whereas it was lowest
among small scale industries (1.4 products per organization).
In fact, the number of products introduced
per organization declines proportionately as the size of
the organization reduces. Thus, on an average, the number
of products introduced per large organization was
1.8 whereas for medium enterprises it was 1.5. Thus, the
difference in the number of products introduced per
organization gives the impression that the size of the
organization or its association with international
players is directly related to the propensity of the organization
to introduce products; larger organizations
and MNCs tend to be more active by introducing more
products per organization. However, in order to obtain
A more realistic picture, we need to examine the proportion
of firms belonging to different categories which
introduced varying number of products. Table 3 gives
these details.
From Table 3, we can draw two interesting inferences.
First, we find that one MNC introduced 10 products
while one large organization, 7 products. If we re-calculate
the number of products introduced per organization
after eliminating these two extreme cases, we find
that the number of products introduced per organization
is not significantly different across different types
of organizations. Thus, after excluding the extreme
cases, we find that, on an average, the number of
products introduced per organization was 1.5 in the
case of MNCs and 1.6 in the case of large organizations.
This pattern is not significantly different from that of
medium enterprises or small scale firms where it was
1.5 and 1.4 products per organization respectively.
Therefore, we find that there is no significant difference
across different types of organizations in their propensity
to introduce new products. Alternatively stated,
evidence does not suggest that either the size of the
organization or its association with international companies
is a significant determinant of an organization's
activity levels regarding product introductions. Second,
we also obtain an insight into the product introduction
strategies of different types of organizations. Of the
sample of 25 MNCs, 68 per cent introduced only one
product and another 16 per cent introduced two
products. This pattern was not significantly different
from that of medium enterprises where 68 per cent of
the firms in this group introduced one product and
another 19 per cent, two products. In the case of large
organizations, proportionately smaller number of firms
(54 per cent) introduced one product but a larger
proportion (28 per cent) introduced two products. A
significant difference, however, was observed in the
case of small scale firms. About 76 per cent of the
organizations in this category introduced only one
product and 17 per cent, two products. If we consider
the proportion of firms introducing one or two
products, 93 per cent of small scale organizations fall in
this category whereas only 84 per cent of MNCs, 82 per
cent of large organizations, and 87 per cent of medium
enterprises belong to the group of firms introducing one
or two products. The conclusion that we can draw from
this pattern is that a predominant number of small scale
firms tends to follow a single product strategy whereas
MNCs, large organizations, and to a lesser extent,
medium enterprises tend to follow multi-product or
multi-brand strategy.
Type of Products Introduced by Different
Organizations
On an aggregate basis, we had noted that about 69 per
cent out of the sample of 237 products belonged to the
consumer non-durable category and the remaining 31
per cent to the consumer durable products category. It
would be interesting to examine if there are any significant
differences among various types of organizations
with regard to the nature of product introduction.
In Table 4, we give the proportion of products belonging
to different product categories introduced by different
types of organizations.
From Table 4, two inferences appear to be most
striking. First, a significantly higher proportion of
products introduced by MNCs belong to the consumer
non-durable category (85 per cent) and only about 15
per cent belong to the consumer durable products
category. This is in contrast to the scenario in large
organizations and medium enterprises, where consumer
non-durables constituted about 67 per cent and
60 per cent of the portfolio of new products respectively.
In fact, the proportion of consumer non-durables
introduced by large and medium enterprises was lower
than the proportion of non-durables in the new product
portfolio of small scale organizations. Within the consumer
non-durable category, MNCs appear to be
strongest in the personal hygiene product group consisting
of products such as toilet soaps, toothpastes,
shampoo, skin care products, etc. About 34 per cent of
the products introduced by MNCs belong to this group.
Even in food and beverage categories, MNCs have a
significant presence (about 28 per cent of product introductions)
although large, medium, and small
enterprises have a higher proportion of products in this
category.
