International market selectionand segmentation: a two-stage

modelCharlotte Gaston-Breton

Department of Business Administration, University Carlos III of Madrid,Madrid, Spain and University Paris Quest Nanterre, Paris, France, and

Oscar Martn MartnDepartment of Business Administration, Public University of Navarre,

Pamplona, Spain and Department of Business Studies,Uppsala University, Sweden

Abstract

Purpose The purpose of this paper is to present a two-stage international market selection andsegmentation model addressed to help decision makers such as foreign institutions and market-seeking multinational enterprises (MNEs) identify and select the most suitable European countries andgroups of consumers.Design/methodology/approach The first stage is conceived as a macro-segmentation screeningprocess based on market attractiveness. The second is a micro-segmentation process addressed toidentify which groups of people are most similar across Europe in terms of social and personal values.The authors model is rooted in previous assumptions and findings from international marketselection (IMS) and Ingleharts theory of material and post-material values.Findings The model is applied to the current 27 European Union (EU) member states and isvalidated through the groups of countries empirically obtained. The model allows us to cluster theEuropean countries by market attractiveness, group the European consumers by personal and socialvalues and describe the value orientation of the resulting clusters.Research limitations/implications The authors used cross-sectional data to validate theirmodel. Among the implications, they encourage international marketing and business scholars tomake use of Ingleharts framework.Practical implications Institutional decision makers and market-seeking MNEs can follow oradapt the prescribed model in order to identify the most promising and similar European countriesand groups of consumers. Public policy makers can gain an in-depth understanding of specificpersonal and social values allowing them to shape public policy agendas.Originality/value This paper contributes to the existing literature on IMS and segmentation inthree ways: it proposes an original and parsimonious two-stage IMS and segmentation integrativemodel for both country-level and consumer-related analyses (suitable to handle and reduce theEuropean diversity that decision makers have to face when dealing with the general public orconsumer products); it applies theoretically grounded general segmentation bases and an alternativeestablished framework of consumer values (Ingleharts value system), and it adopts an updated andpan-European perspective over the enlarged EU.

Keywords European Union, Market segmentation, Consumer behaviour, Multinational companies,Public policy

Paper type Research paper

The current issue and full text archive of this journal is available atwww.emeraldinsight.com/0265-1335.htm

Received August 2009Revised February 2010Accepted January 2011

International Marketing ReviewVol. 28 No. 3, 2011

pp. 267-290r Emerald Group Publishing Limited

0265-1335DOI 10.1108/02651331111132857

The authors wish to thank the three anonymous reviewers for their diligent and insightfulcomments on previous iterations of the manuscript. This research is financially supported by theSpanish Ministry of Education & Science project quoted SEJ2007-65897.

Because one of the special issue Guest Editors was a co-author of this paper, to preventconflict of interest it was submitted separately to the Editor of IMR and handled at arms lengththroughout the process via the central IMR office.

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1. IntroductionThe identification of promising foreign target markets is a critical issue in internationalmarketing and international business research, strategy and management. Its capitalimportance arises from the fact that its inter-relationships with other strategicdecisions, such as mode of entry (Koch, 2001), foreign marketing programmes(Papadopoulos and Denis, 1988) and, ultimately, success and performance (Broutherset al., 2009) have been widely acknowledged. The evaluation of foreign target marketshas been approached from two complementary levels: first, a market (country)perspective usually under the stream of research called international marketselection (IMS) (e.g. Brewer, 2001; Rahman, 2003) and second, a consumer perspective,which can be labeled international consumer segmentation (e.g. Kamakura et al., 1994;Kolman et al., 2003) and involves the segmentation of consumers across countries. Thispaper is a step toward a higher integration of both perspectives by proposing a two-stage model of IMS and segmentation in the process leading to the identification ofpromising European target markets.

Most IMS and segmentation studies use a diversity of data such as economic,geographical, political, cultural, etc. variables (e.g. Whitelock and Jobber, 2004).Consumer data, however, and especially the concept of values are under-investigateddespite their relevance and robustness in cross-cultural research. In IMS, the lack ofattention to consumer values is particularly acute, since neither the old nor most of therecent studies consider them. An exception is the work by Sakarya et al. (2007) whichincludes Hofstedes work-related values-based framework to measure cultural distancein their preliminary assessment of promising emerging markets. However, theseresearchers state (p. 218):

Although the importance and impact of culture on IMS has been explicitly recognizedthrough the psychic distance construct in internationalization literature, neither thetraditional models nor the normative market selection process models incorporate it as asignificant dimension into the screening process.

In international segmentation, studies using consumer data are also under-represented(Steenkamp and Ter Hofstede, 2002) presumably because of the difficulty and costinvolved in its collection. Nevertheless, consumer characteristics and values providerelevant information for managerial decisions when identifying both important andstable international segments (Burgess, 1992). In particular, consumer values are theunderlying determinants of consumers needs, attitudes and behaviors (Vinson et al.,1977; Kim et al., 2002) which illuminate critical marketing dimensions related to, forinstance, advertising and product positioning (De Mooij, 2003). Managers values havebeen also found to significantly influence strategic decisions and the export performanceof the firm (Sousa et al., 2010). Therefore, we designed our study to cover this gap, byusing consumer values in an integrative approach of IMS and segmentation.

A second research gap and opportunity arises from the fact that the segmentationbases used in previous studies on international segmentation, especially at theconsumer-level, are mostly domain specific (Steenkamp and Ter Hofstede, 2002). Inother words, given that the data collected by researchers is generally based on aparticular industry, it leads to practical implications only valid for those sectors suchas the financial (Bijmolt et al., 2004) or the food (Askegaard and Madsen, 1998;Ter Hofstede et al., 1999) industries. However, general segmentation bases (e.g. marketattractiveness and consumer values) are independent of concrete objects and are morestable and enduring than domain-specific variables (e.g. technological and economic

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characteristics of the industry, consumer benefits in using specific products) whichmeans that they can provide decision makers with general and long-term guidance forinternational marketing and communication strategies (Van Raaij and Verhallen, 1994).Also considering that the IMS literature widely supports the use of generalsegmentation bases in a first stage of country screening (e.g. Cavusgil et al., 2004), suchas the one proposed by our two-stage model, we want to alternatively apply generalsegmentation bases both at the country and the consumer level. More specifically, wedecided to build our model on established general segmentation bases such as marketattractiveness at the macro-level as well as consumer values at the micro-level.

