Global Market Segmentation - Literature review Example

Heading: Global Market Segmentation Your name: Course name: Professors’ name: Date Introduction Many companies, today, value global market segmentation as a significant issue in their development, positioning and sale of the products in foreign countries. It enables these companies to target prospective consumers at global-segment level and achieve a suitable positioning overseas. Nevertheless, most of the companies face a major challenge of efficiently dealing with heterogeneity structure in customer wants and needs in foreign countries, and to target consumer segments in various countries. These segments are known to mirror geographic alignments or individual groups and comprise of prospective clients that are probable to demonstrate the same reactions to marketing efforts. There are many other challenging issues; conflicts and tensions that are associated with engaging in worldwide market segmentation by companies. Some of these issues concern political influences, economic influences, legal influences, and cultural influences. Therefore, this essay attempts to explore some of these international marketing issues in business firms, particularly in hospitality organizations. Background Market segmentation Burkard (2003, pp. 2-42) says that this refers to the process of dividing a market into various groups of clients with markedly same needs and service or product requirements. It is the division of large market into distinct and identifiable segments or groups, with each possessing common features and needs, and exhibit similar reactions to marketing activities. Initially, market segmentation was termed as a condition of development during which markets have previously been advanced on a widespread foundation to the extent where extra promotional expenses are producing reducing returns. Currently, there is a generalized consent that they make up a vital basis for prosperous marketing approaches and activities. The key reason of market division is to influence scarce resources; that is to ensure that marketing mix elements like price, place, promotion, distribution and product are intended to satisfy specific needs of different client groups (Baines, Worcester, Jarrett & Mortimore 2005, pp. 107-116). Because companies possess limited resources, it is impossible to produce all probable products for everyone every time. Therefore, the process is influential in enabling firms to effectively and efficiently focus on particular clients’ needs. Besides, this concept is linked to product differentiation. This enables a firm to differentiate its services and products from those of its competitors; hence, capturing a large market share. In market segmentation, there are two possible approaches that can be used. Firstly, a breakdown method where a market can be considered to comprise of clients that are necessarily similar; thus, the activity here is to identify those groups, which have common difference. The second approach is the build-up method that entails a view of the market as consisting of consumers that entirely vary; hence the task is to identify their similarities. Notably, the breakdown method is the most employed approach in the market segmentation, while the build-up method is scarcely used as it aims at moving from an individual level to a general level (Steenkamp & Hofstede 2002, pp. 185-213). Global market segmentation Praporski (2008, Pp. 2-31) maintains that in home market segmentation, some of the features applied include clients’ sex, age, personality, social class, product usage, brand loyalty, and attitude to a specific brand. On contrast, international segmentation uses country features. Every country has particular environmental conditions like social and cultural patterns. Countries also have varied levels of technological and technological advancement that influence purchasing response and patterns. Therefore, these environmental issues can offer widespread indicators of a whole market reaction. Moreover, Baines, Worcester, Jarrett and Mortimore (2005, pp. 107-116) points out that unique national legal and political features seem to pose some constraints on firms’ marketing policies, and as influencing client responses. This can require a different adaptation or approach to various market conditions. Christensen, Cook and Hall (2005, pp. 11-16) note that country features, are therefore, critical considerations in the identification of prospective target markets and the development of suitable marketing strategies. Worldwide markets may also be divided in a two-step procedure; a segments’ ladder. Firstly, it can be divided into a macro segment that consists of group or individuals of a country may be identified on the basis of national market features. In each macro-segment, the market is further divided on the basis of client features. The difference between customer and country characterization is subjective because in most instances, country features are explained in relation to client features of a particular country (Chen 2003, pp. 310-327). Upon dividing market into macro-segment, it can be sub-divided into on the basis of customer features that include age or income brackets in every country. The suitable foundations of market grouping in macro-segments can be similar in every macro-segment or can vary. In the initial case, target market groups can be recognized on an international basis (Burkard 2003, pp. 2-42). Hence, if teenagers in US, Japan, and Canada possess the same purchasing interests and patterns, the pertinent target divisions can be teenage market in the aforementioned nations. Likewise, if executives of global firms display the same purchasing patterns, regardless of their state origin, the worldwide executive set may be pertinent target section. Optionally, various foundations of segmentation can be employed in every macro-segment. For instance, one macro-segment might base it on income lee, whereas the other might use attitude towards a certain product. Furthermore, Christensen, Cook & Hall (2005, pp. 11-16) notes that segmentation bases can be subdivided into situation specific and general characteristics. In terms of general characteristics, they do not differ in buying circumstances, and in client level socioeconomic, demographic, and psychological traits. On contrast, situation specific features entail those that differ with personal