European Marketing
Professor Dr Marin A Marinov ©
University of Gloucestershire, United Kingdom
May 29 – June 2, 2006
University of Warsaw
Topic One:
Is Standardized Marketing
Strategy Applicable in Europe?
Goals:
•To address European diversity
•To present some aspects of culture
heterogeneity of Europe
•To reflect on the applicability of Standardized
Marketing Strategy in Europe
What Is Europe
• Which Europe are we talking about:
– Western Europe
– European Union (EU15 or EU25)
– Geographically defined Europe
– The above plus the Commonwealth of
Independent States
Degree of Homogeneity and Heterogeneity in
Europe
• Depending on what Europe we refer to
• Environmental characteristics
– Political – convergence versus divergence
– Economic – degree of similarities and dissimilarities
– Cultural – probably the most diverse feature
• Languages
• Systems guaranteeing culture development (e.g., education and
help from the government)
• Religions
• Values and believes
– Legal
– Financial
Culture Homogeneity
(Using Hofstede’s Culture Dimensions)
• Anglo-Saxon Europe – Ireland and United
Kingdom
– Low power distance
– Low uncertainty avoidance
– Highly individualistic
– Mostly masculine
– Short-term oriented
Culture Homogeneity
(Using Hofstede’s Culture Dimensions)
• Nordic Europe – Sweden, Norway,
Denmark, Finland, Northern Germany, the
Netherlands
– Low power distance
– Low uncertainty avoidance
– Highly individualistic
– Strongly feminine – defer from Anglo-Saxon
– Short-term oriented
Culture Homogeneity
(Using Hofstede’s Culture Dimensions)
• Western Central Europe – most of
Germany, Luxemburg, Belgium,
Switzerland, Austria, France
– High/low power distance - heterogeneous
– High uncertainty avoidance - defer from
Anglo-Saxon
– Highly individualistic
– Masculine/feminine – heterogeneous
– Short-term to medium-term oriented heterogeneous
Culture Homogeneity
(Using Hofstede’s Culture Dimensions)
• Mediterranean Europe – Spain, Portugal,
Greece, Italy, Southern France
– High power distance - defer from Anglo-Saxon
– High uncertainty avoidance - defer from AngloSaxon
– Collectivistic/individualistic - heterogeneous
– Masculine/feminine – heterogeneous
– Short-term to medium-term oriented heterogeneous
Culture Homogeneity
(Using Hofstede’s Culture Dimensions)
• Eastern Central Europe – Czech Republic,
Hungary, Poland, Slovakia, Slovenia
– High power distance – differ from Anglo-Saxon
– High uncertainty avoidance - defer from AngloSaxon
– Individualistic/collectivistic - heterogeneous
– Masculine/feminine – heterogeneous
– Short-term to long-term oriented heterogeneous
Culture Homogeneity
(Using Hofstede’s Culture Dimensions)
• South-eastern Europe – Bulgaria, Croatia,
Romania, Turkey
– High power distance – differ from AngloSaxon
– High uncertainty avoidance - defer from
Anglo-Saxon
– Collectivistic - defer from Anglo-Saxon
– Mainly feminine – defer from Anglo-Saxon
– Mostly long-term oriented - defer from AngloSaxon
Is Standardized Marketing Strategy
Applicable to Europe?
• ‘…it is clear that Europe stands apart from all
other regions that are characterized by either
high population density and homogeneous
population (e.g., Japan and China) or low
density and heterogeneous population (e.g.,
North America). Europe represents one of the
most potentially lucrative markets in the world.’
Kaynak and Jallat, 2005
Is Standardized Marketing Strategy
Applicable to Europe?
• Europe is very diverse in:
– Culture
– Geo-political characteristics
– Level of economic, legal and financial
development
– Buying behaviour (market features)
– Level of disposable income (Buyer
characteristics)
Is Standardized Marketing Strategy
Applicable to Europe?
• Competing economies with significant
power – German, British, French, Italian
and to some extent Dutch and Swedish
• Dominating role of Anglo-Saxon economic
and business model applied in continental
Europe within the model of social security
which seems to erode
Is Standardized Marketing Strategy
Applicable to Europe?