In order to identify a third research gap, we start by accepting the economicglobalization process (Levitt, 1983) as the most significant trend in internationalmarkets over the last 50 years. Within this context, economically integrated blockshave proven to be one of the most important phenomena in progress worldwide.Among all of these blocks, the European Union (EU) constitutes the most advancedprocess of integration. This attractive and changing region offers excellent researchopportunities and deserves new and updated studies considering the challengesthat the two recent enlargements (ten new countries in 2004 and two in 2007, seehttp://ec.europa.eu/enlargement/) and the subsequent increase in heterogeneityassociated to them pose to companies targeting this block. In this light, severalstudies have focussed on the different approaches to market segmentation (for a recentreview see Lemmens et al., 2007) and marketing strategies (Chung, 2005; Taylor andOkazaki, 2006) that can be applied across the EU or, at least, across a number ofEuropean countries. Nevertheless, studies on the enlarged single European market arenotably lacking and previous research on marketing strategies has mostly resulted inmixed conclusions supporting either the idea of pan-European or multidomesticstrategies (Lemmens et al., 2007). This research gap, i.e. the lack of studies on theenlarged EU, is particularly pronounced as EU marketing studies have addressedissues in specific country contexts, industries, cultures and geographic areas ratherthan being able to tackle pan-European marketing issues (Paliwoda and Marinova,2007, p. 239). Therefore, we designed our model to handle and reduce the diversity ofthe enlarged European block that decision makers have to face when dealing with thegeneral public or consumer products.

The objective of our study is to cover the above-mentioned gaps. Our researchquestion is, therefore, whether or not general segmentation bases can be effectivelyused in a new IMS and segmentation model for decision makers such as foreigninstitutions (e.g. governments, chambers of commerce, foreign trade institutes, etc.)and market-seeking MNEs (Dunning, 1998). More specifically, we propose a two-stagemarket selection and segmentation model by integrating market attractiveness andconsumer values as general segmentation bases and aiming to help decision makersidentify and screen the most suitable European macro-regions, countries and groups ofconsumers. This paper contributes to the existing literature on IMS and segmentationin three ways: it proposes an original and parsimonious two-stage IMS andsegmentation integrative model for both country-level and consumer-related analyses;it applies theoretically grounded general segmentation bases and an alternativeestablished framework of consumer values (Ingleharts value system); and it adopts anupdated and pan-European perspective over the enlarged EU.

In the remaining body of this paper, we first explain the theoretical basesand propose our two-step model. Second, we present the methodology used to test it,describe the two datasets employed for this objective and then discuss the findings.

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To conclude, we identify the implications for policy makers, managers and academicsand finally address the papers limitations and suggest future research avenues.

2. Literature, theory and modelAn established stream of literature focussing on IMS has frequently proposedsegmentation models at the country level to screen countries (e.g. Cavusgil et al., 2004),while there is also a growing number of studies in international marketing andsociology that focus on cross-cultural differences in terms of values and value systems(e.g. Esmer and Pettersson, 2007). Against this background, we propose an integrativetwo-stage model (see Figure 1) rooted, respectively, in IMS prescriptions and thevalue system segmentation bases proposed by Inglehart (1997) which we apply tothe enlarged EU through general (vs domain specific) segmentation bases. Thetheoretical background and explanation for the model then follows.

2.1 The European macro-segmentation process: an IMS perspectiveMost European segmentation studies have included country-level segmentation baseswhich typically comprise a mix of economic, political, geographic, demographic,etc. information without a clear guiding criterion. Since different variables inducedifferent classifications, selecting the appropriate macro-segmentation bases is criticalduring the screening stage of the model, and theoretical bases must be proposed. Wesuggest that the relevant variables for macro-segmentation be identified and borrowedfrom the IMS literature. In fact, researchers on IMS have discussed and supported theefficiency and effectiveness of sequential screening processes when deciding whetheror not to enter or expand a particular market (Cavusgil, 1985). Most sequentialdecision-making IMS models include an initial screening stage based on low cost,comparative, and widely available secondary information indicators about countriessuch as those provided by the World Bank (e.g. Cavusgil et al., 2004). In this light,Russow and Okoroafo (1996, p. 46) conclude from their review of the literature onmarket screening that all researchers propose different criteria and measures.However, market attractiveness is the aspect most consistently included in previous

Stage 1 (screening): Macro-segmentation (country-level)(based on International market selection guiding criteria of market attractiveness)

Market size/potential Market development

Stage 2 (identification): Micro-segmentation (consumer-level)(based on Ingleharts theory of value change and value system of traditional/secular-

rational and survival/self-expression dimensions)

Personal values Social values (values in raising children)

Figure 1.A two-stage internationalmarkets selection andsegmentation model

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research on IMS to discriminate among foreign markets (Ayal et al., 1987; Bennett,1995; Nowak, 1997; Rahman, 2003). In this regard, two dimensions of marketattractiveness are usually distinguished: market size/potential (e.g. Samli, 1972;Douglas and Craig, 1982; Cavusgil, 1990; Brewer, 2001; Papadopoulos et al., 2002) andmarket development (e.g. Liander et al., 1967; Samli, 1972; Day et al., 1988; Rostow, 1990).Similarly, Russow and Okoroafo (1996, p. 49) also remark that The internationalmarket screening literature is highly supportive of using market size and the level ofeconomic development for identifying potential opportunities.

