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International market selection

and segmentation: a two-stage
model
Charlotte Gaston-Breton
Department of Business Administration, University Carlos III of Madrid,
Madrid, Spain and University Paris Quest Nanterre, Paris, France, and

Oscar Martn Martn

International
market selection

267
Received August 2009
Revised February 2010
Accepted January 2011

Department 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 and
segmentation model addressed to help decision makers such as foreign institutions and marketseeking multinational enterprises (MNEs) identify and select the most suitable European countries and
groups of consumers.
Design/methodology/approach The first stage is conceived as a macro-segmentation screening
process based on market attractiveness. The second is a micro-segmentation process addressed to
identify 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 market
selection (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 is
validated through the groups of countries empirically obtained. The model allows us to cluster the
European countries by market attractiveness, group the European consumers by personal and social
values and describe the value orientation of the resulting clusters.
Research limitations/implications The authors used cross-sectional data to validate their
model. Among the implications, they encourage international marketing and business scholars to
make use of Ingleharts framework.
Practical implications Institutional decision makers and market-seeking MNEs can follow or
adapt the prescribed model in order to identify the most promising and similar European countries
and groups of consumers. Public policy makers can gain an in-depth understanding of specific
personal and social values allowing them to shape public policy agendas.
Originality/value This paper contributes to the existing literature on IMS and segmentation in
three ways: it proposes an original and parsimonious two-stage IMS and segmentation integrative
model for both country-level and consumer-related analyses (suitable to handle and reduce the
European diversity that decision makers have to face when dealing with the general public or
consumer products); it applies theoretically grounded general segmentation bases and an alternative
established framework of consumer values (Ingleharts value system), and it adopts an updated and
pan-European perspective over the enlarged EU.
Keywords European Union, Market segmentation, Consumer behaviour, Multinational companies,
Public policy
Paper type Research paper

The authors wish to thank the three anonymous reviewers for their diligent and insightful
comments on previous iterations of the manuscript. This research is financially supported by the
Spanish Ministry of Education & Science project quoted SEJ2007-65897.
Because one of the special issue Guest Editors was a co-author of this paper, to prevent
conflict of interest it was submitted separately to the Editor of IMR and handled at arms length
throughout the process via the central IMR office.

International Marketing Review

Vol. 28 No. 3, 2011
pp. 267-290
r Emerald Group Publishing Limited
0265-1335
DOI 10.1108/02651331111132857

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1. Introduction
The identification of promising foreign target markets is a critical issue in international
marketing and international business research, strategy and management. Its capital
importance arises from the fact that its inter-relationships with other strategic
decisions, such as mode of entry (Koch, 2001), foreign marketing programmes
(Papadopoulos and Denis, 1988) and, ultimately, success and performance (Brouthers
et al., 2009) have been widely acknowledged. The evaluation of foreign target markets
has been approached from two complementary levels: first, a market (country)
perspective usually under the stream of research called international market
selection (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. This
paper is a step toward a higher integration of both perspectives by proposing a twostage model of IMS and segmentation in the process leading to the identification of
promising 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-investigated
despite their relevance and robustness in cross-cultural research. In IMS, the lack of
attention to consumer values is particularly acute, since neither the old nor most of the
recent studies consider them. An exception is the work by Sakarya et al. (2007) which
includes Hofstedes work-related values-based framework to measure cultural distance
in their preliminary assessment of promising emerging markets. However, these
researchers state (p. 218):
Although the importance and impact of culture on IMS has been explicitly recognized
through the psychic distance construct in internationalization literature, neither the
traditional models nor the normative market selection process models incorporate it as a
significant 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 cost
involved in its collection. Nevertheless, consumer characteristics and values provide
relevant information for managerial decisions when identifying both important and
stable international segments (Burgess, 1992). In particular, consumer values are the
underlying determinants of consumers needs, attitudes and behaviors (Vinson et al.,
1977; Kim et al., 2002) which illuminate critical marketing dimensions related to, for
instance, advertising and product positioning (De Mooij, 2003). Managers values have
been also found to significantly influence strategic decisions and the export performance
of the firm (Sousa et al., 2010). Therefore, we designed our study to cover this gap, by
using consumer values in an integrative approach of IMS and segmentation.
A second research gap and opportunity arises from the fact that the segmentation
bases used in previous studies on international segmentation, especially at the
consumer-level, are mostly domain specific (Steenkamp and Ter Hofstede, 2002). In
other words, given that the data collected by researchers is generally based on a
particular industry, it leads to practical implications only valid for those sectors such
as 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. market
attractiveness and consumer values) are independent of concrete objects and are more
stable and enduring than domain-specific variables (e.g. technological and economic

characteristics of the industry, consumer benefits in using specific products) which