The second important inference that can be drawn
from Table 4 is the noticeable presence of medium
enterprises in consumer durable category-about 40
per cent of the products introduced belong to this
product group. This is suggestive of the relative
strength of medium enterprises in the durable products
category. A chi square test performed on the data (base
Table 4) suggests that at 10 per cent probability level,
there is a significant association- between the type of
products introduced and the type of organization ,
Therefore, the pattern of product introduction we observe
is suggestive of the new product activity levels in
different product categories by different organizations.
Thus, the MNCs tend to focus more actively on the
consumer non-durable category, more so on the personal
hygiene products group, whereas medium
enterprises tend to be more active in the consumer
durable product category. When we examine the share
of different types of organizations in product introduction
across various product groups, we find that large
and medium firms have contributed equally in the food
and beverages product group as well as in the consumer
durable product group, It appears that edible oils, packed
foods, beverages, washing machines, kitchen mixies,
wrist watches, and refrigerators are the preferred
products of large and medium firms whereas soaps,
shampoos, toothpastes, and such other toiletries seem
to be preferred by MNCs. The small firms appear to be
stronger in health tonics, vitalizing tablets, geysers, insect
repellants, and similar products,
Product Strategies of Various Types of
Organizations
In order to discern the nature of new product strategies
adopted by various types of organizations, we classified
product introduction strategies into four
categories, namely, relaunch or repositioning, brand or
line extension strategy, new brand strategy, and new
product strategy. For different types of firms, we
analysed the number of product launches belonging to
these four strategy categories. In the following sub-sections,
we discuss the salient findings.
Relaunch/Repositioning Strategy
Out of the sample of 237 products, only 17 (i.e. 7 per
cent) introductions involved relaunch and repositioning
(see Table 5). As a strategy, repositioning/relaunch
received the least priority from organizations. In fact,
only 3 out of 47 products introduced by MNCs aiid 11
per cent each of product introduction by large as well
as medium enterprises were relaunch/repositioning
exercises. For small scale firms, relaunch/ reposi-tioning
was negligible (only 1 product out of 56 launches).
The above pattern suggests the tendency of organizations
to prefer different product introduction
strategies rather than relaunch/repositioning. Perhaps,
organizations may be finding it more profitable to introduce
new brands or new products rather than diverting
energies to merely revitalize the existing brands.
Brand/Line Extension Strategy
Our study indicates that brand/line extensions have
been used by organizations as a significant strategy for
product introduction (see Table 5). About 35 per cent of
the products introduced (83 products out of a total of
237) belonged to this strategy category. The more interesting
pattern, however, is the variations across different
types of organizations in using .brand/line
extensions. For MNCs, brand/line extensions have
emerged as the most important product introduction
strategy; about 51 per cent of the products introduced
by MNCs were brand/line extensions. Even large organizations
show considerable dependence on
brand/line extensions in product introductions, although
to a lesser degree when compared with MNCs.
In the case of large organizations, about 44 per cent of
the product introductions were brand/line extensions.
The dependence of medium enterprises, on the other
hand, was even lesser than that of large organizations;
only about 34 per cent of the products introduced by
them belonged to this strategy category. For small scale
firms, brand extensions constituted only 14 per cent of
product introduction.
The pattern which emerges from the above analysis
confirms the commonly held a priori notions. MNCs
which not only have a significant presence in the consumer
products category but also own well-known
brand names, as a matter of logic, have depended more
on brand or line extensions. Given the need for protecting
their market position, MNCs have adopted both the
offensive strategy of brand extensions as well as the
defensive strategy of line extensions to a greater extent
than the other types of organizations. The presence of
strong brand names has also facilitated adoption of this
strategy. In the case of large organizations also, a relatively
higher dependence on brand/line extensions
than medium enterprises is a reflection of the portfolio
of stronger brand names that they possess. The same
logic applies in the case of medium and small
enterprises as well. The extent to which an organization
emphasizes brand/line extension strategies depends
on the size of the organization's portfolio of strong
brand names; the higher the number of strong brand
names, the greater will be the dependence on
brand/line extensions by organizations. Only about 14
per cent of the products introduced by the small scale
firms were brand or line extensions, as opposed to 51
per cent by MNCs, 44 per cent by large firms, and 34 per
cent by medium enterprises.