Market size/potential, on the one hand, has to do with the size of the market andthe amount of sales, profits, etc. that can be obtained from entry and throughout thepresence of firms in that market or in a planning period. This construct is expectedto be reflected in a variety of indicators, all relating to the size of the economy. Indeed,international trade theories suggest a strong relationship between potentialinternational business transactions and market size (Sakarya et al., 2007, p. 215).The countries GDP and the number of inhabitants are just some of the examples,which, despite the varying importance per product category and industry, are expectedto positively correlate with a higher market size/potential for most products and firms.Market development, on the other hand, captures the quality of the market in termsof its socio-economic advancement or progress. Therefore, aspects such as, forinstance, per capita income and employment rates are believed to reflect levels ofmarket development.

Based on both key dimensions of market attractiveness, our model proposes aparsimonious initial macro-segmentation screening stage. We make the criticalassumption that, in the EU these economic aspects are, overall, the most relevantmacro-characteristics to be considered by foreign entrants. This assumption issustained by the fact that, as a consequence of the integration process and the resultingsingle market, there are very similar legal and political environments and marketbarriers faced by firms operating or willing to operate in the block, while economicsize/potential and development (and culture) vary notably across countries. Thismore uniform legal and political environment is clearly a visible trend since therecent reforms involved by the Treaty of Lisbon which provides the EuropeanParliament with new powers regarding, for instance, EU legislation and policymaking.

2.2 The European micro-segmentation process: Ingleharts frameworkWith the exception of the studies by Bijmolt et al. (2004) and Gielens and Steenkamp(2004), research on European market selection and segmentation has exclusively usedeither macro-segmentation at a country level or micro-segmentation at a consumerlevel (for an excellent review, see Lemmens et al., 2007). In general, high costs and lowavailability of international databases have resulted in most studies on Europeansegmentation using the country level as the basic unit of analysis (Bijmolt et al., 2004).Alternatively, three classes of micro-segmentation bases have been used in theEuropean context. They range from product-specific characteristics, such as attitudestoward attributes (Askegaard and Madsen, 1998; Ter Hofstede et al., 1999; Bijmolt et al.,2004), to domain-specific features such as lifestyles (Boote, 1983), and generalcharacteristics such as central values (Kamakura et al., 1994; Lascu et al., 1996;Kolman et al., 2003). We are particularly interested in the latter variables since theyfollow a general segmentation basis and have demonstrated their universality,centrality and stability (Schwartz and Bilsky, 1990).

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Values have been defined as enduring beliefs that a specific mode of conduct or endstate of existence is personally or socially preferable to an opposite or converse mode ofconduct or end state of existence (Rokeach, 1973, p. 5). Consumer behavior literature issupportive of a general relationship between values and behavior (Vinson et al., 1977).Therefore, values are also an excellent basis for clustering consumers and countrieswith cultural communalities. Actually, decision makers willing to target the EU will beinterested in the identification of potential groups of European consumers sharingcloser values in order to infer how to develop and execute their marketing strategies.Thus, in the context of our integrative two-stage model and with the purpose ofidentifying potential groups of consumers for the standardization of, for instance,communication messages we propose the inclusion of consumers values.

Although several models have been proposed in order to identify the set of valuesthat could accurately define consumer segments (Kamakura and Mazzon, 1991), themost commonly used framework in international segmentation is Hofstedes (1980)cultural model (Steenkamp, 2001) and dimensions. Consequently, some Europeansegmentation studies have relied on these dimensions (e.g. Kale, 1995; Kolman et al., 2003).However, due to the aggregate level of analysis and the work-oriented nature of thesedimensions, attention should also be paid to general human values in order to measureconsumer values with adequacy (Kamakura and Mazzon, 1991).

In this regard, Rokeachs (1973) traditional social value survey which consists of18 instrumental values (ideal modes of behavior) and 18 terminal values (ideal endstates of existence) served as a basis to identify cross-national segments in the UnitedKingdom, Germany and Italy (Kamakura et al., 1994) as well as in Poland and Romania(Lascu et al., 1996). Building on, and extending Rokeachs (1973) work, Schwartz (1994)developed a typology of seven motivational values which have been largely usedto attempt to explain cultural differences in various regions, including Europeancountries (Steenkamp, 2001). However, this framework has not been used forpan-European segmentation. More surprisingly, Ingleharts theory of value change(1977, 1990, 1997) another remarkable value system has never been applied todomestic, European or international segmentation despite its noteworthy and solidbackground in the sociological and political fields.

American political scientist Ronald Inglehart who leads the World Values Survey(WVS) suggests that societies can be classified according to their degree ofmodernity. By exploring the data collected from the WVS since 1981, Inglehart and hiscolleagues (see, e.g., Inglehart, 1997; Inglehart and Baker, 2000; Inglehart and Welzel,2005) showed that modern societies reflect the shift from survival to self-expressionvalues. In addition, they found another dimension of cross-cultural variation whichalso reflects the modernization process: the shift from traditional values to moresecular-rational values, which emphasizes that social and political systems areno longer based on a system of beliefs but rather on the faculty of human reason.Table I gives an overview of the value orientations and the main items related to bothdimensions.

Hofstede, Schwartz, Inglehart and others all propose relevant cultural frameworksbased on large survey data. Nevertheless, Ingleharts value system offers scholarsand managers the opportunity to implement an alternative framework based on thelargest study ever conducted in the world, using publicly available data (seewww.worldvaluessurvey.com) which has been updated in the European context inthe Eurobarometer studies (see http://ec.europa.eu/public_opinion/). Therefore, wefollow Ingleharts framework to provide theoretical foundation to our model and, as

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we will further explain in the next section, to select the indicators of the secular-rational (vs traditional) and self-expression (vs survival) dimensions in terms ofpersonally driven values and socially driven values (values in raising children) in orderto characterize Europeans values.

3. Methodology3.1 DataWe apply our two-stage model to the current 27 EU members. The use of the census ofEU members allows us to cover all of the EU variation in terms of marketattractiveness as well as consumer values. In addition, in line with our purpose ofillustrating a model that could be easily implemented by decision makers, we use twosecondary information sources to collect our data. In the first stage, we employ theWorld Bank Development Indicators (2007) to measure market size/potential andmarket development as general segmentation bases. In the second stage, we extractdata from the Eurobarometer surveys to capture Ingleharts value dimensions.

