An Empirical Investigation of International Consumer Market Segmentation Decisions
by
Stephen H Craft
Bachelor of Arts
Birmingham-Southern College, 1988 Master of Business Administration The George Washington University, 1994
A Dissertation
Submitted to the Faculty of
The School of Business and Public Management of The George Washington University
in Partial Fulfillment of the Requirements for the Degree of
Doctor of Philosophy
Directed by Salah S Hassan, Ph.D Associate Professor of Global Marketing
The George Washington University April 30, 2001
Washington, DC
Trang 2Copyright 2001 by Craft, Stephen Harold
All rights reserved
®
UMI
UMI Microform 3004029
Copyright 2001 by Bell & Howell Information and Learning Company
All rights reserved This microform edition is protected against unauthorized copying under Title 17, United States Code
Bell & Howell Information and Learning Company
300 North Zeeb Road P.O Box 1346
Trang 3PHÊ n
UHH€IU WASHINGTON ty
PH.D PROGRAM
REPORT ON FINAL DOCTORAL DISSERTATION EXAMINATION
The undersigned Committee has examined Mr Stephen H Craft, a candidate for the Doctor of Philosophy degree, on his dissertation entitled: "An Empirical
Investigation of International Consumer Market Segmentation Decisions." The
Committee has found the candidate’s work to be acceptable and recommends to the Board of Trustees that he be granted the Doctor of Philosophy degree on
August 31, 2001
Professor of
6S by A-—— Marketing
Robert F Dyer
Bre a fe ay ⁄ eat Professor 227245 Kho Global Marketing
Marilyn L Liebrenz-~Himes
a Coe Assistant Professor of
Strategic Management and
=- J Griffin Y Public Policy Assistant Professor of Marketing Advocate Salah S Hassan 7
=ZZZ / Member of the Committee on
Doctoral Studies, presiding
Jiawen Yang J
Trang 4PH.D PROGRAM
AN EMPIRICAL INVESTIGATION OF INTERNATIONAL CONSUMER MARKET SEGMENTATION DECISIONS
by
Stephen H Craft
Bachelor of Arts
Birmingham-Southern College, 1988
Master of Business Administration
George Washington University, 1994
A Dissertation Submitted to the School of Business
and Public Management of the George Washington University
in Partial Fulfillment of the Requirements for the
Trang 5Segmentation is the process of dividing market participants into groups that share attitudes or behavioral propensities toward a product or service in order to target that group with customized marketing campaigns Identifying and targeting appropriate
customer segments is a critical step for a firm just entering international markets as well as for established international marketers
This dissertation presents a three-step model that has empirically proven to be an accurate normative representation of the international consumer marketing segmentation decision-making process According to the dissertation model, the three steps comprising a firm’s international segmentation strategy decision-making are: 1) determining which country or region to enter by evaluating country attractiveness; 2) determining which consumer segments to serve within the target country or region by evaluating within- country segment bases; and, 3) determining whether the segments will be managed on a local, regional, or global bases The data does support the model as an accurate normative depiction of the best practices of firms involved in international segmentation This model was developed for the dissertation and is unique to the current research
Trang 6a study participant as part of the data gathering process
Two of the model decision elements, evaluating within-country segment bases and
scale of segment management, have been shown to positively contribute to segmentation
strategy performance based upon the dissertation data In addition, specific within- country segment bases market potential, culture, and socio-economic level have all been demonstrated to be significantly related to segmentation strategy performance Manage each country as a separate market as a scale of segment management has proven to be significantly related to segmentation strategy performance These findings represent a new and unique contribution to the understanding of international segmentation as well as
Trang 7Listing of Figures 2.2.2.0 cc ccc cece ee eee cee ec cee cece eee eeeeene Listing ý V.' XÃ ddỎỎỎỎỐỎỔỔẦỔỐẢÊỀẢŸẢẦỶẢỶẢỶẢ Acknowledgemerts . o2 cẰSsà~ CHAPTER ¡: INTRODDUCTION Statement of£Purpose Research Questions Contributiron of Research
Relation to the Field/Theory
Study Design se Organization ofthe Dissertation
Chapter Summary
CHAPTER 2: LITERATURE REVIEW ¬—
International Segmentation: Decision Process International Segmentation: Country Attractiveness Factors - International Segmentation: Within-Country Market Segment Bases
