Svend Hollensen

GLOBAL MARKETING
4th Edition

Lecture by Ewa Baranowska-Prokop, Ph.D.

The international market selection process

What is this?
What term refers to planning, execution and evaluation of programmes to influence the voluntary behaviour of target audiences in order to improve their personal welfare?

Social marketing

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For discussion
According to Hofstede and Hall, Asians are (a) more group oriented, (b) more family oriented and (c) more concerned with social status. How might such orientations affect the way you market your product to Asian consumers?

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For discussion
What role does the self-reference criterion play in international business ethics? How do the roles of women in different cultures affect womens behaviour as consumers and as business people?

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Communicating in the global world

What steps can a company take to minimize language barriers across borders? What characteristics of a countrys culture need to be researched to ensure business success across borders? What method is most effective for gathering useful, accurate and up-to-date information regarding cultural issues?

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IKEA Catalogue: are there any cultural differences?

Discuss the advantages and disadvantages of having the same catalogues around the world? The catalogue is the most important element in IKEAs global marketing planning. Discuss if there could be some cultural differences in the effectiveness of the catalogue as a marketing tool?

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Learning objectives
Define international market selection and identify the problems in achieving it Explore how international marketers screen potential markets/countries using secondary and primary data (criteria) Distinguish been preliminary and finegrained screening

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Learning objectives (2)

Realize the importance of segmentation in the formulation of the global marketing strategy Choose among alternative market expansion strategies Distinguish between concentration and diversification in market expansion

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Why is it important to identify the right market to enter?

Influences likelihood of success Influences nature of marketing programmes Affects firms ability to coordinate foreign operations

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International market selection in SMEs

Low psychic distance Low cultural distance Low geographic distance

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Figure 8.1 Potential determinants of the firms choice of foreign markets

The firm The environment

International market segmentation INTERNATIONAL MARKET SELECTION (IMS)

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Determinants of firms choice

The firm Degree of internationalization Size/amount of resources Type of industry/nature of business Internationalization goals Existing networks of relationships The environment International industry structure Degree of internationalization of the market Host country:
Market potential Competition Distance Market similarity

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Figure 8.2 International Market Segmentation

The firm Environment

Step 1: Selection of segmentation criteria

Step 2: Development of segments

Step 3: Screening of segments Step 4: Microsegmentation Market entry
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Criteria for effective segmentation

Measurability Accessibility Substantiality/profitability Actionability

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Figure 8.3 The basis of international market segmentation

General characteristics Geographic Language Political factors Demography Economy Industrial structure Technology Social organization Religion Education
Specific characteristics Culture Lifestyle Personality Attitudes and tastes

High degree of measurability, accessibility, and actionability

Low degree of measurability, accessibility, and actionability, but high degree of relevance
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The screening process

Stage 1: Preliminary screening

Stage 2: Fine-grained screening

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What is this?
The _____ is a useful tool for coarsegrained, macrooriented screening of international markets.

Business Environment Risk Index (BERI)

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Criteria included in the overall BERI index

Political stability Economic growth Currency convertibility Labour cost/ productivity Short-term credit Long-term loans/venture capital Attitudes Nationalization Monetary inflation Balance of payments Enforceability of contracts Bureaucratic delays Communications Local management Professional services
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Figure 8.4 The market attractiveness/ competitive strength matrix

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Dimensions of market/ country attractiveness

Market size Market growth Buying power of customers Market seasons Average industry margin Competitive conditions Market prohibitive conditions Government regulations Infrastructure Economic and political stability Psychic distance

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Dimensions of competitive strength

Market share Marketing ability and capacity Products to fit market demands Price Contribution margin Image Technology position Product quality Market support Quality of distributors Financial resources Access to distribution channels

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Categories of Markets
A countries: primary markets offering the best opportunities for long-term strategic development B countries: secondary markets where opportunities are there but risk is high C countries: tertiary markets with high risk

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Figure 8.5 Questionnaire for locating countries on a market attractiveness/ competitive strength matrix

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Develop subsegments
Demographics
Lifestyles/ Psychographics Consumer motivations Buyer behaviour

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Figure 8.6 Transnational clustering of the western European market

Source: Source: Welford and Prescott, 1996. European Business: An issue-based approach, 3rd Edition. Reprinted by permission of Pearson Education Ltd.

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Figure 8.7 Micromarket segmentation

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Figure 8.8 The IMS screening process

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Designing market expansion strategy

Should we enter markets incrementally or simultaneously? Will entry be concentrated or diversified across international markets?

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Figure 8.11 Market expansion strategies: Waterfall approach

High

Advanced countries

Gross national product per capita

Developing countries
Less developed countries
Time
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Low
Source: Source: Global Marketing Management, by Keegan, Warren J. Reprinted by permission of Pearson Education, Inc., Upper Saddle River, NJ.

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Figure 8.11 Market expansion strategies: Shower approach

Advanced countries

Developing countries

Less developed countries

Source: Source: Global Marketing Management, by Keegan, Warren J. Reprinted by permission of Pearson Education, Inc., Upper Saddle River, NJ.

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Figure 8.12 Appropriate global marketing strategies for SMEs

Source: Source: Bradley, 1995. International Marketing Strategy, 2nd Edition. Reproduced by permission of Pearson Education Ltd.

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Figure 8.13 The market expansion matrix

Market/customer target group Concentration Diversification

Concentration Country Diversification

Source: Source: Ayal and Zif, 1979, p. 84.

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Company factors
Favouring country diversification High management risk consciousness Object of growth through market development Little market knowledge
Source: Source: Adapted from Ayal and Zif, 1979; Piercy, 1981; Katsikea et al. (2005).

Favouring country concentration Low management risk consciousness Objective of growth through penetration Ability to pick best markets

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Product factors
Favouring country diversification Limited specialist uses Low volume Non-repeat Early or late in product life cycle Standard product Radical innovation
Source: Source: Adapted from Ayal and Zif, 1979; Piercy, 1981; Katsikea et al. (2005).

Favouring country concentration General uses High volume Repeat purchase product Middle of product life cycle Requires adaptation to different markets Incremental innovation
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Market factors
Favouring country diversification Small markets Unstable markets Many similar markets Low growth rate Established competitors with large share Low loyalty High synergy between countries
Source: Source: Adapted from Ayal and Zif, 1979; Piercy, 1981; Katsikea et al. (2005).

Favouring country concentration Large markets Stable markets Limited number of markets High growth rate Not excessively competitive High loyalty Low synergy effect

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Marketing factors
Favouring country diversification Low communication costs Low order-handling costs Low physical distribution costs Standardized communication Favouring country concentration High communication costs High order-handling costs High physical distribution costs Communication requires adaptation

Source: Source: Adapted from Ayal and Zif, 1979; Piercy, 1981; Katsikea et al. (2005).

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Figure 8.14 Unilevers global portfolio

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For discussion (1)

Why is screening of foreign markets important? Outline the reasons why many firms do not systematically screen countries/markets. Discuss the advantages and disadvantages of using only secondary data as screen criteria in the IMS process.

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For discussion (2)

What are the advantages and disadvantages of an opportunistic selection of international markets? What are the differences between a global market segment and a national market segment? What are the marketing implications of these differences for a firm serving segments on a worldwide basis?
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Mac Baren Tobacco Company Internationalizing the water pipe business

Is it a wise decision for MBTC to enter the water pipe market?
Which screening criteria would you suggest for MBTCs IMS (International Market Selection) process?

Which specific markets would you suggest MBTC enter?

Requires web access

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