means that they can provide decision makers with general and long-term guidance for
international marketing and communication strategies (Van Raaij and Verhallen, 1994).
Also considering that the IMS literature widely supports the use of general
segmentation bases in a first stage of country screening (e.g. Cavusgil et al., 2004), such
as the one proposed by our two-stage model, we want to alternatively apply general
segmentation bases both at the country and the consumer level. More specifically, we
decided to build our model on established general segmentation bases such as market
attractiveness 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 economic
globalization process (Levitt, 1983) as the most significant trend in international
markets over the last 50 years. Within this context, economically integrated blocks
have proven to be one of the most important phenomena in progress worldwide.
Among all of these blocks, the European Union (EU) constitutes the most advanced
process of integration. This attractive and changing region offers excellent research
opportunities and deserves new and updated studies considering the challenges
that the two recent enlargements (ten new countries in 2004 and two in 2007, see
http://ec.europa.eu/enlargement/) and the subsequent increase in heterogeneity
associated to them pose to companies targeting this block. In this light, several
studies have focussed on the different approaches to market segmentation (for a recent
review see Lemmens et al., 2007) and marketing strategies (Chung, 2005; Taylor and
Okazaki, 2006) that can be applied across the EU or, at least, across a number of
European countries. Nevertheless, studies on the enlarged single European market are
notably lacking and previous research on marketing strategies has mostly resulted in
mixed conclusions supporting either the idea of pan-European or multidomestic
strategies (Lemmens et al., 2007). This research gap, i.e. the lack of studies on the
enlarged EU, is particularly pronounced as EU marketing studies have addressed
issues in specific country contexts, industries, cultures and geographic areas rather
than 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 of
the enlarged European block that decision makers have to face when dealing with the
general public or consumer products.
The objective of our study is to cover the above-mentioned gaps. Our research
question is, therefore, whether or not general segmentation bases can be effectively
used in a new IMS and segmentation model for decision makers such as foreign
institutions (e.g. governments, chambers of commerce, foreign trade institutes, etc.)
and market-seeking MNEs (Dunning, 1998). More specifically, we propose a two-stage
market selection and segmentation model by integrating market attractiveness and
consumer values as general segmentation bases and aiming to help decision makers
identify and screen the most suitable European macro-regions, countries and groups of
consumers. This paper contributes to the existing literature on IMS and segmentation
in three ways: it proposes an original and parsimonious two-stage IMS and
segmentation integrative model for both country-level and consumer-related analyses;
it applies theoretically grounded general segmentation bases and an alternative
established framework of consumer values (Ingleharts value system); and it adopts an
updated and pan-European perspective over the enlarged EU.
In the remaining body of this paper, we first explain the theoretical bases
and 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 academics
and finally address the papers limitations and suggest future research avenues.
2. Literature, theory and model
An established stream of literature focussing on IMS has frequently proposed
segmentation 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 and
sociology 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 integrative
two-stage model (see Figure 1) rooted, respectively, in IMS prescriptions and the
value system segmentation bases proposed by Inglehart (1997) which we apply to
the enlarged EU through general (vs domain specific) segmentation bases. The
theoretical background and explanation for the model then follows.
2.1 The European macro-segmentation process: an IMS perspective
Most European segmentation studies have included country-level segmentation bases
which typically comprise a mix of economic, political, geographic, demographic,
etc. information without a clear guiding criterion. Since different variables induce
different classifications, selecting the appropriate macro-segmentation bases is critical
during the screening stage of the model, and theoretical bases must be proposed. We
suggest that the relevant variables for macro-segmentation be identified and borrowed
from the IMS literature. In fact, researchers on IMS have discussed and supported the
efficiency and effectiveness of sequential screening processes when deciding whether
or not to enter or expand a particular market (Cavusgil, 1985). Most sequential
decision-making IMS models include an initial screening stage based on low cost,
comparative, and widely available secondary information indicators about countries
such 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 on
market 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/secularrational and survival/self-expression dimensions)

Figure 1.
A two-stage international
markets selection and
segmentation model

 Personal values
 Social values (values in raising children)