New Brand Strategy
In our study, the largest number of products that were
introduced were new brands; they constituted about 45
per cent of total product introduction (Table 5). The
relative share of new brands in product introduction,
however, varied across different types of organizations.
For the small scale units, new brands constituted the
highest proportion of product introduction (about 55
per cent) whereas for large and medium enterprises, the
proportion of new brands in product introduction was
43 and 42 per cent respectively. For the MNCs, on a
relative basis, new brands received lesser emphasis
than brand/line extensions constituting about 34 per
cent of their product introduction.
The pattern discussed above indicates that new
brand strategy receives far greater attention from small
firms; large firms tend to depend somewhat equally on
brand / line extensions as well as on new brand strategy,
and MNCs tend to rely heavily on brand/line extensions.
This pattern also suggests that introduction of
new brands is an important growth avenue for small
firms and .to a lesser degree, for large and medium
enterprises. In order to extend brand names, organizations
first need to build brands and emphasizing introduction
of new brands probably will help achieve this
purpose in the long run.
New Product Strategy
In our study, new products constituted only 13 per cent
of the products introduced (Table 6). The highest number
of new products were introduced by small scale
firms (16 out of a total of 56 products), and the large
industries accounted for the lowest number (only one
out of 63 products). MNCs introduced a higher number
of new products than large organizations (about 9 per
cent), but this was lower than the proportion of new
products introduced by medium enterprises (13 per
cent).
A chi square test carried out on the data (base—
Table 5) suggests that at 10 per cent probability level,
there is a close association between types of organization
and their product strategies . Thus, new products
as well as new brands constituted the most significant
elements of small scale firms' product strategy accounting
for about 84 per cent of their product introduction.
But, for MNCs and large organizations, brand/line extensions
and new brands accounted for 85 per cent and
87 per cent respectively of the products introduced. For
medium enterprises, although new products formed a
higher proportion of product introductions than MNCs
and large organizations, brand/line extensions as well
as new brands still accounted for about 76 per cent of
product introduction. For small scale firms, and to a
lesser degree medium enterprises, introducing new
brands to consolidate their existing product lines and
introducing new products to enter new lines appear to
be the significant strategy whereas for MNCs and large
firms, protecting their flanks through line extensions,
leveraging brands in new lines for competitive advantage,
and product line consolidation through new
brand introduction appear to be the strategy route.
Product Strategy in Different Product
Categories
An analysis of product strategies with respect to different
product categories indicates some differences
across consumer non-durables and consumer durables
(see Table 6). One significant difference that can be
observed is the proportion of new products introduced
in the consumer durable products category; about 23
per cent of the products introduced in durable products
category were new products whereas in non-durables,
it constituted only about 8 per cent. We can also note
that the proportion of new brands introduced in consumer
non-durables as well as durables categories was'
similar (45 per cent each). This, in other words, means
that about 68 per cent of product introduction in'
durable product category were constituted by new
brands and new products while in non-durable
category, new brands and new products constituted
only about 52 per cent. The proportion of brand/line
extensions was relatively higher in consumer nondurable
category (37 per cent as opposed to 31 per cent
in durable category). In addition to this, about 10 per
cent of products introduced in non-durable category
were relaunch or repositioning exercises whereas in
durables, this exercise accounted for a negligible
proportion. A chi square test carried out on this data
(base — Table 6) suggests a significant relationship
between product category and product introduction
strategy . Thus, in durable products, more firms are
entering the market arena with products new to the
firms while the non-durable category is witnessing a
higher proportion of relaunches, repositioning, and
brand/line extensions. Perhaps this also indicates that
in durables, at least some product-markets are evolving
into more competitive ones with the entry of new
players in the field. But, in the non-durable category,
existing players seem to be more active.
