978-0134129945 Chapter 7 Lecture Note Part 2

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A Framework for Selecting Target Markets

As one can infer from this discussion, it would be extremely useful to have formal tools or

frameworks available when assessing emerging country markets.

Table 7-6 presents a market selection framework that incorporates some of the elements just

discussed. Using China, Russia, and Mexico as potential country target markets, the table shows

the countries arranged in declining rank by market size. Initially, China seems to hold the

greatest potential, based on size. However, the competitive advantage of our hypothetical firm

is .07 in China, .10 in Russia, and .20 in Mexico. Multiplying the market size and competitive

advantage index yields a market potential of 7 in China, 5 in Russia, and 4 in Mexico.

The next stage in the analysis requires an assessment of the various market access

considerations. In Table 7-6 all these conditions or terms are reduced to an index number of

terms of access. However, the “market access considerations” are more favorable in Mexico

than in Russia. Multiplying the market potential by the terms of access index suggests that

Mexico holds greater export potential than China or Russia.

Global expert David Arnold has developed a framework that is based on a “bottom-up” analysis,

beginning at the product-market level.

As shown in Figure 7-1, Arnold’s framework incorporates two core concepts: marketing model

drivers and enabling conditions.

Marketing model drivers are key elements or factors required for a business to take root and

grow in a particular country market environment. The drivers may differ depending on whether a

company serves consumer or industrial markets.

Enabling conditions are structural market characteristics whose presence or absence can

determine whether the marketing model can succeed. For example, in India, refrigeration is not

widely available in shops and market food stalls.

The third step is to weigh the estimated costs associated with entering and serving the market.

The issue of timing is often framed in terms of the quest for first-mover advantage. The

conventional wisdom says that the first company to enter a market has the best chance of

becoming the market leader.

The first company to enter a market often makes substantial investments in marketing only to

find that a late-arriving competitor reaps some of the benefits. There is ample evidence that late

entrants into global markets can also achieve success. One way they do this is by benchmarking

established companies and then outmaneuvering them, first locally then globally.

EMERGING MARKETS BRIEFING BOOK

Middle Eastern Airlines Target Lucrative Global Markets

All three Middle Eastern carriers (Emirates, Etihad Airways and Qatar Airways) are government

owned. Thanks to international open-skies agreements negotiated by the U.S. State Department,

these and other foreign carriers can now fly in and out of the United States much more frequently

than in the past.

Deregulation in the United States has resulted in more consumer choice and lower prices, among

other benefits. As Emirates and other Middle Eastern carriers penetrate more deeply into the

world’s largest aviation market, they are becoming known for very high-quality in-flight service.

Business-class and first-class passengers are particularly lucrative segments, and the Persian

carriers are going to great lengths to attract their business.

However, the Middle Eastern newcomers have also encountered some opposition. United

Continental, American Airlines, and Delta have filed complaints with the U.S. government that

the state-owner carriers are benefiting from substantial government subsidies. According to the

complaint, subsidies, along with tax exemptions and access to low-cost airport services, allows

the carriers to sell seats at below cost in the United States and other markets.

Late movers can also succeed by developing innovative business models. One way to determine

the marketing model drivers and enabling conditions is to create a product-market profile.

The profile should address the following basic questions:

1. Who buys our product or brand?

2. Who does not buy our product or brand?

3. What need or function does our product serve? Does our product or brand address that

need?

4. Is there a market need that is not being met by current product/brand offerings?

5. What problem does our product solve?

6. What are customers currently buying to satisfy the need and/or solve the problem for

which our product is targeted?

7. What price are they paying for the product they are currently buying?

8. When is our product purchased?

9. Where is our product purchased?

PRODUCT–MARKET DECISIONS

(Learning Objective #3)

The next step in assessing market segments is a company review of current and potential product

offerings in terms of their suitability for the country market or segment.

This assessment can be performed by creating a product-market grid that maps markets as

horizontal rows on a spreadsheet and products as vertical columns. Each cell represents the

possible intersection of a product and a market segment. Table 7-7 shows a product-grid for

Lexus.

