ASSESSING GLOBAL MARKET OPPORTUNITIES EMERGING MARKETS

Newly Industrialized Countries (NICs)Countries that are experiencing rapid economic expansion and industrialization.

NIC Growth FactorsPolitical stability in development policies Economic and legal reformsEntrepreneurshipPlanningOutward orientation

NIC Growth FactorsFactors of productionIndustries targeted for growthPrivatization of state-owned enterprises (SOEs) Accessibility of large markets

Development of Information TechnologyInvestment in information technology (IT) is important for economic growth.Wireless technology reduces the need for infrastructureThe Internet allows for inexpensive services

Marketing Needs InfrastructureCountries begin to lose economic development ground when their infrastructure cannot support an expanding population and economy Does the Infrastructure exist?UtilitiesCommunicationsTransportationIs the Infrastructure Reliable?

Emerging MarketsEmerging markets are nations with social or business activity in the process of rapid growth and industrialisation. Based on data from 2006, there are around 28 emerging markets in the world (data from 2010 says there are 40 emerging markets The economies of China and India are considered to be the largest. According to The Economist, many people find the term outdated, but no new term has yet to gain much traction. The ASEAN China Free Trade Area, launched on January 1, 2010, is the largest regional emerging market in the world.

Big Emerging Markets (BEMs)

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 sizeBecause 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

Big Emerging MarketsTraits of Big Emerging Markets: Physically largeSignificant populationsConsiderable markets for a wide range of productsHave strong rates of growth or the potential for growth

Big Emerging Markets

Have undertaken economic reformAre of major political importance in their regionsAre regional economic driversSupport growth in neighboring markets

The Americas

Eastern Europe

Eastern Europe and the Balkanswww.cia.gov/library/publications/the-world-factbook/

CountryGDP ImportExport Life expectPop. (million)Albania6,4004.81.577.83.6Czech Rep.26,800145.1150.576.610.2Poland17,800213.9190.575.438.5Slovenia30,80038.134.376.72.0Turkey12,900204.8141.873.171.9Ukraine7,80082.564.968.146.0

Asia

Asiawww.cia.gov/library/publications/the-world-factbook/

CountryGDP ImportExport Life expectPop. (million)Afghanistan8004.90.3344.232.7Cambodia2,1006.44.661.714.2China6,1001,1561,46573.21,330India2,90028817869.31,147Japan35,30069677782127Laos2,1001.281.0356.36.7Philippines3,40063.450.970.896Singapore52,90030734981.94.6

Africa

Africawww.cia.gov/library/publications/the-world-factbook/

CountryGDP ImportExportLife expectPop. (million)Burkina Faso1,3001.70.852.615.3Egypt5,50056.433.471.981.7Nigeria2,20046.483.146.5146Sierra Leone7000.560.2240.96.3South Africa10,40087.381.548.948.8

Strategic Implications for MarketingAs a country develops:incomes risepopulation concentrations shiftexpectations for a better life lead to higher standardsnew infrastructures evolvesocial capital investments are made When incomes rise, new demand is generatedNew market segments are created.

Strategic Implications for Marketing

Knowledge of the stage of market development is important in helping to develop marketing strategies that are tailored to the level of economic development.

Strategic Implications for Marketing

CountryPopulation (millions)GDP per capitaCars per 1000 TVs per 1000PCs per 1000 Canada33.435,700581655460China1,321.97,800830619India1,129.83,8008586Kenya36.91,20013226Mexico10810,70015124169

A person earning $250 annually in a developing country can afford Gillette razorsAt $1,000 a year he or she can become a Sony television ownerA Nissan or Volkswagen could be possible with a $10,000 incomeWhirlpool 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.It is suggested that

At the $5,000 per capita mark, people are more brand conscious and forego local brands for foreign brands they recognizeAt $10,000, they join those with higher incomes who are exposed to same global information sources. They join the Club of consumers with homogeneous demands who share a common knowledge of products and brands. They become global consumersIt is suggested that

https://www.cia.gov/library/publications/the-world-factbook/index.html

CountryLand LinesCell phonesLand line / CellUkraine12,858,00055,240,0000.23Canada21,000,00018,749,0001.12Turkey18,413,00061,976,0000.30South Africa4,642,00042,300,0000.11Cambodia37,5002,583,0000.01

Objectives of Developing CountriesIndustrialization is the fundamental objective of most developing countriesEconomic growth is seen as the achievement of social as well as economic goalsBetter educationBetter and more effective governmentElimination of many social inequitiesImprovements in moral and ethical responsibilitiesPrivatization is the norm and currently a major economic phenomenon in industrialized as well as in developing countries

Marketings ContributionsMarketing (or distribution) is not always considered meaningful to those responsible for planningMarketing is an economys arbitrator between productive capacity and consumer demandThe marketing process is the critical element in effectively utilizing production resulting from economic growthMarketing is instrumental in laying the groundwork for effective distribution

Marketing in a Developing Country (1 of 3)Marketing efforts must be keyed to each situation and custom tailored to each set of circumstancesA promotional program for a population that is 50% illiterate is vastly different from a program for a population that is 95% literateIn evaluating the potential in a developing country, the marketer must look at two areas:Level of market developmentDemand in developing countries

Marketing in a Developing Country (2 of 3)Level of market developmentMarketer must evaluate existing level of market development and receptivenessThe more developed an economy, the greater the variety of marketing functions demanded, and the more sophisticated and specialized the institutions become to perform marketing functionsPart 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

