Targetmarketselection Michaelnavi 120106054805 Phpapp01

Target Market Selection and Timing Strategies of International Market Entry
K. Navi Phifer Michael Gross International Management WS 2011-2012 HTW-Berlin 16 Dec 2011
Outline

Market Entry Timing Strategies Target Market Selection - selection process - example
Case Study: Groupon

- brief history/facts
- entry into Chinese market
Conclusion
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Timing Strategies
1. 2.
Dynamic Timing
Time of Year
3.
4.
Wave
Sprinkler
5.
Waterfall
Dynamic Timing
For new design and market entry of new products Company should constantly keep knowledge of production efficiency and potential market up-to-date
The product should continuously be improved until

entering the market, when the design process stops. Created by Sechan Oh and Ozalp Ozer U of Texas Dallas (2010)
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K. Navi Phifer - Michael Gross
Time of Year
Some industries are busier at certain times of the year
Example: accountants not wanting new software right before taxes are due
Example: childrens toys for Christmas

Closely related to geographical market segmentation
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Wave
Developed by management consultant Christoph Lymbersky (also developed sprinkler & waterfall timing strategies) Applies to timing entry into international markets New product introduced simultaneously into countries with similar cultures & characteristics Example: product launched in Germany, Austria and Switzerland at
Sprinkler
Applies to timing entry into international markets Product is launched into all suitable countries at the same time Example: countries with same language
Waterfall
Applies to timing entry into international markets Product is launched in one country at a time New markets entered only after sales are established in previous market(s)
Target Market Selection

Target Market: group of individuals who have similar needs, perceptions and interests; show inclination towards similar brands and respond equally to market fluctuations.
Understand consumer lifestyle Age group Income Spending capacity Education & profession Gender Mentality, paradigm & thought process Social status Environment
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Target Market Selection Example: Selling Soap

Need: why do people use soaps? Segment 1: Against Body Odor Soaps with a strong and lasting fragrance Marketing professionals Sales Representatives People exposed to sun for a longer duration Individuals travelling by public 16 Dec 2011
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Need: why do people use soaps? Segment 2: Hygiene & Cleanliness To fight germs and infections - Soaps for a high standard of hygiene Individuals working in hospitals, nursing homes and research centres Individuals working in unhygienic conditions

Need: why do people use soaps? Segment 3: Anti-aging, beautifying For a whiter, brighter skin - Soaps to improve your skins natural glow Ages 30 60+ Female
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Need: why do people use soaps?
Segment 4: Eco-friendly Environmentally friendly soaps, sustainably made for a better, greener future Ages teens 40 Larger spending capacity
Groupon Case Study: Brief Facts

founded November 2008 Its name blends group and coupon strategy: acquisition and renaming

What is the core of Groupons operation?
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Groupon Case Study
first to offer group buy with massive discounts
unique style of One-Deal-Per-Day-PerLocation
they filled in a niche market in eCommerce,
they came and they conquered.

Groupon Case Study: Acquisition

Groupon's first deal was a half-price offer for pizzas for the restaurant on the first floor of its building in Chicago Groupon serves 500 markets and 44 countries:
United States, Canada, Taiwan, Brazil, Germany, Greece, Finland, France, the Netherlands, Belgium, the United Kingdom, India, Ireland, Israel, Italy, Poland, Portugal, Spain, Puerto Rico, Japan, Turkey, Mexico, Peru, Chile, Colombia, South Korea, Sweden, Argentina, the United Arab Emirates, Norway, Romania, Singapore, Malaysia, Hong Kong, Mainland China, 16 Dec 2011 K. Navi Phifer - Michael Gross Russia and South Africa.
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Groupon Case Study: Acquisition
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Problems and failure

A successful deal could temporarily swamp a small business with too many customers, risking a possibility that customers will be unsatisfied, or that there won't be enough product to meet the demand
Problems and failure

Groupon doesnt charge businesses upfront to have their ads run on the site Groupon takes half of the profits generated by the promotion Groupon receives the full amount from the sales upfront Then they pay the first 33% in five days and the rest by the end of 55 days
Market Entry China

They decided to employ 1000 permanent staff by the end of March 2) top international education institutions master degree students building a team of local experts in Beijing by paying above the industry average salaries local clones, their primary competitors are ready for that and they took the initiative in playing dirty
1)
Market Entry China

Battle of Clones according to the latest statistics 1215 Groupon clones with 265 already bankrupt (up till 24th Jan 2011) ready to battle over 1000 clones?
owned by local internet companies equally deep pockets their own territorial market ready to start a pricing war if their terrioritorys invaded
Market Entry China
The differences between Chinese clones and Groupons traditional business

