Welcome to class of Introduction to Emerging Markets

byDr. Satyendra Singh

University of WinnipegCanada

Characteristics of EM

• GNI per capita per year < $10,000• High birth rate• Undeveloped infra structure• Several languages/dialects• Close family ties• Less women in workforce• Cultural issues• Half the world’s population accounts for 25

percent of the EM today

Common Traits of Big EM

• Physically large• Significant populations• Represent markets for a wide range of products• Strong rate/potential of/for growth• Undertaken programs of economic reform• Major political importance within their regions• Regional economic drivers• Engender neighbouring markets as they grow

Research shows that • If Per capita income/ year > $5000

– people become more brand conscious– forgo many local brands to seek out foreign

brands they recognize• At $10,000

– they join those with higher incomes elsewhere who are exposed to the same global information sources. They join the “$10,000 Club” of consumers with homogeneous demands who share a common knowledge of products and brands.

• Then, they become global consumers

EM is important

• Because• Advances in technology,• Increase in world travel, and• Trend toward globalization

– Means, more market

Definitions of EM

• ING and Morgan Stanley (EM and developed)– Per capita income < $10000– Unstable and irresponsible macroeconomic policies– Insufficient shares on the stock exchange

• WTO (developed and developing)– Self selection criteria– Out of 149, 50 are designated as least developed

• UN and World Bank (EM and developed)– Based on score on Human Development Index

• Life expectancy• Adult literacy rate and educational attainment• GDP (better than GNI; it excludes foreign remittances)

Marketing Strategies for EMs…

• Need 2 strategies– Urban Global strategy is applicable

• Consumers prefer global brands to local brand• Global brand equates to quality and prestige• Communicates sophistication and modernity• Admire HIG lifestyle and the products that symbolize that• Large cities have advanced distribution channels• HIG customers are less price sensitive• Serves as social distinction• Firms do not need to be based in developed countries• Concept of 3rd world countries multinationals

– E.g. Nando’s fast food from Africa now in +30 countries• Over engineered brands unlikely to be successful in EM

Marketing Strategies for EMs

• Bottom of the pyramid strategy– LIG radically different

• Low price/value focused segment Tata Nano– Less features, toothbrush with no angles (i.e new design is needed)

• No need to focus western markets in the beginning• Satisfy needs of the mass markets

– Mahindra and Mahindra tractors, India– Ranbaxy pharmaceuticals, India– Orascom telecom, Egypt– Embraer aerospece, Brazil

• These firms have learned to make a profit at prices unheard of the developed countries due to mass marketing at low $

Strategy implementation in EMs• Leadership more involved

– Socioeconomic• Low formal education and high unemployment

– Culture• Highly embedded and hierarchical, risk avoidance

• Organizational structure– More centralized and formalized is appropriate– Small team, and group reward, collective society

• Intraorganizational relations– Social and relational identities

• Rank, status, self esteem, well being > relations• Top managers available physically for guidance

• Learning

Five myths about EM!• EM are technology backwaters

– I.e. Use outdated technologies; may not be true in case of cell phones

• EM consumers won’t pay premium for brands– Brands affect preferences

• EM cannot afford technology purchases– May not true in case of BRIC countries

• Tech. from mature markets will succeed in EM– Develop new product with relevant feature– Nokia phone in India flashlight, individual call

tracking for shared use of phones, multiple address book

• EM consumers focus on products, not services