Download Chapter 9 – Emerging Markets

Chapter 9 – Emerging Markets
Teaching Objectives
Barring a major political and economic shift in the developing world, evidence is strong that through the
first decade of the 21st century emerging markets will be where the majority of world’s total trade growth
will occur. Growth will occur on a variety of fronts: development of infrastructure, opportunities of
foreign investors, and a spectacular growth of the consumer market. The events taking place in emerging
markets make international business exciting and will create opportunities and challenges for
multinational firms.
The impact of trends that are sweeping the developing countries—transition from socialist to marketdriven economies, the liberalization of trade and investment policies in developing countries, the transfer
of public-sector enterprise to the private sector, and the rapid development of regional market alliances—
should be the emphasis of this chapter. The emerging markets, especially the BEMs—those identified by
the Department of Commerce as big emerging markets—will be the centerpiece of global economic
growth. The teaching objectives of this chapter are to:
1) Stress the importance of the political and economic changes affecting global marketing.
2) Illustrate the connection between the economic level of a country and the opportunities created as
economic growth occurs.
3) Explore the various developing markets in the Americas, Eastern Europe and the Baltic States,
and Asia.
4) Examine the idea of the Department of Commerce’s Big Emerging Markets.
5) Discuss the growth of new market segments and the emerging middle class in the BEMs and
other emerging markets.
Comments and Suggestions
1. The growing importance of new market segments is reflected in the number of studies on
consumers that are being conducted. A recent Roper Starch Worldwide global study of 40,000
consumers in 40 countries identified four major styles of shopping. Deal Makers (29%), who love
the process of buying; Price Seekers (27%), who place primary value on the product they are
buying; Brand Loyalists (23%), who purchase name brands and remain true to them; and Luxury
Innovators (21%), those who seek the new, prestigious brands.
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The following is a breakdown by country.
U.S.
Mexico
China
India
Japan
Saudi Arabia
France
Germany
Spain
U.K.
Czech Republic
Brand
Loyalists
11.3%,
19.1
27.9
34.6
23.5
14.8
19.5
16.9
27.0
28.7
23.9
Price
Seekers
35.5%,
23.4,
23.4
7.4
41.0
8.9
45.5
43.7
34.4
27.2
26.9
Luxury
Innovators
16.6%
19.9
22.8
35.8
7.9
34.4
8.5
15.7
18.1
17.5
25.7
Deal
Makers
36.6%
35.0
25.7
22.2
27.1
40.3
26.6
21.9
19.6
25.5
22.61
2. “Cases 1-2 (Nestle) and 4-7 (Aids, condoms) provide a backdrop for a discussion of the everyday
realities in emerging markets. Both go into great detail how consumer behaviors, products, and
promotion interact to have huge impacts on public health.
3. The Big Emerging Markets, BEMs, is where the growth of international trade in the future will
be. Common Traits of Big Emerging Markets, lists the characteristics of these markets and Big
Emerging Markets details some of the economic characteristics of these markets. (See text)
Lecture Outline
I.
Global Perspective: Wal-Mart, Tide, and Three-Snake Wine
II.
Marketing and Economic Development
A. Stages of Economic Development
B. NIC Growth Factors
C. Information Technology, the Internet, and Economic Development
D. Objectives of Developing Countries
E. Infrastructure and Development
F. Marketing’s Contributions
III. Marketing in a Developing Country
A. Level of Market Development
B. Demand in a Developing Country
IV. Developing Countries and Emerging Markets
A. The Americas
B. Eastern Europe and the Baltic States
C. Asia
1
Source: “How the World Shops,” Advertising Age, June 5, 1995, p.3
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D. Newest Emerging States
V.
Strategic Implications for Marketing
Discussion Questions
1.
Define:
Underdeveloped
Economic development
NICs
BEM
Infrastructure
Economic dualism
2. “It is possible for an economy to experience growth as measured by total GNP without a
commensurate rise of the standard of living.” Discuss fully.
A country’s “gross national product” is the total of its economic output and assets. However, the GNP
figure in no way indicates the manner in which this wealth is distributed. One percent of the
population may control 80 percent of the wealth, which is the case in many so-called
“underdeveloped” countries. Thus, though the economy may expand and the GNP increase greatly,
the largest percentage of the population may not experience a commensurate rise in their standard of
living. There is also the problem of population growth. Though total national income may greatly
increase, the average per capita GNP will decline if population growth is extremely high.