TARGET MARKET STRATEGY OPTIONS

(Learning Objective #4)

After evaluating the identified segments in terms of the three criteria presented, a decision is

made whether to pursue a particular opportunity.

If the decision is made to proceed, an appropriate targeting strategy must be developed.

There are three basic categories of target marketing strategies:

1. Standardized marketing

2. Concentrated marketing

3. Differentiated marketing

Standardized Global Marketing

Standardized global marketing is analogous to mass marketing in a single country. It involves

creating the same marketing mix for a broad mass market of potential buyers.

Standardized global marketing, also known as undifferentiated target marketing, is based on the

premise that a mass market exists around the world. In addition, that mass market is served with

a marketing mix of standardized elements.

Product adaptation is minimized. Intensive distribution ensures that the product is available in

the maximum number of retail outlets.

The appeal of standardized global marketing is clear: lower production costs; the same is true of

standardized global communications.

Concentrated Global Marketing

The second global marketing strategy, concentrated target marketing, involves devising a

marketing mix to reach a niche.

A niche is simply a single segment of the global market.

Concentrated targeting is also the strategy employed by the hidden champions of global

marketing: companies unknown to most people that have succeeded by serving a niche market

that exists in many countries. These companies define their markets narrowly and strive for

global depth rather than national breadth. For example is Germany’s Winterhalter, a hidden

champion in the dishwasher market, who focuses exclusively on dishwashers and water

conditioners for hotels and restaurants.

Differentiated Global Marketing

The third target marketing strategy, differentiated global marketing, represents a more

ambitious approach than concentrated target marketing. Also known as multisegment targeting,

this approach entails targeting two or more distinct market segments with multiple marketing

mix offerings.

This strategy allows a company to achieve wider market coverage.

POSITIONING

(Learning Objective #5)

The term positioning is attributed to marketing gurus, Al Ries and Jack Trout, who first

introduced it in 1969. Positioning refers to the act of differentiating a brand in customers’ minds

in relation to competitors in terms of attributes and benefits that the brand does and does not

offer.

Positioning is the process of developing strategies for “staking out turf” or “filling a slot” in the

mind of target customers. Positioning is frequently used in conjunction with segmentation

variables and targeting strategies.

Marketers have utilized a number of general positioning strategies. These include positioning by

attribute or benefit, quality and price, use or user, or competitor.

Recent research has identified three additional positioning strategies that are particularly useful

in global marketing: global consumer culture positioning, local consumer culture positioning,

and foreign consumer culture positioning.

Attribute or Benefit

A frequently used positioning strategy exploits a particular product attribute, benefit, or feature.

Economy, reliability, and durability are frequently used attribute/benefit positions (e.g., Volvo is

known for solid construction that offers safety in the event of a crash).

In global marketing, it may be important to communicate that a brand is imported. This approach

is known as foreign consumer culture positioning (FCCP).

Quality and Price

This strategy runs from high fashion/quality and high price to good value (rather than “low

quality”) at a reasonable price.

Marketers sometimes use the phrase “transformation advertising” to describe advertising that

seeks to change the experience of buying and using a product—the benefit—to justify a higher

price.

Use or User

Another positioning strategy represents how a product is used or associates the brand with a user

or class of users. For example, Max Factor makeup is positioned as “the makeup that makeup

artists use.”

Competition

Implicit or explicit reference to competitors can provide the basis for an effective positioning

strategy.

Dove’s “Campaign for Real Beauty” broke new ground by positioning the brand around a new

definition of beauty.

Global, Foreign, and Local Consumer Culture Positioning

Global consumer culture positioning (GCCP) is defined as a strategy that identifies a brand as

a symbol of a particular global culture or segment. It can be used to target various segments

associated with the emerging global consumer culture.

It has proven to be an effective strategy for communicating with global teens, cosmopolitan

elites, globetrotting laptop warriors who consider themselves members of a “transnational

commerce culture,” and other groups.