Scope of Globalization/Scale of Segment Management
Internationalization of the Firm
Connecting the Segmentation Decision Process to Successfil Market Performance
Conceptual Model
Management Decision Making
Chapter Commentary and Summary
Trang 8CHAPTER 5: METHODOLOGY .- - -. .-
Design Sampling Frame . . -~~-<S+S<s Sample Size and Statistical Power
The Survey Instrument
Factor AnalÌySIS .- -.- {cẰ{sẰẶ Analysis and Results
Delimitations Lee Limitations | 2.2200 0 ccc cece cee ce eee eee ee cee cee cee eee eeeees CHAPTER 6: DISCUSSION AND IMPLICATIONS .-
Support Support Support Support for the Model
for Country Attractiveness Factors
for Within-Country Segment Bases
for Scale of Segment Management
Contributions of the Current Research
Extensions and Future Research Chapter )UmmnarV Dissertation Summary AUTHOR NOTE ồÕÕÕẼẼÕẼŸÃẼÃ APPENDICES 3.A Listing of Qualhtative Study Participants vn Í th th Ca MN Ww Om MOO w > ow Depth Interview Protocol Pretest Protocol Pretest Participants
Text of Expert Panel E-mail
Trang 9FIGURE 2.1 Two-Step International Segmentation Decision Model 15 FIGURE 2.2 Three-Step International Segmentation Decision Model 16 FIGURE 2.3 International Market Segmentation Decision Model (Dissertation) 18
EIGURE 2.4 Conceptual Measurement Model 40
Trang 10TABLE 2.1 TABLE 2.2 TABLE 2.3 TABLE 3.1 TABLE 3.2 TABLE 4.1 TABLE 4.2 TABLE 4.3 TABLE 4.4 TABLE 4.5 TABLE 5.1 TABLE 5.2 TABLE 5.3 TABLE 5.4 TABLE 5.5 TABLE 5.6 TABLE 5.7 TABLE 5.8 TABLE 5.9 TABLE 5.10 TABLE 5.11
Summary of Country Attractiveness Factors
Summary of Within-Country Segment Bases Summary of Scale of Segment Management
Summary of Respondents’ Utilization of Decision Steps Performance Dimensions Identified by Respondents Country Attractiveness Factors
Within-Country Segment Bases Scale of Segment Management
Performance Dimensions
Summary of Variables
Characteristics of Key Informants Summary of Convenience Sample
KMO and Bartlett’s Test for Country Attractiveness Factors KMO and Bartlett’s Test for Within-Country Segment Bases Country Attractiveness Rotated Factor Loadings
Reliability of Country Attractiveness Factors
Within-County Segment Bases Rotated Factor Loading Reliability of Within-Country Segment Bases Factors Regression Model for Equation 1
Regression Model for Equation 2
Trang 11As solitary as the research process seems at times, in retrospect the level of support with which I have been blessed is overwhelming The successful completion of this
research is truly a team accomplishment
First, I would like to thank my wife Carla for her tireless support of my research as well as every facet of our life together I simply would not be the man I am today without her I would also like to thank my daughters Arden and Marley for providing much needed time away from my research to enjoy being a Dad
I would like to thank my parents, James and Barbara Craft, for not giving up ona son who showed less than stellar promise in his early academic career I owe a big thanks
to my sisters Suzanne Craft and Mary Cooper, my brother-in-law Glenn Cooper, and my
niece Anna Cooper and nephew Trace Cooper for years of love and support
I own a considerable thanks to my dissertation committee I wish to thank Salah S Hassan of The George Washington University for being my friend, co-author, advisor and advocate for these six years in the doctoral program and for directing this dissertation My internal committee members are Robert F Dyer and Amy K Smith of The George
Washington University I owe Amy special thanks for her tireless hours of help and
coaching with the analytical portion of this research My outside review committee
members are Marilyn Liebrenz-Himes and Jennifer J Griffin of The George Washington University as well as Michael R Czinkota of Georgetown University
I owe a debt of gratitude to my many colleagues and friends in the doctoral
program at The George Washington University for helping to shape my thinking and hone my research through hours of formal and informal sharing of information and experiences In particular, I want to thank Melissa St James for her assistance in helping to gather the data upon which this research is based
Thanks to my many students at The George Washington University, The University of Maryland, College Park and at Towson University for allowing me to do what I love
Many thanks to my colleagues at Towson University for placing their bets on and hiring an ABD
Finally, thanks to the faculty and staff in the School of Business and Public
Management at The George Washington University for welcoming an ‘industry guy’ who decided he wanted to teach I could not have asked for a better or more nurturing
Trang 12defends itself against
the risk of being read.”
