Download Marketing in a Developing Country

International Marketing
15th edition
Philip R. Cateora, Mary C. Gilly, and John L. Graham
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Introduction
9
• Economic growth and global trade has extended
well into the 21st century
• Three multinational markets are crucial: The
Americas, Europe, and Asia
• Within each of these markets are fully
industrialized nations, rapidly industrializing
nations, and less developed nations
• Time zones, miles, and cultural distances can be
a major concern and many U.S. companies have
organized their international operations
according to these concerns
Roy Philip
2
Overview
9
• The importance of marketing and economic
development
• Stages of economic development, economic
growth factors, objectives of developing
countries, infrastructure and development, and
marketing’s contributions
• Marketing in developing countries
• Big Emerging Markets (BEMs) and the Americas
– NAFTA, DR-CAFTA, MERCOSUR, LAEC, FTAA,
SAFTA
• Strategic Implications for Marketing
Roy Philip
3
Global Perspective
Desnynchronosis? Something George
Clooney Caught Up In The Air?
9
• According to the Encyclopedia Britannica
“Physiological desnychronization” is caused by
transmeridian (east-west) travel between different
time zones
• Most people find it difficult to travel eastward,
adapting a shorter day as opposed to a longer one
• For international travelling executives, jet lag can be
a major concern
• Jet lag can cause extreme fatigue, sleep
disturbances, loss of concentration, disorientation,
malaise, sluggishness, gastrointestinal upset, and
loss of appetite
Roy Philip
4
Marketing and
9
Economic Development (1 of 2)
• The stage of economic growth
– Affects the attitudes toward foreign business
activity
– The demand for goods
– The distribution systems found within a
country
– The entire marketing process
• Static economy – consumption patterns are rigid
• Dynamic economy – consumption patterns
change rapidly
Roy Philip
5
Marketing and
9
Economic Development (2 of 2)
• Economic development is generally understood to
mean an increase in the average per capita gross
domestic product (GDP) and implies a widespread
distribution of increased income
• Economic development, today, also means rapid
economic growth and increases in consumer
demand
Roy Philip
6
Stages of Economic
Development (1 of 2)
9
• The United Nations groups countries into three
categories
– MDCs (more-developed countries – Canada,
England, France, Germany, Japan, and the United
States)
– LDCs (less-developed countries – Asia and Latin
America)
– LLDCs (least-developed countries – Central Africa
and Asia)
– NICs (Newly Industrialized Countries – Chile, Brazil,
Mexico, South Korea, Singapore, and Taiwan)
Roy Philip
7
Stages of Economic
Development (2 of 2)
9
• NICs (Newly Industrialized Countries)
– Countries that are experiencing rapid economic expansion
and industrialization
– Do not exactly fit as LDCs or MDCs
– Have moved away from restrictive trade practices
– Instituted significant free market reforms
– Brazil is a good example of an NIC, exporting everything
from alcohol-based fuels to carbon steel. Brazilian orange
juice, poultry, soybeans, and weapons compete with U.S.
products for foreign markets. The Brazilian aircraft
manufacturer, Embraer provides a substantial portion of
the commuter aircraft used in the U.S. and elsewhere
Roy Philip
8
Standards of Living
in the Eight Most Populous American
Countries
9
Exhibit 9.2
Roy Philip
9
Economic Growth Factors
9
• Economic growth factors for NICs
Political stability in policies affecting their development
Economic and legal reforms
Entrepreneurship
Planning
Outward orientation
Factors of production
Industries targeted for growth
Incentives to force a high domestic rate of savings and to
direct capital to update the infrastructure, transportation,
housing, education, and training
– Privatization of state-owned enterprises (SOEs) that placed
a drain on national budgets
–
–
–
–
–
–
–
–
Roy Philip
10
Information Technology, the Internet,
and Economic Development
9
• New, innovative electronic technologies are key to a
sustainable future for developed and developing
nations
• The Internet accelerates the process of economic
growth by speeding up the diffusion of new
technologies to emerging economics
• The internet allows for innovative services at a
relatively inexpensive cost
• Wireless technologies greatly reduce the need to lay
down a costly telecom infrastructure to bring
telephone service to areas not now served
Roy Philip
11
Objectives of
Developing Countries
9
• Industrialization is the fundamental objective of
most developing countries
• Economic growth is seen as the achievement of
social as well as economic goals
–
–
–
–
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
Roy Philip
12
Infrastructure and
Development
9
• Infrastructure represents those types of capital
goods that serve the activities of many industries
such as paved roads, railroads, seaports,
communication networks, etc.
