Chapter 3
INTERNATIONAL MARKET SELECTION
Objectives
After completing this chapter, students can:
1. Identify the variables that can use to segment global markets and
give an example of each.
2. Explain the Market selection process, procedure, and strategy
3. Understand the global market segmentation
4. Be able to evaluate the market portfolios
Content
1. Segmentation process
2. Regional, trans-national and global segments
3. Global market segmentation
4. Market selection process, procedure, and strategy
5. Evaluating overall foreign market portfolios
3
1. MARKET SEGMENTATION
MARKET SEGMENTATION
The process of classifying customers into homogeneous groups with
similar demand and/or preferences.
(Bruning et al ., 2009, p. 1500)
A process whereby unique customer groups can be identified in
country-based/ individual consumer-based groups. (Bruning et al .,
2009, p. 1500).
MARKET SEGMENTATION
• Internationally oriented firms largely depend on resource based
advantages, high quality products (tradition, chance, or production
philosophy), and long-term personal relationships and
commitment in developing their niche strategies
• can generate specialization.
• involves costs, risks, and possible weaknesses
• analysis of market behavior: channels, customer segments, or use
occasions as well as the geographic dimension
MARKET SEGMENTATION
• Measurability (size, purchasing power, ..)
• Accessibility (effectively reached and served )
• Profitability (large and/or profitable)
• Actionability (formulated for attracting and serving the segments)
Types of segmentation methods
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Demographic segmentation
Psychographic segmentation
Behavior segmentation
Benefit segmentation
For example
• 600 million SE Asian consumers, 70% under age 40
• India has the youngest demographic profile among the world’s large
nations; 2/3 are younger than 35
• Half of Japanese will be 50+ years. by 2025
• EU consumers under 16 almost as large as over 60
• 20% of Americans (70 million) will be 65+ by 2030
• U.S. ethnic groups-African/Black, Hispanics, & Asian Americans have
a combined annual buying power of $3.5 trillion
• US is home to 28.4 million foreign-born with income of $233b
2. SEGMENTATION SCENARIOS
SEGMENTATION SCENARIOS
Country segments
Regional segments
- Similarity across regional level
Transnational segments
- Segments based on similar needs across a group of countries
- Country clusters
Global Segments
- Segments transcending national boundaries with common needs
3. GLOBAL SEGMENTS
GLOBAL SEGMENTS
! “Homogeneous entities categorized by psychographic and
behavioural similarities” (Doole, Lowe & Kenyon, 2018)
! “.. defined based upon market variables other than national
boundaries (Hassan, 2011)
! Share core values, attitudes and aspirations
! Recognition that world markets consist of similarities and
differences as distinguishing characteristics
! Segmentation across markets rather than within - consumers, not
countries
! Problem if geographically spread
“The process of identifying specific segments, whether they be country
groups or individual consumer groups, of potential customers with
homogeneous attributes who are likely to exhibit similar responses to a
company’s marketing mix”
(Hassan & Katsanis, 1991)
GLOBAL SEGMENTS
• Affluent consumers
• Teenagers
• International business travelers
• Technology geeks
• Similarity of needs depends on product categories e.g. high-tech
consumer durables, travel-related products
“Global consumers are willing to put their money where their heart is when it
comes to goods and services from companies committed to social responsibility”.
(Nielsen, 2014)
“China remains an engine of growth for luxury goods as the country’s middle class
continues to grow in size and purchasing power”. (Bain & Co, 2016)
“A group of teenagers randomly chosen from different parts of the world will share
many of the same tastes.”
“GLOBAL ELITE” SEGMENT
“Affluent consumers who are well travelled and have the money to
spend on prestigious products with an image of exclusivity”
Characteristics:
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Increased wealth
Well travelled
Prestige products universally
High quality products
GLOBAL TEEN SEGMENT
“Teenagers sharing memorable experiences which are reflected in their
consumption behavior. Young consumers whose cultural norms have not
become ingrained and who can share universal needs, wants and
fantasies”
• Internet
• Social media
• International education
Characteristics:
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Frequent travel
Appreciation of future trends, fashion & music
Self- conscious about way they look
Role models influence choices
• Music important communications tool
GLOBAL TEEN SEGMENT
• As cultures converge, teenagers around the world become more
similar
• They use well-known global brands like iPhone, Facebook, Nike,
YouTube, Tiktok, Coca Cola …
• They wear the same clothes and want to look and feel right…
GLOBAL KIDS
• Are children around the world becoming more similar?
