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Svend Hollensen

GLOBAL MARKETING4th Edition

The international market selection process

Lecture by Ewa Baranowska-Prokop, Ph.D.

Hollensen, Global Marketing 4e, © Pearson Education 2008 7-2

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


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?


For discussion

What role does the self-reference criterion play in international business ethics?

How do the roles of women in different cultures affect women’s behaviour as consumers and as business people?


Communicating in the global world

What steps can a company take to minimize language barriers across borders?

What characteristics of a country’s 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?


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 IKEA’s global marketing planning. Discuss if there could be some cultural differences in the effectiveness of the catalogue as a marketing tool?


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 ‘fine-grained’ screening


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


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

Influences likelihood of success Influences nature of marketing

programmesAffects firm’s ability to coordinate foreign

operations


International market selection in SMEs

Low psychic distance

Low cultural distance

Low geographic distance


Figure 8.1 Potential determinants of the firm’s choice of foreign markets

The firm The environment

International market segmentation

INTERNATIONAL MARKET SELECTION (IMS)


Determinants of firm’s choice

The firmDegree of

internationalizationSize/amount of resourcesType of industry/nature of

businessInternationalization goalsExisting networks of

relationships

The environmentInternational industry

structureDegree of

internationalization of the market

Host country: Market potential Competition Distance Market similarity


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


Criteria for effective segmentation

MeasurabilityAccessibilitySubstantiality/profitabilityActionability


Figure 8.3 The basis of international market segmentation

General characteristicsGeographicLanguagePolitical factorsDemographyEconomyIndustrial structureTechnologySocial organizationReligionEducation

Specific characteristicsCultureLifestylePersonalityAttitudes and tastes

High degree of measurability, accessibility, and actionability

Low degree of measurability, accessibility, and actionability, but high degree of relevance


The screening process

Stage 1: Preliminary screening

Stage 2: Fine-grained

screening


What is this?

The _____ is a useful tool for coarse-grained, macrooriented screening of international markets.

Business Environment Risk Index (BERI)


Criteria included in the overall BERI index

Political stabilityEconomic growthCurrency convertibilityLabour cost/

productivityShort-term creditLong-term

loans/venture capitalAttitudes

NationalizationMonetary inflationBalance of paymentsEnforceability of

contractsBureaucratic delaysCommunicationsLocal managementProfessional services


Figure 8.4 The market attractiveness/ competitive strength matrix


Dimensions of market/country attractiveness

Market sizeMarket growthBuying power of

customersMarket seasonsAverage industry

marginCompetitive

conditions

Market prohibitive conditions

Government regulations

InfrastructureEconomic and

political stabilityPsychic distance


Dimensions of competitive strength

Market shareMarketing ability and

capacityProducts to fit market

demandsPriceContribution marginImage

Technology positionProduct qualityMarket supportQuality of distributorsFinancial resourcesAccess to distribution

channels


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


Figure 8.5 Questionnaire for locating countries

on a market attractiveness/

competitive strength matrix


Develop subsegments

Demographics

Lifestyles/ Psychographics

Consumer motivations

Buyer behaviour


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.


Figure 8.7 Micromarket segmentation


Figure 8.8 The IMS screening process


Designing market expansion strategy

Should we enter markets incrementally or simultaneously?

Will entry be concentrated or diversified across international markets?


Figure 8.11 Market expansion strategies: Waterfall approach

Advanced countries

Developingcountries

Less developedcountries

Gro

ss n

atio

nal

prod

uct

per

capi

ta

High

Low

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


Figure 8.11 Market expansion strategies: Shower approach

Advanced countries

Developingcountries

Less developedcountries

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


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.


Figure 8.13 The market expansion matrix

1

3 4

2Concentration

Diversification

Country

Market/customer target group

Concentration Diversification

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


Company factors

Favouring country diversification

High management risk consciousness

Object of growth through market development

Little market knowledge

Favouring country concentration

Low management risk consciousness

Objective of growth through penetration

Ability to pick ‘best’ markets

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


Product factors


Limited specialist uses Low volume Non-repeat Early or late in product life

cycle Standard product Radical innovation


General uses High volume Repeat purchase product Middle of product life

cycle Requires adaptation to

different markets Incremental innovation



Market factors


Small markets Unstable markets Many similar markets Low growth rate Established competitors

with large share Low loyalty High synergy between

countries


Large markets Stable markets Limited number of

markets High growth rate Not excessively

competitive High loyalty Low synergy effect



Marketing factors


Low communication costs Low order-handling costs Low physical distribution

costs Standardized

communication


High communication costs

High order-handling costs High physical distribution

costs Communication requires

adaptation



Figure 8.14 Unilever’s global portfolio


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.


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?


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 MBTC’s IMS (International Market Selection) process?

Which specific markets would you suggest MBTC enter?

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