Market Selection & Segmentation PDF

Market selection and market segmentation International Business and International Management Content of the topic Marketing process and market analysis BASIC ENTRY DECISIONS  Marketing process and analysis Selection of markets (market and environment analysis – att...

Market selection and market segmentation International Business and International Management Content of the topic Marketing process and market analysis BASIC ENTRY DECISIONS  Marketing process and analysis Selection of markets (market and environment analysis – attractiveness of markets) Market segmentation (identify bases for segmenting the market, develop segment profiles) Market targeting (strategy of targeting on this market, select target markets) Positioning (develop positioning for target markets, building a brand - physically and mentally, develop marketing mix for each segment) Market selection What markets are attractive for companie´s business and why? BASIC ENTRY DECISIONS 1. WHICH FOREIGN MARKETS? 2. TIMING OF ENTRY BASIC ENTRY DECISIONS WHICH FOREIGN MARKETS? Goal of market analysis To determinate the attractiveness of the market and to understand its evolving opportunities and threats as they relate to strengths and weaknesses of the company. BASIC ENTRY DECISIONS WHICH FOREIGN MARKETS? USA or CUBA? NORTH KOREA or SOUTH KOREA? ISRAEL or SYRIA? BASIC ENTRY DECISIONS WHICH FOREIGN MARKETS? Market analysis by David A. Aaker Pest analysis and its modifications BASIC ENTRY DECISIONS Market analysis by David A. Aaker 1. Market size (current and future) 2. Market growth rate 3. Market profitability 4. Industry cost structure 5. Distribution channels 6. Market trends 7. Key success factors BASIC ENTRY DECISIONS Market analysis by David A. Aaker 1. Market size (current and future) The size of the market can be evaluated based on present sales and on potential sales if the use of the product were expanded. The following are some information sources for determining market size: government data trade associations financial data from major players customer surveys BASIC ENTRY DECISIONS Market analysis by David A. Aaker 2. Market growth rate A simple means of forecasting the market growth rate is to extrapolate historical data into the future. A better method is to study growth drivers such as demographic information and sales growth in complementary products. Index: Average Annual Growth Rate in GDP Purchasing Power Parity per Capita BASIC ENTRY DECISIONS Market analysis by David A. Aaker 3. Market Profitability While different firms in a market will have different levels of profitability, the average profit potential for a market can be used as a guideline for knowing how difficult it is to make money in the market. Michael Porter devised a useful framework for evaluating the attractiveness of an industry or market. BASIC ENTRY DECISIONS Market analysis by David A. Aaker 3. Market Profitability This framework, known as Porter's five forces, identifies five factors that influence the market profitability: Buyer power Supplier power Barriers to entry (threat of new entry) Threat of substitute products Rivalry among firms in the industry BASIC ENTRY DECISIONS Market analysis by David A. Aaker 4. Industry Cost Structure The cost structure is important for identifying key factors for success. To this end, Porter's value chain model is useful for determining where value is added and for isolating the costs. BASIC ENTRY DECISIONS Market analysis by David A. Aaker 5. Distribution Channels Existing distribution channels - can be described by how direct they are to the customer. Trends and emerging channels - new channels can offer the opportunity to develop a competitive advantage. Channel power structure - for example, in the case of a product having little brand equity, retailers have negotiating power over manufacturers and can capture more margin. BASIC ENTRY DECISIONS Market analysis by David A. Aaker 6. Market Trends Changes in the market are important because they often are the source of new opportunities and threats. The relevant trends are industry-dependent, but some examples include changes in price sensitivity, demand for variety, and level of emphasis on service and support. Regional trends also may be relevant. How can Google help us? BASIC ENTRY DECISIONS Market analysis by David A. Aaker 7. Key Success Factors The key success factors are those elements that are necessary in order for the firm to achieve its marketing objectives. A few examples of such factors include: Access to essential unique resources Ability to achieve economies of scale Access to distribution channels Technological progress It is important to consider that key success factors may change over time, especially as the product progresses through its life cycle. BASIC ENTRY DECISIONS Market analysis by David A. Aaker 1. Market size (current and future) 2. Market growth rate 3. Market profitability 4. Industry cost structure 5. Distribution channels 6. Market trends 7. Key success factors BASIC ENTRY DECISIONS Political System of government in a nation Collectivism – collective goals (socialism) Individualism – individual goals and needs Democracy – refers to a political system in which government is by the people exercised either directly or through elected representatives Totalitarianism – form of government in which one person or political party exercises absolute control over all spheres of human life Political 1.How stable is the political environment? 2.Will government policy influence laws that regulate or tax your business? 3.What is the government’s position on marketing ethics? 4. What is the government’s policy on the economy? 