Its not 1 deal per day per location, its as many deals as possible covering as many locations as possible Discounts are not enough to attract huge volume of customers offering free deals is
Market Entry China

Groupon has done one thing right for their venture in China Groupon in a strategic relationship with Tencent the Chinese internet giant who dominate IM in China with QQ (etimated of 640 million users) both companies are reported to enter a 50/50 stake relationship for Groupons ventures in China rising a pool of 950 million euros thats believed will be mostly invested in China.
Market Entry China

Just two months ago at the end of August, Groupon closed 13 of its Chinese locations and fired over 400 full-time staff. Groupon is just the latest example of a Western Internet company to fail in China. four typical mistakes Western Internet companies make when entering the Middle Kingdom
Failures
1. Arrogance
Groupon faced an uphill battle from the very beginning due to its arrogance. Before Groupon entered China, the US firm proclaimed that it would become Chinas largest shopping site. In Europe, Groupon had adopted a strategy of using high salaries to poach competitors top employees and assumed a similar strategy would work in China as well The company also thought that it could just pay huge sums to acquire Lashou, the largest Chinese groupbuying site in order to enter the Chinese market, but was shocked when the Chinese site refused their offer.
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Failures
2. Lack of Local Understanding
Groupons China head seemed to think that all international markets were alike. At first Groupon insisted that its partnering vendors split profits 50-50, without taking into account the realities of Chinas group-buying environment. Given so many existing players in the market, vendors have the upper hand when negotiating with group-buying operators and typically leave their partner only 10 percent of the profits instead of 50 percent. Local vendors were so taken back by Groupons aggressive sales tactics that they often told the companys sales people to calm down and come back later with more realistic expectations. Groupon insisted on using mass email marketing, despite being warned that Chinese people seldom read that type of email.
Failures
3. Misaligned Management Structure
Groupons failure to draw more heavily on local talent in its management structure limited its ability to adapt to local nuances and succeed in the Chinese market. only two management members were Chinese: one from mainland China and the other from Hong Kong. Groupons operations in more remote parts of China were run by foreigners with limited understanding about the local nuances of the Chinese market. foreign managers were managing Chinese employees in a Western style
very low efficiency
Failures
4. Wrong Choice of Local Partner
Groupon made a very smart decision in partnering with Tencent, which next to Alibaba Group, is a true leader in Chinas Internet space. Where Groupon went wrong was not making use of the numerous advantages a partnership with Tencent has to offer. For example rather than rely on Tencents local market expertise, Groupon instead to chose to hire expats to run its operations all over the country.
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References
Target Market & Timing http://www.managementstudyguide.com/target-marketselection.htm http://www.donaldmcmichael.com/market_entry_strategy_intr o.htm http://smallbusiness.chron.com/market-entry-timing-productmarketing-strategy-5074.html http://www.outsource2india.com/services/market_researchser vices.asp?src=hp_mrs Wright State University: Market Entry Strategies: Pioneers Versus Late Arrivals MSOM: 2010 Manufacturing and Service Operations Management Annual Conference Abstracts: A Dynamic Strategy to Optimize Market Entry Timing and Process Improvement Decisions "Market Entry Strategies"; Christoph Lymbersky; (2008)
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References
Groupon http://www.screenwerk.com/2011/12/02/data-suggest-its-too-earlyto-sell-grpn/ http://www.screenwerk.com/2011/06/03/groupons-numbers-day-2-isthe-model-broken/ http://www.wordstream.com/blog/ws/2011/06/17/groupon-bad-press http://businessmodelinstitute.com/is-groupons-business-model-thefoundation-for-failure/ http://blogs.reuters.com/felix-salmon/2011/08/27/the-future-ofgroupons-business-model/ http://www.wordstream.com/blog/ws/2011/06/17/groupon-bad-press http://www.penn-olson.com/2011/11/04/4-mistakes-behindgroupons-failure-in-china/ http://www.retaildoc.com/blog/groupon-worst-marketing-business/ http://techrice.com/2011/02/12/groupon-on-course-for-fail-in-china/
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Target Market Selection and Timing Strategies of International Market Entry

Case Study: Groupon

- entry into Chinese market

The product should continuously be improved until

K. Navi Phifer - Michael Gross

Some industries are busier at certain times of the year

Example: childrens toys for Christmas

K. Navi Phifer - Michael Gross

16 Dec 2011 K. Navi Phifer - Michael Gross 6

16 Dec 2011 K. Navi Phifer - Michael Gross 7

16 Dec 2011 K. Navi Phifer - Michael Gross 8