3. Why do technical assistance programs of more affluent nations typically ignore the distribution
problem or relegate it to a minor role in development planning? Explain.
If an underdeveloped country cannot produce a certain product, it does not have to worry about
distributing that product. The first aim of a technical assistance program is to see that the country has
the capacity to turn out the desired product. But sometimes production is so overemphasized that the
marketing end is almost completely ignored. There is also the problem of transferability of marketing
skills and techniques. It is easier to teach the production of a product than the marketing of the same
product. Cultural and traditional bias against the concept of marketing in many foreign countries often
makes the more affluent nation rather reluctant to press its ideas on marketing upon the
underdeveloped nation it is aiding.
4. Discuss each of the stages of evolution of the marketing process. Illustrate each stage with a particular
country.
The marketing institutions which develop as a country passes from one stage to another are as
follows:
A brief study of Exhibit 9-3 will reveal roughly the state of marketing at each stage of economic
development. As a generalization, a nation develops and industry grows with marketing institutions
evolving to fulfill the distribution needs created at each new level. 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. Also developed are the myriad facilitating
agencies required to support a growing economy. Advertising agencies, facilities for marketing
research, repair services, specialized consumer financing agencies, and storage and warehouse
facilities are created to service the particular needs of expanded markets and economies. It is
important to remember that these institutions do not automatically come about nor do the necessary
marketing institutions simply appear.
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EXHIBIT 9–3
EVOLUTION OF THE MARKETING PROCESS
Stage
Agricultural and raw materials
(MK. (f) = Prod.)2
Manufacturing
(Mk. = Prod.)
Substage
Self-sufficient
Surplus
Commodity producer
Small-Scale
Mass Production
Marketing
(Prod. (f) = Mk.)
Commercial-Transition
Mass Distribution
Marketing Functions
None
Small-Scale Merchants, Traders,
Fairs
Merchants, Wholesalers, ExportImport
Merchants, Wholesalers,
Traders, and Specialized
Institutions
Large-Scale and Chain Retailers
Increase in Specialized
Middlemen
Integrated Channels of
Distribution Increase
Specialized Middlemen
5. As a country progresses from one economic stage to another, what in general are the marketing
effects?
As a general rule, the more complex a nation’s economy becomes, the more complex its marketing
system becomes. The marketing function matures and becomes more specialized. It must expand to
meet the increased problems of planning, distribution, and transportation. The text indicates the need
for such agencies in a more mature economy as “advertising agencies, facilities for marketing
research, repair services, specialized consumer financing agencies, and storage and warehouse
facilities.” Not only do these functions arise from economic expansion, but they are also necessary if
the economy is to continue an increased growth pattern.
6. Locate a country in the agricultural and raw material stage of economic development and discuss
what changes will occur in marketing when it passes to a manufacturing stage.
A country with little industry will not find it necessary to carry on extensive marketing. Most of the
agricultural products will be used for local consumption and the various facets of marketing will not
be overly important. However, when these raw materials are put into the manufacturing process,
marketing has a function. Marketers will be necessary to plan how much and what kinds of goods will
be manufactured. Without this plan, it would be much more difficult to determine the amount of raw
materials needed since there would be no indicator of demand. The range of the market would
change. No longer would products be used mostly for local consumption. Now, distribution over a
wide area would be necessary–perhaps even outside the country’s boundaries. The goods
manufactured must be sold, so advertisement is necessary to increase the market demand. There is
always a fairly set demand for agricultural products, but the demand for manufactured products may
vary greatly. Demand can be increased considerably by the skillful marketer.
7. What are the consequences of each stage of marketing development on the potential for industrial
goods within a country? For consumer goods?
Demand for industrial goods is affected by economic change, and is tied to the economy’s stage of
industrialization. As a country progresses toward economic maturity, demand for industrial goods
changes in character with the degree of industrialization. When there is no industrial base, demand is
2
Mk (f) = Prod: Marketing is a function of production.
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for the equipment to build manufacturing plants, highways, power plants, and other basic products.
Once the next stage is achieved, demand shifts emphasis upon the parts and supplies to maintain
plants. As a country develops, industrial demand then shifts to those items other countries can
produce more competitively than the home country.
