Market Selection : Definition

and Strategies
Export Marketing
Spring 2021
 Introduction
• Three major implications for export managers:

• Need to consider each product and/or market within company portfolio

• Need to focus on broader strategic measures

• Export marketers have a key role in the strategic planning process

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 International Marketing Strategy
Formulation
Export
Marketing
Selection

Ex
po
rt
M
ar
ke
tin
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Di
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cti
on
 International Marketing Strategy
Formulation
• Export Marketing Selection
• “The process of opportunity evaluation leading to the selection of foreign
markets in which to compete”

• Export Marketing Direction

• “Determining whether to build, hold or divest in markets being served”.
 External and Internal Analysis
• External analysis focuses on the characteristics of the targeted markets, and their fit with company
products.

• Internal analysis focuses on the resources of the company available for supporting increased
complexity and differences in foreign markets.

• The need to recognize that each country is unique, so country-specific plans are required.

• The need to develop realistic expectations.

• Time-to-market

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 Market Definition
• Correct market definition is crucial for

• Measurement of share and other indicators of performance.

• For the specification of target customers and their needs.

• For the recognition of important competitors.

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 Market Segmentation
• Market Segmentation:
“A process of classifying customers into homogenous groups with similar
demand and/or preferences”

• In the context of international markets , segmentation can be viewed

as
“A process whereby unique customer groups can be identified whether they are
country-based or individual consumer-based groups”
 Export Market Segmentation
• The success of any market segmentation scheme depends heavily on the
choice of variables by which to perform the segmentation

• Decision to segment on a particular basis should be evaluated in terms of:

• Measurability: It is the degree to which segments can be identified and to which the size and purchasing
power of the segments can be measured.

• Accessibility: Ability to reach and serve (communicate and deliver)

• Profitability: It is the degree to which the resulting segments are large and/or profitable enough to be worth
considering for separate attention.

• Actionability: Can effective programs be formulated for attracting and serving the segments 8
Bases for Export Market Segmentation
 Bases of Segmentation
• Segmentation based on attitude towards luxury products.

• Elitist: Appropriate for small elitist group, not everyone

• Democratic: Should be available to everyone

• Distant: Deem luxury products as useless

• Segmentation based on ethical standards

• Principled Purchasers: less Machiavellianistic, less opportunistic, more trusting of others, less relativistic, and perceive
questionable actions in negative light.

• Suspicious Shoppers: less trusting, proceed with caution in dealings, somewhat opportunistic, high emphasis on ethical
behavior.

• Corrupt Consumers: Machiavellianistic, opportunistic, not ethical 10

 Bases of Segmentation
• Segmentation based on demographics

• Strivers: Median age of 31 and lead active lives. They are mostly under stress and prefer
products that provide instant gratification

• Achievers: Young but they have already found success. Affluent, assertive and style leaders

• Pressured: Mainly women in every age group who find it difficult to manage problems in life.

• Adapters: Respect new ideas without losing sight of their values

• Traditional: Resistant to change and content with familiar products

• Exhibit 5.3 (Core Value Segmentation)
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Market Expansion/Selection Process,
Procedure, and Strategy
 Market Selection Process: Reactive vs Proactive
Approaches
• Reactive Market Selection:
• Act passively
• Exporter responds to a situation that has emerged
• Very common, especially for small or new exporters.

• Proactive Market Selection:

• Formal or informal search;
• Market selection is systematic and formalized

• Decision influenced by :
• Psychic Distance.
• Cultural Distance
• Geographic Distance
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 Market Selection Procedures: Expansive vs
Contractible Methods
• Expansive Method:
• Working outward from core.
• Market selection over time is based on similarities.

• Nearest Neighbor Approach

• Trade Policy

• Temperature Gradient Approach

• Super Hot, Hot, Moderate or Cold.
• Seven variables (political stability, market opportunity, economic development and
performance, cultural unity, legal barriers, physiographic barriers and geo-cultural distance)

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Country placement in temperature-gradient
clusters
 Market Selection Procedures: Expansive vs
Contractible Methods
• Contractible Methods:

• Reducing large number of possible candidates looking at general market

indicators and specific product indicator.

• Systematic screening of all markets leading to immediate elimination of the

least promising markets.
 Market Selection Procedures: Contractible
Method
• Generally there are three stages in process:
(a) Preliminary screening.

(b) Determining specific country characteristics and weights of factors, and

(c) Ranking.
Export Market Selection: A Market Screening Procedure
Geographic Segmentation
General Market Indicators
Product-specific market Indicators
Prohibitive Product Characteristics
Prohibitive Market Characteristics
Estimation of Market Potentials

Socio-economic Segmentation
Demand Patterns
Supply Patterns

Estimation of Sales Potentials

Markets
Segments

Estimation of Profitability
Ranking of markets/segments
Final market selection

Strategic Planning
 Market Selection Strategy

Market ●
High levels of effort in a few markets.
Concentration ●
Slow/gradual expansion over time.

Market ●

●
Resources spread over many markets
Fast rate of growth in the number of
Spreading markets served.
 Foreign Market Portfolios: Techniques and
Analysis
• Standardized Approach to Portfolio Analysis
• BCG Portfolio Analysis

• Applying a Portfolio Model to Export Market Selection Decisions

• Country Attractiveness/ Competitive Strength Matrix
• Variables
• Country Attractiveness
• Competitive Strength

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Boston Consulting Group: Growth Share Matrix
Relative Market Share
High Low
High

Market
Stars Question Marks
Growth
Rate

Low Cash Cows Dogs

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 Growth Share Matrix: Question Marks

• Low share, high growth markets

• Requires cash to hold share

Stars Question Marks
• What should be done?
• Build these into stars or
phase out, sell
Cash Cows Dogs

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 Growth Share Matrix: Star

• High growth, high share

• Needs heavy investment; builds market
share
• Eventually become Cash Cows
Stars Question Marks

Cash Cows Dogs

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 Growth Share Matrix: Cash Cows

• Low growth, high share

• Cash generators
• Established, successful, invest enough to
hold market

Stars Question Marks

Cash Cows Dogs

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 Growth Share Matrix: Dogs

• Low growth, low share

• Discontinue, divest
Stars Question Marks

Cash Cows Dogs

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Dimensions of Country Attractiveness

Country Attractiveness
Market size
(Total and Segments)
Market growth
(Total and Segments)
Market seasons and fluctuations
Competitive Conditions
(Concentration, Intensity, Entry Barriers, etc.)
Market prohibitive conditions
(tariff, nontariff barriers, Import restrictions, etc)

Economic and political stability

Dimensions of Country Attractiveness
Dimensions of Competitive Strength
Competitive Strength

Market share
Marketing ability and capacity
Product fit
Contribution margin
Image

Technology position
Product quality
Market support
Quality of distributors and service
Dimensions of Competitive Strength
Country Attractiveness/Competitive Strength
Matrix
Applying a Portfolio Model to Export Market
Selection Decisions
• Invest/grow countries

• Call for company commitment to strong market position

• Require substantial financial investment
• Product development and modification

• Harvest/divest/license/combine countries
• Call for strategies to harvest profits or sell business

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Applying a Portfolio Model to Export Market
Selection Decisions
• Dominate/divest countries

• Careful analysis of cash requirements and cash availability

• Selectivity countries

• Strong cash flows

• Competition is extreme and intense
• Maintain market share

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