Global Marketing Management Emerging Markets

1. Global Marketing ManagementEmerging Markets MKTG 3231-001 Fall 2013 Mrs. Tamara L. Cohen Class #13

2. Course Pack Reading #4 for this class: EITHER read summary of The World is Flat OR watch Thomas Friedman’s speech Homework #7: Summarize key concepts in The World is Flat Emerging Markets

3. The World is Flat Thomas Friedman • Suggests world is flat as metaphor for level playing field • Globalization has leveled playing fields between industrial and emerging market countries

4. KEY TERMS Economic Development = increase in national production that results in increase in average per capita GDP Emerging Markets = economies in the process of rapid industrialization - between less developed and more developed Bottom-of-the-Pyramid Markets (BoPMs) = clusters of markets defined by pockets of poverty, usually in LDCs & LLDCs; relatively ignored by marketers due to misconceptions about resources & appropriate products

5. KEY CONCEPTS U.N. stages of economic development based on industrialization: • MDCs (more-developed countries) • e.g. Canada, England, France, Germany, USA • LDCs (less-developed countries) industrialized countries just entering world trade; most in Asia & Latin America • LLDCs (least-developed countries) industrially underdeveloped, agrarian, subsistence societies with rural populations; little world trade • Static economy(consumption is rigid) • Dynamic economy(ever-changing market needs & wants)

6. Who are these Emerging Markets? developed emerging

7. Who cares about Emerging Markets? • car companies • food & beverage manufacturers • cell phone companies • advertising companies • EVERYONE Strong economic growth disposable income

8. Emerging Markets BUZZZZ • 28 - 150 emerging markets worldwide • 4 Tigers = Hong Kong, Singapore, South Korea, Taiwan • 4 Lions = Egypt, Morocco, Tunisia, South Africa BRIC = Brazil, Russia, India, China CIVETS = Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa

9. The latest Emerging Markets BUZZZZ MIST countries: • México • Indonesia • South Korea • Turkey

10. Marketing & Economic Development • Stage of economic growthaffects • attitudes toward foreign business activity • demand for goods • distribution systems within country • entire marketing process • Economic development • GDP • implies widespread distribution of increased income

11. Standards of Living for Selected Countries * at PPP A M E R I C A E U R O P E A F R I C A A S I A

12. Political stability in policies affecting development Economic & legal reforms Entrepreneurship Planning Outward orientation Factors of production Strategic industries targeted for growth Incentives to save & update infrastructure Privatization of state-owned enterprises Recipe for Economic Growth of Emerging Markets Chile Brazil Mexico S.Korea Singapore Taiwan

13. BEMs =Big Emerging Markets • have > ½ world’s population • have ½ industrial world’s GDP • all geographically large • significant populations • represent sizeable markets for wide range of products • strong growth rates or potential growth rates • significant economic reforms • major regional political importance • “regional economic drivers” • stimulate expansion in neighboring markets • import > economies of similar size (differ from other developing countries) e.g. India, China, Brazil, Mexico, South Africa, Poland, Turkey Up-and-coming BEMs = Egypt, Colombia, Venezuela

14. Latin America • Military dictatorships to democratically elected governments • Privatization trend • Today many Latin American countries at roughly same stage of liberalization that launched dynamic growth in Asia during 1980s and 1990s. • Reforms led to investor confidence

15. Eastern Europe Baltic States

16. Eastern Europe and the Baltic States Countries that rapidly instituted broadest free-market policies + implemented most radical reforms prospered most • Eastern Europe • privatizing state-owned enterprises • establishing free market pricing systems • relaxing import controls • wrestling with inflation • The Baltic States = Estonia, Latvia, & Lithuania • all started off with roughly same legacy of inefficient industry and Soviet-style command economics • all are WTO members & EU members (since 2004)

17. Asia • Asian-Pacific Rim fastest-growing area in world for past 30 years • Four Tigers (Hong Kong, Singapore, South Korea, Taiwan) • 1st countries in Asia (besides Japan) to move from status of developing countries to Newly Industrialized Countries (NICs) • China • after USA, most important single market is China • 2 major events in 2000 had profound effect on China’s economy • admission to WTO • U.S. granting China normal trade relations on a permanent basis

18. 1997: Hong Kong reverted to China - became a special administrative region (SAR) of People’s Republic of China Hong Kong government negotiates bilateral agreements and makes major economic decisions on its own Asia - Hong Kong