Demand for consumer goods is influenced by the level of economic achievement since the market must
have sufficient purchasing power to acquire goods and services. As an economy develops, levels of
income and its distribution among the people change, and the effect upon market demand is felt in a
variety of ways. The demand for different kinds of goods changes as a smaller proportion of income is
needed to maintain a bare subsistence. Sometimes these changes are very drastic and occur in a very
short period of time. In addition to increases in the demand for particular kinds of goods, consumption
patterns often change as basic needs are fulfilled, and the result is a more discretionary income.
8. Discuss the significance of economic development to international marketing. Why is the knowledge
of economic development of importance in assessing the world marketing environment? Discuss.
Economic development is significant in international marketing because (1) the stage of economic
development has tremendous influence upon the demand for both consumer and industrial goods, and
(2) the level of economic development also has an effect upon the acceptance of a foreign marketer
within the country. The political environment within which the marketer must operate is influenced in
part by the stage of economic development of the particular country. Economic development is also
significant in international marketing because of marketing’s important role in the economic
development of a particular country. While marketing’s contribution may not be accepted,
nevertheless its contribution can be important and thus should be recognized by the international
marketer. Furthermore, economic development is important to international marketing in terms of
long range forecasting of market potential. While the market in a particular country may not be of
significance today, if it is a developing country, market potential may be such that the marketer will
want to become established in the developing country. Finally, the stage of economic development is
important to international marketing because a developing country is a dynamic one, and the marketer
must prepare to adjust to dramatic shifts in the economy.
An international marketer must be capable of adjusting to a foreign economic environment. He must be
able to answer such questions as: (1) What are the objectives of the developing nations? (2) What role is
marketing assigning, if any, in economic growth plans? and (3) What contribution must marketing make
whether overtly planned or not in order for a country to grow successfully? The answers to these
questions are significant in assessing a particular country’s attitude toward marketing because they will
affect the attitude and behavior of a particular country toward marketing. Most countries want to be free
to determine the economic, political, and cultural future and thus will view a foreign marketer as an
outsider and possibly as one which may limit the achievement of their particular growth objectives. This
frequently leads to political and governmental harassment and sometimes consumer boycott of goods.
Often there is a widespread fear and resentment of foreign control of the economy and policies and
actions are sometimes adopted which may retard economic progress and do restrict a foreign marketer’s
operations. Without this knowledge of the possible reaction of a developing country toward a foreign
marketer, the marketer would not be able to properly assess his risks nor the potential of a new market.
9. The Internet accelerates the process of economic growth. Discuss.
In addition to growth factors discussed above, a country’s investment in information technology (IT) is
also an important key to economic growth. The cellular phone, the Internet and other advances in IT
open opportunities for emerging economies to catch up with richer ones. New, innovative electronic
technologies can be the key to a sustainable future for developed and developing nations alike.
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For example:
It is argued that because the Internet cuts transaction costs and reduces economies of scale from vertical
integration, it reduces the economically optimal size for firms. Lower transaction costs makes it possible
for small firms in Asia or Latin America to work together to develop a global reach.3 Smaller firms in
emerging economies can now sell into a global market. It is now easier, for instance, for a tailor in
Shanghai to make a suit by hand for a lawyer in Boston, or a software designer in India to write a
program for a firm in California. One of the big advantages rich economies have is their closeness to
wealthy consumers that will be eroded as transaction costs fall.
The Internet accelerates the process of economic growth by speeding up the diffusion of new
technologies to emerging economies. Unlike the decades it took before many developing countries
benefited from railways, telephones or electricity, the Internet is spreading rapidly throughout Asia,
Latin America and Eastern Europe. IT can jump-start national economies and allow them to leapfrog
from high levels of illiteracy to computer literacy.
The Internet facilitates education, a fundamental underpinning for economic development. The African
Virtual University links 24 African under-funded and ill equipped campuses to classrooms and libraries
worldwide, and will soon grant degrees in computer science, computer engineering and electrical
engineering. South Africa’s School Net program links 1,035 schools to the Net while the government’s
Distance Education program brings multimedia teaching to rural schools.
Mobile phones and other wireless technologies greatly reduce the need to lay down a costly telecom
infrastructure to bring telephone service to areas not now served. In Caracas, Venezuela, for example,
where half of the city’s 5 million population lives in non-wired slums, cell phones with pay-as-you-go
cards have provided service to many residents for the first time.
