3 -1 Chapter Eleven Global Segmentation and Positioning

3 -1 Chapter Eleven Global Segmentation and Positioning MKT 568 Global Marketing Management Dr. Fred Miller

Sample Essay Question Schmidt’s Brewery has wishes to enter international markets with several of its brands to increase sales and profit performance. The firm has asked your for recommendations for segmentation and positioning strategies to implement. Write a short summary for Schmidt in which you: 1) explain macrosegmentation using a specific clustering approach as an example, 2) explain microsegmentation using specific segmenting dimensions as an example and 3) explain product positioning and describe how product space models in the countries they enter can help them compete against local brands.

Market Assessment Tools Global Marketer’s Mindset Selling Orientation Standardization Coordination Centralization Macrosegmentation Objective – identify groups of similar countries Country clustering approaches Selecting clusters using competitive & profitability analysis

A Two-Dimensional Country Clustering Map 4 -11 0 • SWE • DEN NOR • FIN • • UKI • • AUS NEZ • SWI • • NET SOT • • ISR • AUT GER PUE • • • BEL • JAP FRA • CHI • VEN • MAC • SPA PHI • • BRA TUR • IND ITA • • • PER • • • THI PAK ARG MEX COL . 9. 8 , 7. 6. 5. 4. 3. 2. 1 0 -. 1 -. 2 -. 1 0 Protestant Exhibit 4. 4 . 1 . 2 . 3 Catholic . 4. 5. 6 Factor VI . 7 . 8 . 9 1. 0

A Market-Oriented Clustering of World Markets Exhibit 4. 5 Cont. Source: Cavusgil, 1990, pp. 206 -7. Reprinted by permission of Butterworth-Heinemann, Ltd. . , and the author.

World Bank Comparative Data

Macrosegmentation Exercise Why would a firm wish to identify clusters of similar country markets? How might a brewer use each of the following criteria to create country clusters? Climate Language Socioeconomic conditions Religion Geographic proximity List a cluster of countries for each criterion. Combine two criteria and list a cluster of relevant countries with similar characteristics for the two criteria

Global Trends Cup What are the relationships, do you think, among these three socioeconomic measures? How do you think each has changed around the world between 1980 and 2005? Women as a percentage of the workforce Per capita income Number of children per woman

Global Trends Cup Enter a country name in each cell to place your bet. The countries in the race are: China Mexico Japan Germany Measure Women as % of Labor Force Per Capita Income Children per woman Highest value: 2004 Greatest change: 1980 -2004

Global Trends Cup And the winners are! Measure Highest value: 2004 Greatest change: 1980 -2004 % Women in Labor Force 1 -Germany, 2 -China 1 -Mexico, 2 -Germany Per Capita Income 1 -Japan, 2 -Germany 1 -China, 2 -Japan Children per woman 1 -Mexico, 2 -China

Market Analysis Tools Microsegmentation Segmentation requirements Identifiable, measurable, reachable, able/willing to buy Segmenting bases economic, demographic, culture – emerging, new growth culture, benefits, lifestyle - mature Global Product Positioning Product space and components New brand – space intact, extended, new features/perceptions “Mispositioning” of global brands – price, image, Co. O effects Diversification vs Focus strategies

Demographic vs Lifestyle Segmentation

Microsegmentation Exercise Why would a firm wish to use segmentation strategies in individual national markets? Select one of the following segmentation bases and explain how it might be used in emerging and new growth country markets. Economic Demographic Culture Select one of the following segmentation bases and explain how it might be used in mature countries. Culture Benefits Lifestyle

Product Space Positioning Exercise Why would a firm wish to use positioning strategies in individual national markets? Which evaluative criteria should be used in a two dimensional product space? How are product perceptions represented in a two dimensional product space? How can positioning analysis using a product space model help a firm compete more successfully in national markets?

