1 THE GLOBAL MARKETING ENVIRONMENT Sunarto Prayitno

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THE GLOBAL MARKETING THE GLOBAL MARKETING ENVIRONMENTENVIRONMENT

Sunarto Prayitno

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1. Introduction1. Introduction

The macro dimensions of the environment are economic, The macro dimensions of the environment are economic, social and cultural, political and legal, and technological.social and cultural, political and legal, and technological.

Each is important, but perhaps the single most important Each is important, but perhaps the single most important characteristic of the global market environment is the characteristic of the global market environment is the economic dimension.economic dimension.

With money, all thinks (well, almost all!) are possible. With money, all thinks (well, almost all!) are possible. Without money, many thinks are impossible for the Without money, many thinks are impossible for the marketer.marketer.

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Today, in contrast to any previous time in the history of Today, in contrast to any previous time in the history of the world, there is global economic growth.the world, there is global economic growth.

For the first time in the history of global marketing, For the first time in the history of global marketing, markets in every region of the world are potential targets markets in every region of the world are potential targets for almost every company from high tech to low tech, for almost every company from high tech to low tech, across the spectrum of products from basic to luxury.across the spectrum of products from basic to luxury.

Indeed, the fastest-growing markets, as we shall see, Indeed, the fastest-growing markets, as we shall see, are in countries at earlier stages of development.are in countries at earlier stages of development.

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The global marketer is fortunate in having a substantial The global marketer is fortunate in having a substantial body of data available that charts the nature of the body of data available that charts the nature of the environment on a country-by-country basis.environment on a country-by-country basis.

Each country has national accounts data, indicating Each country has national accounts data, indicating estimates of gross national product, gross domestic estimates of gross national product, gross domestic product, consumption, investment, government product, consumption, investment, government expenditures, and price level.expenditures, and price level.

Also distribution by age category, and rate population Also distribution by age category, and rate population growth. growth.

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These data are available for all high-income countries.These data are available for all high-income countries.

The less developed a country is, the scarcer is the ability The less developed a country is, the scarcer is the ability of economic data.of economic data.

In the low-income countries of the world, one can not be In the low-income countries of the world, one can not be certain of obtaining anything more than basic national certain of obtaining anything more than basic national accounts, and demographic and external trade data.accounts, and demographic and external trade data.Nevertheless, in considering the world’s economic Nevertheless, in considering the world’s economic environment, the marketer’s problem is not one of an environment, the marketer’s problem is not one of an absence of data but rather of an abundance.absence of data but rather of an abundance.

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2. The World Economy2. The World Economy

Within the past decade, there have been several Within the past decade, there have been several remarkable changes in the world economy that hold remarkable changes in the world economy that hold important implications for business.important implications for business.

The likelihood of business success is much greater when The likelihood of business success is much greater when plans and strategies are based on the new reality of the plans and strategies are based on the new reality of the changed world economy:changed world economy:

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1.1. Capital movements rather than trade have become the Capital movements rather than trade have become the driving force of the world economy.driving force of the world economy.

2.2. Production has become “uncoupled” from employment.Production has become “uncoupled” from employment.

3.3. The world economy dominates the scene. The The world economy dominates the scene. The macroeconomics of individual countries no longer macroeconomics of individual countries no longer control economic outcomes.control economic outcomes.

4.4. The growth of commerce via the internet diminishes the The growth of commerce via the internet diminishes the importance of national barrier.importance of national barrier.

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The first change is a the increased volume of capital The first change is a the increased volume of capital movements. The dollar value of world trade is greater movements. The dollar value of world trade is greater than ever before. Today, it is capital movements and than ever before. Today, it is capital movements and trade that determine currency value.trade that determine currency value.

The second change concerns the relationship between The second change concerns the relationship between productivity and employment. Although employment in productivity and employment. Although employment in manufacturing remains steady or has declined, manufacturing remains steady or has declined, productivity continuous to grow. productivity continuous to grow.

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The third major change is the emergence of the world The third major change is the emergence of the world economy as the dominant economic unit. Company economy as the dominant economic unit. Company executives and national leaders who recognize this have executives and national leaders who recognize this have the greatest chance of success.the greatest chance of success.