Trang 13Introduction
The forces of globalization have inspired many firms to look to international
markets for growth opportunities Emerging worldwide market opportunities hold the promise of impressive profits for firms that are able to successfully compete internationally According to the World Trade Organization (WTO), the value of merchandise exports in world commerce grew 6% over the 1990’s to $5,729 billion (WTO 2001) The actual value of market opportunities at stake has been estimated
to be even larger, approaching $21 trillion (Fraser and Oppenheim 1997) Froma
marketing perspective, the move toward international markets means that firms will be serving a greater diversity of customers than ever before
A firm wishing to take advantage of the opportunities available in the international market is immediately faced with a number of decisions What countries or regions represent appropriate markets to enter and penetrate? Who
within the country are the potential customers? How should the products be
customized to each market? For example, Coors Brewing International sought to introduce its Coors Light brand to the UK by bringing the brand into Scotland in
1999 Scotland is a traditional beer drinking region Coors was able to reposition
Trang 14designed for the Scottish drinker but with an American heritage (Marketing Week 1999) In contrast, Bass Brewers introduced Asahi, Japan’s number one beer, into the UK in 1999 specifically by not repositioning the product Bass Brewers are targeting an internationally savvy consumer segment who are open to world products A large part of the brand’s appeal is that the product has remained
unchanged from the Japanese product (Marketing 1999) Although Coors and Bass are taking different approaches to their international market expansions, they share an important focus upon positioning their brand relative to an international or global market segment “Firms focusing on a global market segment often can effectively
use the same capabilities and skills to target that segment throughout the world”
(Craig and Douglas 2000, 10)
Examination of the strategy for Coors and Bass demonstrates the
multifaceted nature of international segmentation In each case, the company had made a strategic customer segmentation decision to enter the UK having chosen among other foreign markets Once the decision to enter the UK had been made, Coors identified a specific consumer segment using demographic, psychographic and lifestyle variables Coors then adapted an existing product to target that segment Similar to Coors, Bass identified a specific consumer segment within the UK using psychographic and lifestyle variables However, Bass introduced an existing standardized product to target that segment In each case, a similar set of segmentation decision steps (i.e., country selection and consumer selection) were used to make the segmentation decision; however, the resulting strategies are quite
Trang 15The results for Coors have been modest growth with only a slight market penetration for the Coors product as of 2000 However, the sales of Asahi in Europe have grown from 161,800 cases in 1999 to an estimated 400,000 cases in 2001, representing an increase of 247% Bass has followed-up on the success of Asahi in Europe by launching Asahi Super Malt and Asahi Super Dry products in 2000 For both Coors and Bass, international segmentation is seen as an important
driver of market success, and there are clear performance implications for
segmentation decisions What makes one product launch successful and another
less so? What are the performance implications of customer target selections? What criteria are appropriate when selecting a target segment? These are among the questions addressed in this dissertation
International market segmentation is an increasingly important priority in both the academic and practitioner research agendas Market segmentation has long been a staple of domestic marketing strategy Segmentation is the process of
dividing market participants into groups that share attitudes or behavioral propensities toward a product or service in order to target that group with
customized marketing campaigns Targeting a receptive customer segment offers greater efficiency and is more cost effective than targeting an undifferentiated market (Hassan and Katsanis 1991, Kotler 1994) The literature on domestic customer segmentation in the US is well-developed
The increasing importance of international market segmentation is due in
Trang 16media are increasingly leaving firms with no choice but to identify and target global customer segments The priority of international market segmentation is clearly demonstrated by the Marketing Science Institute’s (MSD) ranking of marketing research priorities International market segmentation and cross-cultural marketing issues are consistently ranked among the top research priorities by MSI based upon the input of marketing and non-marketing executives (Marketing Science Institute Research Priorities 1996-1998 and 1998-2000)
Although segmentation research is no less essential to international
marketing strategy, international market segmentation strategy decision-making is
not a well researched topic Although some of the concepts from domestic segmentation might be applicable to the international arena, the introduction of country variables such as language and culture and the greater diversity of within- country segment bases separates international market segmentation as a clearly distinct area of inquiry Numerous research articles have appeared which advocate utilizing segmentation in international markets, yet few have attempted to
empirically examine the decision process involved in developing an international
market segmentation strategy or the success of international market segmentation strategies once implemented
The traditional international market segmentation approach has focused upon countries as markets based upon geopolitical and economic variables — country
attractiveness factors Alternatively, some current approaches emphasize the
Trang 17Parker 1994) Yet a third approach calls for the use of multi-step models that integrate country attractiveness factors with segment bases (Wind and Douglas 1972, Helsen, Jedidi and DeSarbo 1993, ter Hofstede, Steenkamp and Wedel 1999)
This multi-step approach is the subject of the proposed research
Much of the extant literature in international market segmentation is focused upon some particular segment/product combination leading to results that are difficult to generalize to other circumstances In addition, the international market segmentation literature has focused upon country attractiveness criteria (Buzzell 1968, Helsen, Jedidi and DeSarbo 1993, Nachum 1994) and segment bases (Crawford, Garland and Ganesh 1988, Hassan and Katsanis 1991, Dawar and Parker 1994) as drivers in defining segments Several authors have presented general conceptual models that propose specific segment/product relationships (Domzal and Unger 1987, Kale and Sudharshan 1987, Douglas and Craig 1989, Jain
1989) While researchers have been successful in identifying specific customer segments for a limited defined purpose, relatively little of the available empirical research offers any insight into international market segmentation strategy decisions, nor does it examine or evaluate the assertion in the academic and practitioner
literature that international market segmentation strategy will positively contribute to actual market success once implemented Douglas and Craig observe “strategy issues appear to be a sadly neglected area in international marketing” (1992, 311)
Although a firm will ultimately need to identify and target a particular
Trang 18of international market segmentation strategy because the international segmentation decision process is assumed to be universal (Wind and Douglas 1972, Kale and Sudharshan 1987) “One of the major problems confronting the international marketing manager faced with the breadth and diversity of international markets is how to identify potential target segments, and what information to collect for this purpose” (Wind and Douglas 1972, 24) Although the literature contains some analyses of possible customer segments, there is still no strategy formulation or performance guide to aid managers in the process of systematically identifying international market segments Armed with an understanding of the ‘best practices’ of effective international market segmentation decision-making practice, the
manager will be better able to evaluate the attractiveness of potential target
Trang 19Statement of Purpose
The purpose of this study is to 1) test a model of international consumer
market segmentation strategy that proposes a three-step decision-making process
including evaluation of country attractiveness factors, within-country segment bases, and the scale of segment management; and, 2) relate the model, each model element,
and the selection criteria to the performance of the firm’s market segmentation
strategy in international markets Research Questions
In order to test the international market segmentation decision process, the
current research addressed the following research questions:
How does the degree of utilization of country attractiveness factors in a firm’s
international market segmentation decision process relate to the performance of the firm’s international consumer segmentation strategy?