3.2 Operationalization of the variablesThe macro-segmentation screening stage is based on market attractiveness, which ismeasured through market size/potential and market development as specified inTable II. In order to illustrate the model, market size/potential is operationalizedthrough four established reflective indicators (Jarvis et al., 2003) that clearly capturethe expected content of this construct and show high internal consistency(Cronbachs a 0.986): GDP (e.g. Douglas and Craig, 1982; Sakarya et al., 2007;

Shift from survival toself-expression values

Shift from traditional tosecular-rational values

Characteristics ofvalue orientation

Rather than mere physical security,subjective well-being, self-expression and quality of life arevalued

Decisions, political rule and sensemaking are no longer based on asystem of beliefs, but aresystematically scrutinized by thefaculty of human reason

Personal valuesrelating to bothdimensions

Survival values emphasize thefollowing:Democracy is not necessarily thebest form of governmentRespect for other cultures is notimportantLiberty aspirations are notimportantSelf-expression values emphasizethe opposite

Traditional values emphasize thefollowing:Religion is importantPatriotism is importantRespect for authority is importantSecular-rational values emphasizethe opposite

Social valuesrelating to bothdimensions

Hard work is an important value inraising childrenImagination, tolerance and respectfor others are not important valuesin raising children

Obedience and religious faith areimportant values in raisingchildren

Note: Only the most important items are presented above although many other values are measuredin the World Values Surveys

Table I.The two dimension ofmodernization: from

survival to self-expressionvalues and from

traditional to secular-rational values

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Factor/variable

Indicators

Scale

Min

Max

Mean

Standarddeviation

Market

size/potential

GDP(2006)

CurrentUSD,million

5,748

2,906,681

534,145.30

818,012.06

Population

(2006)

Number

ofinhabitants

406,020

82,310,995

18,336,011.07

23,179,181.43

Imports(2006)

1,000million

Euros

3.7

723.7

139.17

181.25

Energyconsumption

(2004)

Electricity,in

million

Kwh

2,216

614,164

121,487.33

164,026.05

Market

developmentGDPper

capita

Purchasingpow

erstandards

(EU-27100)

37.1

278.6

98.68

47.01

Total

employmentrate

(2006)

%54.5

77.4

64.98

6.96

Gross

dom

esticexpenditure

onR&D(2005)

%of

GDP

0.4

3.9

1.38

0.92

Levelof

internet

access

(2006)

%of

householdswithinternet

access

athom

e14

8045.11

19.46

Corruption

perceptionsindex

(2006)

1-10

3.1

9.6

6.62

1.86

Table II.Measures and descriptivestatistics of marketattractiveness

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Malhotra et al., 2009), population (e.g. Samli, 1977; Cavusgil et al., 2004; Sakarya et al.,2007), imports (e.g. Green and Allaway, 1985) and energy consumption (e.g. Douglasand Craig, 1982). Market development is measured through five indicators which alsovisibly capture the domain of the construct and present high internal consistency(a 0.910): GDP per capita, total employment rate, gross domestic expenditure onR&D, level of internet access and the corruption perceptions index. These indicatorshave been frequently used to measure market development and related constructs. Forinstance, Cavusgil et al. (2004) used GDP per capita as an indicator of prosperity oreconomic well-being; DiRienzo et al. (2007) and Russow and Okoroafo (1996) as that ofeconomic development; and Dow and Karunaratna (2006) for industrial development.Also, Cavusgil et al. (2004) found unemployment rate loading in a standard of livingfactor and internet hosts in that of development of the infrastructure.

The micro-segmentation stage is based on Ingleharts values indicators. Inglehartand his colleagues (Inglehart, 1997; Inglehart and Baker, 2000; Inglehart and Welzel,2005) used data from the first four waves of the WVS for 74 countries. Morespecifically, Inglehart and Baker (2000) identified several values and items stronglylinked to the survival/self-expression dimension such as hard work is one of the mostimportant things to teach a child, imagination is not one of the most important thingsto teach a child and democracy is not necessarily the best form of government(correlation with survival values 0.64, 0.62 and 0.45, respectively). The most recentset of analyses conducted by Inglehart and Welzel (2005) among 78 societies surveyedin the 2000-2001 WVS shows that traditional values are especially reflected by thefollowing items: god is very important in respondents life (factor loading 0.91) andit is important for a child to learn obedience and religion (factor loading 0.88).Secular-rational values emphasize the opposite. In summary, many indicators relatingto personal values (e.g. democracy or religion) and several social values or values inraising children (e.g. tolerance, obedience, hard work, etc.) are correlated to these twodimensions.

Similarly, the European Values Survey (EVS) has measured the indicators of thesecular-rational and self-expression value orientations through a pool of items since1981. More recent datasets like the Spring 2008 Standard Eurobarometer and the 2005Special Eurobarometer titled Values, science and technology use the same indicators.The Standard and Special Eurobarometer are cross-national longitudinal surveys,designed to compare and gauge trends within member states of the EU. In the sameline as Bijmolt et al. (2004), we consider that using this set of surveys makes aneffective contribution to our study. First, we turn to the set of values proposed in theStandard and Special Eurobarometer to study European inhabitants personal andsocial values since its content is better adapted to European reality than any of thedifferent potential cultural or social values traditionally used in a plethora of otherstudies. Second, it covers the population (aged 15 years and over) of all EU countriesin recent periods (2005 and 2008). Third, the scores provided are based on more than30,000 face-to-face interviews in peoples homes and thus it makes up the largest andmost representative available sample of EU respondents. Fourth, these value scores areupdated, so this avoids the risk of making decisions based on pictures taken orsituations observed in the past. In line with our theoretical framework and oursuggested model, we decided to combine the eight childrens upbringing valuesmeasured in the 2005 Special Eurobarometer with the two most important personalvalues indicators in terms of correlation with Ingleharts dimensions which wererecently measured in the 2008 Standard Eurobarometer and described in Table III.