research on IMS to discriminate among foreign markets (Ayal et al., 1987; Bennett,
1995; Nowak, 1997; Rahman, 2003). In this regard, two dimensions of market
attractiveness are usually distinguished: market size/potential (e.g. Samli, 1972;
Douglas and Craig, 1982; Cavusgil, 1990; Brewer, 2001; Papadopoulos et al., 2002) and
market 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 international
market screening literature is highly supportive of using market size and the level of
economic development for identifying potential opportunities.
Market size/potential, on the one hand, has to do with the size of the market and
the amount of sales, profits, etc. that can be obtained from entry and throughout the
presence of firms in that market or in a planning period. This construct is expected
to be reflected in a variety of indicators, all relating to the size of the economy. Indeed,
international trade theories suggest a strong relationship between potential
international 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 expected
to 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 terms
of its socio-economic advancement or progress. Therefore, aspects such as, for
instance, per capita income and employment rates are believed to reflect levels of
market development.
Based on both key dimensions of market attractiveness, our model proposes a
parsimonious initial macro-segmentation screening stage. We make the critical
assumption that, in the EU these economic aspects are, overall, the most relevant
macro-characteristics to be considered by foreign entrants. This assumption is
sustained by the fact that, as a consequence of the integration process and the resulting
single market, there are very similar legal and political environments and market
barriers faced by firms operating or willing to operate in the block, while economic
size/potential and development (and culture) vary notably across countries. This
more uniform legal and political environment is clearly a visible trend since the
recent reforms involved by the Treaty of Lisbon which provides the European
Parliament with new powers regarding, for instance, EU legislation and policy
making.
2.2 The European micro-segmentation process: Ingleharts framework
With the exception of the studies by Bijmolt et al. (2004) and Gielens and Steenkamp
(2004), research on European market selection and segmentation has exclusively used
either macro-segmentation at a country level or micro-segmentation at a consumer
level (for an excellent review, see Lemmens et al., 2007). In general, high costs and low
availability of international databases have resulted in most studies on European
segmentation 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 the
European context. They range from product-specific characteristics, such as attitudes
toward attributes (Askegaard and Madsen, 1998; Ter Hofstede et al., 1999; Bijmolt et al.,
2004), to domain-specific features such as lifestyles (Boote, 1983), and general
characteristics 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 they
follow 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 end
state of existence is personally or socially preferable to an opposite or converse mode of
conduct or end state of existence (Rokeach, 1973, p. 5). Consumer behavior literature is
supportive of a general relationship between values and behavior (Vinson et al., 1977).
Therefore, values are also an excellent basis for clustering consumers and countries
with cultural communalities. Actually, decision makers willing to target the EU will be
interested in the identification of potential groups of European consumers sharing
closer 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 of
identifying 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 values
that could accurately define consumer segments (Kamakura and Mazzon, 1991), the
most commonly used framework in international segmentation is Hofstedes (1980)
cultural model (Steenkamp, 2001) and dimensions. Consequently, some European
segmentation 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 these
dimensions, attention should also be paid to general human values in order to measure
consumer values with adequacy (Kamakura and Mazzon, 1991).
In this regard, Rokeachs (1973) traditional social value survey which consists of
18 instrumental values (ideal modes of behavior) and 18 terminal values (ideal end
states of existence) served as a basis to identify cross-national segments in the United
Kingdom, 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 used
to attempt to explain cultural differences in various regions, including European
countries (Steenkamp, 2001). However, this framework has not been used for
pan-European segmentation. More surprisingly, Ingleharts theory of value change
(1977, 1990, 1997) another remarkable value system has never been applied to
domestic, European or international segmentation despite its noteworthy and solid
background 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 of
modernity. By exploring the data collected from the WVS since 1981, Inglehart and his
colleagues (see, e.g., Inglehart, 1997; Inglehart and Baker, 2000; Inglehart and Welzel,
2005) showed that modern societies reflect the shift from survival to self-expression
values. In addition, they found another dimension of cross-cultural variation which
also reflects the modernization process: the shift from traditional values to more
secular-rational values, which emphasizes that social and political systems are
no 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 both
dimensions.
Hofstede, Schwartz, Inglehart and others all propose relevant cultural frameworks
based on large survey data. Nevertheless, Ingleharts value system offers scholars
and managers the opportunity to implement an alternative framework based on the
largest study ever conducted in the world, using publicly available data (see
www.worldvaluessurvey.com) which has been updated in the European context in
the Eurobarometer studies (see http://ec.europa.eu/public_opinion/). Therefore, we
follow Ingleharts framework to provide theoretical foundation to our model and, as

Characteristics of
value orientation

Personal values
relating to both
dimensions

Social values
relating to both
dimensions

Shift from survival to

self-expression values

Shift from traditional to

secular-rational values

Rather than mere physical security,

subjective well-being, selfexpression and quality of life are
valued

Decisions, political rule and sense

making are no longer based on a
system of beliefs, but are
systematically scrutinized by the
faculty of human reason
Traditional values emphasize the
following:
Religion is important
Patriotism is important
Respect for authority is important
Secular-rational values emphasize
the opposite

Survival values emphasize the

following:
Democracy is not necessarily the
best form of government
Respect for other cultures is not
important
Liberty aspirations are not
important
Self-expression values emphasize
the opposite
Hard work is an important value in
raising children
Imagination, tolerance and respect
for others are not important values
in raising children

Obedience and religious faith are

important values in raising
children

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Table I.
The two dimension of
modernization: from
survival to self-expression
values and from
traditional to secularNote: Only the most important items are presented above although many other values are measured
rational values
in the World Values Surveys

we will further explain in the next section, to select the indicators of the secularrational (vs traditional) and self-expression (vs survival) dimensions in terms of
personally driven values and socially driven values (values in raising children) in order
to characterize Europeans values.
3. Methodology
3.1 Data
We apply our two-stage model to the current 27 EU members. The use of the census of
EU members allows us to cover all of the EU variation in terms of market
attractiveness as well as consumer values. In addition, in line with our purpose of
illustrating a model that could be easily implemented by decision makers, we use two
secondary information sources to collect our data. In the first stage, we employ the
World Bank Development Indicators (2007) to measure market size/potential and
market development as general segmentation bases. In the second stage, we extract
data from the Eurobarometer surveys to capture Ingleharts value dimensions.
3.2 Operationalization of the variables
The macro-segmentation screening stage is based on market attractiveness, which is
measured through market size/potential and market development as specified in
Table II. In order to illustrate the model, market size/potential is operationalized
through four established reflective indicators (Jarvis et al., 2003) that clearly capture
the 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;