buying conditions, or specific products like purchase frequency, brand loyalty, and feelings towards a certain brand. Likewise, at the country market level, general features involve a country’s intrinsic characteristics like its geographic position that influence the overall character of demand; the goods bought and the manner in which they are bought (Burkard 2003, pp. 2-42). Contrastingly, situation specific country features entail national market circumstances that are associated with a specific purchase situation or product like various industries’ assistance, competition level in a certain market, and legislation on a given product (Johnson 2010, pp. 289-295). Therefore, whatever basis taken in market segmentation, there are certain qualifications that should be met, such as, accessibility, substantiality, measurability, identifiability, and action-ability. Conflicts and Tensions in Hospitality Firm Context Robinson (2003, pp. 267-275) holds that there are many challenges, which a global hospitality firm experiences when establishing a property overseas. The firm’s reaction to these constraints will establish the new firm’s general prosperity rate. In turn, this will influence the organization’s amount of profits. Generally, Johnson (2010, pp. 289-295) notes that a hospitality firm can decide to standardize or customize its products and services, when doing foreign market segmentation by basing on a variety of operational factors and business levels. Some of the conflicts and tensions faced by hospitality firms in carrying out global market segmentation are associated with legal, political, economic, and cultural influences. These issues are broadly discussed below: Legal and political influences A hospitality business can experience a challenge in relation to the countries’ political factors. The main considerations that face a hospitality firm in entering a foreign market are legal and political stability of the countries in which it wants to conduct its business. Hospitality firms like Hilton Hotels, and Intercontinental Hotels often experience political instability in various countries in which they carry out their businesses (Robinson (2003, pp. 267-275). Political instability is a great challenge especially in the process of doing market segmentation in foreign nations for hospitality organizations. This mostly happens in third-world countries that discourages any form of foreign investment. This is because it affects the clients’ socio-economic status; hence, negatively influencing the hospitality business in a given country (Robinson 2003, pp. 267-275). Notably, Johnson (2010, pp. 289-295) says that even developed countries can possess generally hostile legal and political environment for foreign investors, particularly hospitality organization. Such countries do this because of their attempt to promote and protect their local industries and businesses against international competitors. Belohlavek (2007, pp. 18-25) asserts that international segmentation of target market is always made difficult by the fact that most states design trade barriers or restrictions on foreign competition. These restrictions are mostly tailor made to safeguard the local companies and industries from stiff international competition. As a result, these designed controls often limit hospitality firms’ business operations in a foreign market (Wood & Brotherton 2008, pp. 62-70). A usual control entails license requirements that compel exporters and importers to achieve a license prior to moving their products or services to or out of a given country. For example, a nation can restrict the export or import of hospitality services or goods. Likewise, a host might decline to license certain imported hospitality services or goods, which compete with local firms it is attempting to help (Burkard 2003, pp. 2-42). Secondly, Pieterse (2007, pp. 1-20) maintains that global market segmentation can be hampered by a country’s taxes and tariffs on imported services, especially of a hospitality business. Countries employ tariffs in the protection of local industries and organizations form international competition. Nevertheless, tariffs can also be applied in ensuring that prices of imported services and goods are equal to local substitutes, or to collect government revenue. Additionally, Robinson (2003, pp. 267-275) asserts that tariffs are always used in penalizing other states or countries for political or commercial actions. For instance, the US can choose to impose a tariff on Japanese or UK hospitality firms in the country as a way of punishing them for establishing high tariffs on other products imported for US. Thirdly, a country can employ a quota in order to restrict the quantity of particular products to be imported from other countries. For instance, in terms of hospitality firms, a country can use a quota to limit the importation of foreign services and goods in the country. Pizam (2010, pp. 231-235) says that apart from tariffs licenses and quotas, other control techniques that can hinder international market segmentation are special taxes like processing or excise taxes on various products; qualitative limitations that identify low standards of safety or quality that should be attained before the state accepts exports or imports; and trade controls that efficiently restrict the quantity of international currency , which importers can get to pay for products and services bought, or which an exporter can acquire for services and goods sold out of the country (Burkard 2011, pp. 6-21). Therefore, hospitality firms like Hilton Hotels often experience conflicts and tensions in conducting global market segmentation in various countries. Social and Cultural influences Czinkota (2008, pp. 239-245) both macro and micro market segmentation in international levels is influenced by social and cultural environment in particular countries. Hospitality organizations that intend to target certain market groups in foreign countries face numerous social and cultural problems. Some of the cultural and social elements include family structure, social class, market segmentation, consumption patterns, and decision making. Since a cultural grasp is central in market segmentation process, firms that attempt to carry out business in international settings naturally seek guidance from people intimate to that particular culture. Alternatively, they can create legal arrangement or