Analysis of the article:“Better marketing to developing countries: why and how?”

by Emanuel Yujuico, Betsy D. Gelb.

1. OVERVIEW

Targeting less developed countries.

The new tendency, explained in the case developed by Emmanuel Yujuico, and Betsy D. Gelb from the Kelley school of business, teach us how, in recent decades, marketing efforts were concentrated on the “upper part of the pyramid” (first world countries) but this market has already become saturated, so profits are decreasing. Now, astute managers in many industries have come to recognize that growing countries (third world), that are less developed, are the next emerging markets, so they are targeting less developed countries. The papers explain how United States needs to consume less and export more to countries from which it imports so that this countries generate internal demand. So the marketing expertise that are now focused on the developed world, must shift to emerging and developing economies, like the ones on third world countries.

Why shift toward less developed countries?

This summarize in long – term economic self-preservation. As said before, marketers must shift, so that countries like United States consumes less and export more. To do this, it requires increasing consumption in LDCs to reduce the imbalances, which currently threaten the world economy. The recommendations begin by analyzing the scenario that requires changing a business as usual approach. Then you should point out how proactive managers in developed nations can help their companies to increase consumption in the developing nations, and thus taken together bring much needed balance to the world economy. Finally, move from the case that targeting consumers in developing nations is a macroeconomic necessity to illustrations of how markets can lower their risk in doing so.

The problem: Unbalanced world trade

In the year 2009, the world trade got unbalanced, this decline was no surprise because is the result to the unwinding of unsustainable consumption in developed countries. This decline were followed by the Asian financial crisis, which later affected parts of Eastern Europe and Latin America. The crisis shifted the emphasis from overvalued exchange rates to undervalued exchanges rates to facilitate export competitiveness. So there is an unbalanced world trade, that causing all this problems.

Consequences of imbalances

United States consumes about 18% of global GDP. Asia has an export led economy and the Middle East never stops producing oil, so the nations are counterbalancing America’s substantial external deficits. They describe how African nations have largely kept pace with Asia rapid rate of reserve accumulation. The problem comes with holding excess reserves. Third world countries apply techniques that are not adequate like covering 3 months’ worth of imports, or for short-term debt maturing within a year, and that has a cost. Countries start losing money because of that because on the interest rate differential between debt issuance, as well as revaluation. So countries are dependent on the marketing expertise of its businesses to raise consumption in LDCs. Reserves, cannot be spent on socially beneficial domestic programs like education, retirement or healthcare because of the loss.

Putting marketing to work

To change marketing views toward increasing consumption in emerging markets call for a shift from short-term to longer-term thinking. This change will lead to companies aiming for new markets, and toward buyers in the developing world.

A wrong move from most develop countries will be to reduce the consumption of overseas good through tariff. This move will create a price war, which will not bring advantage to anyone. Experts support this idea because during great depression in the 30s, tariff instead of helping the economy, shrink even more people’s economy and started a price war.

Protectionism is another solution that can bring more harm than good. Besides reducing consumption, protectionism can bring retaliation between countries. A country-giving tariff to foreign products is prone to be imposed with tariff to their products that sell overseas, leading to an escalade of prices. When prices increase, people will change into saving more money, creating a cycle of lowering consumption and shrinking the economy. This happened to Chine during 2000s. When prices rose due to exchange rates and increasing of prices, investments were affected and the all economy reduce, as GDP of those years exhibit.

2. PROBLEM DEFINITION

To implementing a better marketing to developing countries, have not to focus on just the macroeconomic conditions of each countries, because marketing is not just about the money countries would spend with a better marketing. A better marketing also includes cultural factors, language, and creativity. So, the problem is that they focus more about the macroeconomic conditions.

3. SWOT Analysis

STRENGTHS

Help to the self-preservation of big companies.

Help to reduce the imbalances which currently threaten the world economy. Pro-actives managers in developed nations can help their companies to increase Developing countries as a whole have run a current account surplus. LDC’s strategy will lead to a realization that actions by business in the aggregate

hold the key to countering the challenges of lopsided globalization.

WEAKNESSES

LDC’s strategy decreased combined current account balances in the developed countries, since by accounting identity all current account balances must sum to zero.

Rise of domestic protectionism sentiment negatively affects world trade. Reserves cannot be spent on socially beneficial domestic programs like healthcare,

education and retirement. Less developed countries lose an estimated 1% of GDP annually due to holding

excess reserves. Investment barriers can likewise prompt international retaliation.

OPPORTUNITIES

Marketers in developed world will need to create and promote products that will encourage consumption in developing countries.

Focused in the marketing research. Markets have become saturated and profits from targeting the top are thinning,

astute managers recognize the latent possibilities which lie in marketing to what has been called the “bottom of the pyramid”.

Firms operating in developing countries are likelier to prosper if they protect their workers and the environment.

THREATS

Current global macroeconomic scenario is unsustainable. Globalization can lead to organizational decline for companies that are slow to

adapt. Low income and low willingness to spend, continue to thwart consumption in the

developing word.

4. CONCLUSIONS AND RECOMMENDATIONS

Among all the recommendations the case gives there’s one that can be entitled like the most important because englobes all of the others, and this is: “Firms needs to shift away from markets that has already provided them their possible share, being the low hanging fruit, to

those that will mean facing a short term challenge, but with a big possibility of a long term reward.

Businesses in the developed world must not see instability being political or economic in LDCs as a wall that forbids making any kind of business there; this will mean a huge loss in potential market. So companies may need to work on their responsiveness to these concerns to take advantage of this situation for example making the most out of an economic imbalance in a certain country. Marketers must learn and study their counterparts in the LDCs to either mirror their success or avoid making the same mistakes. In order to succeed in a LDC marketers need to apply already successful technique that those from the inside use.

Although marketing efforts alone will by no means solve the imbalances we have described, it will certainly help to reduce them, allowing a company’s success in this scenario.

Recommendations

The Marketing in developing countries vary extensively between nations that’s why the authors cleverly made a list of possible challenges that international marketers may need to faces and the suggested approach for each challenge as following:

If Consumer priorities change the firm should examine the needs for a more productive lifestyle and then compare them and adapt them to the corporate capabilities.

When your objectives need to be renovated; the firm must consider producing in small quantities, payment plans even in low cost items at tiny margins but high volume.

In LDC the rewarding system needs to change; designers must be rewarded for reducing expenses rather than higher them

When adapting to the LDCs you need to be open to making business with in country firms in to improve logistics and acquiring knowledge about each country’s lifestyle.

Benefiting from Buyers priorities in LDCs; priorities in LDCs are: Education, Healthcare and retirement.