Table II.
Measures and descriptive
statistics of market
attractiveness
Scale

Min

Max

Mean

Current USD, million

5,748
2,906,681
534,145.30
Number of inhabitants
406,020 82,310,995 18,336,011.07
1,000 million Euros
3.7
723.7
139.17
Electricity, in million Kwh
2,216
614,164
121,487.33
Purchasing power standards
(EU-27 100)
37.1
278.6
98.68
Total employment rate (2006)
%
54.5
77.4
64.98
Gross domestic expenditure on R&D (2005) % of GDP
0.4
3.9
1.38
Level of internet access (2006)
% of households with internet
access at home
14
80
45.11
Corruption perceptions index (2006)
1-10
3.1
9.6
6.62

Indicators

274

Market size/potential GDP (2006)

Population (2006)
Imports (2006)
Energy consumption (2004)
Market development GDP per capita

Factor/variable

19.46
1.86

47.01
6.96
0.92

818,012.06
23,179,181.43
181.25
164,026.05

Standard deviation

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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. Douglas
and Craig, 1982). Market development is measured through five indicators which also
visibly capture the domain of the construct and present high internal consistency
(a 0.910): GDP per capita, total employment rate, gross domestic expenditure on
R&D, level of internet access and the corruption perceptions index. These indicators
have been frequently used to measure market development and related constructs. For
instance, Cavusgil et al. (2004) used GDP per capita as an indicator of prosperity or
economic well-being; DiRienzo et al. (2007) and Russow and Okoroafo (1996) as that of
economic development; and Dow and Karunaratna (2006) for industrial development.
Also, Cavusgil et al. (2004) found unemployment rate loading in a standard of living
factor and internet hosts in that of development of the infrastructure.
The micro-segmentation stage is based on Ingleharts values indicators. Inglehart
and 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. More
specifically, Inglehart and Baker (2000) identified several values and items strongly
linked to the survival/self-expression dimension such as hard work is one of the most
important things to teach a child, imagination is not one of the most important things
to 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 recent
set of analyses conducted by Inglehart and Welzel (2005) among 78 societies surveyed
in the 2000-2001 WVS shows that traditional values are especially reflected by the
following items: god is very important in respondents life (factor loading 0.91) and
it is important for a child to learn obedience and religion (factor loading 0.88).
Secular-rational values emphasize the opposite. In summary, many indicators relating
to personal values (e.g. democracy or religion) and several social values or values in
raising children (e.g. tolerance, obedience, hard work, etc.) are correlated to these two
dimensions.
Similarly, the European Values Survey (EVS) has measured the indicators of the
secular-rational and self-expression value orientations through a pool of items since
1981. More recent datasets like the Spring 2008 Standard Eurobarometer and the 2005
Special 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 same
line as Bijmolt et al. (2004), we consider that using this set of surveys makes an
effective contribution to our study. First, we turn to the set of values proposed in the
Standard and Special Eurobarometer to study European inhabitants personal and
social values since its content is better adapted to European reality than any of the
different potential cultural or social values traditionally used in a plethora of other
studies. Second, it covers the population (aged 15 years and over) of all EU countries
in recent periods (2005 and 2008). Third, the scores provided are based on more than
30,000 face-to-face interviews in peoples homes and thus it makes up the largest and
most representative available sample of EU respondents. Fourth, these value scores are
updated, so this avoids the risk of making decisions based on pictures taken or
situations observed in the past. In line with our theoretical framework and our
suggested model, we decided to combine the eight childrens upbringing values
measured in the 2005 Special Eurobarometer with the two most important personal
values indicators in terms of correlation with Ingleharts dimensions which were
recently measured in the 2008 Standard Eurobarometer and described in Table III.

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Factor/variable

Indicators

Personal values

Religion
Democracy
Obedience
Hard work
Determination, perseverance
Thrift, economizing and avoiding waste
Tolerance and respect for other people
Sense of responsibility
Independence
Imagination

Scale

Mean

Standard
deviation

%a
%
%b
%
%
%
%
%
%
%

8.26
25.85
55.96
54.70
65.07
55.85
81.11
82.33
55.26
48.44

6.87
8.90
13.93
27.09
10.98
12.29
7.61
5.41
12.11
11.58

276

Social values
(childrens
upbringing)

Table III.
Measures and descriptive
statistics of personal and
social values

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

3.3 Data analysis technique

As in most studies on segmentation, we use cluster analysis as the main technique of
data analysis. In both macro- and micro-segmentation stages, we first explore the
dimensionality of our indicators by means of factor analysis and, second, we create the
clusters from the factor scores obtained. This procedure is frequent in the literature
(e.g. Askegaard and Madsen, 1998; Steenkamp, 2001) and avoids the problem of
correlated variables and the influence of an unbalanced number of items per dimension
over the multidimensional distances that the cluster algorithm estimates when
grouping objects. We performed a hierarchical cluster analysis using the squared
Euclidean distance as the measure of countries proximity in regard to the factors.
4. Findings
4.1 The identification of European countries attractiveness
We started by carrying out a principal components analysis of our nine market
attractiveness indicators, with Varimax rotation and Kaiser normalization. We found
two 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 market
development also grouped together (see Table IV).
From the factor scores, macro-segmentation produced three large clusters of
countries which show higher and lower attractiveness in terms of market size/potential
and development. In closer detail, and reflected in the dendrogram and the
agglomeration coefficients, we find five large and developed economies in the first
cluster: France, Germany, Italy, Spain and the UK. In the second cluster, we found eight
countries that perform highly on market development but obtain modest scores on
market size/potential indicators: Austria, Belgium, Denmark, Finland, Luxembourg,
Ireland, Sweden and the Netherlands. Finally, the third cluster is composed of the 14
less attractive markets taking together both dimensions (see Figure 2).
Further, the second and third groups of countries are closer to each other in terms of
market size/potential than to the most attractive cluster. Since we use this first stage

