Transcript Slide 1

Market - Regions
Objectives of
Developing Countries
• Industrialization is the fundamental objective of
most developing countries
• Economic growth is seen as the achievement of
social as well as economic goals
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Better education
Better and more effective government
Elimination of many social inequities
Improvements in moral and ethical
responsibilities
• Privatization is the norm and currently a major
economic phenomenon in industrialized as well
as in developing countries
Marketing’s Contributions
• Marketing fits between productive capacity
and consumer demand
• The marketing process is the critical element
in effectively utilizing production resulting
from economic growth
• Marketing is instrumental in laying the
groundwork for effective distribution
Marketing in a
Developing Country (1 of 4)
• Marketing efforts must be keyed to each
situation and custom tailored to each set of
circumstances
– A promotional program for a population that
is 50% illiterate is vastly different from a
program for a population that is 95% literate
http://www.nationmaster.com/graph/edu_ill_r
at_by_sex_age_15-illiteracy-rates-sex-aged15
https://www.cia.gov/library/publications/theworld-factbook/geos/ar.html
http://www.oecd-ilibrary.org/statistics
Marketing in a
Developing Country (2 of 4)
• In evaluating the potential in a developing
country, the marketer must look at two areas:
– Level of market development
– Demand in developing countries
Marketing in a
Developing Country (3 of 4)
• Level of market development
– Marketer must evaluate existing level of market
development and receptiveness
– The more developed an economy, the greater the
variety of marketing functions demanded, and the
more sophisticated and specialized the institutions
become to perform marketing functions
– Part of the marketer’s task when studying an
economy is to determine what in the foreign
environment will be useful and how much
adjustment will be necessary to carry out stated
objectives
Marketing in a
Developing Country (4 of 4)
• Demand in developing countries - Three
distinct kinds of markets in each country
• Traditional rural/agricultural sector
• Modern urban/high-income sector
• Transitional sector usually represented by
low-income urban slums
Strategic Implications for
Marketing (1 of 2)
• A vast population of the emerging market are
viable customers with expanding income
• As a country develops
– Incomes change
– Population concentrations shift
– Expectations for a better life adjust to higher
standards
– New infrastructures evolve
– Social capital investments made
• When incomes rise, new demand is generated at
all income levels for everything from soap to cars
Strategic Implications for
Marketing (2 of 2)
• The “$10,000 Club” is group of consumers with
homogenous demands who share a common
knowledge of products and brands
• If a company fails to appreciate the strategic
implications of the $10,000 Club, it will miss the
opportunity to participate in the world’s fastestgrowing global consumer segment
• Markets are changing rapidly, and identifiable
market segments with similar consumption
patterns are found across many countries
Group question
You want to sell men’s face cream. What
country would you sell it in?
Geographic and Temporal Proximity
and Cultural Factors
• Geographic and temporal proximity
– Recent research demonstrates that differences
across time zones are more important than physical
distances
– Trade tends to travel more easily in north-south
directions then it did in ancient times
– Countries that are widely separated geographically
have major barriers to overcome in attempting
economic fusion
• Cultural factors
– The more similar the culture, the more likely a
market is to succeed because members understand
the outlook and viewpoints of their colleagues
Patterns of
Multinational Cooperation (1 of 3)
• Regional cooperation groups
– Governments agree to participate jointly to
develop basic industries beneficial to each
economy
• Free trade area
– An agreement between two or more countries
• To reduce or eliminate customs duties and
nontariff trade barriers among partner
countries
• Members maintain individual tariff
schedules for external countries
Patterns of
Multinational Cooperation (2 of 3)
• Customs union
– Enjoys free trade area’s reduced or eliminated
internal tariffs
– Adds a common external tariff on products
imported from countries outside the union
• Common market
– Eliminates all tariffs and other restrictions on
internal trade,
– Adopts a set of common external tariffs
– Removes all restrictions on the free flow of
capital and labor among member nations
Patterns of
Multinational Cooperation (3 of 3)
• Political union
– Involves complete political and economic
integration, either voluntary or enforced
– Commonwealth – a voluntary organization
