Market Selection:

Definition and
Strategies
CHAPTER 5

Chapter 5 discusses
The processes for determining what
markets to enter and what direction to
take in those markets
Market selection: determining what
product(s) are best for what potential
market(s)
Marketing direction for existing products
Evaluating overall foreign market portfolios

Dana-Nicoleta Lascu

Atomic Dog Publishing 2006

Key steps in formulating an

international marketing strategy
Export market selection: determining the markets in

which to compete, and the sequence of entries.

Export market direction: determining whether to build,
hold or divest in markets being served.
External analysis focused on the characteristics of the
targeted markets, and their fit with
company products.
Internal analysis focused on the resources of the
company

Market Definition and

Segmentation

Market segmentation: a breakdown into segments of

customers for particular products in particular countries.

Need to consider countries, channels, customer segments

etc.
Unique customer groups may be based on countries or
consumer types across countries.

Dana-Nicoleta Lascu

Atomic Dog Publishing 2006

Export Market
Segmentation

Many possible ways; may use multiple methods.

Need to consider:
(a) measurability: ability to identify potential segments
(b) accessibility: ability to reach and serve
(communicate and deliver)
(c) profitability: is market large enough to be worth
separate attention
(d) actionability: can effective programs be formulated
for attracting and serving

*North American free trade agreement

Dana-Nicoleta Lascu

Atomic Dog Publishing 2006

International
Segmentation

The process of identifying countries and/or

consumers that are similar with regard to key
traits, such as product-related needs and
wants, that would respond to a product and
related marketing mix
Must be performed at country (macro
segmentation) level AND at the consumer
level (micro segmentation).
Dana-Nicoleta Lascu

Atomic Dog Publishing 2006

Bases of Segmentation
(a) increase penetration: extra market share
in existing markets
(b) develop additional products: product
innovation
(c) extend markets: attract new users for
existing basic offerings
(d) widen activities: develop new products
and markets around core activities
See table 5.2

International MacroSegmentation
Country Attractiveness Analysis
Market potentialindicators:

Gross domestic product (GDP) per capita

Industrial and agricultural sector statistics
Market size and potential
Consumer buying power
Investment figures (Foreign direct investment
data, other trade statistics)

Dana-Nicoleta Lascu

Atomic Dog Publishing 2006

International MacroSegmentation (contd.)

Political, legal and financial environment of

country:

Ethnic conflict
History of war engagement
Antiforeigner sentiment
Recent nationalization activities
Legal ambiguity
Trade barriers
Exchange rate controls

Dana-Nicoleta Lascu

Atomic Dog Publishing 2006

10

Typology of
international target
market
Market attractiveness:
e.g.
Labor costs
Brand management
Working hours
New markets
Machine running
times
Taxes
Environmental
standards
Administrative
barriers
Import barriers

Structure (natural) barriers

Strategic (competition) barriers
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Bases for MicroSegmentation

Clusters of consumers that respond in a
similar way to the marketing strategies
Demographic (descriptive statistics):

Age
Occupation
Education
Income
Ethnicity
Race
Nationality
Life-cycle stage
Social class

Dana-Nicoleta Lascu

Atomic Dog Publishing 2006

12

Going International:
Evaluating
Opportunities
Consider drivers of international expansion
in the environment:

Competition
Regional economic and political integration
Economic growth
Technology
Converging consumer needs

Consider firm-related international

expansion drivers:

Product life-cycle considerations

New product development costs
Experience transfers
Labor costs

Dana-Nicoleta Lascu

Atomic Dog Publishing 2006

13

Example: Labor Cost Drivers

Country

Compensation ($U.S.)

United States

22.87

Austria

28.29

Australia

23.09

Brazil

3.03

Denmark

33.75

France

23.89

Germany

32.53

Israel

12.18

Italy

20.48

Japan

21.90

Korea
Netherlands

11.52Hourly Compensation Costs

2.50 in U.S. Dollars for Production
Workers in Manufacturing 2006
30.76

Singapore

7.44 Source: http://stats.bls.gov

Mexico

United Kingdom

24.71

14

Market Selection Process:

Reactive vs Proactive Approaches
Reactive; responding to inquiries; very
common, especially for small or new
exporters.
Proactive; formal or informal search
in-depth research must be carried out
regarding all differences between the home
and country and foreign country

Market Selection Procedures: Expansive vs

Contractible Methods

Expansive: working outward from core; to

nearest neighbor (nearest in distance or
similarities);
may adapt products and/or segment
markets or neither.
Contractible: reducing large number of
possible candidates looking at general
market indicators and specific product
indicator.

Prohibitive product characteristics in obvious

conflict with cultural, religious or other factors.
Prohibitive market factors such as
prohibitions, boycotts, very high Customs
duties or other barriers.
Generally there are three stages in process:
(a) preliminary screening,
(b) determining specific country
characteristics and weights of factors, and
(c) ranking.

Market Selection Strategies

Market concentration: high levels of effort in
a few markets; slow/gradual expansion over
time.
Market spreading: resources spread over
many markets; fast rate of growth in the
number of markets served.

Figure 5.3

Export market selection: a market screening procedure