• Europe is undergoing constant change of
significant nature that affects
– Geo-political
– Economic
– Cultural, etc. boundaries of regions
• However diversity stays and is expected to
stay in the foreseeable future, thus it is
very difficult to implement Standardized
Marketing Strategy in Europe even to
apply Pan-European Marketing Strategy.
Topic Two:
European Customers and Market
Definition
Goals:
•The European market
•European market segmentation
•Special issues
European Market
• Composition – variety of integration blocs:
– European Union (EU) – 25 member states (intended
homogeneity in economic, monetary and political
terms) – about 430 million people
– European Free Trade Agreement (EFTA) – 4 member
states – small to tiny – very homogeneous
economically – Iceland, Liechtenstein, Norway and
Switzerland – less than 10 million people
– Central European Free Trade Agreement (CEFTA) – 4
states prospective EU members Bulgaria (2007),
Croatia, FYR of Macedonia and Romania (2007) –
about 40 million people
– Commonwealth of Independent States (CIS) – all
former USSR republics apart from the Baltic countries
- Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan,
Kyrgyzstan, Moldova, Russia, Tajikistan,
Turkmenistan, Uzbekistan and Ukraine – almost 300
million people
European Market
European Market
• High income European countries – Luxemburg,
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Norway, Ireland, Liechtenstein and Switzerland
High middle income countries – Andorra, Austria,
Denmark, the Netherlands, Iceland, Belgium,
Sweden, United Kingdom, Finland, Germany,
Monaco, San Marino, France and Italy
Low middle income countries – Spain, Cyprus,
Portugal, Greece, Slovenia, Malta, Czech Republic
and Hungary
Low income countries – Slovakia, Estonia, Croatia,
Poland, Lithuania, Latvia, Bulgaria, Russian
Federation, Romania, Turkey and FYR of
Macedonia
Very low income countries – All other countries in
Europe
European Market
• Factors drawing European market apart:
– The enlargement of the EU extends and enhances the
diversity of consumers within the Union
– Most multinationals have regional European HQs –
Matsushita, Kellogg’s, Ford, etc.
• Factors drawing European market together:
– Industrial market is targeted on Pan-European basis about 45 per cent of market transactions in Europe
are of industrial goods
– Companies selling consumer durables are mostly
using unified components of marketing strategy – still
promotion, distribution and sometimes pricing policies
differ across Europe.
European Market
• Industrial Markets
– The Airbus consortium (Germany, France, UK
and Italy) sells a huge range of short- and longhaul aircraft
– Automakers producing commercial vehicles
(Daimler-Benz, GM, Fiat, Renault, etc.) offer a
huge rage of vehicles for the segments by
engine size, performance and exploitation
conditions market
European Market
• Consumer markets - Segmentation
– Formation of large urban clusters of mass European
consumers are recommended by many researchers –
e.g., Paris, London, Milan, Madrid, Vienna)
– Medium-sized regional niche clusters are
recommended in cross-border regions (e.g., high
income consumers in Brussels-Paris region)
– Small local niche clusters can be formed on the basis
of lifestyle (e.g., suburban markets of large urban
areas
Special Issues
• Consumers from low and very low income
countries may need targeting with
different marketing strategies:
– Concerning the marketing mix
– The degree of localization
– The strategic priority formation
– The relocation of production facilities for:
• Obtaining cost leadership
• To be closer to the market
Topic Three:
European Market Intelligence
Goals:
•To identify existing market opportunities
•To provide understanding of the varieties of
marketing process applied in Europe
•To provide data base for future marketing
activities
European Market Intelligence
• What are the feasible motives for serving
the European market?
• What is the level of commitment to the
European market and various parts of it?
• What resources and agencies are available
for conducting European market research?
