Emerging Markets Chapter 9 McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved.

Marketing and Economic Development The stage of economic growth within a country affects the attitudes toward foreign business activity, the demand for goods, the distribution systems found within a country, and the entire marketing process Marketing is constantly faced with the challenge of detecting and providing for new levels of consumption, and marketing efforts must be matched with ever-changing market needs and wants.

Stages of Economic Development: United Nations Classification Scheme The United Nations classifies a country’s stage of economic development based on its level of industrialization into three categories: (1)MDCs (more-developed countries), e.g., Canada, England, France, Germany, Japan, and the United States. (2) LDCs (less-developed countries), e.g., countries in Asia and Latin America (3) LLDCs (least-developed countries), e.g., countries in Central Africa (1)MDCs (more-developed countries), e.g., Canada, England, France, Germany, Japan, and the United States. (2) LDCs (less-developed countries), e.g., countries in Asia and Latin America (3) LLDCs (least-developed countries), e.g., countries in Central Africa

Economic and Social Data

Countries that are experiencing rapid economic expansion and industrialization and do not exactly fit as LDCs or MDCs are more typically referred to as newly industrialized countries (NICs), e.g., Chile, Brazil, Mexico, South Korea, Singapore, and Taiwan. NIC Growth Factors Some factors that contributed to economic growth of NICs are: 1.Political stability in policies affecting their development 2.Economic and legal reforms 3.Entrepreneurship 4.Planning 5.Outward orientation 6.Factors of production 7.Privatization of state-owned enterprises (SOEs)

Infrastructure and Development One indicator of economic development is the extent of social overhead capital, or infrastructure, within the economy. Countries begin to lose economic development ground when their infrastructure cannot support an expanding population and economy. Infrastructure represents those types of capital goods that serve the activities of many industries. Included in a country’s infrastructure are paved roads, railroads, seaports, communications networks, and energy supplies—all necessary to support production and marketing. Infrastructure represents those types of capital goods that serve the activities of many industries. Included in a country’s infrastructure are paved roads, railroads, seaports, communications networks, and energy supplies—all necessary to support production and marketing.

Infrastructure of Selected Countries

Marketing in a Developing Country A marketer cannot superimpose a sophisticated marketing strategy on an underdeveloped economy. The marketing mix must be tailored to the level of development in a country. May have to deal with both traditional and modern market segments. The marketing mix must be tailored to the level of development in a country. May have to deal with both traditional and modern market segments.

Developing Countries and Big Emerging Markets Big emerging markets share a number of important traits as follows: 1.Are physically large. 2.Have significant populations. 3.Represent considerable markets for a wide range of products. 4.Have strong rates of growth or the potential for significant growth. 5.Have undertaken significant programs of economic reform. 6.Are of major political importance within their regions. 7.Are “regional economic drivers”. 8.Will engender further expansion in neighboring markets as they grow.

Market Indicators in Selected Countries

Big Emerging Markets

Latin America Governments dominated economic life for most of the 20th century - bureaucracy led to inefficiency; lack of research and technological development. Have moved from military dictatorships to democratically elected governments. More importing and less protectionism in Latin America. Population of more than 460 million.

Eastern Europe and the Baltic States Post-communist market reforms. Satellite nations of the former USSR are establishing free-market systems. In Eastern Europe, most countries are privatizing state-owned enterprises, relaxing import controls, establishing free-market pricing systems, and wrestling with inflation. Post-communist market reforms. Satellite nations of the former USSR are establishing free-market systems. In Eastern Europe, most countries are privatizing state-owned enterprises, relaxing import controls, establishing free-market pricing systems, and wrestling with inflation.

Eastern European Markets

Asia

Fastest growing area in the world. The most rapidly growing economies in the Asian-Pacific Rim are the group of countries sometimes referred to as the Four Tigers (or Four Dragons) - Hong Kong, South Korea, Singapore and Taiwan. China: GNP is expected to equal that of the U.S. by Admitted admitted into the WTO in Moving from a socialist market system to a hybrid socials/free-market system. Human rights concerns. Six regions with different economic conditions. Lots of corruption, payoffs, and bribery. India: Taking on reforms and opening itself to world markets. Some resistance to change by those currently benefiting. Still high tariffs, inadequate protection of intellectual property rights, anti-business attitudes of government, bribery and corruption. Fastest growing area in the world. The most rapidly growing economies in the Asian-Pacific Rim are the group of countries sometimes referred to as the Four Tigers (or Four Dragons) - Hong Kong, South Korea, Singapore and Taiwan. China: GNP is expected to equal that of the U.S. by Admitted admitted into the WTO in Moving from a socialist market system to a hybrid socials/free-market system. Human rights concerns. Six regions with different economic conditions. Lots of corruption, payoffs, and bribery. India: Taking on reforms and opening itself to world markets. Some resistance to change by those currently benefiting. Still high tariffs, inadequate protection of intellectual property rights, anti-business attitudes of government, bribery and corruption.

Asian Markets

Living Standards in Selected Countries

Strategic Implications for Marketing As a country develops, incomes change, population concentrations shift, expectations for a better life adjust to higher standards, new infrastructures evolve, and social capital investments are made. Market behavior changes and eventually groups of consumers with common tastes and needs (i.e., market segments) arise. When incomes rise, new demand is generated at all income levels for everything from soap to automobiles. This means that knowledge of stage of market development is important in helping to develop marketing strategies that are tailored to the level of economic development.