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Are Emerging Markets Catching Up with the Developed Markets in Terms of Consumption? By A.N.M Waheeduzzaman

Are Emerging Markets Catching Up with the Developed Markets in Terms of Consumption? By A.N.M Waheeduzzaman. PRESENTED BY: Ayca Ozyesilpinar Anh Ta. Introduction. Consumption Revolution in Emerging Nations ; have grown very fast in the last 3o years- increase in consumption

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Are Emerging Markets Catching Up with the Developed Markets in Terms of Consumption? By A.N.M Waheeduzzaman

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  1. Are Emerging Markets Catching Up with the Developed Markets in Terms of Consumption?By A.N.M Waheeduzzaman PRESENTED BY: Ayca Ozyesilpinar Anh Ta

  2. Introduction • Consumption Revolution in Emerging Nations; have grown very fast in the last 3o years- increase in consumption • Consumption in Developed Nations has Slowed; market saturation • Goal of the study: Testing CONVERGENCE HYPOTHESIS: • Two groups: Developed Markets and Emerging Nations • (8 consumption variables used and socioecomic influence tested)

  3. Rise of Emerging Markets • Have begun in colonial period but mostof growth is recent (1980-2009) • Contributors • globalization supported by stabilization 1970's • Political Reforms in 1980's • Opening Up/ Liberalization of Markets 1980's • End of Cold War/Fall of Berlin Wall 1989 • Technology/Computer Revolution 1990's

  4. Characteristics of Emerging Markets Positive Negative • Rapid Economic Growth • Fast Paced Modernization • Urbanization • Large Middle Class • Increased Consumer Expenditure • Growth of Urban Slums • Pollution • Environmental Degradation • Increasing Inequality • Confrontational Politics

  5. Who are the “Emerging Markets”? • List is not 100% agreed upon • 12 Big emerging markets (BEM) as a sample • Brazil, China, Egypt, India, Indonesia, Mexico, Philippines, Poland, Russia, South Korea, South Africa, Turkey (most advanced 52% world pop. & 34% worldGDP) • BRIC (subset of 12 BEM) • Brazil, Russia, India and China (growth and impact to world economy)

  6. Who are the “Developed Markets”? • G7 Nations (economic powerhouse after WWII) • Canada, France, Germany, Italy, Japan, the United Kingdom, the United States – 40% world GDP and 11 % world population) • Most recently Russia • In this study, Russia is included in Emerging Nations

  7. Observation of Rise of Emerging Markets

  8. Understanding Convergence • 3 approaches of economists • β– convergence (Growth rate of a conuntry negatively correlated with level of income, income convergence, lower level growth countries grow faster) • σ- convergence (dispersion) as countries converge over time, dispersion decreases • Conditional convergence (external variables) : population, education, innovation, however these variables are mixed and inconclusive

  9. Convergence in International Marketing • Different meaning compared to economicsts’ notion • International Marketing closest theoratical association in two researches • Standard Adaptation (S-A) – • Focuses on 4 P’s of marketing • “More standardized” = “More Convergence” • Diffusion Research • Innovators (leader) • Imitators (follower)

  10. Convergence • Overall, for the purposes of this article convergence is going to taken into consideration from

  11. Study Focus and Objective • Discuss Growth of Emerging Nations • Defines Consumption Convergence support by the models • Use 30 years as a time frame to determine the extent • Determine influence of socioeconomic variables on emerging nations • Suggest implications and future direction

  12. Methodology • Data – Global Market Information Database (GMID) and Euromonitor International • Convergence hypothesis based on 8 consumption variables • First categories: Consumer expenditure - FOOD, HGS • Second categories: Actual Consumption - CAL, PROT - DSW, MCW, REF, WSM. • Exogenous influence variables: PCI, PCEC, LIFE, PCTRD • Time period: 1980-2009, after 1990s

  13. Models - investigating consumption convergence among developed (G7) and emerging (BEM) market

  14. Time Growth Model (TGM) • Growth in consumption for a particular item over time • Yi = D(t)= α + β1t+ β2m • Yi= consumption in market i, t= discrete time interval t, m= group dummy, 1 = G7, 2 = BEM

