6/22/2020

Segmentation,
Targeting, and
Positioning
Chapter 7

Learning Objectives
• Identify like groups of potential customers
• Choose the groups to target
• Use product-market grid
• Segment markets
• Position the brand in the mind of the
customer

Positioning, how to communicate to the

potential customers.
• Segmentation: Represents an effort to identify
and categorize groups of customers and
countries according to common characteristics
• Targeting: The process of evaluating
segments and focusing marketing efforts on a In segmentation you look for similarities, classifying.
country, region, or group of people that has
significant potential to respond Targeting is selecting the segments.
• Positioning: Efforts that aim to make a brand
occupy a distinct position, relative to competing
brands, in the mind of the customer. Positioning is to create an image of the product

that matches the targeted market

1
 6/22/2020

Requirements for Effective

International Segmentation
• Measurability
• Substantiality
• Stability over time
• Accessibility
• Actionability
• Differential response

Global Market Segmentation

• Defined as the process of identifying specific
segments—whether they be country groups or
individual consumer groups—of potential
customers with homogeneous attributes who are
likely to exhibit similar responses to a company’s
marketing mix.

Contrasting Views of
Global Segmentation
• Conventional Wisdom • Unconventional
• Assumes heterogeneity
between countries
• Assumes homogeneity
within a country
• Focuses on macro level
of cultural differences
• Relies on clustering of
national markets
• Less emphasis on within-
country segments
Wisdom
• Assumes emergence of
segments that transcend
national boundaries
• Recognizes existence of
within-country
differences
• Emphasizes micro-level
differences
• Segments micro markets
within and between
countries

2
 6/22/2020

Global Market: Macro Segmentation

• Market potential – indicators: Gross domestic product (GDP)
per capita, Industrial and agricultural sector statistics, Market
size and potential, Consumer buying power, Investment figures
(FDI, other trade statistics), Urbanization, HDI
• 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
• Marketing support infrastructure: Availability and reliability
of distribution and logistics providers, Availability of competent
partners for strategic alliances, Quality of telecommunication
and transportation infrastructure, Availability of other service
providers, Marketing research firms, Financial firms,
Management consulting firms…

D: Age, income, gender, household sizes, race, profession,

Global Market: Micro Segmentation
P: Attitudes, lifestyle, personality => intro/extrovert, etc
• Demographics
• Psychographics BC: Frequency of use, user status,
• Behavioral characteristics
• Benefits sought BS: Search for a cure, prevention,

Geography is part of macro segmentation

Demographic Segmentation
• Income
• Population
• Age distribution
• Gender
• Education
• Occupation

3
 6/22/2020

Demographic Facts and Trends

• In India, the number of people under the age of 14 is greater
than the entire US population
• In the EU, the number of consumers aged 16 and under is
rapidly approaching the number of consumers aged 60-plus
• By 2030, 20% of Americans will be over 65
• African-, Asian-, and Hispanic-Americans have a $2.5 trillion
buying power
• A widening age gap exists between the older populations in
the West and the large working-age populations in developing
countries
• Asia is home to 500 million consumers aged 16 and under
• Half of Japan’s population will be age 50 or older by 2025

Segmenting by Income
and Population
• Income is a valuable segmentation variable
• 2/3s of world’s GNP is generated in the Triad but
only 12% of the world’s population is in the Triad
• Do not read too much into the numbers
• Some services are free in developing nations so there is
more purchasing power
• For products with low enough price, population is a
more important variable

Per Capita Income & SOL

Differences between income and standard of living are more

pronounced in less-developed countries (for example, a visit to a mud
house in Tanzania will reveal many of the things that an annual per
capita income of $410 can buy: an iron bed frame, a corrugated metal
roof, beer and soft drinks, bicycles).

4
 6/22/2020

10 Most Populous Countries

Age Segmentation

• Global Teens-12 and 19 yr. olds

“A group of teenagers randomly chosen from
different parts of the world will share many of the
same tastes.”