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3.3 Data analysis techniqueAs in most studies on segmentation, we use cluster analysis as the main technique ofdata analysis. In both macro- and micro-segmentation stages, we first explore thedimensionality of our indicators by means of factor analysis and, second, we create theclusters from the factor scores obtained. This procedure is frequent in the literature(e.g. Askegaard and Madsen, 1998; Steenkamp, 2001) and avoids the problem ofcorrelated variables and the influence of an unbalanced number of items per dimensionover the multidimensional distances that the cluster algorithm estimates whengrouping objects. We performed a hierarchical cluster analysis using the squaredEuclidean distance as the measure of countries proximity in regard to the factors.

4. Findings4.1 The identification of European countries attractivenessWe started by carrying out a principal components analysis of our nine marketattractiveness indicators, with Varimax rotation and Kaiser normalization. We foundtwo dimensions, explaining 84.8 percent of the variance (43.2 percent and 41.6 percent,respectively). In the first of these dimensions, the four measures of market size/potential loaded together, while in the second axis, the five indicators of marketdevelopment also grouped together (see Table IV).

From the factor scores, macro-segmentation produced three large clusters ofcountries which show higher and lower attractiveness in terms of market size/potentialand development. In closer detail, and reflected in the dendrogram and theagglomeration coefficients, we find five large and developed economies in the firstcluster: France, Germany, Italy, Spain and the UK. In the second cluster, we found eightcountries that perform highly on market development but obtain modest scores onmarket size/potential indicators: Austria, Belgium, Denmark, Finland, Luxembourg,Ireland, Sweden and the Netherlands. Finally, the third cluster is composed of the 14less attractive markets taking together both dimensions (see Figure 2).

Further, the second and third groups of countries are closer to each other in terms ofmarket size/potential than to the most attractive cluster. Since we use this first stage

Factor/variable Indicators Scale MeanStandarddeviation

Personal values Religion %a 8.26 6.87Democracy % 25.85 8.90

Social values(childrensupbringing)

Obedience %b 55.96 13.93Hard work % 54.70 27.09Determination, perseverance % 65.07 10.98Thrift, economizing and avoiding waste % 55.85 12.29Tolerance and respect for other people % 81.11 7.61Sense of responsibility % 82.33 5.41Independence % 55.26 12.11Imagination % 48.44 11.58

Notes: aPercentage of people identifying religion and democracy as the most important values forthem personally; bpercentage of people that indicated that these values are very important qualitiesthat children might be encouraged to learn at home

Table III.Measures and descriptivestatistics of personal andsocial values

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as a screening procedure in the context of IMS and with an expectedly relativelystable result and long-term perspective, decision makers may decide discard theselection of the third cluster (or the cluster with less attractiveness if other product- orindustry-specific operationalizations of the constructs are used), at least as the mainoption, and focus their analysis on the other two groups.

Figure 2.Macro-segmentation:

countries factor scores

ComponentRotated component matrix 1 2

Level of internet access 0.048 0.936Corruption perceptions index 0.047 0.934Gross domestic expenditure on R&D 0.235 0.831Total employment rate 0.150 0.820GDP per capita 0.156 0.734Population 0.986 0.048Energy consumption 0.985 0.230GDP 0.978 0.123Imports 0.942 0.157Variance extracted (%) 43.2 41.6

Notes: Extraction method: Principal component analysis; Rotation method: Varimax with Kaisernormalization

Table IV.Principal components

analysis of marketattractiveness indicators

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4.2 Dimensionality of the European consumers valuesIn the second stage, we applied the micro-segmentation based on the personal and socialvalues (two personal values and eight specific values in raising children) identified byIngleharts value system. Again, we first explored the dimensionality of our measuresand found three main factors with eigenvalues over one, and more than one indicator,reflecting survival values, self-expression values and traditional values (see TableV). These three factors retain 75.6 percent of the variance and nine of the initial tenvalues. We left out the sense of responsibility item because it loaded alone in a fourthdimension, which did not properly explain the variability of the countries values.

These three dimensions are similar, but not identical, to Ingleharts valuesclassification since they are based exclusively on a recent sample of Europeanconsumers. However, we consider them useful as they provide a relevant segmentationbasis to the decision makers who are currently targeting or willing to target consumerslocated in the EU. According to Inglehart and Baker (2000), survival values emphasizemostly that hard work is one of the most important things to teach a child and thatdemocracy is not necessarily the best form of government. Our first dimension ofsurvival values, which explains 30.7 percent of the variance, does yet first andpositively reflect the Hard work item and second and negatively the democracyitem. Also, determination, perseverance and thrift, economizing and avoidingwaste notably add to this factor.

Independence, imagination as well as tolerance and respect for other people docontribute positively to our second factor which explains 22.5 percent of the variance.Accordingly, we chose to label this second factor self-expression values. The twofactors of survival and self-expression values are valid to uncover over 53 percentof the cross-country values variation in the EU. Following Ingleharts value structure(1997), countries are expected to reflect survival values as opposed to self-expressionvalues. However, in our analyses of the European countries which we will discusslater they form two independent dimensions instead of a continuum. Also, referringto our findings (see Figure 3), we observe that:

(1) most of the countries that score high on survival values and low on self-expression values are East European countries (e.g. Slovakia, the CzechRepublic, Latvia, Romania, Hungary and Bulgaria);

ComponentRotated component matrix 1 2 3

Hard work 0.893 0.049 0.056Democracy 0.789 0.123 0.029Determination, perseverance 0.774 0.043 0.530Thrift, economizing and avoiding waste 0.719 0.196 0.465Independence 0.016 0.846 0.017Imagination 0.023 0.785 0.079Tolerance and respect for other people 0.351 0.773 0.187Religion 0.109 0.101 0.901Obedience 0.302 0.181 0.808Variance extracted (%) 30.7 22.5 22.3

Notes: Extraction method: Principal component analysis; Rotation method: Varimax with Kaisernormalization

Table V.Principal componentsanalysis of personal andsocial values

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(2) Sweden scores particularly high on self-expression values and low onsurvival values; and

(3) some countries score high on both sets of values (e.g. the UK, Ireland andLuxembourg) while Germany scores relatively low in both dimensions.