Building a Product Space The Chinese Beer Marketing Research Results Factor Importance Heineken Imported 7 7 Price 3 3 Taste 5 5 Popularity 4 3 San Miguel Tsingtao 7 2 6 7 2 7 4 7

Building a Product Space Matrix Tsingtao 7 Dry Taste Heineken 1 7 4 4 Domestic Import San Miguel Malty 1 Imported

Market Positioning Map of Selected Automobile Brands (1984) Luxury Conservative • Lincoln BMW • • Porsche 4 Cadillac • 5 Mercedes • • Chrysler 2 • Pontiac • Buick Oldsmobile • • Chevrolet Ford • 1 Dodge • Plymouth • • Datsun • Toyota Altima • Sporty 3 • VW Affordable Source: John Koten, “Car Maker’s Use ‘Image’ Map as Tools to Position Products, ” The Wall Street Journal, March 22, 1984, pp. 31. Reprinted by permission of The Wall Street Journal, © 1984 Dow Jones & Company, Inc. All rights reserved worldwide

Market Analysis Tools Microsegmentation Segmentation requirements Identifiable, measurable, reachable, able/willing to buy Segmenting bases economic, demographic, culture – emerging, new growth culture, benefits, lifestyle - mature Global Product Positioning Product space and components New brand – space intact, extended, new features/perceptions “Mispositioning” of global brands – price, image, Co. O effects Diversification vs Focus strategies

Market Factors Affecting Choice of Expansion Path Factors Growth rate Demand stability Competitive lag Spillover Need to adapt product Need to adapt promo Marginal sales Need for control Entry barriers Exhibit 5. 8 Sprinkler/ Diversify if Low Short High Low Diminishing Low Waterfall/ Focus if High Long Low High Increasing High

3 -1 Chapter Eleven Global Segmentation and Positioning MKT 568 Global Marketing Management Dr. Fred Miller

Export Pricing Problem 1. € 0, 36 per liter, using the formula Direct Unit Cost = Unit Labor Cost +Unit Ingredient Cost € 0, 12 + € 0, 24 = € 0, 36 2. €, 38 per unit, using the formula: Unit Cost = Unit Variable Cost + Unit Fixed Cost where Unit Fixed Cost = Total Fixed Costs / Volume in Units € 0, 38 = € 0, 17 + € 0, 21 (€ 3. 800. 000/22. 000 units) 3. € 0, 64, calculated using the formula: Price = Cost / (1 – Margin) or € 0, 64 = € 0, 38 / (1 - , 4) 4. € 0, 66 FAS LA (€ 0, 64 + € 0, 02 domestic shipping)

Export Pricing Problem 5. € 0, 70 CIF Bangkok, (€ 0, 66 + € 0, 03 international shipping and € 0, 01 insurance) 6. € 0, 78 DDP, CIF Price * (1 + Tariff Rate) so € 0, 70 * 1, 12 7. € 0, 98, calculated using the formula: Price = Cost / (1 – Margin) or € 0, 98 = € 0, 78 / (1 - 0, 2) 8. € 0, 10, using the formula: (Retail Price * VAT Rate) so (€ 0, 98 * 0, 1)

Export Pricing Problem 9. € 1, 08, using the formula: (Retail Price + VAT) so (€ 0, 98 + € 0, 10) 10. 9, 20 Bahts, (Final Price * Exchange Rate) or € 1, 08 * 40 11. € 130. 000, using the formula: ((Price – Full Cost) * Order Volume) or ((€ 0, 64 - € 0, 38) * 500. 000) 12. € 100. 000, using the formula: ((Retail Price – Retailer’s Cost) * Order Volume) or ((€ 0, 98 -€ 0, 78) * 500. 000)

Export Pricing Problem Identify and explain two approaches the firm might use to avoid the price escalation experienced in this situation. 1. 2. 3. 4. 5. Reduce cost through lower quality materials Reduce price resulting in lower profit margins Change customs classification to lower tariffs Shorten distribution channels to reduce intermediary markups Produce in target country, eliminating tariffs, international shipping and insurance costs