• Global Elite–affluent consumers who are well

traveled and have the money to spend on
prestigious products with an image of exclusivity

Gender Segmentation
• In focusing on the needs and wants of one
gender, do not miss opportunities to serve the
other
• Companies may offer product lines for both
genders
• Nike, Levi Strauss

5
 6/22/2020

Psychographic Segmentation

• Grouping people according to attitudes, values, and

lifestyles
• SRI International and VALS 2
• Culture – Hofstede’s dimensions
• Porsche example
• Top Guns (27%): Ambition, power, control
• Elitists (24%): Old money, car is just a car
• Proud Patrons (23%): Car is reward for hard work
• Bon Vivants (17%): Car is for excitement, adventure
• Fantasists (9%): Car is form of escape

The Euroconsumer
Comfortable Belongers
• 25% to 50% of a country’s
population
• conservative
• most comfortable with the
familiar
• content with the comfort of
home, family, friends, and
community
Successful Idealists
• 5% to 20% of the population
• consists of persons who have
achieved professional and material
success
• maintain commitment to abstract
or socially responsible ideals
Disaffected Survivors
• lack power and affluence
• harbor little hope for upward
mobility
• tend to be either resentful or
resigned
• concentrated in high-crime urban
inner city
• attitudes tend to affect the rest of
society
Affluent Materialists
• Status-conscious ‘up-and-
comers’–
• business professionals
• use conspicuous consumption to
communicate their success to
others

Psychographic Segmentation:
Sony’s U.S. Consumer Segments

6
 6/22/2020

Example

Behavior Segmentation
• Focus on whether people purchase a product or not,
how much, and how often they use it
• Usage pattern/process/style (IKEA)
• User status
• 80/20 Rule or Law of Disproportionality or
Pareto’s Law–80% of a company’s revenues are
accounted for by 20% of the customers

Benefit Segmentation
• Benefit segmentation focuses on the value equation
• Value=Benefits/Price
• Based on understanding the problem a product
solves, the benefit it offers, or the issue it addresses

7
 6/22/2020

Ethnic Segmentation
• The population of many
countries includes ethnic
groups of significant
size
• Three main groups in
the U.S. include African-
Americans, Asian-
Americans, and Hispanic
Americans
• Hispanic Americans
• 50 million Hispanic
Americans (14% of
total pop.) with $978
billion annual buying
power
• “$1 trillion Latina”
24 million Hispanic
women: 42% single,
35% HOH, 54%
working

VALS2 to find more information on segmentation

Assessing Market Potential
• Be mindful of the pitfalls
• Tendency to overstate the size and short-term
attractiveness of individual country markets
• The company does not want to ‘miss out’ on a
strategic opportunity
• Management’s network of contacts will emerge as a
primary criterion for targeting

Assessing Market Potential

• Three basic criteria:
• Current size of the segment and anticipated growth
potential
• Potential competition
• Compatibility with company’s overall objectives and the
feasibility of successfully reaching the target audience

8
 6/22/2020

Current Segment Size

and Growth
• Is the market segment currently large enough to
present a company with the opportunity to make a
profit?

• If the answer is ‘no,’ does it have significant

growth potential to make it attractive in terms of a
company’s long-term strategy?

Potential Competition
• Is there currently strong competition in
the market segment?
• Is the competition vulnerable in terms of
price or quality?

Feasibility and Compatibility

• Will adaptation be required? If so, is this economically
justifiable in terms of expected sales?
• Will import restrictions, high tariffs, or a strong home
country currency drive up the price of the product in
the target market currency and effectively dampen
demand?
• Is it advisable to source locally? Would it make sense to
source products in the country for export elsewhere in
the region?
• Is targeting a particular segment compatible with the
company’s goals, brand image, or established sources
of competitive advantage?