Which country attractiveness factors offer the greatest contribution to the performance of the firm’s international consumer segmentation strategy?
How does the degree of utilization of within-country segment bases in a firm’s
international market segmentation decision process relate to the performance of the firm’s international consumer segmentation strategy?
Which within-country segment bases offer the greatest contribution to the performance of the firm’s international consumer segmentation strategy? How does the degree of utilization of decisions regarding scale of segment
management in a firm’s international market segmentation decision process relate to the performance of the firm’s international consumer segmentation strategy?
Which scale of segment management option offers the greatest contribution to the
Trang 20Contribution of Present Research Study
The contributions of the current research to the literature and the field are twofold First, this dissertation presents an integrated model of the international
market segmentation strategy decision process based upon the literature Second,
this dissertation seeks to determine what role each model element and each decision factor plays in the market success of real firms’ international consumer market
segmentation strategy This research is unique in its examination of
outcome/performance measures in relation to international market segmentation Strategy decisions In addition, this research will offer insight into international market segmentation strategy decision-making and provide much needed operationalizations for important segmentation constructs
The contributions of the current research to the practitioner community are
threefold First, the research provides important insight to the firm’s international market segmentation strategy decision-making by identifying the critical steps in the integrated decision process and relating those steps to market performance The
research allows the firm to direct managerial focus to those parts of the decision
process with the greatest potential to impact performance For example, in the
cases where a firm is only utilizing country attractiveness factors in their
Trang 21international market segmentation strategy Third, the research allows for the
identification of country attractiveness factors or within-country segment bases that perform well across industries Anecdotally, managers who were contacted for the qualitative phase of this study expressed a strong interest in the outcome of the current quantitative study One manager noted: “we are very interested in what is happening in other industries relative to targeting international consumers because
there is so little data available.” Most of the participants in the current quantitative
study have expressed an interest in the results of the study by requesting summaries Clearly the proposed research represents a valuable contribution to practitioners Relation to the Field/Theory
The current research falls within what Sheth, Gardner, and Garrett (1988) term the managerial school of marketing thought that is notable for its focus on the
role of the seller The managerial school is the dominant school of marketing
thought Segmentation strategy has its theoretical roots in industrial organizational
economics and price theory/price discrimination (Wind and Douglas 1972) Price
Trang 22Study Design
The current research consists of a qualitative study followed by a survey of
organizations involved in marketing to consumers in international markets The unit of analysis for the study is the firm or the strategy making unit if distinct within the
firm The independent variables, country attractiveness factors, segment bases, and
scale of segment management, are defined generally as the decision elements relating
to the country, segment, or scale which collectively compose a firm’s international consumer segmentation strategy The issue is both the specific decision elements employed and the degree to which country, segment, and scale decision elements are factored into the decision process The dependent variable, success of segmentation
strategy, is defined generally as the degree to which the firm’s international
consumer market segmentation strategy (based upon the decisions outlined above) meets the firm’s expectations for contribution to actual market performance Specific issues of construct operationalization and measurement are addressed in
detail in chapter 4 on methodology
The current research focused exclusively upon consumer markets for goods and services and not upon business-to-business or institutional buyers The reason for focusing upon consumer markets is twofold First, although important
commonalties exist, business-to-consumer and business-to-business marketing practices are distinct in the area of segmentation, and it would be difficult to
Trang 23the findings from the current research might be applicable to the business-to-
business market once extended in future research efforts
Organization of this Dissertation
The first critical step in the research process was to develop a model of international consumer segmentation strategy decisions based upon the literature A
review of relevant literature in international market segmentation is presented in
Chapter 2 The purpose here is to outline how the literature was used to build and
support the model The literature indicates that a model of the international market
segmentation strategy decision process must include three decision elements: country attractiveness factors; within-country segment bases; and, the scale of segment management The model proposes that the three decision elements taken collectively will form a firm’s international market segmentation strategy decision process In addition to the model, specific research hypotheses are identified
Chapter 3 is a summary report on the findings of the qualitative phase of the research The qualitative input from high-level managers directly supports the model presented in chapter 2 The interview protocol and a list of participating organizations appear in the appendices