that provides for the loosest possible
relationship classified as economic integration
– Two new political unions came into existence
in the 1990s
• The Commonwealth of Independent States
(CIS)
• The European Union (EU)
Big Emerging Markets (BRICKS)
(1 of 2)
• The U.S. Department of Commerce estimates that over
75% of the expected growth in world trade over the next
two decades will come from the more than 130 developing
and newly industrialized countries
• Big emerging markets share important traits
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Are all geographically large
Have significant populations
Represent sizable markets for a wide range of products
Have strong rates of growth or the potential for significant
growth
Have undertaken significant programs of economic reform
Are of major political importance within their regions
Are regional economic drivers
Will engender further expansions in neighboring markets as
the grow
Big Emerging Markets (2 of 2)
• BRICKS include Brazil, Russia, India, China and
South Africa. Others include Mexico, Turkey,
Poland
• Different from developing countries in that they
import more than smaller markets and more
than economies of similar size
• Because many BEMs lack modern infrastructure,
much of the expected growth will be in industrial
sectors such as, information technology,
environmental technology, transportation,
energy technology, healthcare technology, and
financial services
The Americas - NAFTA
• North American Free Trade Agreement (NAFTA –
Canada, Mexico, and the United States)
– A single market of 360 million people with a $6 trillion
GNP
– Ratified and became effective in 1994
– Requires the removal of all tariffs and barriers to trade
over 15 years
– All tariff barriers dropped in 2008
– Improves all aspects of doing business within North
America
– Creates one of the largest and richest markets in the
world
The Americas – DR-CAFTA
• United States – Central American Free
Trade Agreement-Dominican Republic Free
Trade Agreement (DR-CAFTA – Costa
Rica, Dominican Republic, El
Salvador, Guatemala, Honduras,
Nicaragua, and the United States)
• Aimed at increasing trade and employment
between the seven countries by reducing
tariffs
The Americas – MERCOSUR
• Southern Cone Free Trade Area
(MERCOSUR – Argentina, Bolivia,
Brazil, Chile, Paraguay, and Uruguay)
• The Treaty of Asuncion, which provided the
legal basis for MERCOSUR, was signed in
1991 and formally inaugurated in 1995
• Second-largest common-market agreement
in the Americas after NAFTA
• Market of 22o million with a combined GDP
of $1 trillion
The Americas – Latin American
Progress
• Most of the countries in Latin America have
moved from military dictatorships to
democratically elected governments in the last
three decades
• Protectionism has given way to privatization
and other economic, monetary, and trade
policy reforms
• Because of its size (population of 600 million is
nearly twice that of the United States and 100
million more than the European Community)
and resource base, the Latin American market
has always been considered to have great
economic and market possibilities
The Americas – Latin American
Economic Cooperation
• Latin American Integration Association (LAIA)
• Its long term goal is a gradual and progressive
establishment of a Latin American common
market
• It allows members to establish bilateral trade
agreements among member countries
• Caribbean Community and Common Market (C
ARICOM)
• Aim is to achieve true regional integration even
having a common currency for all members
• It continues to seek stronger ties with other
groups in Latin America and has singed a trade
agreement with Cuba
Economic and
Monetary Union (EMU)
• It established the parameters of the creating of a
common currency for the EU, the “Euro” and
established a timetable for its implementation
• In 2002, a central bank was established,
conversion rates were fixed, circulation of Euro
bank notes and coins was completed and the
legal tender status of participating members’
bank notes and coins was cancelled
Eastern Europe
and the Baltic States
• Eastern Europe and the Baltic states, satellite
nations of the former Soviet Union, have moved
steadily toward establishing post communist
market reforms
• New business opportunities are emerging almost
daily, and the region is described as anywhere
from chaotic with big risks to an exciting place
with untold opportunities
• Countries in both these regions continue to adjust
to the political, social, and economic realities of
changing from the restrictions of a Marxistsocialist system to some version of free markets
and capitalism
Eastern Europe
• It is dangerous to generalize about eastern Europe
because each of the countries has its own economic
problems and is at a different stage in its evolution
from a socialist to a market-driven economy
• Most eastern European countries are privatizing
