This document discusses target market selection and strategies. It provides information on:
- Evaluating the attractiveness of market segments based on factors like size, growth rate, and competition. Larger segments are not always most profitable.
- Assessing the suitability of segments for a firm based on fit with objectives, resources, and capabilities. Better fit and more attractive segments provide more profit potential.
- Common target market strategies like single-segment, selective specialization, product specialization, and market specialization. Firms can expand to new segments over time.
- The process of selecting foreign target markets involves screening markets based on demand, resources, environment, size, and risks vs. opportunities. Markets are evaluated
2. Target marketing tailors a marketing mix for oneTarget marketing tailors a marketing mix for one
or more segments identified byor more segments identified by
market segmentationmarket segmentation. Target marketing contrasts. Target marketing contrasts
with mass marketing, which offers a singlewith mass marketing, which offers a single
product to the entire market.product to the entire market.
Two important factors to consider whenTwo important factors to consider when
selecting a target market segment are theselecting a target market segment are the
attractiveness of the segment and the fit betweenattractiveness of the segment and the fit between
the segment and the firm's objectives, resources,the segment and the firm's objectives, resources,
and capabilities.and capabilities.
4. The following are some examples of aspects thatThe following are some examples of aspects that
should be considered when evaluating theshould be considered when evaluating the
attractiveness of a market segment:attractiveness of a market segment:
Size of the segment (number of customersSize of the segment (number of customers
and/or number of units)and/or number of units)
Growth rate of the segmentGrowth rate of the segment
Competition in the segmentCompetition in the segment
5. Brand loyalty of existing customers in theBrand loyalty of existing customers in the
segmentsegment
Attainable market share given promotionalAttainable market share given promotional
budget and competitors' expendituresbudget and competitors' expenditures
Required market share to break evenRequired market share to break even
Sales potential for the firm in the segmentSales potential for the firm in the segment
Expected profit margins in the segmentExpected profit margins in the segment
6. Market research and analysis is instrumental inMarket research and analysis is instrumental in
obtaining this information. For example, buyerobtaining this information. For example, buyer
intentions, sales force estimates, test marketing,intentions, sales force estimates, test marketing,
and statistical demand analysis are useful forand statistical demand analysis are useful for
determining sales potential. The impact ofdetermining sales potential. The impact of
applicable micro-environmental and macro-applicable micro-environmental and macro-
environmental variables on the market segmentenvironmental variables on the market segment
should be considered.should be considered.
7. Note that larger segments are not necessarily theNote that larger segments are not necessarily the
most profitable to target since they likely willmost profitable to target since they likely will
have more competition. It may be morehave more competition. It may be more
profitable to serve one or more smallerprofitable to serve one or more smaller
segments that have little competition. On thesegments that have little competition. On the
other hand, if the firm can develop aother hand, if the firm can develop a
competitive advantage, for example, via patentcompetitive advantage, for example, via patent
protection, it may find it profitable to pursue aprotection, it may find it profitable to pursue a
larger market segment.larger market segment.
8. Suitability of Market Segments toSuitability of Market Segments to
the Firmthe Firm
Market segments also should be evaluatedMarket segments also should be evaluated
according to how they fit the firm's objectives,according to how they fit the firm's objectives,
resources, and capabilities. Some aspects of fitresources, and capabilities. Some aspects of fit
include:include:
Whether the firm can offer superior value to theWhether the firm can offer superior value to the
customers in the segmentcustomers in the segment
The impact of serving the segment on the firm'sThe impact of serving the segment on the firm's
imageimage
9. Access to distribution channels required to serveAccess to distribution channels required to serve
the segmentthe segment
The firm's resources vs. capital investmentThe firm's resources vs. capital investment
required to serve the segmentrequired to serve the segment
The better the firm's fit to a market segment,The better the firm's fit to a market segment,
and the more attractive the market segment, theand the more attractive the market segment, the
greater the profit potential to the firm.greater the profit potential to the firm.
11. Single-segmentSingle-segment strategy - also known as astrategy - also known as a
concentrated strategy. One market segment (not theconcentrated strategy. One market segment (not the
entire market) is served with one marketing mix. Aentire market) is served with one marketing mix. A
single-segment approach often is the strategy ofsingle-segment approach often is the strategy of
choice for smaller companies with limited resources.choice for smaller companies with limited resources.