Chapter 4 outlines the model development Each critical construct is
operationalized and measures are presented Control variables are introduced and
defined in both conceptual and operational terms
Trang 24research The pretest protocol and resulting survey instrument appear in the appendices The results of each hypothesis test are presented
Chapter 6 provides a discussion of the findings and implications of the results of the current research The results for each hypotheses test are discussed along with implications for future research
Summary
Segmentation is a critical issue to firms marketing internationally The goal of the current research is to examine the decision process by which firms develop
international consumer market segmentation strategies The current research
contributes to the field by presenting an integrated model of the international market segmentation strategy decision process based upon the literature and supported by
input from practitioners In addition, the current research is making a unique
contribution by testing the model to determine whether the utilization of the decision elements and specific factors gleaned from the literature actually impacts the market
success of a firm’s international market segmentation strategy The remaining
chapters in this dissertation outline the literature underlying the model, the
Trang 25Chapter 2: Literature Review
Introduction
This literature review seeks to cover recent and seminal literature that directly relates to segmentation strategy decision-making in the international
context While international segmentation has been widely discussed, there has been surprisingly limited focus on directly addressing segmentation strategy decisions in the international context The following is a review of the relevant literature on international segmentation strategy decision-making, including contributions to both country attractiveness factors and bases of segmentation as well as the closely related concepts of the scale of segment management and scope of globalization In addition, the theoretical link between segmentation strategy and the market
performance of segmentation will be addressed
International Segmentation: Decision Process
A distinct track of the literature in international segmentation began with
Wind and Douglas’ pioneering treatment of the international segmentation decision process in 1972 Prior to that time, market segmentation was viewed primarily as a
domestic strategy, and the occasional mention of international segmentation in
Trang 26of social behavior is likely to be significantly greater when considering the world as
opposed to a national market” (Wind and Douglas 1972, 17) Wind and Douglas (1972) conclude that a firm will reap greater benefit from international segmentation because of the greater diversity that a successful international segmentation strategy will accommodate
Wind and Douglas (1972) propose a two-step model (Figure 2.1) for defining international market segments The first step is the “macro” segment in which countries are classified and targeted based upon national market
characteristics or country factors While not meant to be all inclusive, the country
factors identified include: cultural and social patterns; level of economic and technological development; and, national legal and political characteristics
The second step in the Wind and Douglas (1972) model is to analyze and sub-divide each qualifying target country by customer characteristics Again, not meant to be all-inclusive, they suggest the following bases for dividing customers into segments within qualifying target countries: demographics (age, income); socioeconomics; personality and lifestyle; brand loyalty; frequency of purchase; and, attitude toward the brand The model proposed by Wind and Douglas (1972) is
Trang 27Figure 2.1 Two-Step International Segmentation Decision Model (Adapted from Wind and Douglas 1972) International Segmentation Strategy Identify “macro” segments of countries Identify within-country customer segments
Wind and Douglas (1972) recognize that the distinction between country factors and customer characteristics might seem arbitrary since country factors
might actually be related to the characteristics of consumers within the country The
operational distinction is that while country factors are “common to all customers of the given country such as national character or dominant cultural patterns,” within- country segment bases “enable a distinction among various customers within a country” (Wind and Douglas 1972, 18) Utilizing the definition presented allows country factors and customer characteristics to remain operationally distinct despite some obvious overlap For example, the general level of educational attainment across the society might be a country factor used to identify target countries, and the individual consumer’s level of education might be a demographic bases for sub- dividing the market into customer segments
Wind and Douglas (1972) view the model as a two step process with a clear
temporal relationship country qualification followed by the within-country division of customers into segments They argue that a firm will naturally seek to economize by selecting among countries prior to examining customer behavior
within individual countries and thereby avoid the expense of researching and
Trang 28segmenting consumers in numerous countries The reasoning for thiss order is that
the cost of examining individual customers and their behavior (step two) within a
number of countries is likely to be significantly more expensive than aletermining the attractiveness of countries (step one) Therefore, Wind and Douglas (1972) view the international segmentation strategy process as clearly linear or hierarchical
International segmentation has received a fair amount of attemtion in the marketing literature since 1972 However, the first substantive addition to the
international segmentation decision model presented by Wind and Douglas (1972)