We call the third dimension traditional values since the indicators of religion andobedience load 0.90 and 0.81, respectively. It explains 22.3 percent of the remainingvariance. This third factor captures part of the first dimension of the cross-culturalvariation proposed by Inglehart and Baker (2000), also called traditional valueswhich, according to these researchers, reflects items such as god is very important inrespondents life and obedience and religion faith are important values in raisingchildren. We observe in Figure 4 that most European countries score low ontraditional values. Several exceptions need to be underlined: Malta and Cyprus scorevery high, with Greece and Poland following in their wake.

4.3 The value orientation of the European macro- and micro-clustersThe three macro-clusters of European countries, classified according to theirattractiveness, can be profiled according to their mean value orientation. On average,the less attractive group is the only one that scores positive on the survival andtraditional values while negative in self-expression (see Figure 5), whereas the twomost attractive groups are oriented toward self-expression values and get negativemean scores on survival and traditional values.

Following our model, we perform the second stage of cluster analysis in each of thetwo groups ranking higher in market attractiveness in order to identify similar micro-

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Figure 3.Micro-segmentation:

countries factor scores forsurvival and self-expression values

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segments in terms of consumers values. To this end, we enter the factor scores of thethree relevant dimensions of survival, self-expression and traditional values inthe new cluster analyses. Results from the most attractive group show, first, thatFrance, Italy and Spain group together in a micro-cluster. Within the most attractivemacro-cluster, these are the countries closest in terms of the three dimensions ofpersonal and social values. Indeed, in these countries, survival, self-expression andtraditional values are relatively moderate (see Figure 6). Second, Germany and theUK create individual micro-clusters and reflect low and high scores, respectively, onthe three dimensions.

Within the second most attractive macro-cluster, three micro-clusters emerged. Oneis composed by Sweden, which scores the highest on self-expression values and verynegatively in the survival and traditional (see Figure 7). In a second micro-clusterare Luxembourg and Ireland. Although displaying opposite signs in tradition (clusteranalysis does not search for patterns but for n-dimensional distances), they are quiteclose in all three dimensions and more particularly in O`self-expression.O Finally,Austria, Finland, the Netherlands, Belgium and Denmark belong to a third micro-cluster. They are close, and get negative scores, in traditional values with all of themexcept Belgium scoring negative in survival values.

5. Discussion, implications, limitations and future research5.1 DiscussionThe core findings allow decision makers to identify the most attractive markets andthe most suitable strategies in reaching European consumers. In our illustration, we

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Figure 4.Micro-segmentation:countries factor scores forsurvival and traditionalvalues

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Cluster 3 Cluster 2 Cluster 1

Clusters of EU countries by market attractiveness

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Cluster 1: France, Germany, Italy, Spain and the UK Cluster 2: Austria, Belgium, Denmark, Finland, Ireland, Luxembourg, Netherlands, Sweden Cluster 3: Bulgaria, Cyprus, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia

Notes:Figure 5.

Value orientation of thethree macro-clusters of

European countries

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France Germany Italy Spain United Kingdom

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have identified two groups of appealing countries. The most attractive countries(i.e. France, Germany, Italy, Spain and the UK) should be prime targets for decisionmakers if we leave aside other strategic aspects such as firm resources andcharacteristics, particular industries, and the factors of the macro-environment notconsidered by the model and use general segmentation bases. This group of countriesglobally demonstrates higher mean scores of self-expression values than those ofsurvival and traditional values.

The micro-segmentation identified within the most attractive macro-cluster three sub-clusters with closer and further value orientations. This intra-cluster relativeproximity is what decision makers have to consider in order to develop marketingstrategies and communication campaigns based on the three sets of value orientations.For instance, considering that advertising appeals are likely to reflect cultural valuesand that matching cultural values and advertising appeals enhance the persuasivenessof advertising (Okazaki and Mueller, 2007), global advertising appeals (vs localadvertising appeals) could be developed for consumers sharing the same value system(vs different value system) (De Mooij, 2003). In particular, decision makers suchas advertisers may consider similar strategies in France, Italy and Spain (the firstmicro-cluster) while Germany and the UK (the second and third micro-clusters) needto be considered independently since they, respectively, reflect low and high scoreson the three dimensions and they are far from each other and from the Latinmicro-cluster. To go further, positive references to values such as hard work anddemocracy (associated to the survival dimension), imagination and independence(relating to the self-expression dimension) or religion and obedience (associated tothe traditional dimension) are more likely to be accepted in communication campaignsby a British audience than by a German one (see Figure 6 and Table V) given theirhigher congruence with British values and, ultimately, the cognitive processes ofselective attention, distortion and retention influencing advertising effectiveness.

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Austria Belgium Denmark Finland Ireland Luxembourg Netherlands Sweden

Second most attractive countries cluster

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Figure 7.Value orientation of thesecond cluster of mostattractive Europeancountries

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Although there is scarce research that can be used to accurately compare our findings,this result is consistent with the study by Kamakura et al. (1994) who showed thatconsumers from Italy, the UK and Germany belong to different value segments.

A second group of European countries can also be considered of higher interestthan the third one because of their attractiveness in terms of market development(i.e. Austria, Belgium, Denmark, Luxembourg, Ireland, Finland, the Netherlands andSweden). Globally, this group proves most oriented toward self-expression values whileboth survival and traditional values also remain distinguishing features of the groupdue to their negative scores. These globally negative scores mean that, in general,in order to design congruent messages to this group they have to negativelyemphasize survival and traditional values (or positively self-expression and modern ornon-traditional values). However, due to the fact that these countries were primarilygrouped in terms of market attractiveness, their proximities and patterns of valueorientations is diverse (see Figure 7).