9
 6/22/2020

Framework for Selecting

Target Markets

9 Questions for Creating a

Product-Market Profile
• Who buys our product?
• Who does not buy it?
• What need or function does it serve?
• Is there a market need that is not being met by current
product/brand offerings?
• What problem does our product solve?
• What are customers buying to satisfy the need for which our
product is targeted?
• What price are they paying?
• When is the product purchased?
• Where is it purchased?

Product-Market Decisions
• Review current and potential products for best
match for country markets or segments

• Create a matrix with countries and products to

help with analysis

10
 6/22/2020

Target Market
Strategy Options
• Standardized Global Marketing or
Undifferentiated target marketing

• Mass marketing on a global scale

• Standardized marketing mix
• Minimal product adaptation
• Intensive distribution
• Lower production costs
• Lower communication costs

Target Market Strategy Options

• Concentrated Global • Differentiated Global

Marketing Marketing
• Niche marketing • Multi-segment targeting
• Single segment of global • Two or more distinct
market markets
• Look for global depth • Wider market coverage
rather than national • Ex.: P&G markets Old
breadth Spice and Hugo Boss for
• Ex.: Germany’s Men
Winterhalter focuses
exclusively on
dishwashers and water
conditioners for hotels
and restaurants.

Positioning

• Locating a brand in consumers’ minds over and

against competitors in terms of attributes and
benefits that the brand does and does not offer
• Attribute or Benefit: Volvo  Safety
• Quality and Price: L’Oreal  Because you’re worth it
• Use or User: Bayer Aspirin  Recommended by doctors
• Competition: The Body Shop -> Natural ingredients, no
animal testing

11
 6/22/2020

Positioning Strategies

• Global consumer culture positioning

• Identifies the brand as a symbol of a particular global
culture or segment
• High-touch and high-tech products
• Foreign consumer culture positioning
• Associates the brand’s users, use occasions, or product
origins with a foreign country or culture

Positioning Strategies
• Local consumer culture positioning
• Identifies with local cultural meanings
• Consumed by local people
• Locally produced for local people
• Used frequently for food, personal, and household
nondurables
• Ex.: Budweiser is identified with small-town America

12

Positioning
• Attribute or Benefit
• Economy
• Reliability
• Durability
• BMW: The Ultimate
Driving Machine or
Visa: It’s Everywhere
You Want To Be
• Foreign Consumer
Culture Positioning:
Focus on import benefits
Positioning
• Use or User
• Associates the brand with
a user or class of users
• Max Factor: The makeup
that makeup artists use
Importing,
Exporting, and
Sourcing
Chapter 8
6/22/2020
• Quality and Price
• Continuum from high
price/quality and high
price to good value
• Stella Artois beer:
Reassuring Expensive
• Foreign consumer
culture positioning
(FCCP): Grey Goose
(France), Ketel One (the
Netherlands)
• Competition
• Implicit or explicit
reference to competition
• Dove: Campaign for Real
Beauty
• 2% of women worldwide
think they are beautiful
• New definition of beauty
13
 6/22/2020

Learning Objectives
• Export selling and export marketing
• Organizational export activities
• National policies on imports and exports
• Tariff systems
• Key export participants
• Export organizations
• Payment methods
• Sourcing decisions

Export Selling vs. Export

Marketing
• Export selling involves selling the same product, at
the same price, with the same promotional tools in a
different place
• Export marketing tailors the marketing mix to
international customers.
• Requirements:
• An understanding of the target market environment
• The use of market research and identification of market
potential
• Decisions concerning product design, pricing, distribution and
channels, advertising, and communications

Export: Developmental
Process - Stages
1. The firm is unwilling to export; it will not even fill an
unsolicited export order.
2. The firm fills unsolicited export orders but does not pursue
unsolicited orders. Such a firm is an export seller.
3. The firm explores the feasibility of exporting (this stage
may bypass Stage 2).
4. The firm exports to one or more markets on a trial basis.
5. The firm is an experienced exporter to one or more
markets.
6. The firm pursues country- or region-focused marketing
based on certain criteria
7. The firm evaluates global market potential for the “best”
target markets.