• The quality of an infrastructure directly affects a
country’s economic growth potential and the ability
of an enterprise to engage effectively in business
• The less developed a country is – the less adequate
the infrastructure is for conducting business
• Countries begin to lose economic development
ground when their infrastructure cannot support an
expanding population and economy
Roy Philip
13
Infrastructure of Most
Populous American Countries
9
Exhibit 9.3
Roy Philip
14
Marketing’s Contributions
9
• Marketing (or distribution) is not always
considered meaningful to those responsible for
planning
• Marketing is an economy’s arbitrator 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
Roy Philip
15
Marketing in a
9
Developing Country (1 of 3)
• 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
• In evaluating the potential in a developing
country, the marketer must look at two areas:
– Level of market development
– Demand in developing countries
Roy Philip
16
Marketing in a
9
Developing Country (2 of 3)
• 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
Roy Philip
17
Evolution of the Marketing
Process
9
Exhibit 9.4
Roy Philip
18
Marketing in a
9
Developing Country (3 of 3)
• 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 lowincome urban slums
Roy Philip
19
Consumption Patterns in Most
Populous American Countries
9
Exhibit 9.5
Roy Philip
20
BEMs and Markets
of the Americas
9
• Big Emerging Markets (BEMs)
• The Americas
– North American Free Trade Agreement (NAFTA)
– United States – Central American Free Trade
Agreement-Dominican Republic Free Trade
Agreement (DR-CAFTA)
– Southern Cone Free Trade Area (MERCOSUR)
– Latin American Progress
– Latin American Economic Cooperation
– FTAA or SAFTA?
Roy Philip
21
Big Emerging Markets (BEMs)
(1 of 2)
9
• 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
–
–
–
–
–
–
–
–
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
Roy Philip
22
Big Emerging Markets (BEMs)
(2 of 2)
9
• Prominent BEMs include India, China, Brazil,
Mexico, Poland, Turkey, and South Africa
• 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
Roy Philip
23
The Americas - NAFTA
9
• 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
– Job losses have not been as drastic as once feared, in part
because companies have established maquiladora plants in
anticipation of the benefits from NAFTA
Roy Philip
24
Key Provisions of NAFTA
9
Exhibit 9.6
Roy Philip
25
The Americas – DR-CAFTA
9
• 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
Roy Philip
26
The Americas – MERCOSUR
9
• 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
Roy Philip
27
The Americas – Latin
American Progress
9
• 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
Roy Philip
28
American Market Regions
9
Exhibit 9.7
Roy Philip
29
The Americas – Latin American
Economic Cooperation
9
• 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
(CARICOM)
• 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
Roy Philip
30
The Americas –
FTAA or SAFTA
9
• Initially NAFTA was envisioned as the
blueprint for a free trade area extending from
Alaska to Argentina
• Free Trade of the Americas (FTAA) essentially
would stretch from the Bering strait (Canada)
all the way south to Cape Horn (Chile)
• South American Free Trade Association
(SAFTA) led by Brazil and the other member
states of MERCOSUR
Roy Philip
31
Strategic Implications for
Marketing (1 of 2)
9
• 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
Roy Philip
32
Strategic Implications for
Marketing (2 of 2)
9
• 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
Roy Philip
33
Summary (1 of 2)
9
• Foreign marketers must be able to
– Rapidly react to market changes
– Anticipate new trends within constantly evolving
market segments that may not have existed as recently
as last year
• As nations develop their productive capacity, all
segments of their economies will feel pressure to
improve
• The impact of these political, social and economic
trends will continue to be felt throughout the world
• IT will speed up the economic growth in every
country
Roy Philip
34
Summary (2 of 2)
9
• Marketers must focus on devising plans
designed to respond fully to each level of
economic development
• Big emerging markets may present special
problems however, they are promising markets
for a broad range of products now and in the
future
• Emerging markets create new marketing
opportunities for MNCs as new market segments
evolve
Roy Philip
35