Component
Rotated component matrix
Level of internet access
Corruption perceptions index
Gross domestic expenditure on R&D
Total employment rate
GDP per capita
Population
Energy consumption
GDP
Imports
Variance extracted (%)

0.048
0.047
0.235
0.150
0.156
0.986
0.985
0.978
0.942
43.2

0.936
0.934
0.831
0.820
0.734
0.048
0.230
0.123
0.157
41.6

Notes: Extraction method: Principal component analysis; Rotation method: Varimax with Kaiser
normalization

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Table IV.
Principal components
analysis of market
attractiveness indicators

Figure 2.
Macro-segmentation:
countries factor scores

as a screening procedure in the context of IMS and with an expectedly relatively

stable result and long-term perspective, decision makers may decide discard the
selection of the third cluster (or the cluster with less attractiveness if other product- or
industry-specific operationalizations of the constructs are used), at least as the main
option, and focus their analysis on the other two groups.

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4.2 Dimensionality of the European consumers values

In the second stage, we applied the micro-segmentation based on the personal and social
values (two personal values and eight specific values in raising children) identified by
Ingleharts value system. Again, we first explored the dimensionality of our measures
and found three main factors with eigenvalues over one, and more than one indicator,
reflecting survival values, self-expression values and traditional values (see Table
V). These three factors retain 75.6 percent of the variance and nine of the initial ten
values. We left out the sense of responsibility item because it loaded alone in a fourth
dimension, which did not properly explain the variability of the countries values.
These three dimensions are similar, but not identical, to Ingleharts values
classification since they are based exclusively on a recent sample of European
consumers. However, we consider them useful as they provide a relevant segmentation
basis to the decision makers who are currently targeting or willing to target consumers
located in the EU. According to Inglehart and Baker (2000), survival values emphasize
mostly that hard work is one of the most important things to teach a child and that
democracy is not necessarily the best form of government. Our first dimension of
survival values, which explains 30.7 percent of the variance, does yet first and
positively reflect the Hard work item and second and negatively the democracy
item. Also, determination, perseverance and thrift, economizing and avoiding
waste notably add to this factor.
Independence, imagination as well as tolerance and respect for other people do
contribute 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 two
factors of survival and self-expression values are valid to uncover over 53 percent
of the cross-country values variation in the EU. Following Ingleharts value structure
(1997), countries are expected to reflect survival values as opposed to self-expression
values. However, in our analyses of the European countries which we will discuss
later they form two independent dimensions instead of a continuum. Also, referring
to our findings (see Figure 3), we observe that:
(1)

most of the countries that score high on survival values and low on selfexpression values are East European countries (e.g. Slovakia, the Czech
Republic, Latvia, Romania, Hungary and Bulgaria);

Rotated component matrix

Table V.
Principal components
analysis of personal and
social values

Hard work
Democracy
Determination, perseverance
Thrift, economizing and avoiding waste
Independence
Imagination
Tolerance and respect for other people
Religion
Obedience
Variance extracted (%)

Component
2

0.893
0.789
0.774
0.719
0.016
0.023
0.351
0.109
0.302
30.7

0.049
0.123
0.043
0.196
0.846
0.785
0.773
0.101
0.181
22.5

0.056
0.029
0.530
0.465
0.017
0.079
0.187
0.901
0.808
22.3

Notes: Extraction method: Principal component analysis; Rotation method: Varimax with Kaiser
normalization

(2)

Sweden scores particularly high on self-expression values and low on

survival values; and

(3)

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

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

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4.3 The value orientation of the European macro- and micro-clusters

The three macro-clusters of European countries, classified according to their
attractiveness, 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 and
traditional values while negative in self-expression (see Figure 5), whereas the two
most attractive groups are oriented toward self-expression values and get negative
mean scores on survival and traditional values.
Following our model, we perform the second stage of cluster analysis in each of the
two groups ranking higher in market attractiveness in order to identify similar micro3.00000

Sweden

United Kingdom

Self-expression values

2.00000
Luxembourg

Ireland
Malta

1.00000

Slovenia
Finland

Denmark

Netherlands

Spain

Poland

0.00000
Austria

Greece
Bulgaria
Estonia
France Belgium
Hungary
Portugal
Italy
Romania

Germany

1.00000

Cyprus

Lithuania
Czech Republic
Slovakia

Latvia

2.00000
3.00000

2.00000

1.00000
0.00000
Survival values

1.00000

2.00000

Figure 3.
Micro-segmentation:
countries factor scores for
survival and selfexpression values

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Cyprus

3.00000

Malta

2.00000

280
Traditional values

Greece

1.00000

Poland
United Kingdom
Romania

Netherlands

0.00000

Lithuania
Denmark

Austria Finland
Germany

1.00000

Sweden

Figure 4.
Micro-segmentation:
countries factor scores for
survival and traditional
values