For example, Sony’s “My First Sony” line is positioned as the electronics brand for youngsters

around the globe with discerning parents. Heineken’s strong brand equity around the globe can

be attributed in good measure to a GCCP strategy that reinforces consumers’ cosmopolitan self-

images.

Certain categories of products lend themselves especially well to GCCP. High-tech and high-

touch products are both associated with high levels of customer involvement and by a shared

“language” among users. High-tech products are sophisticated, technologically complex, and / or

difficult to explain or understand.

High-touch products are generally energized by emotional motives rather than rational ones.

Consumers may feel an emotional or spiritual connection with high-touch products, the

performance of which is evaluated in subjective, aesthetic terms rather than objective, technical

terms. Consumption of high-touch products may represent an act of personal indulgence, reflect

the user’s actual or ideal self-image, or reinforce interpersonal relationships.

A brand’s GCCP can be reinforced by the careful selection of the thematic, verbal, or visual

components that are incorporated into advertising and other communications. For marketers

seeking to establish a high-touch GCCP, leisure, romance, and materialism are three themes that

cross borders well. By contrast, professionalism and experience are advertising themes that work

well for high-tech products such as global financial services.

In some instances, products may be positioned globally in a “bipolar” fashion as both high tech

and high touch. This approach can be used when products satisfy buyer’s rational criteria while

evoking an emotional response. (Apple positions its products on the basis of both performance

and design) see Exhibit 7-13.

To the extent that English is the primary language of international business, mass media, and the

Internet, one can make the case that English signifies modernism and a cosmopolitan outlook.

Therefore, the use of English in advertising and labeling throughout the world is another way to

achieve GCCP. Benetton’s tag line “United Colors of Benetton” appears in English in all of the

company’s advertising.

Another way to reinforce a GCCP is to use brand symbols that cannot be interpreted as

associated with a specific country culture. Examples include the Nike swoosh, and the Mercedes-

Benz star.

A second option is foreign consumer culture positioning (FCCP) associates the brand’s users,

use occasions, or production origins with a foreign country or culture.

Foster’s Brewing Group’s U.S. advertising proudly trumpets the brand’s national origin; print ads

feature the tag line “Foster’s. Australian for beer.” The “American-ness” of Levi jeans, Marlboro

cigarettes, and Harley-Davidson motorcycles enhances their appeal to cosmopolitans around the

world and offers opportunities for FCCP.

Local consumer culture positioning (LCCP) is a strategy that associates the brand with local

cultural meanings, reflects the local culture’s norms, portrays the brand as consumed by local

people in the national culture, or depicts the product as locally produced for local consumers.

An LCCP approach can be seen in Budweiser’s U.S. advertising; ads featuring the iconic

Clydesdale horses, for example, associate the brand with small-town American culture.

TEACHING TOOLS AND EXERCISES

Additional Cases:

“Managing Co-Branding Strategies: Global Brands into Local Markets”. Russell Abratt;

Patience Motlana. HBS BH080.

“How to Market to Generation M(obile).” Fareena Sultan; Andrew Rohm. HBS SMR285.

Activity: Students should be preparing or presenting their Cultural-Economic Analysis and

Marketing Plan for their country and product as outlined in Chapter 1.

Out-of-class Reading: Assign the seminal work on positioning: Al Ries and Jack Trout,

Positioning: The Battle For Your Mind (New York: Warner Books, 1982).

The authors argue that differentiation is largely a creative exercise. According to Ries and Trout,

“Positioning is what you do to the mind of the prospect.” The authors are interested in the

psychological positioning or repositioning of existing products and that in an “over

communicated society,” the marketer’s task is to create product distinctiveness. Students can

apply these ideas to global organizations and give specific examples. They could select

companies already discussed such as McDonald’s and Disney.

Positioning: Students will find advertisements that show different positioning strategies.

Compare and contrast these ads.

Internet Exercise: Recently, Germany’s Volkswagen and Japan’s Suzuki announced a joint

venture in China. Research the Internet and find out what both sides appear to be gaining by this

joint venture and the role(s) that targeting played in their decision.