Again, the micro-segmentation identified within this second macro-cluster threemicro-clusters having the potential to help in the development of marketing strategiesand communication campaigns based on the three sets of value orientations. Inparticular, Sweden (a micro-cluster) needs to be reached through values such asimagination, independence and tolerance due to their association to the self-expression dimension, whereas values relating to the survival and the traditionaldimensions will be less effective. Luxembourg and Ireland (another micro-cluster) arealso proximate in their value orientation and can be effectively reached with acampaign emphasizing self-expression and survival values. Finally, Austria, Belgium,Denmark, Finland and the Netherlands (the third micro-cluster) highly vary in theirvalue orientation although it would be possible to design a campaign centered inthe value orientation of the centroid of the sub-group, i.e. the average point in themultidimensional space defined by the three dimensions.

Consequently, by considering both the economic and socio-cultural differenceswithin Europe, we underline that despite years of integration efforts, a standardizedapproach seems to some extent ineffective for tackling the European market. Thiscorollary is in line with previous studies on marketing strategies which demonstratethat New Zealand, Japanese or US managers still perceive differences among EUmarkets (Chung, 2005; Taylor and Okazaki, 2006).

Another interesting theme for discussion concerns the differences between our valuesdimensions and those proposed by Ingleharts theory, both in terms of (a) content (thedimensions meaning) and (b) importance (variance explained). Regarding (a), thetwo Ingleharts key dimensions of cross-cultural variation, i.e. the traditional/secular-rational dimension (differences between religious and traditional values andsecular and rational values) and the survival/self-expression dimension (the shift fromeconomic and physical security to self-expression and well-being values) have alsobeen reflected in our study. From this perspective, our research is, to some extent,supportive of Ingleharts framework in a European context. However, our findings alsoshow that survival and self-expression make up two distinctive uncorrelateddimensions instead of one, which suggests that they may not form a continuum ofvalues across the EU. In other words, individual European countries can be reflectedin both sets of values but not necessarily with opposite signs in their scores. However,once the entire set of countries is clustered according to the economic aspects (marketattractiveness), each of the three resulting macro-groups completely opposite values intheir orientation toward survival vs self-expression (see Figure 5), again support

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Ingleharts two dimensions. Moreover although we would need a longitudinalresearch design to properly prove it the modernization theorists who argue thateconomic change brings cultural change might come out reinforced given that threegroups of countries with varying economic settings in terms of market size/potentialand development also show different scores in their social and personal valueorientations.

On the other hand, our findings also point to an association between Inglehartstraditional/secular-rational dimension and our traditional values dimension. Sincewe have found empirical evidence for this traditional values dimension and,according to Ingleharts framework, secular-rational values emphasize the opposite,we suggest that this rationale might still be valid for EU countries and that they likelystill form a continuum. This can also be inferred from Figure 5 if we look, globally,at the positive scores of the traditional values dimension regarding the lesseconomically attractive cluster in comparison to the negative ones in the other twoclusters.

When comparing (b), i.e. the importance of the dimensions, beyond the fact that ourthree dimensions explain more cross-cultural variance than in Ingleharts (76 percentvs 71 percent), we find some specific remarkable differences. First, our traditionalvalues dimension accounts for 22 percent of the variance and thus ranks thirdin importance. In contrast, for Inglehart, the traditional/secular-rational valuesdimension remains the major factor as it explains up to 46 percent of cross-culturalvariation in the world (Inglehart, 2007). We suggest this difference could be explainedif we consider that all EU members have currently already shifted from an agrarianto an industrial society while this is not the case in the world perspective consideredby Inglehart and Welzel (2005). In fact, these researchers based their analyses on datafrom a variety of countries, many of which are still in the first wave of modernization.Second, the transition from industrial to post-industrial or knowledge society (i.e. thechange from survival to self-expression values) appears to explain over 53 percent ofEU cross-cultural variation while the figure only comes to 25 percent in Inglehartsfindings. Again, Europes specific characteristics in terms of economic development, incomparison to the world sample used by Inglehart, point to a similar justification forthis shift.

In the context of a steady process of economic integration and convergence inEurope, our results support the idea of a cultural heterogeneity, which suggest that Aseconomic conditions converge across countries, the manifestation of value differenceswill become stronger (De Mooij and Hofstede, 2002, p. 61). Understanding the valuesof consumers is therefore a key issue for managers and researchers in internationalmarketing. Our research is a step in that direction since it contributes to identifyingthe diverse dominant values of European consumers. In this light we want to remarkthat they can have a specific value orientation (e.g. self-expression values for theSwedish), its opposite (e.g. survival values for the Bulgarians) or a mix of both(e.g. the coexistence of self-expression and survival values for the UK).

This study contributes to the literature by presenting an easy to adapt originaltwo-stage IMS and segmentation model based on established screening criteria andthe personal and social values and dimensions derived from Ingleharts theory.This models strengths are visible in terms of content (it includes the most relevantdimensions of economic and cultural variation appropriate for long-term decisions),data availability (regarding both the number of countries and time proximity), easy useor interpretation (only factor and cluster analyses are needed), parsimony (it simplifies

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the screening and consumers segmentation process by focussing exclusively on keyfactors), low cost (implementable from secondary information sources) and objectivity(free of the subjectivity that characterizes the approach usually followed by firms).In addition, we fill an existing gap by providing a widely needed updated andpan-European perspective on the enlarged EU market and by exploring and applyingmeasures of specific European values.

5.2 ImplicationsOur research presents important implications for institutions and public policymakers, managers and academia. First, institutional decision makers can followthe prescribed model as a market screening tool in order to prioritize Europeancountries in terms of market attractiveness. As mentioned earlier, the use of themacro-segmentation stage as a screening procedure is broadly supported by the IMSliterature (e.g. Cavusgil et al., 2004). Second, we present low cost and highly availableindicators of both sets of measures hence the practical importance of our specificmeasures for those needing to perform general analyses of the EU markets. Third,public policy makers may also learn the specific personal and social values to promotein order to build more self-expressive and secular-rational and less survival orientedsocieties in the long term. The importance of this issue goes beyond European borderssince it is connected with one of Ingleharts central findings when survival seems secure:increasing emphasis on self-expression values makes the emergence of democracyincreasingly likely where it does not yet exist, and makes democracy increasinglyeffective where it already exists (Inglehart, 2007, p. 11). Indeed, self-expression valueshave been considered civic in character in some recent studies (e.g. Welzel, 2010).

