Emerging Markets Chapter 7 Matakuliah: J0474 International Marketing Tahun: 2009

Bina Nusantara University 3 Learning Outcome Marketing and Economic Development. Marketing in a Developing Country. Developing Countries and Emerging Markets

Bina Nusantara University 4 Marketing and Economic Development The sage of economic growth within a country affects the attitudes toward foreign business activity, the demand for goods, the distribution systems found within a country, and the entire marketing process. Economic development presents a two-sided challenge. 1.A study of the general aspects of economic development is necessary to gain empathy regarding the economic climate within developing countries. 2. The state of economic development must be studied with respect to market potential, including the present economic level and the economy’s growth potential.

Bina Nusantara University 5 Marketing and Economic Development Economic development is generally understood to mean an increase in national production that results in an increase in the average per capita Gross Domestic Product (GNP). Economic development as commonly defined today, tends to mean rapid economic growth and increases in consumer demand- improvements achieved rather than centuries.

Bina Nusantara University 6 1. Stages of Economic Development Stage 1. The traditional society Stage 2. The preconditions for takeoff Stage 3. The takeoff Stage 4. The drive to maturity Stage 5. The age of high mass consumption

Bina Nusantara University 7 1. Stages of Economic Development The United Nations classifies a country’s stage of economic development based on its level of industrialization. MD Cs (more-developed countries) LD Cs (less-developed countries) LLD Cs (least-developed countries)

Bina Nusantara University 8 2. NIC Growth Factors ( Newly Industrialized Countries) 1.Political stability in policies affecting their development. 2. Economic and legal reforms. 3. Entrepreneurship. 4. Planning 5. Outward orientation. 6. Factors of production. 7. Industries targeted for growth. 8. Incentives to force a high domestic rate of saving and to direct capital to update the infrastructure, transportation, housing, education, and training. 9.Privatization of state-owned enterprises (SO Es) that placed a drain on national budgets.

Bina Nusantara University 9 3. Information Technology, the Internet, and Economic Development A country’s investment in IT is an important key to economic growth. The cellular phone, the internet, and other advances in IT open opportunities for emerging economies to catch up with richer ones. Internet uses : 1.Accelerates the process of economic growth by speeding up the diffusion of new technologies to emerging economies. 2. Facilitates education, a fundamental underpinning for economic development. 3. The internet allows for innovative services at a relatively inexpensive cost

Bina Nusantara University Objectives of Developing Countries Industrialization is the fundamental objective of most developing countries. Many countries have deregulated industry, opened their doors to foreign investment, lowered trade barriers and begun privatizing SO Es.

Bina Nusantara University Infrastructure and Development Infrastructure represents those types of capital goods that serve the activities of many industries Included in a country’s infrastructure are paved roads, railroads, seaports, communications, networks, financial networks and energy supplies- all necessary to support production and marketing. The quality of an infrastructure directly affects a country’s economic growth potential and their ability of an enterprise to engage effectively in business.

Bina Nusantara University Marketing’s Contributions The marketing process is the critical element in effectively utilizing production resulting from economic growth, The marketing can create a balance between higher production and higher consumption. The marketing is instrumental in laying the groundwork for effective distribution.

Bina Nusantara University 13 Marketing in a Developing Country External Inputs: Foreign direct investment (FDI) Resources from external partners Communication with/access to external markets. Cluster Characteristics :, Efficiency in supply, distribution and transportation. Specialization of labor. Efficiency of training. Ongoing links to local markets, suppliers and inputs. Retention of authenticity/distinctiveness of indigenous products. Effective boundary-spanning leader. Effective mobilization of embedded ties Shared normative governance Vibrant Industry Cluster : Growth in output Enhanced product diversity Improved product quality Agglomeration of related craft and marketing entities Dynamic Transformation of BOPM Clusters

Bina Nusantara University 14 Developing Countries and Emerging Markets Big Emerging Markets (BE Ms) share a number of important traits. They : 1.Are all physically large. 2. Have significant populations. 3. Represent considerable markets for a wide range of products. 4. Have strong rates of growth or the potential for significant growth. 5.Have undertaken significant programs of economic reform. 6.Are of major political importance within their regions. 7.Are regional economic drivers. 8.Will engender further expansion in neighboring markets as they grow. How with emerging markets in Latin America, Eastern Europe and the Baltic States, Asia Pacific Rim, China, etc?

Bina Nusantara University 15 Summary The foreign marketer of today and tomorrow must be able to react to market changes rapidly and to anticipate new trends within constantly evolving market segments that may not have existed as recently as last year. As nations develop their productive capacity, all segments of their economics will feel the pressure to improve. Emerging markets create new marketing opportunities for MN Cs as new market segments evolve.