The Grameen Bank, a private commercial enterprise in Bangladesh, has a program to supply phones to
300 villages. There are only three phones for every 1,000 people in Bangladesh, one of the lowest
phone-penetration rates in the world. The new network will be nationwide, putting every villager within
two kilometers of a cellular phone.
Cyber post offices in Ghana offer e-mail service for the price of a letter. Telecenters in five African
countries provide public telephone, fax, computer and Internet services where students read online
books and local entrepreneurs seek potential business partners.
Medical specialists from Belgium help train local doctors and surgeons in Senegal via video linkups
between classrooms and operating centers and provide them with Internet access to medical journals
and databases. It would be prohibitively expensive if they had to travel there to teach; via Internet
technology it costs practically nothing.
10. Discuss the impact of the IT revolution on the poorest countries
Substantial investments in the infrastructure to create easy access to the Internet and other aspects of IT
are being made by governments and entrepreneurs. Hong Kong is investing in a $1.7 billion cyber port
to house high-tech companies. If successful, it will create a new information economy and thousands of
new jobs. Singapore’s broadband network brings fast digital transmission capacity to homes and offices,
allowing delivery of advanced multimedia services. Vietnam has entered the first stage of e-commerce
development with the opening of a software “zone” in Hanoi and plans to spend $32.4 million to
develop an information technology park.
3
Thomas Sancton, "A Great Leap Developing Countries Are finding Way to Leverage Advances in Information Technology and Help Narrow
the North-South Divide," Time International, January 31, 2000, p. 42.
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11. Select one country in each of the five stages of economic development. For each country, outline the
basic existing marketing institutions and show how their stages of development differ. Explain why.
Library project.
12. Why should a foreign marketer study economic development? Discuss.
Economic development should be studied by a foreign marketer in order to (1) assess present demand
within a country, (2) to assess potential and future demand within a country, (3) become aware of the
probable consequences of his actions within a developing country, i.e., that is political reaction to his
involvement, and (4) determine what contributions as a marketer he can and should make to the
development of a particular country.
13. The infrastructure is important to the economic development of an economy. Comment.
One indicator of economic development is the extent of social overhead capital or infrastructure
within the economy. The quality of infrastructure directly affects a country’s economic growth
potential and the ability of an enterprise to engage effectively in business. When an infrastructure
does not develop with an expanding population and economy, countries begin to lose economic
development ground. A country can produce commodities for export but cannot sell them because of
inadequacies of the infrastructure. For example, in Zimbabwe there was excess agricultural product
for sale but only about a third available could be moved to ports because of weaknesses in the
railroads. The infrastructure is also a crucial component of the uncontrollable elements for the
marketer. Without adequate transportation facilities a marketer’s distribution costs can increase
substantially and the ability to reach certain segments of the market may be impaired. The market’s
full potential may never be realized because of an inadequate existing infrastructure.
14. What are the objectives of economically developing countries? How do these objectives relate to
marketing? Comment.
Industrialization is the fundamental objective of most developing countries; although for an
appreciation of its impact upon a nation’s people, economic growth must be viewed as a means to an
end rather than as the end itself. Certainly, most countries see in “economic growth” the achievement
of social as well as economic goals. Satisfaction of nonmaterial as well as material needs must be
achieved in order to fulfill the desires and aspirations of most underdeveloped nations. This would
include better education for all, better and more effective government, and the elimination of social
inequities as well as improvements in moral and ethical responsibilities of both the public and private
sectors of the economy. A knowledge of these objectives can help explain the attitude and behavior
toward marketing which often exists within an underdeveloped country in the growth stage. The fact
that most countries wish to be free to determine their economic, political, and cultural future goes far
in explaining the potential vulnerability of a foreign marketer in these countries. Because foreign
marketers are outsiders, it is often assumed that their presence is limiting the achievement of these
objectives. Frequently, this feeling results in political and governmental harassment and sometimes
consumer boycott of goods. The widespread fear and resentment of foreign control of the economy
commonly leads to the adoption of policies and actions which at times retard rather than facilitate
economic progress.
15. Using the list of NIC growth factors, evaluate India and China as to their prospects for rapid growth.
Which factors will be problems for India? For China?
Students should be encouraged to search current information about these two countries since many of
the factors are influenced by ongoing conditions. At the time this was written, both seemed to be on a
path of nuclear expansion, a costly venture that will drain much need capital from economic growth.
