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Transcript of Lim 5
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
Hollensen, Global Marketing 4e, © Pearson Education 2008 7-3
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?
Hollensen, Global Marketing 4e, © Pearson Education 2008 7-4
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?
Hollensen, Global Marketing 4e, © Pearson Education 2008 7-5
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?
Hollensen, Global Marketing 4e, © Pearson Education 2008 7-6
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?
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-7
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
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-8
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
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-9
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
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-10
International market selection in SMEs
Low psychic distance
Low cultural distance
Low geographic distance
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-11
Figure 8.1 Potential determinants of the firm’s choice of foreign markets
The firm The environment
International market segmentation
INTERNATIONAL MARKET SELECTION (IMS)
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-12
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
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-13
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
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-14
Criteria for effective segmentation
MeasurabilityAccessibilitySubstantiality/profitabilityActionability
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-15
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
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-16
The screening process
Stage 1: Preliminary screening
Stage 2: Fine-grained
screening
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-17
What is this?
The _____ is a useful tool for coarse-grained, macrooriented screening of international markets.
Business Environment Risk Index (BERI)
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-18
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
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-19
Figure 8.4 The market attractiveness/ competitive strength matrix
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-20
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
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-21
Dimensions of competitive strength
Market shareMarketing ability and
capacityProducts to fit market
demandsPriceContribution marginImage
Technology positionProduct qualityMarket supportQuality of distributorsFinancial resourcesAccess to distribution
channels
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-22
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
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-23
Figure 8.5 Questionnaire for locating countries
on a market attractiveness/
competitive strength matrix
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-24
Develop subsegments
Demographics
Lifestyles/ Psychographics
Consumer motivations
Buyer behaviour
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-25
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.
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-26
Figure 8.7 Micromarket segmentation
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-27
Figure 8.8 The IMS screening process
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-28
Designing market expansion strategy
Should we enter markets incrementally or simultaneously?
Will entry be concentrated or diversified across international markets?
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-29
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.
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-30
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.
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-31
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.
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-32
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.
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-33
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).
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-34
Product factors
Favouring country diversification
Limited specialist uses Low volume Non-repeat Early or late in product life
cycle Standard product Radical innovation
Favouring country concentration
General uses High volume Repeat purchase product Middle of product life
cycle Requires adaptation to
different markets Incremental innovation
Source: Source: Adapted from Ayal and Zif, 1979; Piercy, 1981; Katsikea et al. (2005).
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-35
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
Favouring country concentration
Large markets Stable markets Limited number of
markets High growth rate Not excessively
competitive High loyalty Low synergy effect
Source: Source: Adapted from Ayal and Zif, 1979; Piercy, 1981; Katsikea et al. (2005).
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-36
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).
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-37
Figure 8.14 Unilever’s global portfolio
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-38
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.
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-39
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?
Hollensen, Global Marketing 4e, © Pearson Education 2008 8-40
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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