was put forward by Kale and Sudharshan (1987) Kale and Sudharshean (1987) offer a three step international segmentation decision model The first twos steps in the Kale and Sudharshan (1987) model are substantially duplicative of W ind and Douglas (1972) The third step proposed by Kale and Sudharshan (1'987) is the linking of what they call strategically equivalent segments (Figure 2.2.) Like Wind and Douglas (1972), the model proposed by Kale and Sudharshan (1987) is
normative in nature
Trang 29In the Kale and Sudharshan (1987) model (Figure 2.2), the first step is to select the appropriate countries to enter This decision is based upon factors such as
political climate and communications infrastructure Second, identify specific
customer segments to serve within each country based upon product and marketing mix factors They refer to this step as “microsegmentation.” Finally, select common “strategically equivalent” segments across a range of countries that may be served with a common marketing mix Kale and Sudharshan (1987) provide a hypothetical example of a frozen dessert The hypothetical management team starts by reducing the number to eight qualifying countries prior to within-country behavioral analysis
Hypothetical segments in different countries may be comprised of different
consumers (teenage females in country A versus adult males in country B) yet still be strategically equivalent if they are similar on key characteristics such as degree of information search and desired sweetness Kale and Sudharshan (1987), like Wind and Douglas (1972), view the segmentation decision process as linear or hierarchical in nature Kale and Sudharshan (1987) argue that this methodology will maximize strategic focus on cross-market homogeneity and minimize extraneous efforts to overcome within-country heterogeneity Kale and Sudharshan (1987) conclude that this standardization of cross-national segments allows a firm to regard national boundaries with “honorific significance” and concentrate its efforts on serving customer groups which respond similarly to a particular marketing mix
Douglas and Wind in 1987 take up the issue of how segments might be
Trang 30not intended as such, Douglas and Wind’s work may be interpreted as a
reformulation of step three (as adapted from the Kale and Sudharshan model) The reformulated decision step, selection of the level of segment management,
constitutes the third decision in the international segmentation strategy decision synthesis /dissertation model (see figure 2.3)
Figure 2.3 International Market Segmentation Decision Model
(Synthesis / dissertation model) International Segmentation Country Attractiveness Factors Scale of Segment Management Strategy
As the preceding discussion highlights, the three-step international segmentation decision model presented is derived from a synthesis of the
international segmentation decision literature In addition, chapter three highlights the fact that practitioner input from international managers also supports the model The synthesis model is unique to this dissertation
The dissertation model presented is a clear improvement over past attempts to describe the decision process on three points First, the dissertation model is the first attempt in the literature to develop a comprehensive model of the international
consumer segmentation decision process Second, the dissertation model has
brought together differing strands of the international segmentation literature to identity segmentation strategy decision making as a process with three distinct
Trang 31decision steps Third, unlike earlier treatments in the literature, the dissertation model is readily operationalizeable which allows for data gathering to examine the veracity of the model
The literature offers little discussion of the entire international segmentation
decision process and seemingly little if any attempts to empirically examine the decision steps or the process it represents prior to the current research The bulk of the extant literature has tended to focus upon one or more steps in the international segmentation decision process by examining country attractiveness factors used for
target country selection, within-country customer characteristics used as a basis to segment consumers within target countries, or the scale of segment management These topics comprise the remainder of this chapter
International Segmentation: Country Attractiveness Factors
Following upon Wind and Douglas (1972), a number of studies sought to
classify countries based upon macro-factors Hofstede (1980) explored the
possibility of classifying countries based upon cultural factors, but he offers little
insight into consumption behavior Huszagh, Fox, and Day (1986) clustered
countries based upon economic and geographic factors but found significant
heterogeneity within the countries on issues of product acceptance There are a number of other country classification systems suggested in the literature, including
political orientation, gross national product per capita (Keegan and Green 1997),
national income per household (Kotler 1994), the presence of strategically
Trang 32legal/regulatory system, cultural norms and financial systems (Douglas and Wind
1987)
Helsen, Jedidi, and DeSarbo (1993) examine the speed and pattern of diffusion within target countries They suggest diffusion as the critical country
classification factor to assess target country attractiveness The authors find that the segments formed by evaluating diffusion patterns are not the same as the segments
formed by examining traditional macro-country attractiveness factors Helsen,
Jedidi, and DeSarbo (1993) argue based upon an empirical study that the speed and
pattern of diffusion might be an appropriate indicator of country attractiveness for some product categories
Luqmani, Yavas, and Quraeshi (1994) examine two specific macro/cultural
factors: time-saving orientation and desire for comfort They seek to connect these criteria to consumer preferences and shopping habits The authors offer no
