Market Selection : Definition

and Strategies
Export Marketing
Spring 2024
 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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Introduction
• An effective international and export marketing strategy, the process of
market selection and direction has at least three major implications for
export managers.
• First, the marketer should not focus only on individual products and
their foreign markets; there is the need to consider the role of each
product and/or market within a company portfolio.
• Second, in addition to the traditional focus on the detailed issues of
segmentation and differentiation, the process of market selection needs
to focus also on the broader strategic measures representing the overall
attractiveness of a market and the overall competitive position of the
company in that market.
Introduction
• Third, export marketers have a key role in the strategic planning
process, since many planning tools depend heavily on marketing
concepts such as market share, market definition, segmentation,
positioning, customer relationship management (CRM), and the
product life cycle
• An important step in formulating an international marketing strategy
is export market selection: ‘The process of opportunity evaluation
leading to the selection of foreign markets in which to compete.’
Introduction
• A second decision in marketing strategy, closely related to market
selection, is export market direction. Should the company seek to
build, hold, divest or abandon its position in a given foreign market?
• This decision is almost inextricable from that of market selection
because the factors that determine a country’s degree of
attractiveness for selection are highly relevant to the decision on the
company’s direction in that market
Whitelock and Jobber, 2004
• A study of external factors in the decision of United Kingdom
industrial companies that were international in scope to enter a new
foreign market looked at the impact of five broad external factors that
potentially could affect that decision (Whitelock and Jobber, 2004).
The factors were: (1) the country environment, (2) psychic (or
geocultural) distance, (3) market-based factors, (4) competition, and
(5) information and market knowledge.
Whitelock and Jobber, 2004
• The findings revealed five factors that were important in
discriminating between entry and non-entry (in order of importance):
• 1. Developed economy
• 2. Good market information
• 3. Unsympathetic government attitude
• 4. Geocultural/political similarity
• 5. Attractive market
 International Marketing Strategy
Formulation

Export Marketing Selection

Export Marketing Direction

Export market selection
• An important step in formulating an international marketing strategy
is export market selection: ‘The process of opportunity evaluation
leading to the selection of foreign markets in which to compete.’
• This process requires an appraisal of the fit between a prospective
market’s requirements and a company’s ability to meet those
requirements (or conversely, the company’s ability to alter the
requirements of the market)
Export market direction
• A second decision in marketing strategy, closely related to market
selection, is export market direction. Should the company seek to
build, hold, divest or abandon its position in a given foreign market?
• This decision is almost inextricable from that of market selection
because the factors that determine a country’s degree of
attractiveness for selection are highly relevant to the decision on the
company’s direction in that market
 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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External and Internal Analysis
 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
• Accessibility
• Profitability
• Actionability
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Measurability
• Measurability is the degree to which segments can be identified and
to which the size and purchasing power of the segments can be
measured.
• In export marketing management, important qualitative indicators
such as cultural characteristics are intuitively appealing bases for
country segmentation, but difficult to use due to conceptual and
measurement problems.
Accessibility
• Accessibility is the degree to which the resulting segments can be
effectively reached and served.

• In export marketing, communication problems pose distinct

difficulties in reaching the end user (often also the foreign distributor)
because of inadequate language skills, nationalistic attitudes, the
difficulties for an exporter in understanding foreign media systems
(structure and format), and so on
Profitability
• Profitability is the degree to which the resulting segments are large
and/or profitable enough to be worth considering for separate
marketing attention.
• In export marketing there can be excessively high costs involved in
segmenting markets because of necessary adaptation to local markets’
specific needs and demands. Market conditional factors such as the
imposition of tariffs or taxes on certain goods create a basis for product
modifications.
• Product conditional factors, such as specific legal restrictions (patent
agreements, quality standards, and controls) may also influence
product specification and costs.
Actionability
• Actionability is the degree to which effective programs can be
formulated for attracting and serving the segments.
• Segments that are measurable, accessible, and potentially profitable
are ‘worthless’ as segments unless marketing programs can be
developed and implemented for each of them.
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.
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• Corrupt Consumers: Machiavellianistic, opportunistic, not ethical
 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

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Market Selection Process: Reactive vs
Proactive Approaches
• Decision influenced by :

• Psychic Distance: feeling of uncertainty about foreign markets, and of the perceived
difficulty of finding information about them

• Cultural Distance: the perceived differences between the manager’s own and the
destination culture

• Geographic: Distance:proximity
Market Selection Procedures: Expansive vs
Contractible Methods
• This approach takes as its starting point the home market or the existing
market core. Market selection over time is based upon similarities
between the national market structures of a political, social, economic, or
cultural nature, so that the export marketer expands from one market to
the next, introducing a minimum of further adaptation to the product as
well as other export marketing parameters.
• Among the national market characteristics either environmental proximity
or trade policy proximity can determine the market selection process.
• 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
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 criteria for examining countries are identified. The
result is a list of feasible countries.

(b) second stage determines which country characteristics are to be used in

evaluating marketing opportunities and how each should be weighted. Four
types of variable are examined: operating risks, market potential, costs, and
potential local and foreign competition.

(c) Countries are evaluated on the basis of the criteria selected in the second
stage, and they are rank ordered on the basis of scores derived.
Export Market Selection: A Market Screening Procedure

Geographic Segmentation
General Market Indicators
Product-specific market Indicators
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
Step 1:Geographic segmentation
• The first screening stage can be further divided into an information
stage and a decision stage, depending upon the proximity of the
market and the degree of accumulated experiences the exporter has
in collecting data on a set of general market indicators. In addition to
geographic indicators as such, demographic, economic, political, and
infrastructure market characteristics are also of interest.
• Prohibitive factors: a set of prohibitive product characteristics and a
set of prohibitive market factors, that is, when the market itself for
various reasons prevents or makes further investigations meaningless
because of prohibitions, bans, boycotts, embargoes, import quotas,
and prohibitive Customs duties and nontariff barriers
Step 2: Customer segmentation
• Customer segmentation indicators the demand and supply patterns are
crucial, both being measured by quantitative as well as qualitative data
• Demand side the characteristics differ considerably between consumer
and industrial markets, although for both types of markets
psychographic indicators such lifestyle, attitudes, buying patterns, and
decision-making must be included.
• Supply side competitors have to be characterized according to
nationalities, capacities, activities, and so on. In addition, distribution
channels have to be identified in terms of such characteristics as
availability, capacities, and activities performed
Market Selection Strategy
• The major strategic alternatives of market expansion are market
concentration and market spreading.
• Market concentration strategy has been described as a slow and
gradual rate of growth in the number of markets served by a
company.
• Market spreading is characterized by a fast rate of growth in the
number of markets served at the early stages of expansion.
Market Selection Strategy
• A market concentration strategy is characterized by channeling
available resources into a small number of markets, devoting relatively
high levels of marketing effort and resources to each market in an
attempt to win a significant share of these markets, for example, to
provide export growth by market penetration. After building strong
positions in existing markets the company slowly expands the scope of
its operations to other countries and/or customer segments.
• A market spreading strategy is characterized by allocating marketing
resources over a large number of markets in an attempt to reduce risks
of concentrating resources and to exploit the economics of flexibility,
for example, to provide export growth by market development
Market Selection Strategy
 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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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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