Chapter- 6

Foreign Market Selection Managerial Issues

Entry to Foreign MarketsManagerial Decisions

1. Company s Resources 2. Managerial Mindset 3. Nature of Opportunities and Threats

Global Marketing does not mean entering every country in the world.  Global Marketing refers to widening business horizons to encompass the world in scanning for opportunities and threats.
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International Market Selection Process- Steps

5. Selecting most promising countries 4. Filtering less promising countries 3. Analysis of relevant data 2.Collection of relevant data on each country 1. Segmentation, targeting & positioning

Global Market Segmentation

 Process of identifying specific segments-

whether country or consumer groups of potential customers with homogeneous attributes likely to exhibit similar buying behavior.  Global companies use market segmentation to identify, define, understand and respond to customer wants on a worldwide basis.
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Basis of Global Market Segmentation

1. Demographics (national income and size

of population). 2. Psychographics (values, attitudes and lifestyles). 3. Behavioral characteristics. 4. Environment of the country (presence or absence of government regulation in a particular industry).
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Demographic Segmentation
 Income and Population: 1. Population is a more

valuable segmentation variable than income for very low unit cost consumer products and services. 2. Income is single most important indicator of market potential for vast range of industrial and consumer products.  By segmenting in terms of income marketers can reach most affluent markets.
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GNI Per Capita PPP (2009) Top Ten Countries of the World
Country Luxembourg Kuwait Macao SAR, China Norway Brunei Singapore Switzerland US Hong Kong China Netherlands GNI PC (PPP) ($) 59,590 53,890a 57,390 55,420 51,200a 49,780 47,100 45,640 44,540 39,740

Note: Ranking is approximate as some countries do not have 2009 data. a: 2009 data not available. Source: World Development Indicators Database, World Bank, 14 April 2011. 7

TOP TEN COUNTRIES WITH THE HIGHEST POPULATION (July, 2009) United Nations Department of Economic and Social Affairs No
.

Countries China India United States Indonesia Brazil Pakistan Bangladesh Nigeria Russia

Population 1,336,170,000 1,177,803,000 308,798,000 231,369,500 192,564,000 168,883,000 162,221,000 154,729,000 141,927,297 127,430,000 4,001,894,797 2,804,405,203 6,806,300,000

% of World Population 19.6% 17.3% 4.5% 3.4% 2.8% 2.5% 2.4% 2.3% 2.1% 1.9% 59.0% 41.0% 100.0%

Growth Rate (2007) 1.1% 1.7% 0.8% 1.8% 1.4% 2.6% 2.6% 0.5% 1.1% 0.1% 1.1%

GNI PC $ (2008) 2,770 1.070 47,580 2,010 7,350 980 520 9,620 1,160 38,210

1 2 3 4 5 6 7 8 9

10 Japan Top Ten Countries Rest of the World Total World Pop.

 Ten most populous countries in the world

account for 59% of World s population.  A company can be global by targeting buyers in 10 or fewer countries as income is concentrated in the high-income and large-populated countries.  China and India with more than 1 billion population each represent attractive target markets.  An estimated around more than 400 million Indians can be classified as upper middle class (GNI per capita > $ 2000) - an attractive segment. 9

 Global segment based on demographics is

global teenagers- young people between ages 12 to 19.  Teens shows consistent consumption behavior across borders- have not conformed to cultural norms.  Companies make it possible to reach global teen segment with unified marketing program.  An attractive segment in terms of its size and its multibillion dollar purchasing power.
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 Global elite: more older, more affluent

consumers have money to spend on prestigious products with an image of exclusivity.

Psychographic Segmentation
 Groups people in terms of attitudes, values

and lifestyles.  Five global psychographics segments are: Strivers, Achievers, Pressured, Adapters, and Traditional.
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 Strivers: Consists of young people with an

median age of 31 who live hectic, on-thego lives. Materialistic pleasure seekers. Time and money are in short supply (26 per cent).  Achievers: Older than strivers. Have attained a good measure of success. Are status-conscious consumers- quality is important (22 per cent).  Pressured: Largely comprised of women, cut across age groups characterized by constant financial and family pressures (13 per cent).
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 Adapters:

Comprised of older people. Managed to maintain their values while keeping open minds when faced with change (18 per cent).  Traditional: Segment is rooted to the past and clings to country s heritage and cultural values (21 per cent).

Behavior Segmentation
 Focuses on whether people buy and use a

product- how often and how much.