This exercise is the basis for a discussion of these two important nations. The correctness of responses
is a matter of debate.
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The factors that existed to some extent during the economic growth of NICs were:

Political stability in policies affecting its development

Economic, political and legal reforms

Entrepreneurship. In all of these nations, free enterprise in the hands of the self-employed
was the seed of the new economic growth.

Planning. A central plan with observable and measurable development goals linked to
specific policies.

Outward orientation. Production for the domestic market and export markets with increases in
efficiencies and continually differentiating exports from competition.

Factors of production. If deficient in the factors of production – land (raw materials), labor,
capital, management and, technology – an environment where these factors could easily come
from outside the country and be directed to development objectives.

Industries targeted for growth. Strategically directed industrial and international trade policy
to identify those sectors where opportunity existed. Key industries encouraged to achieve
better positions in world markets by directing resources into promising target sectors.

Incentives. Incentives to force a high domestic rate of savings and to direct capital to update
the infrastructure, transportation, housing, education and training.

Privatization. Privatized SOEs that placed a drain on national budgets. Privatization released
immediate capital to invest in strategic areas and gave relief from a continuing drain on future
national resources. Often when industries are privatized, new investors modernize thus
creating new economic growth.
The final factors that must be present are large, accessible markets with low tariffs. During the early
growth of many of the NICs, the first large open market was the United States later joined by Europe
and now, as the fundamental principles of the World Trade Organization (WTO) are put into place,
much of the rest of the world.
16. What is marketing’s role in economic development? Discuss marketing’s contributions to economic
development.
Marketing is critical to economic development. Marketing is an economy’s arbiter between
productivity, capacity, and consumer demand. The marketing process is a critical element in
effectively utilizing the production resulting from economic growth to provide a higher standard of
living. Effective marketing helps to improve the life-style and well being of the people in a specific
economy, but it has more far-reaching effects by upgrading world markets.
Essential to the growth of any economy is a developed marketing system that provides effective
distribution for whatever a country produces. What generally exists in an underdeveloped country is an
inefficient, “outrageously” high-cost market structure where most of those engaged in marketing are
barely managing to survive. Marketing can help to eliminate some of the inefficiencies which sap the
economies of underdeveloped countries.
Marketing also helps to increase the size of existing markets. Although marketing cannot create
purchasing power, it can uncover and direct that which already exists and thereby increase the level of
economic activity.
Effective and efficient marketing leads to increasing market size which leads to further improvements in
marketing and production efficiency, and so on.
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Another important contribution of marketing to very underdeveloped economies is the growth or
spreading of a money economy. Until an economy has established monetary systems, growth is stunted
at a very low level. Since marketing requires a money system in order to flourish effectively, it helps to
spread the use of money throughout the economy.
The growth and stimulation which result from increased desire for material possessions frequently lead
to the development of much needed managers and entrepreneurs. For accelerated economic growth, a
country must have a ready supply of entrepreneurs who “can see and seize the opportunities for joining
the available capital with the available resources in new combinations.”
Effective marketing leads to the higher levels of economic opportunity which can spawn local
entrepreneurs by creating the opportunities for small business and the stimulus for development of
professional management.
Finally, marketing contributes to the development of standards for economic behavior, integrity, and
product and service reliability. In many underdeveloped countries, there is a painful lack of standards of
morality in business and personal relationships.
17. Discuss the economic and trade importance of the big emerging markets.
The Department of Commerce estimates that over 75 percent of the expected growth in the world
trade over the next two decades will come from the more than 130 developing and newly
industrialized countries (NICs). There is a small core of these that will account for over half of that
growth. They predict that the countries identified as Big Emerging Markets (BEMs) alone will be a
bigger import market by the end of this decade than the European Union and by the year 2010, will be
importing more than the EU and Japan combined.
The BEMs differ from other developing countries because they import more than smaller markets an
more than economies of similar size. As they embark on economic development, demand for capital
goods to build their manufacturing base and develop infrastructure increases. Increased economic
activity means more jobs and more income to spend on products not yet produced locally. Thus, as their
economies expand, there is an accelerated growth in demand for goods and services, much of which
must be imported. BEM merchandise imports are expected to be nearly one trillion dollars higher than
they were in 1990; if services are added, the amount jumps beyond one trillion dollars.