The forth major change is in this new decade, the growth The forth major change is in this new decade, the growth of computer usage and e-commerce is revising the of computer usage and e-commerce is revising the economic landscape.economic landscape.

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3. Economic Systems3. Economic Systems

There are three types of economic systems: There are three types of economic systems: capitalistcapitalist, , socialistsocialist, and , and mixedmixed..

This classification is based on the dominant method of This classification is based on the dominant method of resources allocation: market allocation, command or resources allocation: market allocation, command or central plan allocation, and mixed allocation, central plan allocation, and mixed allocation, respectively.respectively.

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1. Market Allocation:1. Market Allocation:A market allocation system is one that relies on A market allocation system is one that relies on consumers to allocate resources. Consumers “write” the consumers to allocate resources. Consumers “write” the economic plan by deciding what will be produced by economic plan by deciding what will be produced by whom.whom.

The market system is an economic democracy – citizens The market system is an economic democracy – citizens have the right to vote with their pocketbooks for the have the right to vote with their pocketbooks for the goods of their choice. The role of the state in a market goods of their choice. The role of the state in a market economy is to promote competition and ensure economy is to promote competition and ensure consumers protection.consumers protection.

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2. Command Allocation:2. Command Allocation:In a command allocation system, the state has broad In a command allocation system, the state has broad powers to serve the public interest. These include powers to serve the public interest. These include deciding which product to make and how to make them.deciding which product to make and how to make them.

Consumers are free to spend their money on what is Consumers are free to spend their money on what is available, but decisions about what is produced and, available, but decisions about what is produced and, therefore, what is available are made by state planners. therefore, what is available are made by state planners. Because demand exceeds supply, the element of the Because demand exceeds supply, the element of the marketing mix are not used as strategic variables.marketing mix are not used as strategic variables.

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3. Mixed System:3. Mixed System:

There are, in reality, no pure market or command There are, in reality, no pure market or command allocation systems among the world’s economies.allocation systems among the world’s economies.

All market systems have a command sector, and all All market systems have a command sector, and all command systems have a market sector; in other words, command systems have a market sector; in other words, they are “mixed”.they are “mixed”.

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4. Stages of Market 4. Stages of Market DevelopmentDevelopment

Global country markets are at different stages of Global country markets are at different stages of development. GNP per capita provides a very useful way development. GNP per capita provides a very useful way of grouping these countries.of grouping these countries.

Using GNP as a base, we have divided global market Using GNP as a base, we have divided global market into four categories. Although the income definition for into four categories. Although the income definition for each of the stages is arbitrary, countries in each of the each of the stages is arbitrary, countries in each of the four categories have similar characteristics.four categories have similar characteristics.

Thus, the stages provide a useful basis for global market Thus, the stages provide a useful basis for global market segmentation and target marketing.segmentation and target marketing.

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1. Low-Income Countries:1. Low-Income Countries:Low-income countries, also known as pre-industrial Low-income countries, also known as pre-industrial countries, are those with incomes of less than US $786 countries, are those with incomes of less than US $786 per capita.per capita.

They constitute 37% of the world population but less They constitute 37% of the world population but less than 3% of world GNP.than 3% of world GNP.

The following characteristics are shared by countries at The following characteristics are shared by countries at this income level:this income level:

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1.1. Limited industrialization and a high percentage of the Limited industrialization and a high percentage of the population engaged in agriculture and subsistence population engaged in agriculture and subsistence farming.farming.

2.2. High birthrates.High birthrates.3.3. Low literacy rates.Low literacy rates.4.4. Heavy reliance on foreign aid.Heavy reliance on foreign aid.5.5. Political instability and unrest.Political instability and unrest.6.6. Concentration in Africa, south of the Sahara.Concentration in Africa, south of the Sahara.

In general, these countries represent limited markets for all In general, these countries represent limited markets for all products and are not significant locations for competitive threats.products and are not significant locations for competitive threats.

