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DECISION MAKING IN INTERNATIONAL MARKETS. Market Distance Segmentation Of countries Of consumers within countries Approaches Country screening Evaluation of market potential. Market Distances. GEOGRAPHICAL DISTANCE. ECONOMIC DISTANCE. DOMESTIC FIRM. TARGET MARKET. POLITICAL

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decision making in international markets
DECISION MAKING ININTERNATIONAL MARKETS
  • Market Distance
  • Segmentation
    • Of countries
    • Of consumers within countries
    • Approaches
  • Country screening
  • Evaluation of market potential
market distances
Market Distances

GEOGRAPHICAL

DISTANCE

ECONOMIC

DISTANCE

DOMESTIC

FIRM

TARGET

MARKET

POLITICAL

DISTANCE

PSYCHIC

DISTANCE

identifying international markets
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
country segmentation
Country Segmentation
  • Geographic
  • Demographic
  • Income
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)

Segmentation Within Countries
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

More Within-Country Segmentation Examples
country market segmentation by overall market attractiveness
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
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)

Selection of Foreign Markets
international market analytical tools
International Market Analytical Tools
  • Boston Consulting Group (Growth-Share) Matrix
  • Market Attractiveness/Company Strength
    • Primary markets
    • Secondary markets
    • Tertiary markets
the japanese keiretsu
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
example of a keiretsu
Example of a Keiretsu

CHEMICAL

STEEL

ELECTRO-

NICS

AGRI-

CULTURE

AUTO

BANK

FOOD

PRO-

CESSING

HEAVY

MACHI-

NERY

REST-

AURANT

TRANS-

PORTA-

TION

some economic concepts
Some Economic Concepts
  • “Permanent” income—expected average over lifetime
    • Retirement expectations
    • Employment expectations
  • Conspicuous consumption
approaches to international market segmentation
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]
intra market vs inter market segmentation
INTRAMARKET VS. INTERMARKET SEGMENTATION

INTRAMARKET

INTERMARKET

  • No overlap between countries
  • Some, but not all,segments overlap between the two countries
  • Comparable segments may differ in size between countries

COUNTRY 1

COUNTRY 2

COUNTRY 1

COUNTRY 2

A

A

E

G

A

B

C

B

F

B

H

C

D

H

C

D

MKT 440

Lars Perner, Instrucror

Rev. 2/98

intermarket vs intramarket differences part i
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?
intermarket vs intramarket differences part ii
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
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

Positioning Across Markets:Not an Easy Choice!
marketing mix issues
Marketing Mix Issues
  • Need to address markets with
    • Entrenched competitors
    • High consumer expectations
    • Discretionary income for new products
  • Marketing mix decisions
    • Product
    • Price
    • Distribution
    • Promotion