When we analyse product strategies in the two
sub-groups of consumer non-durables, we find that
new brands constituted 56 per cent of product introduction
in food and beverages whereas in the personal
hygiene product group, only 38 per cent accounted for
new brands. The latter also witnessed a higher propor-
Vol. 19, No. 2, April-June 1994 29
tion of brand/line extensions (42 per cent) and
relaunch/repositioning exercises (18 per cent) than
food and beverages product group (30 per cent and 7
per cent respectively). This indicates a trend whereby a
larger number of new brands are being introduced in
food and beverage categories while the existing players
are consolidating their presence through brand/line
extensions and relaunch/repositioning exercises in personal
hygiene products. Interestingly, new products
constitute only a small proportion of product introduction
in both these product groups.
Launch Strategies
While introducing a new product to the market, organizations
either launch the product nationally or in a
limited geographical area. Several factors such as the
relative newness of the product, competitive situation,
marketing infrastructure of the organization, etc.
govern the nature of launch of the products. In our
study, we could gather information on the nature of
launch pertaining to 182 out of 237 products. The
original data source had mentioned whether the
product was launched nationally or whether it was
launched in different zones or regions or metro cities or
in important cities. Since the definition of regions or
zones or even important cities could not be discerned
from the original data source, we categorized the nature
of the launch into two categories only, namely, national
launch and regional/zonal/metros/cities launch. In
Table 7 we give the launch strategies categorized into
these two groups with respect to different types of
organizations.
From Table 8, we can note that, on an aggregate
basis, only 40 per cent of the products were launched
nationally; the remaining 60 per cent launches were
confined to regions, zones, metro cities or other important
cities. We can also infer from this table that the
proportion of national launches was higher for large
organizations (about 51 per cent) and MNCs (45 per
cent), somewhat lower for medium enterprises (about
40 per cent) and low for small scale firms (28 per cent).
Although, based on this pattern, one would expect that
the size of the firm (which points towards the level of
marketing infrastructure that the firm possesses such as
extent and coverage of distribution, size of the field
sales force, number of branch/regional offices, etc), is
likely to influence the nature of the launch followed by
the organizations, a chi square test performed on this
data do not show any significant association between
launch strategies and type of organization . However,
for further insight, we analysed whether the nature of
the product has any relationship with the type of
launch. In Table 8, we give the kind of product launches
with respect to different product categories.
The interesting point that emerges from Table 8 is
the difference in the launch strategy with respect to
different type of products. First, a higher proportion of
consumer durable products was launched nationally
(57 per cent); in the non-durable products category,
only 31 per cent products were national launches.
Second, within the non-durable products category, only
a lesser proportion of food and beverages products was
launched nationally (26 per cent) when compared with
personal hygiene products which had a higher proportion
of national launches (50 per cent). Even within the
miscellaneous consumer non-durables, insect repellents
were the main candidates for national launches.
From this analysis, it appears that the nature of a
product is an important factor which mediates the type
of launch; products which tend to have variations in
preferences and habits across geographical regions (for
example, food and beverages which have regional
preferences due to taste and habits or consumer
durables which have lesser variations in consumer
preferences across geographical areas) tend to be
launched initially in limited geographical areas. When
a chi square test was carried out on this data, it was seen
that at 10 per cent probability level, there is indeed a
significant relationship between product categories and
nature of product launches . This suggests that it is the
nature of the product more than the nature of the organization
which mediates the type of product
launches.
Conclusions
The study of 237 product introductions comes up with
several interesting findings. On the one hand, we find
that consumer non-durables account for a higher
proportion of products introduced mainly due to a
higher average number of products introduced per organization.
On the other hand, consumer durable
product category is characterized by a large number of
players, each introducing on an average lesser number
of products than the firms in the consumer non-durable
category.
