Consumers’ interest in developed & developing markets: implications for responsible business

1. Consumers’ interest in developed & developing markets: implications for responsible business Pradeep S Mehta Secretary General, CUTS International OECD CSR Roundtable Paris, 15th June 2009

2. Outline of the presentation • Variations in consumers’ interest/awareness between developing and developed countries • Large no of contributory factors (externalities) in developing countries • Relationship between law enforcement, company behaviour and consumer welfare • Highlights challenges and traces the road ahead

3. Consumer Interests Developing Countries Developed Countries • Low-levels of consumer awareness • Consumers poorly organised, few Cons. Organisations • Views of consumers seldom incorporated into laws • No involvement of consumers in law enforcement • Redressal mechanism ill-developed, cumbersome and costly • Bargaining power very low/absent • Standards often reflect views of a particular class of consumers

4. Consumer Interests Developing Countries Developed Countries • High levels of consumer awareness • Consumers play active role in advocacy • Play active role in enforcement of laws • Redressal process transparent, simple and cost effective • Consumers have high bargaining power • Consumers play active part in standard-setting, etc.

5. Contributory Factors (Law & Regulation related) Developing Countries Developed Countries • Laws absent; or ineffective if present • Enforcement Institutions resource-strapped • Multiple institutions created but limited capacity on enforcement • Interference of interest groups hamper functions • Consumer standards not observed (goods and services) • Poor governance and weak functions of regulatory institutions

6. Contributory Factors(Law & Regulation related) Developing Countries Developed Countries • Effective laws and better enforcement • Dynamic process of legislative/regulatory reforms • Effective governance mechanism and efficient functioning of regulatory institutions

7. Contributory Factors(External Factors) Developing Countries Developed Countries • Policy often inclined to benefit SoEs • Monopolies and abuse of dominance by companies • Unfair Trade Practices (UTPs) predominant • Poor service standards (e.g. after sales service) • Bad infrastructural facilities act as dis-incentive for Cos • Use of obsolete technology; labour intensive processes

8. Contributory Factors(External Factors) Developing Countries Developed Countries • Predictable business environment and rules • Markets often competitive (level-playing field) • Excellent service standards – high levels of consumer satisfaction • Well developed infrastructural facilities • Improved technology leading to improved products

9. Implication for Businesses Developing Countries Developed Countries • Often extractive, to source raw materials • Non-transparent operations, little or no communication with communities/consumers/shareholders • Weak enforcement – help avoid actions • Low propensity to re-invest in host countries • Consumer ignorance used to their benefit • Viewed with suspicion by civil society (no dialogue) • Large no. of SMEs – little or no incentives by the State • Old (often ineffective) marketing practices

10. Implications for Businesses Developing Countries Developed Countries • Stern action (precedents) facilitate responsible conduct • Transparent policy and operations • Close involvement with consumers/shareholders • High level of consumer awareness (watch dog) • Incentives from the State for responsible conduct • Dynamic marketing strategies

11. Challenges & the Way Ahead • Making relevant information available to consumers in developing countries – enhancing awareness • Promoting cooperation between regulatory institutions and consumers/groups in developing countries • International (donors) community to strengthen regulatory regimes/institutions in developing countries • MNCs to maintain consistent standards of performance across host (developed & developing) countries

12. Thank You! psm@cuts.org +91-9829013131 www.cuts-international.org