European Market Intelligence
• Using existing publications for preliminary
information:
– ESOMAR (European Society for Opinion and
Marketing Research) – organizes conferences
and publishes research findings
– Official publications of various government
institutions
• Hiring research companies foreign/local to
conduct market research
Specific Issues in European Market
Intelligence
• Demographic data – mostly reliable, depending on
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source (government or other)
Educational stratification – different educational
systems – process of unification – long-term effect
Marital status or partner co-existence (hetero- and
homo-sexual couples/families)
Social stratification – can differ significantly across
Europe – low, medium and high end of the market
Promotional issues:
– Approaches to promotion
– Promotional budgets
Topic Four:
Market Entry and Country
Selection
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Goals:
To evaluate market entry strategies for Europe
To make decision associated with country
selection
To understand existing competition challenges
Market Entry Strategies for Europe
• What are theoretically available choices:
– Exporting – indirect, direct
– Contracting intellectual property – licensing,
franchising
– Investment
• Forms: Greenfield or acquisition
• Outcomes: Strategic alliances, joint ventures,
partially or wholly owned subsidiaries
• Management dilemmas: which party manages the
venture
Market Entry Strategies for Europe
• Benefits and risks from the application of various
modes of market entry:
– Benefits increase from indirect exporting to wholly
owned subsidiary
– Risks also augment when we move along that line –
Country risk evaluation
• Business/marketing strategy and market entry
strategy:
– Cost leadership strategy requires investment
– Differentiation and focus strategies may be associated
with any market entry strategy
Market Entry Strategies for Europe
• Current foreign involvement in European markets
(Percentages in value terms):
– Importing – about 20 per cent
– Contractual arrangements – about 10 per cent
– Investment – more than 70 per cent
• Research based preferred modes of market entry by
some European countries:
– Strategic alliances (Austria, France, Germany, Italy, Spain, United
Kingdom) – most preferred and applied in France, last preferred
and applied in Germany
– Franchising – Applied on a massive scale for fast food
restaurants, trade and other services across Europe
– Investment – Joint ventures mostly applied in riskier countries
and counties with limited market intelligences, elsewhere
preference for the formation of wholly owned subsidiaries
Market Entry Strategies for Europe
Country Selection
• Regional or European market targeting:
– Pan-European or country specific approach –
remember similarities and differences across
Europe
– Is testing of the market necessary – choice of a
lead country
– How much commitment should be devoted to
various countries – entering the markets of
various countries with different modes of market
entry
Market Entry Strategies for Europe
• Regionalization of the European market –
sets of criteria to use
– Geo-political
– Demographic
– Cultural
– Membership in various integrations –
Implications of various policies (quotas, tariffs,
CAP, etc.)
– Industry specific criteria
Market Entry Strategies for Europe
• How to select countries:
– Market size, market specifics, purchasing power
distribution and growth potential (Market and
economic constraints)
– Competition
• Type and intensity
• Domestic or foreign
• Positioning of competitors
– Risks associated with market entry and operations
– Government and consumer attitudes – government
policy; ethnocentrism and animosity
– Cost of market entry and transaction cost issues
– Infrastructure and business support structure
– Negotiation practices and lobbying opportunities –
significance of domestic partner
Market Entry Strategies for Europe
Competition
• Competition related issues (Michael Porter
questions associated with competition:
– Will the competition retaliate to the entry?
– When the retaliation take place?
– What impact will the retaliation have?
– How strong the retaliation will be?
– Can retaliation be controlled, managed or
influenced?