14
 6/22/2020

Potential Export Problems

National Policies Governing

Exports and Imports
• Most nations encourage exports and restrict
imports
• In 2011, the total was $2.7 trillion
• European Union trade, domestic and foreign, is
$3 trillion +

Top 10 Clothing Exporters

2011 ($ billions)

Source: WTO, https://www.wto.org/english/res_e/statis_e/its2014_e/its14_merch_trade_product_e.htm

15
 6/22/2020

Government Programs that

Support Exports
• Tax incentives
• Subsidies
• Governmental assistance
• Free trade zones

Governmental Actions to Discourage

Imports and Block Market Access

• Tariffs
• Import controls
• Nontariff barriers (hidden trade barriers)
– Quotas
– Discriminatory procurement policies
– Restrictive customs procedures (The Buy American Act
of 1993)
– Arbitrary monetary policies
– Restrictive regulations (antidumping regulations,
product size regulations, and safety and health
regulations)

Examples of Trade Barriers

16
 6/22/2020

Tariff Systems
• Single-column tariff
–Simplest type of tariff
–Schedule of duties in which rate applies to
imports from all countries on the same basis

• Two-column tariff
–General duties plus special duties apply

Example: Two-Column Tariff

NTR = Normal Trade Relations, formerly MFN

Preferential Tariff
• Reduced tariff rate applied to imports from
certain countries
• GATT prohibits the use, with three
exceptions:
• Historical preference arrangements already
existed
• Preference is part of formal economic integration
treaty
• Industrial countries are permitted to grant
preferential market access to LDCs

17
 6/22/2020

Customs Duties
• Ad valorem duty
• Expressed as percentage of value of goods
• Specific duty
• Expressed as specific amount of currency per unit
of weight, volume, length, or other unit of
measurement
• Compound or mixed duties
• Apply

Other Duties and

Import Charges
• Anti-dumping Duties
• Dumping is the sale of merchandise in export markets at unfair
prices
• Special import charges equal to the dumping margin
• Countervailing Duties: additional duties levied to offset
subsidies granted in the exporting country
• Variable Import Levies: If prices of imported products
would undercut those of domestic products, the effect of these
levies would be to raise the price of imported products to the
domestic price level.
• Temporary Surcharges: provide additional protection for
local industry and, in particular, in response to balance-of-payments
deficits.

Key Export Participants

• Foreign purchasing
agents
• Export brokers
• Export merchants
• Export commission
representative
• Cooperative exporter
(mother hen/ a piggyback
exporter

• Export management • Freight forwarders

companies • Manufacturer’s
• Export distributor export
representatives

18
 6/22/2020

Organizing for Exporting in

the Manufacturer’s Country
• Exports can be handled
–As a part-time activity performed by domestic
employees
–Through an export partner
–Through an export department
–Through an export department within an
international division
–For multi-divisional companies; each possibility
exists for each division

Organizing for Exporting

in the Market Country
• Direct market representation
–Advantages: control and communications

• Representation by independent intermediaries

–Advantages: best for situations with small sales
volume

Trade Financing and

Methods of Payment
• Documentary credits (letter of credit)
• Documentary collections (bill of exchange)
• Cash in advance
• Sales on open account
• Sales on consignment basis

19
 6/22/2020

Documentary Credit

Documentary Credit (Con’t)

Additional Export and

Import Issues

20
 6/22/2020

Customs Trade Partnership

Against Terrorism
• The U.S. Customs and Border Patrol inspects cargo
• C-TPAT aims to have businesses certify their
security and that of their partners
• They get inspection priority

Duty Drawback
• Refunds of duties paid on imports that are
processed or incorporated into other goods
AND re-exported
• Reduce the price of imported production
inputs
• Used in the U.S. to encourage exports
• After NAFTA, U.S. reduced drawbacks on
exports to Canada and Mexico
• China had to reduce drawbacks in order to join
the WTO

