Chapter 7 International Marketing

Emerging Markets and Market Behaviour

Professor Dr. Waseem Ur Rehman

Head Of Department Business Administration
University of The Punjab Gujranwala Campus
 CHAPTER LEARNING OBJECTIVES
➢ The nature and the importance of emerging
markets
➢ The connection between the economic level
of a country and the marketing task
➢ New developments in market behaviour in
these new markets
➢ The differences between emerging markets
and developed markets
➢ How to evaluate the growth of developing
markets and their importance to regional trade
➢ The marketing implications of growing
homogeneous market segments
WHAT ARE EMERGING MARKETS?
❑ In general, emerging markets are countries which are
transitioning from developing to developed markets
due to rapid growth and industrialisation.
o The definition of emerging markets may sometimes be
confusing as authors and institutions focus on a diverse
range of factors in defining them. Still, only countries
which have engaged in major reforms, increased their
participation in global business and achieved steady
growth can be referred to as emerging markets.
 GROWTH OF EMERGING MARKETS
▪ In the twentieth century many developing countries faced severe economic
crises. A major factor leading to these crises was the maintenance of
protectionist policies which led to limited development in the private sector.
▪ As export income of such countries was low, governments often subsidised
their economies by borrowing, which increased their dependence on foreign
capital and generated significant debt burdens.
▪ As a response to economic crisis, emerging markets undertook structural and
economic reforms to increase stability and instigate growth.
 state-owned enterprises (SOEs)
companies owned by the government

Today, foreign investors are seen as vital partners in economic

development. In many emerging markets, experience with state-owned
businesses proved to be a disappointment to most governments. Instead
of being engines for accelerated economic growth, state-owned
enterprises (SOEs) were often mismanaged, and created inefficient
drains on state treasuries. Further, the rapid industrialisation of many
emerging markets pointed towards private-sector investment as the
most effective means of economic growth.
 Privatisation
when a government company is sold to private investors

New leaders have turned away from the traditional closed policies of the past to
implement positive market-oriented reforms and seek ways for economic
cooperation. Privatisation of SOEs and other economic, monetary and trade policy
reforms show a broad shift away from inward-looking policies of import substitution
(that is, manufacture products at home rather than import them) and protectionism
that were so prevalent earlier. In a positive response to these reforms, investors are
spending billions of dollars to buy airlines, banks, public works and
telecommunications systems.
 Demand and consumption in emerging markets

The BRICs (Brazil, Russia, India and China) are some of the countries undergoing
impressive changes in their economies and emerging as vast markets. In these and
other countries, there is an ever-expanding and changing demand for goods and
services. Markets are dynamic, developing entities reflecting the changing lifestyles of
a culture. As economies grow, markets become different, larger and more demanding.
When economies grow and markets evolve beyond subsistence levels, the range of
tastes, preferences and variations of products sought by the consumer increases; they
demand more, better and/or different products. As countries prosper and their people
are exposed to new ideas and behaviour patterns via global communications networks,
old stereotypes, traditions and habits are cast aside or tempered and new patterns of
consumer behaviour emerge.
 Marketing and economic development

▪ The economic level of a country is the single most important environmental element to which the
foreign marketer must adjust the marketing task.
▪ Economic development is generally understood to mean an increase in national production that results
in an increase in the average per capita GDP.
▪ Infrastructure is a crucial component of the uncontrollable elements facing marketers.
For Example: distribution costs can increase substantially, and the ability to reach certain segments of the
market is impaired. In fact, a market’s full potential may never be realised because of inadequate
infrastructure.
▪ As trade develops, a country’s infrastructure typically expands to meet the needs of the growing
economy.
▪ As trade develops, a country’s infrastructure typically expands to meet the needs of the growing
economy.
▪ A marketer cannot superimpose a sophisticated marketing programme on an underdeveloped economy.
 Marketing in emerging markets

▪ Emerging markets offer tremendous opportunities for business.