Hungary
Ireland
Slovakia
Bulgaria
Italy
Spain Luxembourg
Slovenia
Latvia
Portugal

France

Belgium

Czech Republic
Estonia

2.00000
3.00000

2.00000

1.00000
0.00000
Survival values

1.00000

2.00000

segments in terms of consumers values. To this end, we enter the factor scores of the
three relevant dimensions of survival, self-expression and traditional values in
the new cluster analyses. Results from the most attractive group show, first, that
France, Italy and Spain group together in a micro-cluster. Within the most attractive
macro-cluster, these are the countries closest in terms of the three dimensions of
personal and social values. Indeed, in these countries, survival, self-expression and
traditional values are relatively moderate (see Figure 6). Second, Germany and the
UK create individual micro-clusters and reflect low and high scores, respectively, on
the three dimensions.
Within the second most attractive macro-cluster, three micro-clusters emerged. One
is composed by Sweden, which scores the highest on self-expression values and very
negatively in the survival and traditional (see Figure 7). In a second micro-cluster
are Luxembourg and Ireland. Although displaying opposite signs in tradition (cluster
analysis does not search for patterns but for n-dimensional distances), they are quite
close in all three dimensions and more particularly in O`self-expression.O Finally,
Austria, Finland, the Netherlands, Belgium and Denmark belong to a third microcluster. They are close, and get negative scores, in traditional values with all of them
except Belgium scoring negative in survival values.
5. Discussion, implications, limitations and future research
5.1 Discussion
The core findings allow decision makers to identify the most attractive markets and
the most suitable strategies in reaching European consumers. In our illustration, we

8.00000
Survival
Self-expression
Traditional

6.00000

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4.00000

Factor scores

281
2.00000
0.00000
Cluster 3

Cluster 2

Cluster 1

2.00000
4.00000
6.00000
8.00000
Clusters of EU countries by market attractiveness

Notes: 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

Figure 5.
Value orientation of the
three macro-clusters of
European countries

2.50000
2.00000

Survival
Self-expression
Traditional

1.50000

Factor scores

1.00000
0.50000
0.00000
France

Germany

Italy

Spain

United Kingdom

0.50000
1.00000

Figure 6.
Value orientation of the
first cluster of most
attractive European
countries

1.50000
2.00000
Most attractive countries cluster

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2.50000
2.00000
1.50000

Survival
Self-expression
Traditional

1.00000
Factor scores

282

0.50000
0.00000
Austria

Belgium

Denmark

Finland

Ireland Luxembourg

Netherlands

Sweden

0.50000
1.00000
1.50000

Figure 7.
Value orientation of the
second cluster of most
attractive European
countries

2.00000
2.50000
3.00000
Second most attractive countries cluster

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 decision
makers if we leave aside other strategic aspects such as firm resources and
characteristics, particular industries, and the factors of the macro-environment not
considered by the model and use general segmentation bases. This group of countries
globally demonstrates higher mean scores of self-expression values than those of
survival 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 relative
proximity is what decision makers have to consider in order to develop marketing
strategies and communication campaigns based on the three sets of value orientations.
For instance, considering that advertising appeals are likely to reflect cultural values
and that matching cultural values and advertising appeals enhance the persuasiveness
of advertising (Okazaki and Mueller, 2007), global advertising appeals (vs local
advertising appeals) could be developed for consumers sharing the same value system
(vs different value system) (De Mooij, 2003). In particular, decision makers such
as advertisers may consider similar strategies in France, Italy and Spain (the first
micro-cluster) while Germany and the UK (the second and third micro-clusters) need
to be considered independently since they, respectively, reflect low and high scores
on the three dimensions and they are far from each other and from the Latin
micro-cluster. To go further, positive references to values such as hard work and
democracy (associated to the survival dimension), imagination and independence
(relating to the self-expression dimension) or religion and obedience (associated to
the traditional dimension) are more likely to be accepted in communication campaigns
by a British audience than by a German one (see Figure 6 and Table V) given their
higher congruence with British values and, ultimately, the cognitive processes of
selective attention, distortion and retention influencing advertising effectiveness.

