MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 1
DECISION MAKING ININTERNATIONAL MARKETS
• Market Distance
• Segmentation
– Of countries
– Of consumers within countries
– Approaches
• Country screening
• Evaluation of market potential
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 2
Market Distances
DOMESTICFIRM
TARGETMARKET
ECONOMICDISTANCE
GEOGRAPHICALDISTANCE
POLITICALDISTANCE
PSYCHICDISTANCE
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 3
Identifying International Markets
• Reactive approach– Accidental entry through foreign orders not
anticipated– Economic pressure for sales increases
• Systematic approach– Proactive– Concentration of resources as needed– Based on market scanning and research
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 4
Country Segmentation
• Geographic• Demographic• Income
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 5
Segmentation Within Countries
• Averages of countries are often not meaningful
• Implications of demographic factors will depend on country context—e.g., family income of $20,000 would be very affluent in India– Will be able to pay for
a lot of local service and manufacturing
– Able to hire others
• Example: Segmentation of Indian consumer families by income– Rich (benefit
maximizers--$4840/yr)
– Consumers (cost-benefit optimizers--$1,030-4,839)
– Climbers (cash-limited benefit seekers--$495-1029)
– Aspirants ($360-494)– Destitutes ($0-359)
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 6
More Within-Country Segmentation Examples
• China by age– Generation I (45-59)
• Some received education
• Usually work or worked for State firms
– Generation II (30-44)• Limited education
opportunities• Married, 1 “little
emperor”– Generation III (18-29)
• Better education• Prospects for better,
market economy
• Indian youth—psychographic– Homebodies—traditional,
low individuality– Two-faced—”outwardly
traditional; outwardly modern”
– Wannabes--“Materialistic mainstream;” “show-offs;” part of crowd
– Rebels—traditional parents; often first generation professionals; understood by friends, not parents
– Cool guys—”work hard-play hard;” confident, westernized
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 7
Country Market Segmentation by “Overall Market Attractiveness”
• “Platform” countries—for gathering intelligence and market info
• Emerging markets—current minimal markets but growing potential over time
• Growth markets—already experiencing high levels of growth
• Maturing markets—well entrenched competitors; often have sizable middle class
• Established markets—mature, usually fewer growth prospects; high competition but quite affluent
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 8
Selection of Foreign Markets
• Preliminary screening– Market size
• Population• Income
– Accessibility—barriers:• Tariff
– Import– Export
• Non-tariff
– Government participation
– Procedures– Product
requirements
– Profitability• Cost of barriers• Risks
– Exchange rate– Political– Legal
• Selection and targeting– Trade analysis– Analogy—estimation
based on performing of “leading” country (e.g., using China to estimate Vietnamese potential)
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 9
International Market Analytical Tools
• Boston Consulting Group (Growth-Share) Matrix• Market Attractiveness/Company Strength
– Primary markets– Secondary markets– Tertiary markets
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 10
The Japanese Keiretsu
• Collection of firms with informal cross-ownership of stock
Preference for buying within the keiretsu• Benefits
– Assures demand for product– Able to pool resources over the Product Life Cycle
(bank in center)• May keep inefficient firms in business too long
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 11
Example of a Keiretsu
BANK
ELECTRO-NICS
AGRI-CULTUREAUTO
CHEMICALSTEEL
REST-AURANT
FOOD PRO-
CESSINGTRANS-PORTA-
TION
HEAVYMACHI-NERY
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 12
Some Economic Concepts
• “Permanent” income—expected average over lifetime
– Retirement expectations
– Employment expectations
• Conspicuous consumption
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 13
Approaches to International Market Segmentation
• Countries as segments (Macro-level segmentation]--country aggregate characteristics are used to classify country--e.g.,– demographics (age distribution, urbanization, ethnic
composition)– socioeconomic (level of development]
• Segments within countries:– intramarket segmentation (unique segmentation scheme for
each country]– intermarket segmentation [some segments overlap between
countries]
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 14
COUNTRY 1
INTRAMARKET VS. INTERMARKET SEGMENTATION
INTRAMARKET INTERMARKET
BC
A
D
G
F
E
H
B
C
A
DCB
A
HMKT 440Lars Perner, Instrucror Rev. 2/98
•No overlap between countries
COUNTRY 1COUNTRY 2 COUNTRY 2
•Some, but not all,segments overlap between the two countries•Comparable segments may differ in size between countries
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 15
Intermarket vs. Intramarket Differences, Part I
• (Compare to Analysis of Variance [ANOVA] in statistics)
• Average differences between countries but also significant differences within countries
• Segment structure may be similar, but segment sizes are likely to differ
• Relative vs. absolute differences--what is “upscale” in a given country?
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 16
Intermarket vs. Intramarket Differences, Part II
• Global brands can serve similar consumers across borders --> possible economies of scale
• Product life cycle--segments in one country may follow or lead those of other country
MKTG 376 MARKET DECISION MAKING Lars Perner, Instructor 17
Positioning Across Markets:Not an Easy Choice!
• Uniform or differential positioning across markets?
• Optimal position for product across countries may differ due to
– Country-of-origin effects – Competitive and cost
structure within country markets
• However, consistent image may be desirable due to
– spillover of advertising and promotional efforts (e.g., satellite TV, cross-country circulation of periodicals, portrayal in film/media)
– consumption by individuals who cross boundaries