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

1. Target MarketTarget Market
SelectionSelection

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.

3. Attractiveness of aAttractiveness of a
Market SegmentMarket Segment

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.

10. Target MarketTarget Market
StrategiesStrategies

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..

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.

17. Market selectionMarket selection
(Country selection)(Country selection)

18. Foreign market selectionForeign market selection

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

21. Resource availabilityResource availability
 Determine resource availabilityDetermine resource availability
 Raw materialsRaw materials
 LaborLabor
 CapitalCapital
 LandLand
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

30. Opportunities and risksOpportunities and risks
Evaluation

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

34. RisksRisks
MeasureMeasure WeightingWeighting Rating (1-10)Rating (1-10) AttractivenessAttractiveness
FranceFrance IndiaIndia KoreaKorea FranceFrance IndiaIndia KoreaKorea
Risk & uncertaintyRisk & uncertainty
Lowest 10 - highest 1Lowest 10 - highest 1
50%50% 99 88 55 4.54.5 4.04.0 2.52.5
Competitive riskCompetitive risk
Lowest 10 - highest 1Lowest 10 - highest 1
20%20% 33 99 55 0.60.6 1.81.8 1.01.0
Monetary riskMonetary risk
Lowest 10 - highest 1Lowest 10 - highest 1
10%10% 77 55 44 0.70.7 0.50.5 0.40.4
Political riskPolitical risk
Lowest 10 - highest 1Lowest 10 - highest 1
10%10% 88 99 55 0.80.8 0.90.9 0.50.5
TotalTotal 100%100% 6.66.6 7.27.2 4.44.4
Evaluation

35. Opportunity-risk matrixOpportunity-risk matrix
3.3
6.7
Low Med High
Opportunities
Low
Med
High
Risks
India
France
S Korea
6.73.3
Evaluation