state-owned enterprises, establishing free market
pricing systems, relaxing import controls and
wrestling with inflation
• The Czech Republic has fared better than other
eastern European countries; Yugoslavia has been
plagued with ethnic violence; some countries have
become members of the Organization for Economic
Cooperation and Development (OECD)
The Baltic States
• Estonia, Latvia, and Lithuania are prime examples of
the difference that right policies can make. All three
countries started off with roughly the same legacy of
inefficient industry and Soviet-style command
economies
• Since 1991, Estonia’ s economic reform policy has led
to a liberalized, nearly tariff-free, open-market
economy
• The most significant hurdle for U.S. trade and
investment has been government bureaucracy,
corruption, and organize crime, found in Latvia and
Lithuania
• All three countries are members of WTO and, as of
2004, EU members
The Commonwealth
of Independent States (CIS)
• Formed after aborted coup against Gorbachev
and dissolution of USSR
– Included the remaining 12 republics after the
formation of the Baltic States
• The CIS is a loose economic and political alliance
with open borders but no central government
• The 12 members of the CIS share a common
history of central planning
– Their close cooperation could make the change to
a market economy less painful
– Differences over economic policy, currency
reform, and control of the military
Regional Groups - Africa
• Economic Community of West African States
(ECOWAS) – 15-nation group
– Plagued with financial problems, conflict
within the group, and inactivity
• Southern African Development Community
(SADC)
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Most advanced and viable of Africa’s regional
organizations
• East African Community (EAC)
Opportunities
• Large markets are particularly important to
businesses accustomed to mass production
and mass distribution because of the
economies of scale and marketing efficiencies
that can be achieved
• Most multinational groups have coordinated
programs to foster economic growth as part
of their cooperative efforts so as to take
advantage of increasing purchasing power,
improving regional infrastructure, and
fostering economic development
Marketing Mix Implications
• In the past, companies often charged different
prices in different European markets such as
Colgate Palmolive
• As long as products from lower-priced markets
could not move to higher-priced markets,
differential price schemes worked as in the
case of Badedas Shower Gel
• Companies initiating uniform pricing policies
are reducing the number of brands to focus on
advertising and promotion efforts as with
Nestle and Unilever
The People’s Republic of
China (PRC) (1 of 2)
• Aside from the United States and Japan,
there is no more important single national
market than the PRC
• The PRC with a dual economic system,
embracing socialism along with many tenets
of capitalism, has produced an economic
boom with expanded opportunity for foreign
investment
• Its GNP averaged nearly 10% since 1970 and
is predicted to be around 8 – 10% in the next
10 to 15 years, equaling that of the US by
2015
The People’s Republic of China
(PRC) (2 of 2)
• Two major events that occurred in 2000 had
a profound effect on China’s economy:
– Admission to the World Trade Organization
(WTO)
– US granting normal trade relations (NTR) to
China on a permanent basis (PNTR)
• Two steps China must take if its road to
economic growth must be smooth:
– Improving human rights
– Reforming the legal system
Marketing Opportunities in
Greater China
• Across this vast land of opportunity, there are
extreme differences in economic wellbeing,
cultures, and political structures
• The following sectors are great for American
exporters:
– Automotive components, cleaner coal, construction
equipment, education and training services,
machine tools, marine industries, healthcare, water
and wastewater treatment, rail equipment,
renewable energy, and green building
• Finally, the influence of national government
policies and regulations of marketing will often be
minor compared with that of their local
Hong Kong
• After 155 years of British rule, Hong Kong
reverted to China in 1997, when it became a
special administrative region (SAR) of the
PRC
• Hong Kong is given a high degree of
autonomy. It negotiates bilateral agreements
which are then “confirmed” by the PRC0 and
makes major economic decisions on its own
Taiwan, The ROC
• Both Taiwan and China continue to
implement WTO provisions between
themselves
• Taiwan companies have invested over $50
billion in China, and about 250,000
Taiwanese-run factories are responsible for
about 12% of China’s exports
• Trade helps out both countries: Taiwanese
companies face rising costs at home - China
offers a nearly limitless pool of cheap labor
and engineering talent.