Factors that Affect Sourcing

• Management vision (Swatch watches are manufactured in
Switzerland)
• Factor costs and conditions
• Customer needs (call center jobs)
• Logistics
• Country infrastructure
• Political risk
• Exchange rate, availability, and convertibility of
local money

21
 6/22/2020

Global Market Entry

Strategies: Licensing,
Investment and Strategic
Alliances
Chapter 9

Learning Objectives
•Licensing and forms of foreign investments
•Global strategic partnerships
•Asian cooperatives
•Virtual corporation
•Market expansion strategies

Investment Cost of The more you invest the more opportunities

Marketing Entry Strategies

22
 6/22/2020

Which Strategy Should Be Used?

• It depends on:
• Vision
• Attitude toward risk
• Available investment capital
• How much control is desired

Licensing
• A contractual agreement whereby one company (the
licensor) makes an asset available to another company
(the licensee) in exchange for royalties, license fees, or
some other form of compensation
• Patent
• Trade secret
• Brand name
• Product formulations

Advantages to Licensing
• Provides additional profitability with little
initial investment
• Provides method of circumventing tariffs,
quotas, and other export barriers
• Attractive ROI
• Low costs to implement
• License agreements should have cross-
technology agreements to share developments
and create competitive advantage for each
party

23
 6/22/2020

Disadvantages to Licensing

• Limited participation
• Returns may be lost
• Lack of control
• Licensee may become competitor
• Licensee may exploit company resources

Special Licensing
Arrangements
• Contract manufacturing
– Company provides technical specifications to a
subcontractor or local manufacturer
– Allows company to specialize in product design while
contractors accept responsibility for manufacturing
facilities
• Franchising
– Contract between a parent company-franchisor and a
franchisee that allows the franchisee to operate a business
developed by the franchisor in return for a fee and
adherence to franchise-wide policies

Franchising Questions
• Will local consumers buy your product?
• How tough is the local competition?
• Does the government respect trademark and
franchiser rights?
• Can your profits be easily repatriated?
• Can you buy all the supplies you need locally?
• Is commercial space available and are rents
affordable?
• Are your local partners financially sound and do they
understand the basics of franchising?

24
 6/22/2020

Licensing

Disney is the world’s top licensor.

Investment
• Partial or full ownership of operations outside of
home country
–Foreign Direct Investment (FDI)

• Forms
– Joint ventures
– Minority or majority
equity stakes
– Outright acquisition

IKEA spent $2 billion to enter Russia.

Toyota took advantage of the threats, not the

Joint Ventures
opportunities (SWOT) that is why they are #1.
• Entry strategy for a single target country in
which the partners share ownership of a Back in the day they exported less cars (VER).
newly-created business entity
• Builds upon each partner’s strengths So they responded with Acura, Lexus, ...
• Examples: Budweiser and Kirin (Japan), GM
and Toyota, GM and Daewoo in S. Korea, Ford
and Mazda, Chrysler and Fiat

25
 6/22/2020

Joint Ventures
• Advantages • Disadvantages
– Allows for risk sharing– – Requires more investment
financial and political than a licensing
– Provides opportunity to agreement
learn new environment – Must share rewards as
– Provides opportunity to well as risks
achieve synergy by – Requires strong
combining strengths of coordination
partners – Potential for conflict
– May be the only way to among partners
enter market given – Partner may become a
barriers to entry competitor

Investment via
Direct Foreign Investment
• Start-up of new operations
–Greenfield operations or
–Greenfield investment
• Merger with an existing enterprise
• Acquisition of an existing enterprise
• Examples: Volkswagen, 70% stake in Skoda
Motors, Czech Republic (equity), Honda, $550
million auto assembly plant in Indiana (new
operations)