Marketing in a Developing Country (3 of 3)Demand in developing countries - Three distinct kinds of markets in each countryTraditional rural/agricultural sectorModern urban/high-income sectorTransitional sector usually represented by low-income urban slums

The Americas - NAFTANorth American Free Trade Agreement (NAFTA Canada, Mexico, and the United States)A single market of almost 500 million people with a 10 + $ trillion GNPRatified and became effective in 1994Requires the removal of all tariffs and barriers to trade over 15 yearsAll tariff barriers dropped in 2008Improves all aspects of doing business within North America Creates one of the largest and richest markets in the worldJob losses have not been as drastic as once feared, in part because companies have established maquiladora plants in anticipation of the benefits from NAFTA (A maquiladora is a manufacturing operation in which a factory imports materials and equipment on a duty-free and tariff-free basis for assembly, processing, or manufacturing and then re-exports the assembled, processed, or manufactured product, sometimes back to the raw materials' country of origin. A maquila is also referred to as a "twin plant", or "in-bond" industry. Most maquiladoras are in Latin America, but such arrangements also exist in other countries with legislation in place to enable them. Currently about 1.3 million Mexicans are employed in maquiladoras)

A maquiladora plant

The Americas DR-CAFTAUnited 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 MERCOSURSouthern 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 NAFTAMarket of about 250 million with a combined GDP of $3 trillion

The Americas Latin American ProgressMost of the countries in Latin America have moved from military dictatorships to democratically elected governments in the last three decadesProtectionism has given way to privatization and other economic, monetary, and trade policy reformsBecause 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 CooperationLatin American Integration Association (LAIA)Its long term goal is a gradual and progressive establishment of a Latin American common marketIt 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 membersIt continues to seek stronger ties with other groups in Latin America and has signed a trade agreement with Cuba

Strategic Implications for Marketing (1 of 2)A vast population of the emerging market are viable customers with expanding incomeAs a country developsIncomes changePopulation concentrations shiftExpectations for a better life adjust to higher standardsNew infrastructures evolveSocial capital investments madeWhen 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 brandsIf 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 segmentMarkets are changing rapidly, and identifiable market segments with similar consumption patterns are found across many countries

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 PRCThe 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 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 rightsReforming the legal system

Hong KongAfter 155 years of British rule, Hong Kong reverted to China in 1997, when it became a special administrative region (SAR) of the PRCHong 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 ownHong Kong is a free society with legally protected rights as the PRC continues to pursue a generally noninterventionist approach to economic policy that stresses the private sector

Taiwan, The ROCBoth Taiwan and China continue to implement WTO provisions between themselvesAbout 250,000 Taiwanese-run factories are responsible for about 12% of Chinas exportsTrade helps out both countries: Taiwanese companies face rising costs at home - China offers a nearly limitless pool of cheap labor and engineering talent; Chinas SOEs (State-owned enterprises) are laying off millions and Taiwan provides plentiful jobs

JapanJapans 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 stalledFour explanatory themes have emerged:Faulty economic policiesInept political apparatusDisadvantages due to global circumstancesCultural inhibitions

Global CircumstancesJapanese 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 hairSerious disadvantage in the information age: its complex language (three alphabet system) hindered software innovationsWith historically low real prices of oil and the U.S. peak consumption level of SUVs, Japan was late to tap this market

The Cultural ExplanationThe lack of a national goal for Japan plagued them after successfully building themselves from the ruins of World War IIThe 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 eraJapan is expected to continue its slow-growth economy; Toyotas 2010 quality problems may have disrupted its contributions to the economy

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 (State-owned enterprises)Signing a trade agreement with the U.S. to lift all quantitative restrictions on importsMaintaining momentum in the reform of the petroleum sectorPlanning 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 environmentTariffs are well above those of developing world normsInadequate protection of intellectual property rightsAnti-business attitudes of Indias federal and state bureaucracies continue to hinder potential investors and plague their routine operationsDelay by policymakers on selling money-losing SOEs, making labor laws flexible, and deregulating bankingWidespread corruption and ingrained bribery

IndiaBut India presents a lot of opportunitiesMassive market (over 1 billion, second in size only to China)Cheap and qualified laborKnowledge of EnglishEducated middle class numbering 250 million (college graduates, scientists, engineers, etc)Supplier and exporter of expertise in all areas of information technologyTime zone puts India in a competitive position with their European counterparts (they work while Americans sleep)

Asia Pacific Trade AssociationsOnce 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 marketsThree 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 ASEANOperating within a free trade areaThe 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 restrictionsPricing can be more consistent, which helps reduce smuggling and parallel importingMarketing can become more regionally and centrally managed

Asia-Pacific Economic Cooperation (APEC)APEC was formed in 1989Provides formal structure for major governments to discuss mutual interests in open trade and economic collaborationIncludes all major economies of the region and the most dynamic, fastest-growing economies in the worldCommon goal and commitment to:Open tradeIncrease economic collaborationSustain regional growth and developmentStrengthen the multilateral trading systemReduce barriers to investment and trade without detriment to other economies

Marketing Opportunities in Greater ChinaAcross this vast land of opportunity, there are extreme differences in economic wellbeing, cultures, and political structuresThe 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 buildingFinally, the influence of national government policies and regulations of marketing will often be minor compared with that of their local counterparts

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