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 that
consumers from Italy, the UK and Germany belong to different value segments.
A second group of European countries can also be considered of higher interest
than the third one because of their attractiveness in terms of market development
(i.e. Austria, Belgium, Denmark, Luxembourg, Ireland, Finland, the Netherlands and
Sweden). Globally, this group proves most oriented toward self-expression values while
both survival and traditional values also remain distinguishing features of the group
due to their negative scores. These globally negative scores mean that, in general,
in order to design congruent messages to this group they have to negatively
emphasize survival and traditional values (or positively self-expression and modern or
non-traditional values). However, due to the fact that these countries were primarily
grouped in terms of market attractiveness, their proximities and patterns of value
orientations is diverse (see Figure 7).
Again, the micro-segmentation identified within this second macro-cluster three
micro-clusters having the potential to help in the development of marketing strategies
and communication campaigns based on the three sets of value orientations. In
particular, Sweden (a micro-cluster) needs to be reached through values such as
imagination, independence and tolerance due to their association to the selfexpression dimension, whereas values relating to the survival and the traditional
dimensions will be less effective. Luxembourg and Ireland (another micro-cluster) are
also proximate in their value orientation and can be effectively reached with a
campaign emphasizing self-expression and survival values. Finally, Austria, Belgium,
Denmark, Finland and the Netherlands (the third micro-cluster) highly vary in their
value orientation although it would be possible to design a campaign centered in
the value orientation of the centroid of the sub-group, i.e. the average point in the
multidimensional space defined by the three dimensions.
Consequently, by considering both the economic and socio-cultural differences
within Europe, we underline that despite years of integration efforts, a standardized
approach seems to some extent ineffective for tackling the European market. This
corollary is in line with previous studies on marketing strategies which demonstrate
that New Zealand, Japanese or US managers still perceive differences among EU
markets (Chung, 2005; Taylor and Okazaki, 2006).
Another interesting theme for discussion concerns the differences between our values
dimensions and those proposed by Ingleharts theory, both in terms of (a) content (the
dimensions meaning) and (b) importance (variance explained). Regarding (a), the
two Ingleharts key dimensions of cross-cultural variation, i.e. the traditional/
secular-rational dimension (differences between religious and traditional values and
secular and rational values) and the survival/self-expression dimension (the shift from
economic and physical security to self-expression and well-being values) have also
been reflected in our study. From this perspective, our research is, to some extent,
supportive of Ingleharts framework in a European context. However, our findings also
show that survival and self-expression make up two distinctive uncorrelated
dimensions instead of one, which suggests that they may not form a continuum of
values across the EU. In other words, individual European countries can be reflected
in 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 (market
attractiveness), each of the three resulting macro-groups completely opposite values in
their orientation toward survival vs self-expression (see Figure 5), again support

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Ingleharts two dimensions. Moreover although we would need a longitudinal

research design to properly prove it the modernization theorists who argue that
economic change brings cultural change might come out reinforced given that three
groups of countries with varying economic settings in terms of market size/potential
and development also show different scores in their social and personal value
orientations.
On the other hand, our findings also point to an association between Ingleharts
traditional/secular-rational dimension and our traditional values dimension. Since
we 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 likely
still 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 less
economically attractive cluster in comparison to the negative ones in the other two
clusters.
When comparing (b), i.e. the importance of the dimensions, beyond the fact that our
three dimensions explain more cross-cultural variance than in Ingleharts (76 percent
vs 71 percent), we find some specific remarkable differences. First, our traditional
values dimension accounts for 22 percent of the variance and thus ranks third
in importance. In contrast, for Inglehart, the traditional/secular-rational values
dimension remains the major factor as it explains up to 46 percent of cross-cultural
variation in the world (Inglehart, 2007). We suggest this difference could be explained
if we consider that all EU members have currently already shifted from an agrarian
to an industrial society while this is not the case in the world perspective considered
by Inglehart and Welzel (2005). In fact, these researchers based their analyses on data
from 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. the
change from survival to self-expression values) appears to explain over 53 percent of
EU cross-cultural variation while the figure only comes to 25 percent in Ingleharts
findings. Again, Europes specific characteristics in terms of economic development, in
comparison to the world sample used by Inglehart, point to a similar justification for
this shift.
In the context of a steady process of economic integration and convergence in
Europe, our results support the idea of a cultural heterogeneity, which suggest that As
economic conditions converge across countries, the manifestation of value differences
will become stronger (De Mooij and Hofstede, 2002, p. 61). Understanding the values
of consumers is therefore a key issue for managers and researchers in international
marketing. Our research is a step in that direction since it contributes to identifying
the diverse dominant values of European consumers. In this light we want to remark
that they can have a specific value orientation (e.g. self-expression values for the
Swedish), 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 original
two-stage IMS and segmentation model based on established screening criteria and
the personal and social values and dimensions derived from Ingleharts theory.
This models strengths are visible in terms of content (it includes the most relevant
dimensions of economic and cultural variation appropriate for long-term decisions),
data availability (regarding both the number of countries and time proximity), easy use
or interpretation (only factor and cluster analyses are needed), parsimony (it simplifies