Examples of Market Entry &

Expansion by Joint Venture

26
 6/22/2020

Examples of Equity Stake

Examples of Acquisitions

Global Strategic Partnerships

• Possible terms:
• Collaborative agreements
• Strategic alliances
• Strategic international alliances
• Global strategic partnerships
• Star Alliance: Create a global travel network by linking 27
member airlines and providing improved service for international
travelers

27
 6/22/2020

Three Characteristics of
Strategic Alliances

The Nature of
Global Strategic Partnerships

• Participants remain independent following

formation of the alliance
• Participants share benefits of alliance as well
as control over performance of assigned tasks
• Participants make ongoing contributions in
technology, products, and other key strategic
areas

Five Attributes of True Global

Strategic Partnerships
• Two or more companies develop a joint long-
term strategy
• Relationship is reciprocal
• Partners’ vision and efforts are global
• Relationship is organized along horizontal
lines (not vertical)
• When competing in markets not covered by
alliance, participants retain national and
ideological identities

28
 6/22/2020

Success Factors of Alliances

• Mission: Successful GSPs create win-win
situations, where participants pursue objectives
on the basis of mutual need or advantage.
• Strategy: A company may establish separate
GSPs with different partners; strategy must be
thought out up front to avoid conflicts.
• Governance: Discussion and consensus must
be the norms. Partners must be viewed as
equals.

Success Factors (Con’t)

• Culture: Personal chemistry is important, as is

the successful development of a shared set of
values.
• Organization: Innovative structures and
designs may be needed to offset the complexity
of multi-country management.
• Management: Potentially divisive issues must
be identified in advance and clear, unitary lines
of authority established that will result in
commitment by all partners.

Alliances with Asian Competitors

• Western companies must learn from Asian
firms’ excellence in manufacturing, overcome
NIH syndrome, become students, not teachers
• Four common problem areas
–Each partner had a different dream
–Each must contribute to the alliance and each
must depend on the other to a degree that justifies
the alliance
–Differences in management philosophy,
expectations, and approaches
–No corporate memory

29
 6/22/2020

Cooperative Alliance in Japan:

Keiretsu
• Inter-business alliance or enterprise groups in
which business families join together to fight
for market share
• Often cemented by bank ownership of large
blocks of stock and by cross-ownership of
stock between a company and its buyers and
non-financial suppliers
• Keiretsu executives can legally sit on each
other’s boards, share information, and
coordinate prices

Horizontal Keiretsu

• Big Six: Mitsui, Mitsubishi, Sumitomo, Fuyo, Sanwa,

DKB Groups
• Horizontal keiretsu: intragroup relationships involve
shared stock holdings and trading relations
• Large, powerful with revenues in hundreds of billions
• Can block foreign suppliers causing higher prices
• Promotes corporate stability, risk sharing, long-term
employment

Vertical Keiretsu

• Hierarchical alliances between manufacturers and

retailers
• Matshusita sells its products through its chain of
National stores; 50-80% of products are Matshusita
brands Panasonic, Technics, and Quasar
• Manufacturing keretsui: vertical hierarchical
alliances between automakers suppliers, and
component manufacturers

30
 6/22/2020

Cooperative Strategies in South

Korea: Chaebol

• Composed of dozens of companies, centered

around a bank or holding company, and
dominated by a founding family
–Samsung
–LG
–Hyundai
–Daewoo

21st Century Cooperative Strategies:

Targeting the Digital Future
• Alliances between companies in several
industries that are undergoing transformation
and convergence
• Computers
• Communications
• Consumer electronics
• Entertainment

Beyond Strategic Alliances

• Semantech: Consortium of 14 tech companies

tasked with saving the U.S. chip-making industry
• Relationship enterprise: groupings of firms from
different industries and countries with common
goals and act as one entity
• Next stage of evolution of the strategic alliance
• Super-alliance
• Virtual corporation

31
 6/22/2020

Market Expansion
Strategies

• Companies must decide to expand by:

– Seeking new markets in existing countries
– Seeking new country markets for already identified
and served market segments

32