18. What are the traits of those countries considered to be big emerging markets? Discuss
Those BEMs, as the Department of Commerce refers to them, share a number of important traits:
They are all physically large; have significant populations; represent considerable markets for a wide
range of products; all have strong rates of growth or the potential for significant growth have all
undertaken significant problems of economic reforms; are all of major political importance within
their regions; are “regional economic drivers;” will engender further expansion in neighboring
markets as they grow.
While these criteria are general ion nature and each country does not meet all the criteria, the
Department of Commerce has identified the following BEMs. In Asia: China, Indonesia, India, and
South Korea. In Latin America: Mexico, Argentina, and Brazil. In Africa: South Africa. In Central
Europe: Poland. In Southern Europe: Turkey. Vietnam, Thailand, Venezuela, and Columbia may
warrant inclusion in the near future. The list is fluid in that some countries will drop off while others
will be added as economic conditions change. The message is clear, the Department of Commerce is
focusing on countries that demonstrate the greatest potential for growth.
19. Discuss how the economic growth of BEMs is analogous to the situation after World War II when
tremendous demand was created during the reconstruction of Europe.
As Europe rebuilt its infrastructure and industrial base, demand for capital goods exploded and, as
more money was infused into its economies, consumer demand also increased rapidly. For more than
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a decade, Europe could not supply its increasing demand for industrial and consumer goods. During
that period, the U.S. was the principal supplier since most of the rest of the world was rebuilding or
had underdeveloped economies. Meeting this demand produced one of the largest economic booms
the United States had ever experienced. Now Japan, Europe and NICs will become fierce rivals in
emerging markets.
20. Discuss the problems a marketer might encounter when considering the socialist countries as a
market.
Contrasting political systems and economic philosophies account for the major differences in the
trade characteristics of Eastern and Western countries. For example: Within a nonsocialist economy,
supply and demand are the most important determinants of price. However, in socialist countries
national goals for economic development are more critical determinants for pricing policies than are
demand characteristics of the market. In addition, because of centralized planning, most, if not all,
trade is conducted by state trading organizations rather than by individual profit-oriented end users as
is the situation in most Western economies. As a consequence, suppliers very rarely are able to
negotiate directly with the final user of a product. Arrangements for sales require contact with the
trading companies or national buying agencies. Thus purchase patterns and demand estimations are
different; promotion and advertising must be approached differently; and methods of payments and a
demand for certain class of goods may be different than in Western countries. The three items with
the greatest difference found are: (1) in estimating market demand, especially future demand, (2) the
process of communicating with end users and decision makers, and (3) negotiating a trade.
21. One of the ramifications of emerging markets is the creation of a middle class. Discuss.
One of the ramifications of emerging markets is the creation of a middle class household that
generates new markets for everything from disposable diapers to automobiles. Middle-class in
emerging markets differs from that in the United States. Whey they do not have two automobiles and
suburban homes, they have discretionary income that is income not needed for food, clothing and
shelter. It is income that can be spent on goods such as washing machines, TVs radios, better
clothing, and special treats. Examining how income is spent in households between developing and
developed countries reveals that more household money goes for food in emerging markets than in
developed markets. Second to food, the next category of high expenditure for emerging and
developed alike is appliances and other durables; Iran and India are the exceptions.
When incomes rise, so do consumer appetites for everything from soap to automobiles despite low per
capita incomes. How can those who earn $100 a month be a lucrative consumer market? Officially, per
capita income in China is under $400 a year. But nearly every independent study by academics and
multi-lateral agencies put income, adjusted for black market activity and purchasing power parity, at
three or four times that level. Further, large households can translate into higher disposable incomes.
Young working people in Asia and Latin America usually live at home until they marry. With no rent to
pay, they have more discretionary income and can contribute to household purchasing power. Low per
capita incomes are potential markets for a variety of goods; consumers show remarkable
resourcefulness in finding ways to buy what really matters to them. In the United States, the first
satellite dishes sprang up in the poorest parts of Appalachia. Similarly, the poorest slums of Calcutta are
home to 70,000 VCRs and in Mexico, homes with color televisions outnumber those with running
water.
A London securities firm says a person earning $250 annually in developing countries can afford
Gillette razors, and at $1,000 he can become a Sony television owner. A Nissan or Volkswagen could
be possible with a $10,000 income. Whirlpool estimates that in Eastern Europe a family with an annual
income of $1,000 can afford a refrigerator and with $2,000 they can buy an automatic washer as well.