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2. Lower-Middle-Income Countries:2. Lower-Middle-Income Countries:Lower-middle-income countries (also known as less Lower-middle-income countries (also known as less development countries or LDCs) are those with a GNP development countries or LDCs) are those with a GNP per capita of more than $786 and less than $3,125.per capita of more than $786 and less than $3,125.

This countries constitute 39% of the world population but This countries constitute 39% of the world population but only 11% of world GNP.only 11% of world GNP.

These countries are at the early stages of These countries are at the early stages of industrialization.industrialization.

Factories supply a growing domestic market with such Factories supply a growing domestic market with such items as clothing, batteries, tires, building materials, and items as clothing, batteries, tires, building materials, and packaged foods.packaged foods.

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These countries are also locations for the production of These countries are also locations for the production of standardized or mature products such as clothing for standardized or mature products such as clothing for export markets.export markets.

Consumer market in these countries are expanding. Consumer market in these countries are expanding. LDCs represent an increasingly competitive threat as LDCs represent an increasingly competitive threat as they mobilized their relatively cheap – and often highly they mobilized their relatively cheap – and often highly motivated – labor to serve target markets in the rest of motivated – labor to serve target markets in the rest of the world.the world.

LDCs have a major competitive advantage in mature, LDCs have a major competitive advantage in mature, standardized, labor-intensive products such as athletic standardized, labor-intensive products such as athletic shoes.shoes.

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3. Upper-Middle-Income Countries:3. Upper-Middle-Income Countries:Upper-middle-income countries, also known as Upper-middle-income countries, also known as industrializing countries, are those with GNP per capita industrializing countries, are those with GNP per capita between $3,126 and $9,655.between $3,126 and $9,655.

Those countries account for 7% of world population and Those countries account for 7% of world population and almost 7% of world GNP.almost 7% of world GNP.

In these countries, the percentage of population In these countries, the percentage of population engaged in agriculture drops sharply as people move to engaged in agriculture drops sharply as people move to the industrial sector and the degree of urbanization the industrial sector and the degree of urbanization increases.increases.

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Many of the countries in this stage are rapidly Many of the countries in this stage are rapidly industrializing.industrializing.

They have rising wages, and high rates of literacy and They have rising wages, and high rates of literacy and advanced education, but they still have significantly advanced education, but they still have significantly lower wage costs than the advanced countries.lower wage costs than the advanced countries.

Countries in this stage of development frequently Countries in this stage of development frequently become formidable competitors and experience rapid, become formidable competitors and experience rapid, export-driven economic growth.export-driven economic growth.

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4. High-Income Countries:4. High-Income Countries:High-income countries also known as advanced, High-income countries also known as advanced, industrialized, postindustrial, or First World countries, are industrialized, postindustrial, or First World countries, are those with GNP per capita above $9,655.those with GNP per capita above $9,655.

With the exception of a few-oil rich nations, the countries With the exception of a few-oil rich nations, the countries in this category reached their present income level in this category reached their present income level through a process of sustained economic growth.through a process of sustained economic growth.

This countries account for only 16% of world population This countries account for only 16% of world population but 82% of world GNP.but 82% of world GNP.

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Product and market opportunities in a postindustrial Product and market opportunities in a postindustrial society are more heavily dependent on new products society are more heavily dependent on new products and innovation than in industrial societies.and innovation than in industrial societies.

Ownership levels for basic products are extremely high Ownership levels for basic products are extremely high in most households.in most households.

Organizations seeking to grow often face a difficult task it Organizations seeking to grow often face a difficult task it they attempt to expand share of existing markets.they attempt to expand share of existing markets.

Alternatively, they can endeavor to create new markets.Alternatively, they can endeavor to create new markets.

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5. Basket Cases:5. Basket Cases:

A basket case is a country with economic, social, and A basket case is a country with economic, social, and political problems that are so serious they make the political problems that are so serious they make the country unattractive for investment and operations.country unattractive for investment and operations.

Some basket cases are low-income, and no-growth Some basket cases are low-income, and no-growth countries, that lurch from one disaster to the next.countries, that lurch from one disaster to the next.

Documents

1 THE GLOBAL MARKETING ENVIRONMENT Sunarto Prayitno