In this essay I propose to critically evaluate the above research paper: “International market segmentation (economics, national culture and time)” published recently in the European Journal of Marketing. The paper aims to investigate the influence, economic and cultural factors have separately and in combination over international country segmentation and also try to reveal the stability of these factors and country segments over time.
Segmentation can be described as the strategy of dividing market in homogenous group (Goyat, 2011). The growth of global competition has established international segmentation as a key issue in developing, positioning and selling products throughout the world (Ter Hofstede et al., 1999) quoted by (Budeva and Mullen, 2014).
International segmentation has thus become a key extension of the traditional marketing concept, as lack of familiarity with diverse foreign environments tends to lead to generalization of demand condition in overseas market. This can form national stereotypes. Thus a policy of segmentation will help alleviate problems arising from such misconceptions, as it acknowledges the magnitude and relevance of differences and similarities between foreign countries. However (Budeva and Mullen, 2014) suggests that if a company can achieve competitive advantage as a result of global standardization, a “standardization oriented approach” is in order.
International segmentation also provides a number of advantages from the organization point of view, one of it being that organizations find it easier to enter countries in the same cluster in which they have been successful (Budeva and Mullen, 2014)
Thus if one accepts this premise, the question is not whether to segment the international market but when to segment and how to segment (what basis for segmentation should be considered) (Wind and Douglas, 1972).#p#分页标题#e#
In the evaluated research paper a longitudinal analysis (1990-1999) is undertaken and as a result, provide an insight into whether economic & cultural characteristics change overtime. The influences of economic and cultural factors are examined separately, and then combined.
The study includes economic and cultural variables for 30 countries measured at two periods (1990-1999). The research is designed to capture the effects of country specific variables on segment membership and changes overtime to evaluate our hypotheses. Hypotheses of the research are mentioned in the following paragraphs.
The author argues, when companies enter new markets research on economic development alone cannot adequately predict firm’s chances of success in these markets. The viability of this argument can be supported by the fact that economic development of a country is just an indicator of its populations buying capacity and what should be the price range of the products marketed in that specific country however the consumer preferences and rational/motivation behind consumer’s product selection is ignored. Neither do results of research undertaken with only economic development as a base can help organizations design or select marketing strategies for their product in that market. As a result the success of the firm cannot be predicted accurately. Thus, it is important that instead of country segmentation based entirely on economic data or entirely on cultural data, we combine the two in general segmentation framework. Therefore the first two hypotheses are:
H1 Country segments formed from strictly economic variables will be different than country segments formed with strictly cultural variables.
H2 Country segments formed from economic and cultural variables will result in different segments than those formed from either economic or cultural variables alone.
The result of this research indicates that both hypotheses H1 and H2 are found to be true. Hypotheses1 can be confirmed as when economic factor alone is taken into consideration USA has a different segment and does not share this segment with any other country however, when culture is made the base of segmentation USA. Is clustered with other countries such as Canada, Austria, Ireland and Italy. The clustering changes for many countries included in the study, while shifting the basis of segmentation from economic factors to culture.
H2 is also found to be true and can be confirmed by the fact that while countries were evaluated separately on economic growth and culture a 4 four segment solution appeared to be most appropriate for the same set of countries whereas when evaluated in combination a six cluster solution seems to be most appropriate. Also the structure of the segments is different from solutions based only on economic or cultural variables.#p#分页标题#e#
Another argument made by the author is that countries differ in economic development but they are not static. Example of china is given to support this argument. This argument in my viewpoint is very strong as explained by the author by giving china’s example, that countries may experience rapid changes in economic indicators such as GDP (it jumped from 3% in 1990 to 9% in the following year and again jumped to 14%in 1992. This argument can be verified not only by looking at fluctuating GDP rates of china but also of many other world economies with fluctuating GDP rates such as India.
The author argues that culture changes as a consequence of economic development, and some countries develop faster than others (Budeva and Mullen, 2014). However this argument in my point of view is not completely true as in my opinion not only culture gets influenced by economic development but culture also influences economic development. As a country which scores high on self expression in comparison to survival will generally have a lot more small investors and entrepreneurs will be much more willing to take risks to raise themselves to a standard of better living thereby pushing the wheel of economic growth in that country. However a country driven by more traditional cultural values will look for safety in every investment and business transaction they make, and as a result may not take appropriate timely risks and may loose out on opportunities to increase profit margins. In support of my argument “The extent of corruption also varies sharply between different countries and different financial cultures, and this can make profound difference to economic performance.” (Sen, 2008). Amartya sen in his article culture and development also talks about a great sociologist Max Webber’s thesis on the crucial role of protestants ethics on in the successful development of a capitalist industrial economy. The author also assumes, people will be more resistant to cultural changes than economic development the third hypotheses is:
H3 Changes in economic development will result in movement of countries across segments more often than changes in national culture.