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22. The needs and wants of a market and the ability to satisfy them are the result of the triune interaction
of the economy, culture, and marketing efforts of business.
The statement recognizes the point that markets are not static, but are constantly changing, and that
change can be influenced by changes in the economy, changes in the culture, and, certainly, changes
brought about by businesses. For example, the very fact that a business offers a product for sale in a
market can and frequently does have an affect on the way that market perceives its needs and wants.
The important part of this statement is the recognition of the dynamic nature of markets and the
interaction of all the efforts of business, the economy, and all the culture.
23. Discuss changing market behavior and the idea that “markets are not, they become.”
There is an ever-expanding and changing demand for goods and services the world over. Markets are
dynamic, developing entities reflecting the changing lifestyles of a culture–they become different,
larger, and more demanding as they mature. When economies grow and markets evolve beyond
subsistence levels, the range of tastes, preferences, and variations of products sought by the consumer
proliferate; they demand more, better, and/or different products. As countries prosper and their people
are exposed to new ideas and behavior patterns via global communications networks, old stereotypes,
traditions, and habits are cast aside or tempered, and new patterns of consumer behavior emerge.
Instant tortilla meal is consumed in Guatemala, hot dogs and hamburgers in France and traditional
market vendors and specialty stores give way to supermarkets and 24-hour convenience stores. With
these changes come opportunity and the need for sophisticated marketing strategies.
Markets evolve from a three-way interaction of the economy, the culture, and the marketing efforts of
companies. Markets are not, they become, that is, they are not static but are constantly changing as they
affect and are affected by changes in incomes, awareness of different life styles, exposure to new
products and exposure to new ideas. Changing incomes raise expectations and the ability to buy more
and different goods. The accessibility of global communications, TV, radio, and print media means that
people in one part of the world are aware of lifestyles in another. Global companies span the globe with
new ideas on consumer behavior and new products to try. With the prosperity that results from
economic growth, markets grow and distinct segments begin to emerge.
24. Discuss the strategic implications for marketing in India.
The IT revolution is not limited to broad, long range economic goals but, as Exhibit 9-2 illustrates, it
can have almost immediate impact upon the poorest in an emerging country.
The eleventh largest industrial economy in the world, India has a population of approximately one
billion, of which 200 to 250 million are considered middle class. The modern sector demands products
and services similar to those available in any industrialized country; the remaining 750 million in the
traditional sector, however, demand items more indigenous and basic to subsistence. As one authority
on India’s market observed, “A rural Indian can live a sound life without many products. Toothpaste,
sugar, coffee, washing soap, bathing soap, kerosene are all bare necessities of life to those who live in
semi-urban and urban areas.”
India not only stands firmly at the center of many success stories in Silicon Valley (Indian engineers
provide some 30 percent of the workforce for California’s Silicon Valley) but is seeing Internet
enthusiasm build to frenzy on its own shores. Indian entrepreneurs and capital are creating an Indian
Silicon Valley of their own. Dubbed “Cyberabad,” exports are growing 50 percent annually and each
worker adds $27,000 of value per year, an extraordinary figure in a country where per capita GDP is
below $500. After a little more than a decade of growth, the Indian industry has an estimated 280,000
software engineers in about 1,000 companies.
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Similar investments are being made in Latin America and Eastern Europe as countries see the
technology revolution as a means to leapfrog their economic and social development. As one economist
commented, “Traditional economic reforms in the 1980s and 1990s managed to stop hyper-inflation and
currency crises, but further change will not produce significant new growth needed to combat poverty.
Governments must work to provide public access to the Internet and other information technologies.”
25. Too much emphasis is usually laid by Chinese policymakers as well as by foreign businessmen on
China’s strength as an export machine. China is so big that its economic potential might more usefully
be compared with continental America’s. Discuss fully.
In the long run the economic strength of China will not be as an exporting machine but as a vast market.
The economic strength of the United States comes from its resources, productivity and vast internal
market that drive its economy. China’s future potential might better be compared with America’s
economy driven by domestic demand rather than Japan’s driven by exports. China is neither an
economic paradise nor an economic wasteland, but a relatively poor nation going through a painfully
awkward transformation from a socialist market system to a hybrid socialist/free-market system, not yet
complete and with the rules of the game still being written.
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