We also find variations in the pattern of product
introduction strategies followed by different types of
organizations. Although some researchers argue that it
is easier for large firms to introduce new products when
compared to smaller ones (Gatigna et al. 1990), our
study indicates that various types of organizations exhibit
somewhat similar propensity to introduce new
products. But we also find that a higher proportion of
MNCs and large organizations tend to follow multiproduct
or/and multi-brand strategies as opposed to
small scale firms and to a lesser degree medium
enterprises which tend to follow single product or
single brand strategies.
MNCs which are stronger in consumer nondurable
category tend to depend heavily on brand/line
extensions and to a lesser degree, on new brand introduction.
They protect their territory aggressively by
providing variety to customers through line extensions
and introducing new brands in the same line. They
leverage the established brands to obtain differential
advantage in new product lines. However, they appear
to be less aggressive in entering the not-so familiar
territories through introduction of new products. It has
been noted that MNCs obtain competitive advantage
over local firms by using intangible assets such as superior
technology, international brand name, marketing
expertise, etc. (Dunning, 1988). We also obtain some
support to this strategic posture which MNCs tend to
adopt, particularly leveraging brand equity to consolidate
their position in the chosen fields. But we do
not have strong evidence to suggest that the intangible
assets are exploited by them to enter new product
arenas.
The pattern of product introduction strategy followed
by large organizations is by and large similar to
that of MNCs lending support to the view that the
strategies of large local firms tend to resemble the
strategies of MNCs (Chong, 1973). However, large organizations,
when compared to MNCs, have a stronger
presence in consumer durable product category, show
lesser dependence on brand/line extensions, accord a
higher emphasis on new brand strategy, and exhibit an
equally weak posture with regard to introducing new
products.
The strategy of product introduction by medium
enterprises falls between that of their larger counterparts
and their smaller brethren. They are strong in
consumer durable products, try to get well entrenched
in their chosen lines by introducing new brands, and
show more aggressiveness than MNCs or large organizations
in entering new product categories through
new product introduction. At the same time, their dependence
on brand/line extensions is lower than that
of the large organizations. Given the nature of products
they are involved with and their resource base, a
predominant number of their products are launched in
limited geographical areas.
The small scale industries show an almost equal
propensity to introduce products when compared to
MNCs, large, and medium enterprises. They do not
have strong brand names to leverage and hence their
dependence on brand/line extensions tends to be low.
However, their inability to capitalize on equities of
mega brands is adequately compensated by a larger
number of new brand introduction and an aggressive
stance in entering new product categories through new
products. In fact, small scale firms account for the
highest proportion of new products that were introduced
and this ability to venture into uncharted territories
emerges as the greatest strength of small
enterprises. This conclusion supports the views that
small and medium sized firms are the main providers
of technological innovation and entrepreneurship (Kau
Ah Keng and Tan Soo Jinan, 1989) and the smaller firms
respond to market forces more rapidly than their larger
counterparts (Yaprak, 1985).
The pattern of product strategies of different types
of organizations suggests that the differential advantages
of larger organizations with better resource
base will come from their brand names whereas
medium enterprises will continue to be strong players
in markets which are less attractive to big players but
yet beyond the capabilities of small players. The small
firms, due to their entrepreneurial capabilities, will venture
into newer fields and derive growth from new
product introductions. But the critical requirement for
long-term success in markets which are becoming more
competitive is to develop strong brands in the chosen
fields and hence the need for investing in brand equity
for creating differential advantages must be recognized
by all marketers, irrespective of their size and past
performance.
Notes
1. All chi square analyses performed after suitable re-group
ing. X2 cal = 20.642; X2(.10,12) = 18.549; therefore significant
at 10% probability level.
2. X2cal - 25.8495; X2(.10,6) = 10.644; therefore significant at
10% probability level.
3. X2 cal = 24.979; X2 (.10,9) = 14.6837; therefore significant
at 10% probability level.
4. X2 cal = 7.2; X2 (.10,8) = 13.361; therefore not significant at
10% probability level.
5. X2 cal = 37.991; X2(.10,6) = 10.644; therefore significant at
10% probability level.
32 Vikalpa
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