The results of this research finds this hypotheses to be true as a visible change in country clustering can be seen over the decade based on economic development as the bases of segmentation. Shifts in country clustering with economic growth, as base is much more in comparison to clustering on the bases of culture. The author argues that culture may change slowly, in incremental steps but it does change.
The author argues that change in culture is triggered by the economy. In the last hypotheses of this research the author assumes that with the economic development, culture also changes, and this leads to restructuring in segments that we obtain from one period to the other, based on this the final hypotheses of this research is:#p#分页标题#e#
H4 Countries that move from developing economies to higher income status will experience cultural changes resulting in changed segmentation patterns.
The results of this research shows that only two countries show a shift in country clustering based on cultural factors whereas for country clustering based on economic factors there were a lot more changes. Thus we can say that cultural factors change very slowly in comparison to economic factors. Also the two countries Czech republic and Spain which changed country segments moved away from economically backward country and became part of clusters of economically advanced countries example Spain joins the segment with other European countries. As these two countries moved from less developed country cluster to a well developed one economically a considerable shift can be seen in there clustering with culture as the clustering base. This proves the above stated hypotheses.
The sample used in this research paper by the author includes countries surveyed by WVS in both 1990-1991 wave and 1999-2001. The initial sample covered a total of 34 countries but three of them were eliminated due to missing data and also west Germany and east Germany is treated as one.
The sample used in my opinion is exhaustive in itself and can also be assessed by looking at the results of this research paper as it includes countries ranging variedly in economic development with gross national income (GNI) per capita ranging from 380 dollars (India) to Sweden with GNI 34,280 dollars. The sample is not only exhaustive of economically varied countries but also covers a full spectrum culturally varied ones; it covers countries all the way from Japan and Sweden which score high on secular rational values to countries like Ireland and Chile.
However, one can argue though the survey samples used in the WVS survey’s is large and exhaustive but the number of countries s a whole is small. The author tries to justify his choice of using this small number of countries due to matching requirements across two periods and missing data. Thus we can say that the sample used in this research paper is adequate and well informed about the various dimensions.
But it is worth giving a thought that had the number of countries used in this research been much more than it is right now, what effect it would had on the current findings of the research? Is there a possibility that some of the hypotheses in the research would have been dismissed?
From the above analysis of the research article we can say that it covers only a small number of countries due in this research can be seen as one of the limitations of this research.
Also as secondary source of data is used to carry out this research the fact that availability of economic data of the countries is much more in comparison to the cultural data and no specific measure is present to verify whatever amount of cultural data is available, could have lead to some deviations in the results of this research corresponding to the use of culture as the base of country clustering.#p#分页标题#e#
Besides this there is a lack of theoretical bases to guide the selection of variables and development of segments.
And lastly classification of countries on the basis of country segments provides very weak indicators of marketing behavior in a country. (Wind and Douglas, 1972). This is because every individual is different and generalization of consumers so widely on the basis of country can provide only a glimpse of the expected consumer behavior in that country.
On the other hand this research has some very positive insights
Firstly, this research makes it possible to test whether cultural values change under the influence of certain environmental forces such as economic development.
Secondly, this research piece fills the gap in previous literature. The author explains in the literature review that traditional researches on international marketing segmentation have been criticized for focusing on economic and cultural variables separately and not on both together. “a successful segmentation plan must produce market segments which meet the four basic criteria” sustainability is one of them (Goyat, 2011). The longitudinal analysis of this research has the potential to cover the sustainability of these two factors and also tests the dynamics of these two factors overtime. Also this research peace examines market segmentation using both these bases together and also tries to find a link between the two.
Thirdly, critically it can be stated that demographic may prove as good bases of segmentation but the psyche of the consumers play a crucial role in determining consumer behavior.
Something to think about
Every consumer has special demands from the products and services he/she consumes. Segmenting market as widely as country segments and generalizing even those segments by grouping countries with certain economic and cultural factors thus poses a question whether such wide segmentation would actually prove useful in assuring an organization’s marketing success? If yes, to what extent?