International Marketing

Chapter 9

Emerging Markets

The developing world is seeking economic growth and improvement of living standards; people want to be part of the successful global consumer world. There are changes happening in the economies of developing nations, as market-driven economies continue to rise, and we see shifts in political structure, increased privatization and changes in investment policies take place.

There are three multinational regions that compromise the major trading blocks and they are Europe, the Americas, and the rapidly growing Asia. However, other nations across the globe are striving to become like their role models through economic and social reconstruction.

Economic development is the increase in national production that results in an increase in the average per capita (per head) gross domestic product, or GDP. For developing countries, this idea presents a challenge. First of all we have to study the aspects needed for growth and consider the general economic climate within such countries, and secondly, we must study the state of economic development with respect to market potential.

In dynamic economies, consumption patterns change at a very high rate, therefore marketing is continuously challenged with detecting and providing for new levels of consumption and the changing market needs and wants.

Let us take a look at the stages of economic development, before going in depth about the effects of these emerging markets on international marketing research.

Stages of Economic Development

The best known model for classifying countries by degree of economic development is the five stage model designed by Rostow, as follows:

Stage 1: The Traditional Society.

In this stage countries have a difficult time increasing their levels of productivity, and an absence of the applications of modern science and technology which are required for development. Illiteracy rates are high, as well as other social measurements.

Stage 2: The Preconditions for Takeoff.

Countries under this stage are those which are in the transition phase and are beginning to apply sciences in agriculture and production. Transportation, communications and education are on there way to growth at its beginning stages.

Stage 3: The Takeoff.

Now, countries have achieved a growth pattern and are sustaining steady development.

Stage 4: The Drive to Maturity.

The sustained progress is maintained and the economy seeks to grow when it comes to technologies and international involvement.

Stage 5: The Age of High Consumption.

Here, mass consumption leads towards long-lasting consumer goods and services. Real income per capita rises to the point were large numbers of the public have significant amounts of flexible income.

These stages give marketers with indications about the type of products and services an economy may need, as well as the level of the sophistication of its industrial infrastructure.

Other Ideas about the Stages of Economic Development

The UN classifies a country's stage in development according to its industrialization level. Although this no longer seems relevant to the rapidly industrializing world today, it could still be considered. The UN divides development of nations into three stages:

MCD'S or More-developed countries with high per capita incomes such as Japan, Germany and Canada.

LDC's or Less-developed countries whom are just entering the the world trade, with relatively low per capita incomes as in Asia and the Latin Americas.

LLDC's or Least-developed countries, with extremely low per capita income and many social and economic problems halting growth; as in the Africas.

LDC's and MCD's can be referred to as newly industrialized countries or NIC's, which have grown rapidly in a shorter time frame and have attracted foreign investment and privatization. Among such nations are the "Four Tigers" of Southeast Asia, Singapore, Taiwan, Hong Kong and Sri Lanka.

NIC Growth Factors

The reasons why these countries have managed to develop so fast and steadily are debatable. Some attribute it to cultural values and ethics in work, while others say it is cheap labor or due to education and literacy.

What we can do is take a look at the strategy Asian countries developed in order to reach their success. East Asia used an outward oriented, market based economic policy while stressing on education and health care. This model allowed for the steady rise of so called NIC's, but it is important to note the factors that existed during this stage, which included: political stability, legal reforms, planning, entrepreneurship, and the privatization of stage-owned enterprises.

Also, large accessible markets were present at low tariffs. The exports of agricultural products contributed largely to the growth of the nations. Regional cooperation and open markets were also crucial for economic growth.

IT, the Internet and Economic Development

The investment in information technology is important for economic growth. New innovative