5. Does the government have a view on culture and religion? 6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others? Economic Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at: 1. Interest rates. 2. The level of inflation, employment level per capita. 3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita.  Social-cultural 1.What is the dominant religion? 2.What are attitudes to foreign products and services? 3.Does language impact upon the diffusion of products onto markets? 4.How much time do consumers have for leisure? 5.What are the roles of men and women within society? 6.How long are the population living? Are the older generations wealthy? 7.Do the population have a strong/weak opinion on green issues?  Technological 1. Does technology allow for products and services to be made more cheaply and to a better standard of quality? 2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones? 3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions? 4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM)? BASIC ENTRY DECISIONS PEST analysis modification: PESTEL/PESTLE - political, economic, social, technological, legal, environmental STEEPLE – social, technological, economic, ethic, political, legal, environmental Another variations: STEPE, PESTLIED, STEEPLED Legal system Common law – based on tradition, precedent and custom Civil law – based on a detailed set of laws organized into codes (more than 80 countries operate with a civil law system) Theocratic law - based on religious teachings (Islamic law is the most widely practiced theocratic legal system in the modern world) Legal system Property rights and corruption Protection of intelectual property (patents, copyrights, trademarks) Health and safety laws Discrimination laws BASIC ENTRY DECISIONS WHICH FOREIGN MARKETS? Several factors: nation's long-run profit potential (economic factors, political factors, social factors, technical factors), legal system, property rights, corruption, potential of market (size of market, purchasing power), number and strength of competitors the attractiveness of the country Doing business index, Average Annual Growth Rate in GDP, Human Development Index, Purchasing Power Parity per Capita, Political Freedom, http://www.doingbusiness.org/rankings World Happiness Report BASIC ENTRY DECISIONS TIMING OF ENTRY After a firm identifies which market to enter, it must determinate the timing of entry 1. Entry is EARLY when a firms enters a foreign market before other foreign firms 2. Entry is LATE when a firms enters a foreign market after other foreign firms  BASIC ENTRY DECISIONS TIMING OF ENTRY First-mover advantages = the advantages frequently associated with entering a market early a potential to make a lasting impression on customers, which can to brand recognition and brand loyalty. more time to refine their processes and to perfect their products the ability to build sales volume in the country building a strong brand name and stable market share an advantage in controlling resources, such as a strategic location or an exclusive contract with key suppliers or talented employees BASIC ENTRY DECISIONS First-mover disadvantages??? BASIC ENTRY DECISIONS First-mover disadvantages??? (first to market – first to fail) Pioneering costs (it may be expensive to be first) - Make customer aware, convince them to try something brand new - Create totally new to-the-market supply and distribution chains - Teach your own team how to make and sell something new in the new market - Work with relevant regulators to create regulator framework/standards BASIC ENTRY DECISIONS Successful first-movers  Marketing process and analysis Selection of markets (market and environment analysis – attractiveness of markets) Market segmentation (identify bases for segmenting the market, develop segment profiles) Market targeting (strategy of targeting on this market, select target markets) Positioning (develop positioning for target markets, building a brand - physically and mentally, develop marketing mix for each segment) Market segmentation What segment we can identify on the market? What is structure of this segments? Market segmentation Market segmentation is an integral part of a company's marketing strategy. It is the process of breaking down a larger target market into smaller, more homogeneous groups of customers that you can more efficiently market to. One market segment is totally distinct from the other segment. A market segment comprises of individuals who think on the same lines and have similar interests. Benefits of market segmentation Growing profits Stronger marketing message Targeted digital advertising Developing effective marketing strategies Attracting the right customers Increasing brand loyalty Differentiating your brand from the competitors Product development Thank you for your attention International Business and International Management BASIC ENTRY DECISIONS Exercise: create a list of factors for every dimensions of PEST model and describe when (in which conditions) or for whom could be these factors opportunity or threat. Assignment No. 2 - Presentation: Market analysis and market selection - Prepare presentation about market analysis of selected market (use PEST analysis and add legal, ethic or environmental area) At the end of your presentation answer these questions: - How much is this market attractive for business? in the scale 0 - 100? (and reason why?) - What segments you can find in this market? (statistical examples of market segments in economy, at least 3 examples) - No paperwork necessary, just presentation – 25 minutes per team - Teamwork - Submit presentation till Sunday 7th November in MS TEAMS IMIB SEMINAR - Presentation day: 09.11.2021