Selective specializationSelective specialization- this is a multiple-segment- this is a multiple-segment
strategy, also known as a differentiated strategy.strategy, also known as a differentiated strategy.
Different marketing mixes are offered to differentDifferent marketing mixes are offered to different
segments. The product itself may or may not besegments. The product itself may or may not be
different - in many cases only the promotionaldifferent - in many cases only the promotional
message or distribution channels vary.message or distribution channels vary.
12. Product specializationProduct specialization- the firm specializes in a- the firm specializes in a
particular product and tailors it to different marketparticular product and tailors it to different market
segments.segments.
Market specializationMarket specialization- the firm specializes in serving- the firm specializes in serving
a particular market segment and offers that segmenta particular market segment and offers that segment
an array of different products.an array of different products.
Full market coverageFull market coverage - the firm attempts to serve- the firm attempts to serve
the entire market. This coverage can be achieved bythe entire market. This coverage can be achieved by
means of either a mass market strategy in which ameans of either a mass market strategy in which a
single undifferentiated marketing mix is offered to thesingle undifferentiated marketing mix is offered to the
entire market, or by a differentiated strategy in which aentire market, or by a differentiated strategy in which a
separate marketing mix is offered to each segmentseparate marketing mix is offered to each segment
13. The following diagrams showThe following diagrams show
examples of the five marketexamples of the five market
selection patterns given threeselection patterns given three
market segments Smarket segments S11, S, S22, and S, and S33,,
and three products Pand three products P11, P, P22, and P, and P33..
14.
15. A firm that is seeking to enter a market andA firm that is seeking to enter a market and
grow should first target the most attractivegrow should first target the most attractive
segment that matches its capabilities. Once itsegment that matches its capabilities. Once it
gains a foothold, it can expand by pursuing agains a foothold, it can expand by pursuing a
product specialization strategy, tailoring theproduct specialization strategy, tailoring the
product for different segments, or by pursuing aproduct for different segments, or by pursuing a
market specialization strategy and offering newmarket specialization strategy and offering new
products to its existing market segment.products to its existing market segment.
16. Another strategy whose use is increasing isAnother strategy whose use is increasing is
individual marketingindividual marketing, in which the marketing, in which the marketing
mix is tailored on an individual consumer basis.mix is tailored on an individual consumer basis.
While in the past impractical, individualWhile in the past impractical, individual
marketing is becoming more viable thanks tomarketing is becoming more viable thanks to
advances in technology.advances in technology.
19. Screening potential marketsScreening potential markets
Step 1: Identify Basic Appeal
Step 2: Access national business environment
Step 3: Measure market size
Step 4: Select the market
20. DemandDemand
Determine basic demandDetermine basic demand
Whether there is a basic demand for companyWhether there is a basic demand for company’’ss
productproduct
Religion constraintReligion constraint –– E.g. No pork in Islamic countriesE.g. No pork in Islamic countries
Climatic conditionClimatic condition –– E.g. No hot-air conditioner inE.g. No hot-air conditioner in
tropical countriestropical countries
Step 1: Identify Basic Appeal
22. Cultural & local forcesCultural & local forces
Cultural forcesCultural forces
Language, attitude toward business, religious beliefLanguage, attitude toward business, religious belief
and customand custom
Product adaptationProduct adaptation
Some products can be sold worldwideSome products can be sold worldwide
Some products need local customizationSome products need local customization
E.g. KFC, books and magazineE.g. KFC, books and magazine
Step 2: Access national business environment
23. Political & legal forcesPolitical & legal forces
Political and legal forcesPolitical and legal forces
Political stabilityPolitical stability
Government regulationGovernment regulation
GovernmentGovernment’’s attitude toward trade and investments attitude toward trade and investment
Types of restriction on import and exportTypes of restriction on import and export
Investment barriersInvestment barriers
