Many multinationals are increasingly using a "big bang" approach to product launches in their various markets around the world. With increased global competition, intensified market integration, and other such factors increasingly a global reality, the so-called "sprinkler" strategy of entering all markets simultaneously, while still rare, is becoming increasingly popular.
As markets continue to globalise and buying power in many emerging nations improves, regarding countries as stand-alone markets appears much less logical for many MNCs. Most multinationals, however, still prefer the "waterfall" approach of introducing their new products into developed economies first, then gradually letting them "trickle down" to less affluent markets.
INSEAD Chaired Professor of Business Administration Hubert Gatignon and Christophe Van den Bulte of the Wharton School consider why the current evolutionary trends would seem to favour increasing support for sprinkler-style market entries. They begin their analysis with a consideration of the three primary ways in which many multinationals now consider market segmentation:
· Clustering countries based on country factors involves determining which states are the most similar, based on macroeconomic variables. This offers the advantages of being relatively straightforward, and of allowing firms to rely on easily accessible statistics.
· Clustering individual customers is far closer to traditional market segmentation practices, and involves searching for differences and similarities among consumers - as opposed to among countries - quite possibly across national borders.
· Clustering countries based on diffusion patterns essentially consists of classifying countries according to the ways in which their citizens typically accept new products. Being able to ascertain such diffusion patterns can greatly help a firm develop appropriate targeting and sequencing strategies.
The third approach is the target of the authors' main focus, and they go into extensive detail about how corporations are now increasingly using very sophisticated methods to apply it. Gatignon and Van den Bulte also analyse more basic, but equally critical considerations, such as how corporations may decide which markets to enter; what the sequence of entry should be; how spillover effects across countries can affect entry strategies, or even if such effects actually exist in any meaningful way.
Naturally, commitment to a corporation's chosen market rarely comes cheap. Product launches demand a lot of resources while increasing risks. The authors discuss the various ways that risk can be raised or lowered, including via pricing, product adaptation and sales force deployment. The critical roles of distribution channels and product standardisation decisions are also examined in depth.
Cambridge University Press, 2004