– What strategy will work best in any particular
contexts
Market Entry Strategies for Europe
Competition
• Government factors influencing competition:
– Protectionist policy towards local businesses:
Subsidies, credits with low or no interest
– Favourable policy towards foreign business –
Encouraging imports, helping local businesses
enter in partnerships, low taxation, tax holidays
– Financial regulations – centralized in the Euro
zone, but not in all other European countries
including the EU member states outside the
Euro zone
Market Entry Strategies for Europe
Competition
• Entering European markets with a cost
leadership strategy:
– In more affluent countries – target the most
profitable segments – profit maximization approach
– In less affluent counties – target the mass market
consisting of highly price-sensitive customers with
price-oriented promotional campaigns – building
market share approach
– In highly competitive markets avoid attacking directly
existing major competitors – reposition, search for
niche markets
– In less affluent countries patience is needed for profit
generation – such is rather limited or none existent in
the first years of operation
– Example: Dell Computers market entry in Europe in
1990s highly profitable since early 2000s
Market Entry Strategies for Europe
Competition
• Entering European markets with differentiation or
focus strategies:
– In all country markets targeting of specific segments or
niche markets would be beneficial – non-price segment
formation and targeting approach
– In high end markets in all countries it is advisable to put
an emphasis on augmented products (high value added
products and provision of special or superior customer
services)
– In all country markets attempt to lock in customers (create
customer loyalty) with specialist product attributes mostly
intangible (brand building and brand recognition)
Topic Five:
Marketing Mix Polices
Goals:
•Product policy decisions
•Price policy decisions
•Promotion policy decisions
•Distribution policy decisions
Product Policy Decisions
• Barriers to Trade:
– Compliance with EU or national standards and
legislation
– Adherence the international (ISO) or national
technical and product related standardization
systems
• Customization versus Standardization of
products – most serious issues with FMCGs
(French versus British approaches).
Product Policy Decisions
• Branding Decisions – Brand Positioning:
– Euro-mass brands: high volume, basic quality, low margins. Example:
Natrel deodorant launched by Gillette in 12 European countries with
same brand name, formula, packaging and promotion. More success
in some countries, less success in other.
– Euro-niche brands: low to medium volume, high value added, high to
very high margins. Example: American Express Card introduced in
Europe appeals to a small target group in most European countries –
the business community engaged in international operations.
– Local national or regional brands in Europe: tailored to specific
national or regional tastes. Example: Regional beer brands in
Germany (more than 150), one of the best selling British tabloid
newspapers The Sun targets a very specific readership, which is quite
distinctive to the UK.
– In summary there is a small number of Euro brands because of the
huge variation of consumer tastes, legislation, media preferences,
etc. Thus targeting Europe with a branding strategy should be done
very carefully.
Product Policy Decisions
• Private Label and Original Equipment
Opportunities in Europe:
– Importer and local producers use retailer’s brand
names – For private label goods (mostly food retailers)
Carrefour, Tesco, etc. In 2004 the share of such goods
was 8 per cent in Italy, 17 per cent in France, 39 per
cent in the UK
– Imports of parts and components for B2B markets in
which firms serve as OEM (consumer durables) and
industrial goods assembly – about 28 per cent of the
goods sold in the 35 country EU in 2003 were
produced using OEM
Product Policy Decisions
• Service Quality:
– Expectations for service quality in the
developed and affluent European markets are
very high and mostly uniform; expectations are
constantly increasing in other parts of Europe
- Special training programmes required at all
management levels to meet these expectations
- Meeting a certain quality threshold a must to
be able to serve successfully European market
Pricing Policy Decisions
• The Role of the EU and EMU (European
Monetary Union) on Making of Pricing
Decisions:
– Price transparency and comparability
– Tax policies – Impact of direct and indirect taxes
on prices – Price comparison across Europe
– None unified VAT taxation
– Subsidies – CAP (Common Agricultural Policy)
Pricing Policy Decisions
• Pricing impact of the Euro (in 12 EU member
countries and 13 national currencies:
– Hampering unified pricing
– Necessity of unified currency quotations
• Pricing outside EU and EFTA:
– Hedging against currency fluctuations – If a contract
price were quoted in Polish zloti sufficient amount of
this currency may be bought on the future market to
cover the contract. Banks and specialized financial
markets like LIFFE (London International Financial
Future Exchange).
Promotion Policy Decisions
• Regulation of promotional activities of EU
member countries:
– Centralized EU regulation exercised by the
European Commission (EC) bodies
– Country specific restrictions of promotional
activities
– The role of media regulation – satellite
television, cross-border print advertising
France-Belgium; Austria-Germany;
Scandinavian countries
Promotion Policy Decisions
• Promotional expenditure in the EU:
– Advertising – about two-thirds of overall promotional
spending
– Sales promotion – approximately 15 per cent
– Direct mail – circa 8 per cent
• Advertising expenditure as a percentage of GDP
(2004):
– Countries with advertising expenditure above 1.00 per
cent of their GDP: Spain – 1.71 per cent; UK – 1.68
per cent; Italy – 1.35 per cent; the Netherlands –
1.21 per cent; Denmark – 1.11 per cent
– Countries with highest advertising expenditure in
absolute figures (2004 in billion Euros): UK – 9.7;
Germany – 7.1; Italy – 6.9; France – 5.2; Spain – 3.8.