As for the managerial implications, considering that we applied a generalsegmentation basis, market-seeking MNE managers can use industry- and product-specific criteria to operationalize both dimensions and readily identify the specificattractiveness of European markets related to their businesses. In other words, ourmodel illustrates the use and integration of general macro-and micro-segmentationbases in an IMS context. Industry- and product-specific applications are possible justby measuring the same key constructs of market attractiveness for particularindustries and products. In addition, considering the expected impact of consumervalues on marketing programs (Vinson et al., 1977), advertising agencies and businessto consumer firms (whose products require frequent and intense communicationstrategies) would benefit from categorizing countries with similar personal and socialvalues. In the same vein, brand positioning and advertising messages that match thespecific but common values of European countries groups are obviously expected toemerge. More in general, in relation to the mixed results that research on internationalmarketing standardization has generated from the EU perspective (see Chung, 2005),our findings support, somehow, a more eclectic view. Although we agree that thedifferences in consumers value orientation make it difficult to employ a highlystandardized marketing program across the EU countries, we suggest that managersfollow a more fine-grained approach in which communication messages can at least bestandardized within the micro-clusters that their specific analysis may detect byapplying our model in their particular sectors. Last, but not least, large market-seekingMNEs in consumer markets, owning resources to penetrate most European countries,should be aware of the potential benefits of using our approach: first to prioritizegroups of markets and, second, to adapt part of their marketing mix to their targetconsumers personal and social values.

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When it comes to the implications for researchers, we framed our personal andsocial values in Ingleharts theory and thus we bridged different research domainsand traditions by bringing solid contributions developed in the sociological andpolitical sciences to the international marketing and business fields. In order toconceptualize and operationalize core values in their studies in line with Yaprak(2008) we encourage scholars to not only use the most typical frameworks ofcross-cultural variation, such as those based, for instance, on Hofstede (1980),Schwartz (1994) or the Globe study (House et al., 2004), but other established referencesin the domains of social sciences as well.

5.3 Limitations and future research avenuesAmong the research limitations, is the cross-sectional data we used to develop ourmodel. Further research is needed to study the temporal stability of the dimensionsfound and of the clusters observed. This can be done by monitoring the Eurobarometerwaves and by testing the model with new data on the enlarged EU as soon as newsurveys are available. However, we expect the findings to be robust since Inglehartsframework has been longitudinally replicated and confirmed in different datasets.Second, we recognize the traditional criticisms and limitations of IMS methods basedon grouping models (Cavusgil and Nevin, 1981; Cavusgil et al., 2004) related tothe aggregate nature of the data generally used, the lack of temporal validity ofthe clusters due to the possible rapid changes in markets, the lack of availablecomparable data and the internal heterogeneity of the countries. However, throughoutthe manuscript, our focus has been limited to the research gaps that we identifiedin the introduction since no study can deal with all of the potential limitationsand gaps in an area of research. Therefore, addressing these limitations was out ofour scope and future research will have the potential to contribute to overcomingthem. Third, the applicability and validity of our model in other world regions cannotyet be assumed. On the one hand, our purpose was to develop a model useablefor decision makers such as market-seeking MNEs willing to enter the EU market.On the other hand, it has been built on information about a customized set ofEuropean values. As a result, and despite the significant similarities between ourdimensions and those found by established theories, we remain skeptical aboutthe extent to which our model can be applied or replicated in other areas of theworld. Fourth, while the model seems particularly useful for decision makers dealingwith general public policies and for market-seeking MNEs, the combination of morethan one method of market selection has been recommended for the final marketselection process (Cavusgil et al., 2004). Future studies can combine the model andextend its stages and applications in that direction. In this regard, a particularlypromising possibility would be its combination with models including othermicro-environmental actors such as, for instance, type or level of competition.Finally, future research can go forward as follows: first, in studying and applyingalternative established frameworks of cross-cultural variation borrowed fromother social sciences and second, with a specific comparison of the proposeddimensions and those found in major studies in the marketing and business fields.For instance, Inglehart (2007) discusses the commonalities between his self-expressionvalues, Hofstedes (1980) individualism and collectivism dimension and Schwartzs(1994) autonomy/embeddedness concept. Discussions about the differences betweenthe country scores we have used and those reported in other studies would helpto this end.

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About the authors

Charlotte Gaston-Breton, PhD in Marketing from the University Paris Dauphine (France), is anAssociate Professor at the University Paris Ouest Nanterre (France) as well as a VisitingProfessor at University Carlos III of Madrid (Spain). Her research interests concern several areasin consumer behaviour: the decision process of the consumers (perception process and cognitivebias), the pricing strategies and tactics (Euro impact and psychological pricing) andmulticultural management (advertising strategies of foreign firms and internationalnegotiations). Her publications are available in several journals such as InternationalMarketing Review, Journal of Product & Brand Management and Recherche et Applications enMarketing, book chapters and conference proceedings.

Oscar Martn Martn is an Assistant Professor at the Public University of Navarre (Spain) andan Associated Researcher at Uppsala University (Sweden). His research focuses on three mainareas in international business: the internationalization process of firms comprising expansionby Born Globals, psychic, cultural and country distance, international market selection andsegmentation and performance; country of origin awareness and effects; and MNEs, includingthe development and transfer of innovations and the role of headquarters. He has published inrefereed journals such as International Business Review, International Marketing Review, Journalof Management Studies and Management International Review, book chapters and conferenceproceedings. Oscar Martn Martn is the corresponding author and can be contacted at:oscar.martin@unavarra.es

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