empirical support for these assertions Dawar and Parker (1994) examine the degree to which a country devotes resources to retailing activities They hope to demonstrate that the degree of retail involvement will be a superior predictor of
consumption patterns and therefore is an appropriate indicator of country
attractiveness The empirical findings in Dawar and Parker’s (1994) analysis offer some limited support for country classification based upon retail involvement
As the preceding discussion highlights, a number of authors have suggested factors for determining which countries a firm should enter (see Table 2.1) There is little agreement, however, as to which country factors are best suited to identify
Trang 33qualifying countries based upon attractiveness factors is an important step in developing an international segmentation strategy Consistent with the preceding discussion, the following proposition can be made:
Proposition I: The inclusion of country attractiveness factors in the
international segmentation decision will positively impact the success and performance of the firm’s international segmentation strategy In addition, specific country attractiveness factors may impact performance to varying degrees
However, country attractiveness factors alone provide little insight into within- country heterogeneity among consumers — the very heart of domestic segmentation strategy In a recent study, ter Hofstede, Steenkamp, and Wedel (1999) empirically verify that a segmentation model can integrate both country factors and consumer characteristics to better form segments which share consumption patterns versus traditional models employing country factors alone However, the study stops well short of addressing the nature of the segmentation decision-making or the
contribution of segmentation decision criteria to performance The ter Hofstede,
Trang 34Table 2.1 Summary of Country Attractive Factors Country Attractiveness Factors Sources in Academic Literature
economic development Huszagh, Fox & Day 1986
Wind & Douglas 1972 national income per household Kotler 1994
technological development Wind & Douglas 1972 legal/regulatory Douglas & Wind 1987
Wind & Douglas 1972
geographic Douglas & Wind 1987
Huszagh, Fox & Day 1986
Samli & Hill 1998
ethnic identity Samli & Hill 1998 demographics Wind & Douglas 1972
political/form of government Kale & Sudharshan 1987 Keegan & Green 1997 Wind & Douglas 1972 social patterns Wind & Douglas 1972 communications infrasructure Kale and Sudharshan 1987 culture Douglas & Wind 1987 Hofstede 1980 Wind & Douglas 1972 financial systems Douglas & Wind 1987 retail development Dawar & Parker 1994 gross national product per capita Keegan & Green 1997 diffusion Helsen, Jedidi & DeSarbo 1993 time-saving orientation Lugqmani, Yavas and Quraeshi 1994 desire for comfort Luqmani, Yavas and Quraeshi 1994
International Segmentation: Within-Country Market Segment Bases
The second decision in the international market segmentation decision model
(dissertation model Figure 2.3) is identifying the bases upon which to segment
Trang 35heavily from developments in domestic segmentation Kotler (1994) describes the
bases of segmentation as falling into one of four general categoriess geographic, demographic, psychographic, and behavioristic Within this frame=work, segment
variables can be customer specific, such as demographic, psychogrraphic,
mediagraphic, socioeconomic, personality, lifestyle or attitude Segment bases can
also be situation-specific, such as product usage, purchase patterns, benefits sought,
convenience orientation, or reactions to specific media (Dickson asnd Ginter 1987; Wind 1978; Luqmani, Yavas, and Quraeshi 1994)
Baalbaki and Malhotra (1993) divide the bases for internatzonal
segmentation into two categories They conclude that factors such as geography, politics, and culture are environmental and therefore distinct from managerial factors such as product characteristics and price They provide an extensivve listing of segment criteria gleaned from the literature
In the international segmentation literature, Domzal and Umger (1987) suggest that market segments be identified across countries and regions based upon psychographic and lifestyle analyses This is similar to the segmentzation methods utilized domestically, such as the Stanford Research Institute’s Values and Lifestyles (VALS) segmentation system which categorizes the US populatiom into nine
psychographic segments (Kotler 1994) Crawford, Garland, and Gianesh (1988) suggest segmenting on the basis of attitudes toward imported prodwicts and country of origin factors They distinguish between developed economies aand newly
Trang 36attitude They limit the applicability of their research findings to specific products
which share a commonality of consumer attitude across countries
Like Crawford, Garland, and Ganesh (1988), Samli and Hill (1998) distinguish between bases for segmenting the markets of developed versus developing countries They contend that demographic, geographic, behavioral,
lifestyle, attitudes, taste or predisposition are appropriate bases for segmenting consumers within developed countries The authors identify ethnic and racial
identity, as well as geography, as being useful in segmenting consumers within
developing countries The authors find evidence that these bases will allow a firm to find important similarities in segments across countries
While the international segmentation literature offers little consensus as to which bases of segmentation are preferred, there is nearly universal agreement that defining within-country segments is a critical decision step in developing a firm’s international segmentation strategy Consistent with the preceding discussion, the following proposition can be made:
Proposition II: The inclusion of within-country segment bases in the
international segmentation decision will positively impact the success and
performance of the firm’s international segmentation strategy In addition, specific within-country segment bases may impact performance to varying degrees
