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Market - Regions

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Title: 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
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