  15. Table 1. Decade average of the variables

  16. Table 1. Time Grow and Trend Difference Models

  17. Findings from Time Growth Model • Consumption has increased significantly over time • Difference between G7 and BEM consumption is significant

  18. Trend Difference Model (TDM) • ∆ Yi = F(YD-Yi)= α + β1t • YD: mean score of consumption in G7, Yi:in merging market i, t: discrete time interval t • Determine the difference in consumption is convergence or divergence

  19. Table 1. Time Grow and Trend Difference Models

  20. Findings from Trend Difference Model (TDM) • The consumption convergence between G7 and BEM is real, but very slow. • ∆FOOD: BEM – catch up by $25.03 every year • ∆HGS: $6.5 per year • Convergence on ∆CAL > ∆PROT

  21. Table 2. Trend difference Models: BRIC Nations

  22. Findings from Trend Difference Model (TDM) • Varying Rate of convergence • Brazil and Russia have better convergence on FOOD and CAL consumption • Durable consumption such as Refrigerator and washing machine, China is in the lead.

  23. Socioeconomic Influence Model (SIM) • ∆ Yi = F(YD – Yi) = α + β1X1 + β2X2 + β3X3 + β4X4 • YD: mean score of consumption in G7, Yi : consumption in emerging market i, X1: PCI in market I, X2: PCEC, X3: LIFE, X4: PCTRD • Explain why the convergence is taking place

  24. Table 2. Socioeconomic Influence: Individual Variable Models

  25. Table 3. Socioeconomic Influence: Full and reduced Models

  26. Findings from 3 models • Consumption convergence between G7 and BEM is taking place , but at very slow rate • In particular, $25 in FOOD, $6.5 in HGS, 9 calories, 0.5 gram protein, and only 1% for durable consumption category • Braziland Russia are leading on consumer expenditure and basic consumption. China leads on durable consumption. • Income per capital is crucial influence in consumption convergence. Life expectancy is more influence than energy consumption

  27. Implications and Future Research • This study ; Investigateconsumption convergence between developed and emerging nations with using two seperate aspects of consumption • Previous studies only examined economic development and marketing but NOT consumption convergence • Model used in this study; • TGMs • TDMs • SIMs can be usefull to marketing managers many different ways.

  28. TGM Implications • Forecasting & indicating the difference among countries • Help understanding the lead-lag hypothesis • Determining the order of countries for enter strategy.

  29. TDM Implications • Forecasting, market penetration/saturation purposes • By setting TGMs managers can estimate the level of saturation of markets. • Determine the penetration strategy based on the level of market saturation

  30. SIMs Implications • Socioeconomic variables used for market segmenting and country profiling • The influences of variables used for predictive purposes • These variables are: income, energy consumption, trade and life expectancy

  31. Future Research • Investigating other time frames, more variables and countries • Planning economic strategies for different countries • Useful for international organization as well to determine their policies

  32. Conclusion • Explore the consumption convergence hypothesis in international markets and IT WAS ACHIEVED by using : • Consumer expenditure and actual consumption of 8 variables between developed and emerging markets • Consumption convergence is taking place but the rate is very slow

  33. Conclusion – Interpreted with Cautions • The models are inherenly economic in nature and results are data-driven. • BUT The model carries both economic and social- cultural aspects • Social cultural experience beyond numbers • Affected by our culture • Attitude • Group membership • Economic freedom • Dynamics of the society we live

  34. Conclusion – Interpreted with Cautions • Considering the impact of globalization • The mass media • Internet • Tourism • Multinationals

  35. Conclusion – Interpreted with Cautions International Demonstration Effect and homogenization in global consumption culture

  36. What we found? • Specific researches/articles about the narrow topics such as: • Cultural converngences in world wine consumption • Income, culture, household consumption patterns • Cross country convergence in energy and electricity consumption • Convergence of the new members of the EU (regional level and external impact during the period) • No current publised researches with using various variables

  37. Thank you for your attention! Do you have any Questions?

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