▪ In analysing emerging markets, institutional voids – inefficiencies in capital, product and labour
markets – are often emphasised. Institutions provide information, resources and services which
assist market functions. For instance institutions can provide access to capital. They can also
provide valuable information regarding the players within a value chain, firms’ credibility, consumer
characteristics and supply information. In addition, regulatory institutions governing the legal
system ensure efficiency in business transactions and help resolve disputes.
▪ In developed markets, specialised intermediaries such as distributors, and logistics companies help
distribute a firm’s products.
▪ On the other hand, emerging market environments are changing rapidly and the business
environments in such markets are improving continually. Increased global participation and the
need to attract further foreign investment lead to increased efforts in improving the business
environments in emerging markets.
 CONTINUE……
The physical infrastructure of a country refers to the country’s facilities which enable
its economy to function and determine living conditions. In a given country,
infrastructure can be analysed by considering factors such as the quality and
efficiency of transportation and communication systems. A major difference between
developed and emerging markets is that, in emerging markets, infrastructure may be
inadequate or inefficient. For international marketers, infrastructural weaknesses
especially highlight potential difficulties in distribution, logistics, and difficulties in
communicating with potential consumers.
 Continue……

✓ Unique characteristics of emerging markets influence the marketing process. For instance, limited
information availability or the dispersed nature of the market population can create obstacles in segmenting
and targeting consumers.
✓ In marketing to emerging markets, product features often need to be adjusted. Low incomes can indicate
the need to focus on affordability and durability.
✓ In emerging markets, even the middle-income segments have relatively limited budgets which are lower
than those of developed market consumers.
✓ Many companies enter emerging markets with the belief that their products accepted in other countries will
be welcomed by emerging market customers. However, such is not often the case due to cultural differences,
different needs and wants. In emerging markets, marketers also need to consider cultural factors in
designing marketing strategies.
 Emerging market groups:
What is occurring in the emerging markets is analogous to the
situation after the Second World War when tremendous
demand was created during the reconstruction of Europe. As
Europe rebuilt its infrastructure and industrial base, demand
for capital goods exploded and, as more money was infused
into its economies, consumer demand also increased rapidly.
During that period, the USA was the principal supplier
because most of the rest of the world was rebuilding or had
underdeveloped economies. Now the USA, Japan, Europe and
the BRICs will become fierce rivals in emerging markets.
Continue….

Eastern Europe and the Asia:

Baltic States :
Eastern Europe and the Baltic states, Asia is the fastest- China:
satellite nations of the former USSR,
have established free-market systems
growing market in the The economic and social changes
occurring in China since it began
(see Exhibit 7.8). New business world and its share of actively seeking economic ties with
opportunities are emerging almost
daily and the region is described as global output was the industrialised world have been
anywhere from chaotic with big risks to dramatic. 14 China’s dual economic
an exciting place with untold projected to account system, embracing socialism along
opportunities. Both descriptions fit, as
countries adjust to the political, social
for almost one-half of with many tenets of capitalism,
produced an economic boom with
and economic realities of changing the increase in global expanded opportunity for foreign
from the restrictions of a Marxist-
output through the investment.
socialist system to some version of free
markets and capitalism.
next decade.
CONTINUE…
India:
The wave of change that has been washing
away restricted trade, controlled
economies, closed markets and hostility to
foreign investment in most developing
countries finally reached India in the early
1990s. Since its independence, one of the
world’s largest markets had set a poor
example as a model for economic growth
for other developing countries and was
among the last of the economically
important developing nations to throw off
traditional insular policies.
The Americas:
Most of the countries have moved from
military dictatorships to democratically
elected governments, while sweeping
economic and trade liberalisation is
replacing the economic model most
Latin American countries followed for
decades. Today many of them are at
roughly the same stage of liberalisation
that launched the dynamic growth in
Asia during the last two decades.
 SUMMARY
The increasing scope and level of technical and economic growth have enabled many countries to advance
their standards of living by as much as two centuries in a matter of decades. As countries develop their
productive capacity, all segments of their economies will feel the pressure to improve. The impact of these
social and economic trends will continue to be felt throughout the world, causing significant changes in
marketing practices. Marketers must focus on devising marketing plans designed to respond fully to each
level of economic development. China and the former Soviet Union continue to undergo rapid political and
economic changes that have resulted in opening most communist-bloc countries to foreign direct investment
and international trade. And although emerging markets present special problems, they are promising
markets for a broad range of products. This ever-expanding involvement of more and more of the world’s
people with varying needs and wants will test old trading patterns and alliances. 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. Many of today’s
market facts will probably be tomorrow’s historical myths.