Distribution Policy Decisions
• EU cross-border restrictions:
– Customs control is mainly exercised when entering
the EU (exception most EU new member states)
– Foreign exchange controls are now applied when
entering the new EU member states and goods
originate from these states
• Retail regulation:
– Closing hours
– Restrictions in developments in urban and suburban
areas
Distribution Policy Decisions
• Retailing development and structure:
– Excessive expansion of food retailing in recent
years – more foreign retail outlets, increased
competition, concentration of transaction points
– Concentration of grocery buying (Per cent buying
from the 10 largest retailers, 2003):
• Switzerland – 96%, Sweden – 93%, Germany – 84%,
the Netherlands – 82%, Belgium – 72%, UK – 70%
• By contrast – Italy – 33%, Spain – 28%, Romania –
24%
Topic Six:
Marketing in the Emerging Markets of
South-eastern Europe
Goals:
•To identify geo-political environment
•To analyse main economic features
•Common marketing features of the countries
Geo-Political Environment
• Consisting of four countries pre-1991:
– Albania – small, underdeveloped, strictly socialist
country;
– Bulgaria – small to medium, somewhat industrialized,
the closest ally to the ex-USSR
– Romania – medium-sized, somewhat industrialized,
under personal dictatorship
– Socialist Federal Republic of Yugoslavia – mediumsized federation of six republics, the most open to the
West socialist country
Geo-Political Environment
• Presently comprising nine countries with territory of
about 640 000 square kilometres and population of
about 58 million:
– Albania – 3.5 million, Muslim country
– Bosnia and Herzegovina – 4 million, in political and economic
instability, federation, Muslim and Christian population
– Bulgaria – 8 million, mostly Christian country
– Croatia – 4.5 million, economically stable, mostly Christian
population
– FYR of Macedonia – 2 million, Christian and Muslim population
– Montenegro – 0.7 million, mostly Christian population, last break
through republic from former Yugoslavia (May 2006)
– Romania – 23 million, mostly Christian country
– Serbia – 10 million, mostly Christian country
– Slovenia – 2 million, most advanced economically, EU member
(2004), mostly Christian country
Economic Environment
• GDP per capita in purchasing power parity (PPP) in 2003:
– Slovenia – US$18 500, highest average puchasing power
– Newly expected EU member states:
• Bulgaria – US$6 800 (January 2007)
• Croatia – US$8 800 (2008)
• Romania – US$7 100 (January 2007
– Rest of the countries:
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Macedonia – US$4 800
Serbia and Montenegro – US$4 700
Albania – US$3 900
Bosnia and Herzegovina – US$3 800
• Comprising about 1 per cent of the world population it
contributed in 2003 1.12 per cent to the world’s GDP
measured in PPP.
Common Marketing Features
• Consumer behaviour:
– High price sensitivity
– Preference for purchasing locally produced
goods (especially food stuff)
– Medium to high ethnocentrism and consumer
animosity
– Predominantly frequent purchases of fresh food
– Medium to high conservatism in buying habits
– Low level of brand recognition and brand loyalty
Common Marketing Features
• Promotion:
– High reliance on television advertising by
foreign companies
– High reliance on print and radio advertising by
local companies
– Aggressive advertising by foreign companies
– Low degree of regulation of the promotion
activities - underdeveloped legislation and
problems with law enforcement
Common Marketing Features
• Distribution:
– Highly fragmented distribution systems
– Quick development of centralized puchasing
through penetration of foreign retail chains –
super- and hypermarkets
– Traditional retail outlets still popular with low
income buyers
– Small specialist retailers establishing presence
in these markets on franchise basis