Understanding cultural groups’ market segmentation is essential
Introduction Today’s markets now globalizes in unprecedented ways. Coupled with the developments in technology, specifically the internet and aviation, and the liberalization of international commerce, globalization is now becoming a reality to many people. Globalization presents business with new realities and therefore new challenges. Businesses are challenged not only to excel in their trade but now must be able to bring that trade to fresh waters and beyond their comfort zones. Understanding Culture
Culture is described by Dr. Lars Perner, Assistant Professor of Marketing at San Diego State University as “A learned, shared, compelling, interrelated set of orientations for members of society”. Culture influences goals, beliefs, attitudes and values (Perner, 2006). The modern concept of culture commonly recognized is behaviour. Culture should be considered when managers are making their decisions (Bellah, 1989) . This in effect influences the manner in which marketing strategies should be formulated, implemented and executed.
How much an individual is predisposed cultural and societal will define his buying patterns, preference and choice. Gert Hofstede was a Dutch researcher who, in 1980, interviewed IBM executives in several countries and found that cultural differences among the executive tended to centre around four key dimensions (Hofstede, 1980): 1. Individualism vs. collectivism – the extent of belief in the concept individual responsibility and reward vs. belief in the concept collective responsibility 2. Power distance – the extent of separation of individuals based on rank
3. Masculinity vs. femininity – involves the concept of “masculine” values suggestive of competition and “conquering” vs. “feminine” values involve harmony and environmental protection 4. Uncertainty avoidance – extent to which a “structured” situation is preferred vs. an ambiguous one. A fifth dimension has been added to this list recently and it is of long term vs. short term orientation. In the U. S. prefer immediate results while Japanese managers tend to be tolerant to long periods before profits are realized. Figure 1.
Screenshots of one of the first collaterals for the HSBC: The world’s local bank campaign launched in March 2002 (HSBC 2002). An example of how the cultural idiosyncrasies is being considered to a high degree by globalized companies is the use of the by-line “world’s local bank” by HSBC in its international Integrated Marketing Communications (IMC) program. The advertisements run on network and cable channels follows the storyline of pointing out contradicting practices or tradition and the culmination is of HSBC having the skills necessary to cope and the conscientiousness to deal with these practices or traditions.
The program was launched in 2002 and still is the same theme that the company uses in its marketing programs (HSBC, 2006). Was the campaign successful? The London based bank was, under the name of HSBC Bank Middle East and was also voted best bank in the Middle East in 2003 by Euromoney magazine in spite of suffering terrorist attacks against it in Turkey in the same year (Guardian Unlimited, 2003). The importance of culture in characterizing consumer behaviour concepts such as hidden motivators, emotional gratification, perceived risk, and cognitive dissonance can not be denied.
The ability to understand local culture and work with its context creates association, acceptance or tolerance and loyalty for products, services and ideas. This creates a strong local marketing background for both existing and new entrants. Understanding Segmentation In 1997, Pepsi-Cola, whose chief competitor is Coca-Cola, announced its decision to restrain its international marketing efforts citing the difficulty in sustaining international markets. The decision came after the difficulties it encountered marketing locally specially in South Africa.
Beverage Industry (1998) relates that Pepsi instead employed “limited global” approach which entails focusing on some key markets while choosing hold back on others. Though Pepsi eventually had to cede its markets in Argentina in Venezuela and Argentina, the strategy they employed allowed them to gain significantly in the markets of Brazil, Russia and Norway (cited by Johansson, 2001). The nucleus of this strategy of Pepsi-Cola employed segmentation of the vast global market where it had the greatest advantages instead of focusing on the global market as a whole.
Segmentation is defined by Koetler (1998) as a process of selecting a portion of the population on the basis of a special set of characteristics. Cultural segmentation then implies the selection of a portion of the population based on a culturally based specification that identifies a subgroup. Applying the knowledge of cultural subgroups and segmentation. As of to 2001, Australia the local Muslim population census at 280,000 individuals. The demand for Halal food products in the local consumer market are currently is one of the most promising industries for Australia.
In addition to the citizens and permanent residents, Australia has also become popular destination for foreign students, tourists and other short-term visitors from Muslim countries specially those neighbouring it like Malaysia and Indonesia. Halal food is expected to grow solidly as a niche market for Australia (Department of Immigration and Multicultural and Indigenous Affairs, 2004) To develop this market, the Australian government created programs to orient existing food and agricultural industries to the Halal Accreditation Process by approved Islamic organisations.
In 2002 alone, various halal lamb and mutton exports to Bangladesh, Egypt, Indonesia, Malaysia, Saudi, Arabia, United Arab Emirates and other Middle East countries. The industry produced for the consumer 40,000 tonnes valued over 330 million dollars. Australia’s consideration of the culture that stems from the religion of Islam and its gaining approval from related Islamic councils has allowed it to cater to Muslims locally and abroad.
Without identifying the distinct needs of this segment and formulating corresponding programs to establish Australia’s position in the halal food industry would not have been able to create the niche it has with the market today. When Richard Ash, General Manager of “Macquarie Bank’s China Housing Investment Funds”, he was told that that it was important to own your own house in China, where men now outnumbered women, to attract a girlfriend and wife. This prompted Macquarie Bank’s interest in the housing market in China .
One of the primary reasons that China was targeted was because the company already had significant experience in dealing with Chinese customers. They identified as the most essential to improve in order to succeed in China was brand recognition. The company wanted to capitalize on its track record in investment market is based upon a proven track in Australia and the establishment of close relationships with investors. To raise the capital for its operations, Macquarie intends to have a mixture of currencies to distribute the danger.
The technique was to maximize firstly the Australian investment, ten from Asia, USA, and Europe. The minimum investment in the “China Housing Investment Fund” (CHIF) is $US was 500,000, and in order to get people to make such an investment it became crucial to gain confidence and establish trust directly. Keeping in mind that the Chinese were known to be more comfortable dealing with other Chinese businessmen or those already familiar with the culture, all members of the team from Sydney could be from China or were therefore familiar with Chinese business culture and the services that are vital.
Recognizing the language barriers existing, Macquarie ran extensive newspaper advertisements in both English and Chinese newspapers, prepared and circulted English and Chinese Memorandum and held seminars for potential Chinese investors were also held (Department of Immigration and Multicultural and Indigenous Affairs, 2002). Was the strategy successful? As of 1998 it had approximately 60% Australian investors, 30% Asian and 10% American. These figures exceeded company targets as well as whether the Asian Economic Crisis of the 90’s.