DECISION MAKING IN INTERNATIONAL MARKETS

1
DECISION MAKING ININTERNATIONAL MARKETS

• Market Distance
• Segmentation
• Of countries
• Of consumers within countries
• Approaches
• Country screening
• Evaluation of market potential

2
Market Distances
GEOGRAPHICAL DISTANCE
ECONOMIC DISTANCE
DOMESTIC FIRM
TARGET MARKET
POLITICAL DISTANCE
PSYCHIC DISTANCE
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

4
Country Segmentation

• Geographic
• Demographic
• Income

5
Segmentation Within Countries

• Averages of countries are often not meaningful
• Implications of demographic factors will depend
  on country contexte.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)

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 youthpsychographic
• Homebodiestraditional, low individuality
• Two-facedoutwardly traditional outwardly
  modern
• Wannabes--Materialistic mainstream
  show-offs part of crowd
• Rebelstraditional parents often first
  generation professionals understood by friends,
  not parents
• Cool guyswork hard-play hard confident,
  westernized

7
Country Market Segmentation by Overall Market
Attractiveness

• Platform countriesfor gathering intelligence
  and market info
• Emerging marketscurrent minimal markets but
  growing potential over time
• Growth marketsalready experiencing high levels
  of growth
• Maturing marketswell entrenched competitors
  often have sizable middle class
• Established marketsmature, usually fewer growth
  prospects high competition but quite affluent

8
Selection of Foreign Markets

• Preliminary screening
• Market size
• Population
• Income
• Accessibilitybarriers
• Tariff
• Import
• Export
• Non-tariff
• Government participation
• Procedures
• Product requirements

• Profitability
• Cost of barriers
• Risks
• Exchange rate
• Political
• Legal
• Selection and targeting
• Trade analysis
• Analogyestimation based on performing of
  leading country (e.g., using China to estimate
  Vietnamese potential)

9
International Market Analytical Tools

• Boston Consulting Group (Growth-Share) Matrix
• Market Attractiveness/Company Strength
• Primary markets
• Secondary markets
• Tertiary markets

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

11
Example of a Keiretsu
CHEMICAL
STEEL
ELECTRO- NICS
AGRI- CULTURE
AUTO
BANK
FOOD PRO- CESSING
HEAVY MACHI- NERY
REST- AURANT
TRANS- PORTA- TION
12
Some Economic Concepts

• Permanent incomeexpected average over lifetime
• Retirement expectations
• Employment expectations
• Conspicuous consumption

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

14
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 1
COUNTRY 2
COUNTRY 2
A
A
G
E
A
B
C
B
F
B
H
C
D
H
C
D
MKT 440 Lars Perner, Instrucror
Rev. 2/98
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?

16
Intermarket vs. Intramarket Differences, Part II

• Global brands can serve similar consumers across
  borders --gt possible economies of scale
• Product life cycle--segments in one country may
  follow or lead those of other country

17
Positioning Across MarketsNot an Easy Choice!

• 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

• 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

18
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