the screening and consumers segmentation process by focussing exclusively on key

factors), 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 and
pan-European perspective on the enlarged EU market and by exploring and applying
measures of specific European values.
5.2 Implications
Our research presents important implications for institutions and public policy
makers, managers and academia. First, institutional decision makers can follow
the prescribed model as a market screening tool in order to prioritize European
countries in terms of market attractiveness. As mentioned earlier, the use of the
macro-segmentation stage as a screening procedure is broadly supported by the IMS
literature (e.g. Cavusgil et al., 2004). Second, we present low cost and highly available
indicators of both sets of measures hence the practical importance of our specific
measures 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 promote
in order to build more self-expressive and secular-rational and less survival oriented
societies in the long term. The importance of this issue goes beyond European borders
since it is connected with one of Ingleharts central findings when survival seems secure:
increasing emphasis on self-expression values makes the emergence of democracy
increasingly likely where it does not yet exist, and makes democracy increasingly
effective where it already exists (Inglehart, 2007, p. 11). Indeed, self-expression values
have been considered civic in character in some recent studies (e.g. Welzel, 2010).
As for the managerial implications, considering that we applied a general
segmentation basis, market-seeking MNE managers can use industry- and productspecific criteria to operationalize both dimensions and readily identify the specific
attractiveness of European markets related to their businesses. In other words, our
model illustrates the use and integration of general macro-and micro-segmentation
bases in an IMS context. Industry- and product-specific applications are possible just
by measuring the same key constructs of market attractiveness for particular
industries and products. In addition, considering the expected impact of consumer
values on marketing programs (Vinson et al., 1977), advertising agencies and business
to consumer firms (whose products require frequent and intense communication
strategies) would benefit from categorizing countries with similar personal and social
values. In the same vein, brand positioning and advertising messages that match the
specific but common values of European countries groups are obviously expected to
emerge. More in general, in relation to the mixed results that research on international
marketing standardization has generated from the EU perspective (see Chung, 2005),
our findings support, somehow, a more eclectic view. Although we agree that the
differences in consumers value orientation make it difficult to employ a highly
standardized marketing program across the EU countries, we suggest that managers
follow a more fine-grained approach in which communication messages can at least be
standardized within the micro-clusters that their specific analysis may detect by
applying our model in their particular sectors. Last, but not least, large market-seeking
MNEs in consumer markets, owning resources to penetrate most European countries,
should be aware of the potential benefits of using our approach: first to prioritize
groups of markets and, second, to adapt part of their marketing mix to their target
consumers personal and social values.

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When it comes to the implications for researchers, we framed our personal and
social values in Ingleharts theory and thus we bridged different research domains
and traditions by bringing solid contributions developed in the sociological and
political sciences to the international marketing and business fields. In order to
conceptualize and operationalize core values in their studies in line with Yaprak
(2008) we encourage scholars to not only use the most typical frameworks of
cross-cultural variation, such as those based, for instance, on Hofstede (1980),
Schwartz (1994) or the Globe study (House et al., 2004), but other established references
in the domains of social sciences as well.
5.3 Limitations and future research avenues
Among the research limitations, is the cross-sectional data we used to develop our
model. Further research is needed to study the temporal stability of the dimensions
found and of the clusters observed. This can be done by monitoring the Eurobarometer
waves and by testing the model with new data on the enlarged EU as soon as new
surveys are available. However, we expect the findings to be robust since Ingleharts
framework has been longitudinally replicated and confirmed in different datasets.
Second, we recognize the traditional criticisms and limitations of IMS methods based
on grouping models (Cavusgil and Nevin, 1981; Cavusgil et al., 2004) related to
the aggregate nature of the data generally used, the lack of temporal validity of
the clusters due to the possible rapid changes in markets, the lack of available
comparable data and the internal heterogeneity of the countries. However, throughout
the manuscript, our focus has been limited to the research gaps that we identified
in the introduction since no study can deal with all of the potential limitations
and gaps in an area of research. Therefore, addressing these limitations was out of
our scope and future research will have the potential to contribute to overcoming
them. Third, the applicability and validity of our model in other world regions cannot
yet be assumed. On the one hand, our purpose was to develop a model useable
for 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 of
European values. As a result, and despite the significant similarities between our
dimensions and those found by established theories, we remain skeptical about
the extent to which our model can be applied or replicated in other areas of the
world. Fourth, while the model seems particularly useful for decision makers dealing
with general public policies and for market-seeking MNEs, the combination of more
than one method of market selection has been recommended for the final market
selection process (Cavusgil et al., 2004). Future studies can combine the model and
extend its stages and applications in that direction. In this regard, a particularly
promising possibility would be its combination with models including other
micro-environmental actors such as, for instance, type or level of competition.
Finally, future research can go forward as follows: first, in studying and applying
alternative established frameworks of cross-cultural variation borrowed from
other social sciences and second, with a specific comparison of the proposed
dimensions and those found in major studies in the marketing and business fields.
For instance, Inglehart (2007) discusses the commonalities between his self-expression
values, Hofstedes (1980) individualism and collectivism dimension and Schwartzs
(1994) autonomy/embeddedness concept. Discussions about the differences between
the country scores we have used and those reported in other studies would help
to this end.

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About the authors
Charlotte Gaston-Breton, PhD in Marketing from the University Paris Dauphine (France), is an
Associate Professor at the University Paris Ouest Nanterre (France) as well as a Visiting
Professor at University Carlos III of Madrid (Spain). Her research interests concern several areas
in consumer behaviour: the decision process of the consumers (perception process and cognitive
bias), the pricing strategies and tactics (Euro impact and psychological pricing) and
multicultural management (advertising strategies of foreign firms and international
negotiations). Her publications are available in several journals such as International
Marketing Review, Journal of Product & Brand Management and Recherche et Applications en
Marketing, book chapters and conference proceedings.
Oscar Martn Martn is an Assistant Professor at the Public University of Navarre (Spain) and
an Associated Researcher at Uppsala University (Sweden). His research focuses on three main
areas in international business: the internationalization process of firms comprising expansion
by Born Globals, psychic, cultural and country distance, international market selection and
segmentation and performance; country of origin awareness and effects; and MNEs, including
the development and transfer of innovations and the role of headquarters. He has published in
refereed journals such as International Business Review, International Marketing Review, Journal
of Management Studies and Management International Review, book chapters and conference
proceedings. Oscar Martn Martn is the corresponding author and can be contacted at:
oscar.martin@unavarra.es

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