Japan
• Japan’s fast growth in the 1970s and 1980s
amazed the world. Then came the early
1990s, and Japan’s economy produced a
stunning surprise: it slowed, sputtered, and
stalled
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Faulty economic policies
Inept political apparatus
Disadvantages due to global circumstances
Cultural inhibitions
Global Circumstances
• Japanese population is shrinking faster than
the U.S. In 2005, while American baby
boomers were at their peak of productivity,
the Japanese were about 10 years ahead to
population declines and graying hair
• Serious disadvantage in the information age:
its complex language (three alphabet system)
hindered software innovations
• With historically low real prices of oil and the
U.S. peak consumption level of SUVs, Japan
was late to tap this market
The Cultural Explanation
• The lack of a national goal for Japan plagued
them after successfully building themselves
from the ruins of World War II
• The Japanese management culture such as,
lifetime employment, job promotion based
not on merit but on length of service,
reciprocal contractor/subcontractor loyalties,
hindered their adjustment to the new
economic era
India
• The following steps have already been taken:
– Privatizing state-owned companies ; reducing
stake to about 51%
– Recasting the telecom sector’s regulatory
authority and demolishing the monopolies
enjoyed by SOEs
– Signing a trade agreement with the U.S. to lift
all quantitative restrictions on imports
– Planning the opening of domestic long-distance
phone services, housing, and real estate and
retail trading sectors to foreign direct
investment
India
• India still presents a difficult business
environment
– Tariffs are well above those of developing world
norms
– Inadequate protection of intellectual property
rights
– Anti-business attitudes of India’s federal and
state bureaucracies continue to hinder potential
investors and plague their routine operations
– Delay by policymakers on selling money-losing
SOEs, making labor laws flexible, and
deregulating banking
India
• But India presents a lot of opportunities
– Massive market (over 1 billion, second in size
only to China)
– Cheap and qualified labor
– Knowledge of English
– Educated middle class numbering 250 million
(college graduates, scientists, engineers, etc)
– Supplier and exporter of expertise in all areas of
information technology
– Time zone puts India in a competitive position
with their European counterparts (they work
while Americans sleep)
Asia Pacific Trade Associations
• Once a source of inexpensive labor for
products shipped to Japan or to third
markets, countries in the Asia Pacific region
are now seen as viable markets
• Three free trade associations in this region:
– Association of South East Asian Nations
(ASEAN)
– ASEAN+3 (ASEAN members plus ministers
from China, Japan, and South Korea)
– Asia-Pacific Economic Cooperation (APEC)
Association of Southeast Asian
Nations (ASEAN)(1 of 2)
• Goals of the ASEAN
– Operating within a free trade area
– The ability to sell in an entire region without
differing tariff and nontariff barriers
– Distribution can be centralized at the most
cost-effective point rather than having
distribution points dictated by tariff
restrictions
– Pricing can be more consistent, which helps
reduce smuggling and parallel importing
– Marketing can become more regionally and
centrally managed
Asia-Pacific Economic
Cooperation (APEC)
• APEC was formed in 1989
– Provides formal structure for major governments to
discuss mutual interests in open trade and economic
collaboration
– Includes all major economies of the region and the
most dynamic, fastest-growing economies in the world
• Common goal and commitment to:
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Open trade
Increase economic collaboration
Sustain regional growth and development
Strengthen the multilateral trading system
Reduce barriers to investment and trade without
detriment to other economies