partnership to have their services or products marketed by domestic companies. Most importantly, Pizam (2010, pp. 431-435) says that the level of cultural material in a foreign country must be considered. For example, organizations seeking to operate in countries with less developed cultural materials, specifically semi-industrialization and non-industrialization, will usually demand more restricted product lines, and must cope with low sophisticated distribution systems, simple advertisements and a lot of time to acknowledge the fresh service or product (Robinson 2003, pp. 267-275). In case of a hospitality firm, Pizam (2010, pp. 431-435) argue that global market segmentation can be hindered by language barriers brought about by different languages in foreign countries like Chinese, Spanish, and French, Japanese. Some countries, like China and Japan, strictly use their local languages, hence making it hard foreign companies like, the Intercontinental Hotels and Marriott Corporation, which want to invest in the countries. Therefore, numerous different dialects or languages have a negative impact on the whole market segmentation process of a hospitality firm. Still on cultural and social effects of international market division, it is important to consider the country’s aesthetics, which entail the societal stylistic tastes. This element is influential in making decisions that relate to product design, packaging and advertising. Likewise, the educational level of societal members determined the sophistication of promotional, packaging, and product activities (Pizam 2010, pp. 431-435). For instance, a foreign hospitality firm’s activities can be influenced by the aesthetics of the countries in which they operate. It can also negatively affect its distribution channels since they must be staffed by local resources. Additionally, Wood and Brotherton (2008, pp. 62-70) maintain that international market segmentation can be hampered by customer feeling towards risk-taking, family organization, and religious beliefs among other factors. Mostly, failures take place when foreign companies are trying to assimilate its operations into different social and cultural settings. Competitive and economic influences Burkard (2011, pp. 6-21) argues that countries have different economic and competition development levels that must be considered by global firms intending to invest in them. Generally, countries that are at the industrialization mature stages are most probable to provide strong markets for imports, since they have equitable purchasing power distribution, have advanced technologies, and have acquiescent to modern products. Moreover, such nations provide many of other advantages like currency stability, stable monetary and fiscal infrastructure, effective communication and transport systems, which are valuable in efficient business operations. Therefore, most of the international hospitality firms face economic challenges in third-world countries, and even in some already developed nations, as they try to expand their business abroad. Furthermore, Pizam (2010, pp. 431-435), different countries have different levels of competition for services and products that range from product environment or monopolistic country that would be unreachable, to pure competition. What is more, some firms can succeed in oligopolistic environments that have key companies dominating the regional market. Threats of new market entrants can also challenge a hospitality firm’s attempt to conduct global market segmentation. Few barriers to entry can result in elevation of competitive risks, especially when a firm has less proprietary advantages. Therefore, already existing competition is a great challenge to a new hospitality entrant to market, as it can negatively affect its profitability. Conclusion Market segmentation is crucial in the development, positioning and sale of the products in foreign countries. It allows companies to target prospective consumers at global-segment level and achieve a suitable positioning overseas. Segmentation can be done by breakdown, or build-up methods, and it done on a variety of bases that include personality, attitude towards services or goods, socioeconomic, demographic, and psychological traits. Hospitality firms experience certain conflicts and tensions in the process of carrying out international market division, and these have adverse effects on their performance. Some of these issues include social and cultural, competitive and economic, legal and political factors. References Baines, P, Worcester, R, Jarrett, D & Mortimore, R 2005, ‘Product Attribute-based Voter Segmentation and Resource-advantage Theory’, Journal of Marketing Management, vol. 22, no.1, pp. 107–116. Belohlavek, P 2007, Introduction to Unicist Market Segmentation, Blue Eagle Group, New York. Pp. 18-25. Burkard, N 2003, Market Segmentation and Branding in the hotel industry with special references to Hilton Cooperation, GRIN Publishing GmbH, Munich. Pp. 2-41. Burkard, N 2011, Global Market Segmentation Hospitality Industry, GRIN Verlag, New York. Pp. 6-21. Chen, 2003, ‘Developing a travel segmentation methodology’, Journal of Hospitality and Tourism Research, vol. 27, no. 3, pp. 310–327. Christensen, C, Cook, S & Hall, T 2005, ‘Marketing Malpractice: The Cause and the Cure’, Harvard Business Review, vol 83, no. 12, pp. 74–83. pp. 11-15. Czinkota, M 2008, Fundamentals of international business, Wessex Press, S.l. Pp. 239-245. Johnson, D 2010, International business: themes and issues in the modern global economy, Routledge, New York, NY. pp. 289-295. Pieterse, J 2007, Ethnicities and global multiculture: pants for an octopus, Rowman & Littlefield Publishers, Lanham. Pp. 1-20. Pizam, A 2010, International encyclopedia of hospitality management, Butterworth-Heinemann, Oxford. Pp. 431-435. Praporski, N 2008, Customization vs. standardization in global hotel expansion, University of Nevada, Las Vegas. Pp. 2-31. Robinson, W 2003, Transnational conflicts: Central America, social change, and globalization, VERSO, London New York. Pp. 267-275. Steenkamp, JEM & Hofstede, FT 2002, ‘International market segmentation: issues and perspectives’, International Journal of Research in Marketing, vol. 19, no. 1, pp. 185–213. Wood, RC & Brotherton, B 2008, The Sage handbook of hospitality management, Sage, Los Angeles. Pp. 62-70. 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