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Consumers’ interest in developed & developing markets: implications for responsible business
Pradeep S MehtaSecretary General, CUTS InternationalOECD CSR Roundtable Paris, 15th June 2009
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
Consumer Interests
Developed CountriesDeveloping 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
Consumer Interests
Developed CountriesDeveloping 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.
Contributory Factors (Law & Regulation related)
Developed CountriesDeveloping 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
Contributory Factors(Law & Regulation related)
Developed CountriesDeveloping Countries
Effective laws and better enforcement Dynamic process of legislative/regulatory reforms Effective governance mechanism and efficient functioning of regulatory institutions
Contributory Factors(External Factors)
Developed CountriesDeveloping 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
Contributory Factors(External Factors)
Developed CountriesDeveloping 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
Implication for Businesses
Developed CountriesDeveloping 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
Implications for Businesses
Developed CountriesDeveloping 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
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