• Watch TV/Netflix, play computer games, download films, go to
McDonalds/ KFC
• International success of TV programmes like Teletubbies, Harry Potter
books and films, Nintendo games, Disney
Psychographic Segmentation
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Based on attitudes, values, and lifestyle
Lifestyle surveys
S R I International’s Values and Life Styles, V A L S & V A L S2
Porsche example
• Top Guns (27%): Ambition, power, control
• Elitists (24%): Old money, car is just a car
• Proud Patrons (23%): Car is reward for hard work
• Bon Vivants (17%): Car is for excitement, adventure
• Fantasists (9%): Car is form of escape
Behavior Segmentation
• Focus on whether people purchase a product or not, how much, and
how often they use it
• Usage rates: heavy, medium, light, non-user
• User status: potential, non-users, ex-users, regulars, first-timers, users
of competitor’s products
• 80/20 Rule or Law of Disproportionality or Pareto’s Law-80% of a
company’s revenues are accounted for by 20% of the customers
Benefit Segmentation
• Benefit segmentation focuses on the value equation
Value = Benefits / Price
• Based on understanding the problem a product solves, the benefit it
offers, or the issue it addresses
VALS SEGMENTATION
(Values – Attitudes – Lifestyles)
HIGH RESOURCES
• Innovators
LOW RESOURCES
• Believers
• Thinkers
• Strivers
• Achievers
• Makers
• Experiencers
• Survivors
GLOBAL, LOCAL & FOREIGN
• Global Consumer Culture Positioning (GCCP)
• Brand symbolic of global consumer culture
• Local Consumer Culture Positioning (LCCP)
• Brand global, but portrayed as an intrinsic part of local culture
• Foreign Consumer Culture Positioning (FCCP)
• Build brand mystique around specific foreign culture, usually with
positive connotations
“The fact that pizza-loving consumers are found in many countries does
not mean they are eating the exact same thing.” (Keegan & Green,
2008)
“Globalization will probably never reduce the complex human system
to a state of homogeneity” (Rugimbana & Nwankwo, 2003)
TRENDS INFLUENCING GLOBAL CONSUMPTION
- Spread of global consumer culture
- Global flow of distinctive, cultural resources
- Increases in GNP per capita
- Rise in life expectancy
- Increase in education & literacy levels
- Growth in urbanization in developing countries
- Advances in transportation and communications
- World travel
- Global acceptance of certain consumer products (beverages, fast food, fashion, cars,
electronics)
4. Market selection process, procedure,
and strategy
MARKET SELECTION PROCESS
• Reactive approaches passive, informal, unsystematic, responding to
situation, used by small and medium-sized exporters, short term
profit motive.
• Proactive approaches active in initiating market selection, formal
process.
Influencing factors:
• Psychic distance – feeling of uncertainty about foreign markets,
perceived difficulty of finding information
• Cultural distance – the perceived differences between the
manager’s own and the destination culture
• Geographic distance – proximity.