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 Usage rates: Heavy, medium, light and

nonuser.  User status: Potential users, nonusers, exusers, regulars, first-timers and competitors products users.  Chinese have highest per capita consumption of soup in the worldCampbell Soup company has targeted China.  Chinese are heavy smokers and tobacco companies look China as a big market.
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Global Targeting
 Act of evaluating and comparing the

 1. 2. 3. 4.

identified groups and then selecting one or more with highest potential. Necessary to create a product-market profile- 9 w s are: Who buys our product? Who does not buy our product? What need does our product serve? What problem does our product solve?
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5. What are customers currently buying to satisfy the need for which our product is targeted? 6. What price are they paying for the product they are currently buying? 7. When is our product purchased? 8. Where is our product purchased? 9. Why is our product purchased?  If a company wants to penetrate an existing market, it must offer more value than competitors- better benefits, lower prices or both.
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 3 basic criteria for assessing opportunity

in global target markets: 1. Current size of the segment and anticipated growth potential. 2. Competition. 3. Compatibility with company s over all objectives and feasibility of successfully reaching target.

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Positioning
 Act of locating a brand in customers  1. 2. 3. 4. 5.

minds over and against other products. Strategies for positioning products are: Attribute or benefit Quality and price Use or application Competitor High-tech and high-touch (Global products)
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Model for Selecting Foreign Markets

Macro Level Research ( General Market Potential)

Filter 1

Economic Statistics, Political Environment, Social Structure, Geographic Features

Preliminary Opportunities

General Marketing Relating to the Products

Filter 2

Growth Trends for Similar Products, Cultural Acceptance of Such Products, Market Size, Taxes and Duties

Rejected Country

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Possible Opportunity Micro Level Research ( Specific Factors Affecting the Product)

Filter 3

Existing and Potential Competition, Ease of Entry, Reliability of Information, Sales Projections, Cost of Entry, Probable Product Acceptance, Profit Potential

Probable Opportunity Target Markets

Filter 4

Corporate Factors Influencing Implementation

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Filtering Process- First Stage

 Using

macro variables discriminating countries- Opportunities, little opportunity, no opportunity, excessive risk.  Macroeconomic statistics- GNP, Per Capita GNP, Personal Disposable Income .  Political conditions.  Relation between the home and host country.  Geographical distance
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Filtering Process- Second Stage

 Variables indicating potential market size

and acceptance of the product or similar products are used.  Year to year growth rates and total sales of similar products are indicators of market size and growth.  Also consider taxes and duty requirements.

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Filtering Process- Third Stage

 Consider a limited number of countries.  Get more detailed, reliable and updated

information.  Focus of screening process switches from market size to profitability.  Issues- Looking to the competitors, how much should be invested to gain a particular market share?
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Third Stage
 Issues- Given the prices currently charged

in the market, what margin can your company expect?  Given the cost of entry and the expected sales, what is the likely profit?  Micro-level factors influence the success or failure of specific product in market.
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Filtering Process- Fourth Stage

 Evaluates and ranks the potential target

countries based on corporate resources, objectives and strategies.

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Criteria For Selecting Target Countries

Critical factors influence market selection are:  Market size  Economic Environment  Political environment  Legal environment  Social and cultural environment
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Market Size and Growth

Macro Indicators of Market Size Geographic Indicators  Size of the country in terms geographic area  Climatic condition Demographic Characteristics  Total Population  Population growth rate  Distribution of the population age-wise, genderwise, income-wise, rural-urban wise, etc.  Population density
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Economic Characteristics  Gross National Income (GNI)  Per Capita Income (PCI)  Personal or household disposable income  Income distribution  Growth Rate of Economy (GDP Growth Rate)  Industrial, mineral, agriculture infrastructure  Import size and growth  Nature and extent of restrictions and incentives  Trade agreements with the other countries
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Micro Indicators of Market Size

 Radios  Television sets  Cinema seats  Scientists and Engineers  Hospitals and Beds  Physicians  Alcoholic Liquor Consumption  Coffee Consumption  Petrol/Diesel Consumption  Telephones  Tourist Arrivals
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Micro Indicators of Market Size

 Passenger cars  Civil airline passengers  Steel production  Land under cultivation  Electricity consumption  Number of farms

Micro indicators indicate actual consumption of the product that a firm wants to sell or a similar product.
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Political Environment Indicators of Political Risk Probability of nationalization Bureaucratic delays Number of riots and assassinations Political executions Percent of members of the communist party Restrictions on capital movement Government intervention
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Social and Cultural Conditions

Main elements are:  Material Culture  Language  Esthetics  Education  Religion

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Errors in Selection
1. Ignoring

countries with significant potential for the company s products. 2. Spending resources investigating countries that may turn out to be poor prospects.

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