The use of segment bases in this dissertation is to examine both the degree to which their inclusion as a step in the segmentation decision process is related to the
Trang 37summarizes the within-country segment bases identified and their source within the academic literature Table 2.2 Summary of Within-Country Segment Bases Within-Country Segment Bases Sources in Academic Literature
lifestyle Samli & Hill 1998
Wind & Douglas 1972
personality Wind & Douglas 1972
attitude toward imports Crawford, Garland & Ganesh 1988 frequency of purchase Wind & Douglas 1972
product acceptance Huszagh, Fox & Day 1986
loyalty Wind & Douglas 1972
attitude toward brand Samli & Hill 1998
Verhage, Dahringer & Cundiff 1989 Wind & Douglas 1972 country of origin effects Crawford, Garland & Ganesh 1988
age Samli & Hill 1998
Wind & Douglas 1972
demographics Wind & Douglas 1972
ethnic identity Samli & Hill 1998
income Samli & Hill 1998
Wind & Douglas 1972
culture Douglas & Wind 1987 Hofstede 1980 Wind & Douglas 1972 segment size Kotler 1986 Sheth 1986 communications infrasructure
Kale and Sudharshan 1987
Scope of Globalization/Scale of Segment Management
The third step in the international market segmentation decision model
Trang 38manage its segments (i.e., multi-local, regional or global) A closely related issue to the scale of segment management is the scope of globalization The scope of globalization refers to the degree to which a firm might standardize its products and marketing programs across a large part of the world as opposed to adapting,
customizing, or localizing its products and programs to each country in which the firm operates (Hassan and Blackwell 1994) Speaking to the issue of
standardization versus adaptation, Solberg (2000) states: “even though many researchers have addressed the issue, it still remains an under researched field of international marketing (96).” The scale of segment management and the scope of globalization are closely related because segmentation is frequently identified as a compromise or hybrid strategy in the standardization versus adaptation debate
The globalization discussion was significantly energized by Theodore Levitt in a persuasive and influential 1983 article in which he frames the debate over the appropriate scope of globalization He draws the distinction between the
multinational corporation which customizes its products and marketing campaigns to each country served and the global corporation which produces universal
products for a world-wide consumer or global segment He proposes that through technology and a desire for modemization, “the world’s needs and desires have been irrevocably homogenized (Levitt 1983, 93),” giving rise to world-wide or global customer segments He goes on to define the key to competitive success in this new
market as the “search for sales opportunities in similar segments across the globe in
Trang 39a clear connection between international segmentation strategy and firm performance
Levitt (1983) argues that a customer segment is seldom unique to a country and has close approximations in many parts of the globe due to the homogenizing effects of technology and the universally shared characteristic of scarcity It is
exactly this commonality of scarcity that he suggests is the key to a firm’s
international marketing success In short, a firm that can produce a higher quality
product and sell it for a lower price (due to the economies of scale available through nearly complete world-wide or regional product and program standardization) to a
global segment will out-compete a comparably lower quality or higher priced product that is customized to any particular country
In contrast to Levitt’s (1983) emphasis on standardization to a world-wide
global segment, Kotler (1986) and Sheth (1986) both propose a narrow scale of segment management by advocating adaptation of products and marketing programs on a country by country or multi-local basis Specifically, Sheth (1986) argues that the increase in global competition and global products is due to systemic changes in the business environment and is not an indication of increased commonality or homogeneity of needs generally Sheth (1986), specifically linking the scope of globalization and the scale of segment management, argues that a global segment would need to exist and reach significant size in order for global standardization to
become viable Kotler (1986) concedes that global standardization is possible with a
few limited products where needs are similar However, he argues that most (80%)
Trang 40each target country following a multi-local segmentation strategy Kotler (1986) concurs with Sheth (1986) that segment size will be a critical factor in determining the viability of an international segment
Porter (1986) and Daniels (1987) acknowledge the emergence of a homogeneity of needs internationally, but they disagree with Levitt’s (1983) conclusion that firms should necessarily standardize their products and marketing programs to a global customer segment However, both authors concede that selective standardization of certain operations may be used to gain strategic advantage Porter (1986) suggests a continuum of segmentation schemes ranging from total country adaptation (multi-local) to total world-wide standardization depending upon the product and competitive factors Daniels (1987) concludes that hybrid strategies of standardization and adaptation will result from a firm’s need to balance the impediments of country differences and resistance by local management against the potential strategic gains of serving global segments
Huszagh, Fox, and Day (1986) examined the feasibility of standardization to a global segment as described by Levitt Their research suggests that regional segmentation is a viable strategy for similar markets with similar product
acceptance They conclude that standardization to a regional or global customer segment is feasible with certain product categories (consumer non-durable) and suggest clustering countries based upon the similarity of target customer groups within the countries