MARKET SELECTION PROCEDURES
Expansive methods: home market starting point, based on similarities
and experience, use of market clusters selection
Contractible methods: optimal market selection, starts with large
number, systematic screening leading to elimination
MARKET SELECTION PROCEDURES
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3 stages of Contractible methods
1. Preliminary screening criteria for examining countries are identified
(feasible countries)
2. Determines country characteristics in evaluating marketing opportunities and
how each should be weighted (operating risks, market potential, costs, and
potential local and foreign competition)
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3. Ranking of markets on the basis of scores derived
Step 1: Geographic segmentation
→
⤑
→
Estimation of sales potentials
Markets
Segments
→
→
Strategic planning
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General market indicators
Product-specific market indicators
Prohibitive product
characteristics
Prohibitive market
characteristics
Estimation of market potentials→⇢
Social-economic segmentation
Demand patterns
Quantitative indicators
Qualitative indicators
Supply patterns
Competition
Distribution
Media
⤑
Potential markets screening
Estimation of profitability
Ranking of markets/
segments
Final market selection
MARKET SELECTION PROCEDURES
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Step 2: Customer segmentation
On the demand side behavior, lifestyle, attitudes, buying patterns, and
decision-making must be included for both consumer and industrial
markets
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On the supply side - competitors nationalities, capacities, activities
- distribution channels characteristics availability,
capacities, and activities performed
- media situation availability, costs, circulation, and
priorities.
Step 1 + 2 → estimate market share, estimate profitability
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MARKET SELECTION STRATEGIES
Market spreading
Market concentration
• Allocating resources over large
• Channeling resources into small
number of markets
number of markets
• Fast growth rate at early stages of • Devoting high levels of marketing
expansion
effort & resources to each market
• Focus on reducing risk
• Slow and gradual expansion to
other countries or segments
• Can create entry barriers to
competitors
• More intensive development can
create higher market shares and
strong competitive position
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INFLUENCING FACTORS
Market spreading
Market concentration
Company factors
High management risk-consciousness
• Objective of growth through market
development
• Little market knowledge
Product factors
• Limited specialist uses
• Low volume
• Nonrepeat
• Early or late in product life cycle
• Standard product saleable in many
markets
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Low management risk-consciousness
Objective of growth through market
penetration
Ability to pick ‘best’ markets
General uses
High volume
Repeat-purchase product
Middle of product life cycle
Product requires adaptation to different
markets
INFLUENCING FACTORS
Market spreading
Market concentration
Market factors
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Small markets – specialized segments
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Large markets – high volume segments
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Unstable markets
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Stable markets
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Many similar markets
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Limited number of comparable markets
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New or declining markets
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Mature markets
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Low growth rate in each market
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High growth rate in each market
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Large markets are very competitive
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Large markets are not excessively competitive
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Established competitors have large share of key markets
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Key markets are divided among many competitors
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Low source loyalty
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High source loyalty
Marketing factors
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Low communication costs for additional markets
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Low order handling costs for additional markets
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High communication costs
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Low physical distribution costs for additional markets
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High order handling costs
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Standardized communication in many markets
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High physical distribution costs
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Communication requires adaptation to different markets
5. EVALUATING OVERALL FOREIGN
MARKET PORTFOLIOS
MARKET SELECTION STRATEGIES
Market/Country attractiveness
Competitive strength strength of a
product/company as compared to competitors.
• Market size (total and segments)
• Market share (achievable)
• Market growth (total and segments)
• Marketing ability and capacity
• Market seasons and fluctuations
• Product and positioning fit
• Competitive conditions
• Contribution margin
(concentration, intensity, entry
barriers, etc.)
• Image
• Market prohibitive conditions (tariff, • Technology position
nontariff barriers, import restrictions, • Quality of distribution services
etc.)
• Patents
• Price levels
• Market support
• Profitability
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MARKET PORTFOLIOS
• Invest: The market is very attractive (size & its potential for
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growth), suitable for entry and major investment.
Divest/ license: The company will have problems or need to
make heavy investments to gain some market share. (better
to do through ‘licensing’ - least demanding of resources).
Joint Venture: Market attractive but difficult, require huge
investments/resources to gain considerable/acceptable
market share
Export: The market is not attractive due to its size or
segment growth, not to make heavy investments & to sell
the product through exports.
Selective strategy: fierce competition & difficult to maintain
a stable market share, could invest if product/positioning fit
with the market or have a powerful brand.
?
• Give examples of global market segments and companies that are
marketing on that basis. Can small and medium-sized enterprises
market successfully to such segments? Explain.
• Distinguish between expansive and contractible market selection
procedures. If you were making a decision on such a procedure,
which would you favor, and why?