Business ownershipBusiness ownership
E.g. 51% of local ownershipE.g. 51% of local ownership
Step 2: Access national business environment
24. Government regulationGovernment regulation
Restrict remitting profit out of countryRestrict remitting profit out of country
Strict environmental regulationStrict environmental regulation –– Strict pollution standardStrict pollution standard
which may increase cost of productionwhich may increase cost of production
Require that companies divulge ceratin trade informationRequire that companies divulge ceratin trade information
–– E.g. Coca-cola left India because it refused to discloseE.g. Coca-cola left India because it refused to disclose
its secret Coke formulaits secret Coke formula
Step 2: Access national business environment
Political & legal forcesPolitical & legal forces
25. Economic forcesEconomic forces
Economic forcesEconomic forces
Fiscal and monetary policiesFiscal and monetary policies
Interest rate - Can cause high inflationInterest rate - Can cause high inflation
Currency devaluationCurrency devaluation –– Can affect exportCan affect export
Other forcesOther forces
TransportationTransportation
InfrastructureInfrastructure
Step 2: Access national business environment
26. Data & InformationData & Information
InformationInformation
Industrial market dataIndustrial market data
Consumer dataConsumer data
Emerging marketEmerging market
Data may not be readily availableData may not be readily available
Step 3: Measure market size
27. Market variablesMarket variables
Market sizeMarket size
Market growth rateMarket growth rate
Consumption capacityConsumption capacity
E.g. % of middle class populationE.g. % of middle class population
Commercial infrastructureCommercial infrastructure
E.g. Number of TVs, phones, PCs, cars etcE.g. Number of TVs, phones, PCs, cars etc
Step 3: Measure market size
28. Market variablesMarket variables
Economic freedomEconomic freedom
E.g GovernmentE.g Government’’s trade policiess trade policies
Market receptivityMarket receptivity
Volume of international trade as a % of GDPVolume of international trade as a % of GDP
Step 3: Measure market size
29. Field tripField trip
Competitor analysisCompetitor analysis
Step 4: Select the market
31. OpportunitiesOpportunities
CHOOSING AND WEIGHTING VARIABLESCHOOSING AND WEIGHTING VARIABLES
Variables must be weighed against each other to effectively evaluate the potentialVariables must be weighed against each other to effectively evaluate the potential
success of a particular venture and to compare various ventures.success of a particular venture and to compare various ventures.
OpportunitiesOpportunities
Market SizeMarket Size
Market size is determined by sales potential.Market size is determined by sales potential.
Ease and Compatibility of OperationsEase and Compatibility of Operations
Market located nearby, share the same language and offer similar market conditions.Market located nearby, share the same language and offer similar market conditions.
Costs and Resource AvailabilityCosts and Resource Availability
The cost of labor, the cost of inputs, tax rates, and available capital, utilities, real estateThe cost of labor, the cost of inputs, tax rates, and available capital, utilities, real estate
and transportation.and transportation.
Red TapeRed Tape
Difficulty of getting permission to operate the business.Difficulty of getting permission to operate the business.
Evaluation
32. OpportunitiesOpportunities
Measure Weighting Rating (1-10) Attractiveness
France India Korea France India Korea
Market size
Best 10 – worst 1
50% 8 9 6 4.0 4.5 3.0
Ease and
compatibility of
operation
Best 10 – worst 1
30% 7 9 2 2.1 2.7 0.6
Costs and resource
availability
Best 10 – worst 1
10% 2 10 5 0.2 1.0 0.5
Red tape
Lowest 10 - highest 1
10% 8 2 5 0.8 0.2 0.5
Total 100% 7.1 8.4 4.6
Evaluation
33. RisksRisks
Economic and political risk ratingsEconomic and political risk ratings
Risk and UncertaintyRisk and Uncertainty
Firms usually experience higher risk and uncertainty when they operateFirms usually experience higher risk and uncertainty when they operate
abroad.abroad.
Competitive RiskCompetitive Risk
A firmA firm’’s innovative advantage may be short-lived.s innovative advantage may be short-lived.
Monetary RiskMonetary Risk
A firmA firm’’s expansion occurs through foreign-direct investment, foreign-s expansion occurs through foreign-direct investment, foreign-
exchange rates and access to investment capital and earnings.exchange rates and access to investment capital and earnings.
Political RiskPolitical Risk
Look for economic and social conditions that could lead to politicalLook for economic and social conditions that could lead to political
instability.instability.
Evaluation
