Market - Regions

1
Market - Regions
2
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
• 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

3
Marketings 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

4
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_rat_by_s
  ex_age_15-illiteracy-rates-sex-aged-15
• https//www.cia.gov/library/publications/the-world
  -factbook/geos/ar.html
• http//www.oecd-ilibrary.org/statistics

5
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

6
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 marketers 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

7
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

8
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

9
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 worlds
  fastest-growing global consumer segment
• Markets are changing rapidly, and identifiable
  market segments with similar consumption patterns
  are found across many countries

10
Group question

• You want to sell mens face cream. What country
  would you sell it in?

11
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

12
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

13
Patterns of Multinational Cooperation (2 of 3)

• Customs union
• Enjoys free trade areas 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

14
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)

15
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
• 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

16
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

17
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

18
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

19
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

20
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

21
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 (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

22
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

23
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
  Marxist-socialist system to some version of free
  markets and capitalism

24
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)

25
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

26
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

27
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)
• Most advanced and viable of Africas regional
  organizations
• East African Community (EAC)

28
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

29
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

30
The Peoples 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

31
The Peoples Republic of China (PRC) (2 of 2)

• Two major events that occurred in 2000 had a
  profound effect on Chinas 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

32
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
  counterparts

33
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

34
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
  Chinas 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.

35
Japan

• Japans fast growth in the 1970s and 1980s amazed
  the world. Then came the early 1990s, and
  Japans economy produced a stunning surprise it
  slowed, sputtered, and stalled
• Four explanatory themes have emerged
• Faulty economic policies
• Inept political apparatus
• Disadvantages due to global circumstances
• Cultural inhibitions

36
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

37
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

38
India

• The following steps have already been taken
• Privatizing state-owned companies reducing
  stake to about 51
• Recasting the telecom sectors 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

39
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 Indias 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
• Widespread corruption and ingrained bribery

40
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)

41
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)
• ASEAN3 (ASEAN members plus ministers from China,
  Japan, and South Korea)
• Asia-Pacific Economic Cooperation (APEC)

42
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

43
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
• 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