19. Asia - Hong Kong Keys to Hong Kong’s economic success: “one country, two systems” • free market philosophy • entrepreneurial drive • no trade barriers • well-established rule of law • low and predictable taxes • transparent regulations • complete freedom of capital movement

20. Asia - Taiwan • Mainland-Taiwan economic ties approached crossroads as both countries entered WTO • “Three direct links” must be faced because WTO rules insist members communicate over trade disputes and other issues

21. “Three Direct Links” Between 1949 and 1979 there was military conflict across the Taiwan Straits, between mainland China and island of Taiwan. People-to-people contacts and direct links in mail, transport & tradewere suspended completely. In 1979 China initiated an effort to link mail, transport and trade (the “Three Direct Links”) across the Straits. In 1987 Taiwan began allowing people-to-people contact (visits). Economic and cultural contacts have since developed.

22. Asia - India 5-point agenda to promote trade: • Improve investment climate • Develop a comprehensive WTO strategy • Reform agriculture, food processing & small scale industry • Eliminate red-tape • Institute better corporate government $1,800

23. NEWEST Emerging Market ? U.S. decision to lift embargo against Vietnam • If Vietnam follows same pattern of development as other SE Asian countries, could become another Asian Tiger • Vietnam’s future development depend on government action + external investment by other governments & multinational firms • rapid advances in info. tech., manufacturing, oil production • dependence on agriculture • political power monopoly • human rights violations • foreign investment growth • WTO membership in 2007

24. NEWEST Emerging Market U.N. lifting of embargo against South Africa • South Africa has industrial base that can help propel it into rapid economic growth • South African market also has developed infrastructure • South Africa’s future development depend on government action + external investment by other governments & multinational firms • high unemployment • huge social inequity • big current account deficit • “strike season” in construction, car manufacturing, textiles, electricity, mining Ford workers striking for higher wages

25. Objectives of Developing Countries • Industrialization is fundamental objective of most developing countries • Economic growth is seen as 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 currently a major economic phenomenon in industrialized and in developing countries

26. Infrastructure = structures that serve activities of many industries Infrastructure includes financial networks & IT Quality of infrastructure Less development = less infrastructure for conducting business. Countries lose economic development when infrastructure cannot support expanding population and economy. Infrastructure & Development

27. TheParadoxof Africa =people mostly desperately poor +some land extraordinarily rich opposite to Asia in terms of resources, but Asia has boomed over last few decades in 1950s several African countries at same income level as many East Asian countries - why did they not prosper in similar ways?

28. What’s happening in Africa? • Rate of return on foreign investment > in Africa than in any other developing region real GDP growth = 4.9% p.a. (2000 to 2008) collective GDP = $1.6 trillion (2008) • Africa’s growth widespread across sectors 2002 - 2007 • Africa nearly as urbanized as China • As many cities of one million people as Europe • Trade growth with other developing regions: China Brazil India Middle East Europe (south-south trade)

29. Africa’s Four Lions Four Lions = Africa’s fastest-growing economies Egypt Morocco South Africa Tunisia

30. What’s driving Africa’s growth? Macro + micro reforms • privatization • open trade • regulatory & legal systems • critical infrastructure • free trade agreements • corporate taxes • inflation • foreign debt • budget deficits • armed conflict Trade Economic growth Urbanization Expanding labor force Middle class African consumer ? • Poverty • Disease • Education

31. 4 billion people across the globe with annual income < $1,200 BoPM = 60% of world population Ignored by international marketers because of misconceptions about lack of resources ($ & tech) and lack of appropriate products & services. Industries & markets can be created in BoPMs INDUSTRY CLUSTERS evolve; can be supported by outside investments from commercial & gov’t concerns Craftspeople network + collaborate [ efficiencies in production + distribution + other marketing activities Concentrated in LDCs & LLDCs BoPMs =Bottom-of-the-Pyramid Markets

32. What’s important for global marketers in Emerging Markets? • Anticipate new trends within constantly evolving market segments. (Trends 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. • Impact of political, social & economic trends will continue to be felt throughout the world. • IT will speed up economic growth in every country. • Design plans to respond to each level of economic development. • Emerging Markets may present special problems, but they are promising markets for broad range of products now & in future. • Emerging Markets create new marketing opportunities for MNCs as new market segments evolve. • Marketing's contribution to the growth and development of a country's economy.

33. Next class: Market Entry Strategies Preparation: Course Pack - Reading #6 Homework: IKEA visit