“Classifying” Markets

1. “Classifying” Markets • “The level of economic development in a country is the single most important environmental element to which the foreign marketer must adjust the marketing task.” —Cateora and Graham, Chapter 9, page 244 • Improvements in economic development are measured by changes in per capita GDP.

2. GDP versus GNP • Gross Domestic Product—the total value of all goods and services produced within the boundaries of a nation, regardless of asset ownership • Gross National Product—the total value of goods and services produced within a country after excluding the amount produced by foreign-owned assets • Ford owns a manufacturing plant in Thailand. The total annual value of goods produced in that Ford plant is included in Thailand’s GDP but not its GNP • Honda owns a manufacturing plant in Marysville, OH in the United States. The total annual value of goods produced in that Honda plant is included in the USA’s GDP but not in it’s GNP

3. United Nations Classification Scheme • MDCs—More-Developed Countries—fully industrialized with high per capita incomes—Canada, England, France, Germany, Japan, U.S. • LDCs—Less-Developed Countries—industry and trade are developing; per capita income is still relatively low—Mexico, South Korea, Brazil, China • LLDCs—Least-developed Countries—industry is extremely underdeveloped; high incidence of rural subsistence populations; per capita income is very low; Central African countries, Guatemala, Honduras

4. The “Misfits” • Problem: Emerging markets with rapidly changing industrialization rates, new trade agreements, and rising per capita incomes don’t fit well in any existing UN category • Examples of countries undergoing impressive and rapid industrialization—China, India, Taiwan, Hong Kong, Singapore, South Korea, Poland, Argentina, Brazil, Mexico, Indonesia, Chile

5. Newly Industrialized Countries—NICs • NICs—countries experiencing rapid economic expansion through industrialization and trade, that do not fit as LDCs or MDCs • NICs also exhibit: Political Stability Economic and Legal Reforms Growing Levels of Entrepreneurship Central Planning Outward Orientation Industries Targeted for Growth Privatized State-Owned Enterprises Low Tariffs Increasing Rates of Personal Savings

6. “Big Emerging Markets” • 75% of the world’s economic growth over the next two decades will come from China, India, Brazil and other Newly Industrialized Countries • The U.S. Department of Commerce has classified a small core of these countries as “Big Emerging Markets” (BEMs) • By 2010, BEMs will account for more than half the world’s population and 50% of its GDP • Today, exports to BEMs exceed exports to Europe and Japan combined

7. BEMs—Big Emerging Markets

8. Important Traits of Big Emerging Markets (BEMs) • Are physically large • Have significant populations • Represent considerable markets for a wide range of products • Have undertaken significant programs of economic reform • Are of major political importance within their regions • Are “regional economic drivers” • Will engender further expansion in neighboring markets as they grow

9. Brazil occupies one-half the entire area of South America and is the world’s 5th largest country

10. China is the world’s second largest country, following Russia and leading Canada and the U.S., in land mass