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Atiqah Ismail The World Bank’s Stages of Market Development Model

2011

1. Outline the World Bank‟s stages of market development model. 2. Using the Global Marketing Information Database for: India 3. Summarise the marketing implications of its socio-economic demography i.e. which markets are favoured by trends in per capita real income and demography? 4. Identify and describe organisations which target the country with products and services.

The World Bank has developed a classification system that uses per capita Gross National Income (GNI) – World Bank‟s stages of market development model: Stage Low Income Lower-middle Income Upper-middle Income High Income GNI per capita < $935 $936 - $3,705 $3706 - $11,455 >$11,456 Mean GNI per capita $649 $2,038 $5,913 $36,608 % of World Wealth 3% 10% 10% 77% % of World Population 37% 35% 12% 16%

India is located in Southeast Asia and is the second most populated country in the world after China. It is a developing economy, which falls under the lower-middle income country, with US$1,220 Gross National Income (GNI) per capita. India is a very highly populated economy with a population of 1.2 billion at the beginning of 2011, which grows at a rate of 1.4% (CIA, 2011). Although poverty has been reducing, it still remains a major challenge for the economy, with 26% of its population live under the poverty line (World Bank, 2005) whilst 37% is poor which accounts to around 410 million people, making India home to 1/3 of the world‟s poor people -- 40% of India‟s population are eligible for subsidised food (BBC, 2010). Slightly more than half (50% <) of the workforce is in agriculture, but services are the major source of economic growth, accounting for more than half of India‟s output, with only onethird of its labour force. Marketing implications of its socio-economic demography: Market opportunities:     Market for service providers and software developers Market for wine Markets for cars and motorbikes Market for premium products (niche market)

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Atiqah Ismail Market for service providers and software developers

2011

With the increase in the penetration of PCs and the internet, usage of e-commerce is increasing and thousands of users in the 21 to 35 years old age group play social games on a daily basis on portals such as ibibo.com. More than 33 million Indian internet users, who form 84% of the total internet audience, visited a social networking site in July 2010. This ranks India as the seventh-largest global market for social networking. The arrival of low cost mobile handsets with connectivity to the internet, along with general packet radio services (GPRS) provided by telecom operators at very competitive rates, have contributed to the popularity of social networking in India, allowing a growing number of people to access these sites from their mobile phones. Broadband is also a key growth market and is projected to rise from a 2.8% household ownership to 21.2% in 2020. The main opportunities for the sector lie in the mobile phone sector. This will be sparked not only by the launch of 3G services in the short-term, but also the gradual migration to 4G in the longer-term. There will be great opportunities in the mobile phone market for service providers and software developers who can create applications which are tailored to the Indian marketplace.

Market for wine - Changing drinking habits as wine grows in popularity The appeal of wine was limited to the urban, high-income, 30 to 50-something population. However, the domestic production of wine has resulted in wine becoming more affordable, as when compared to imported varieties. To help wine shed its elite image and generate greater demand among middle-income, twenty-something consumers, since 2010, coffee chains have started selling wines throughout their outlets across India. As more youngsters enter the workforce wine consumption is expected to increase with a CAGR of about 7% (constant value terms) between 2010 and 2020. Bangalore, the IT capital of India and home to thousands of young techies with high disposable incomes, is now fast turning into the wine capital of the country. According to the Karnataka Wine Board statistics, sales of wine rose to 2.5 million litres per annum between 2008 and 2009, as opposed to 1.3 million litres in 2006-2007. Interest in wine consumption in India has also fuelled a growing demand for international wines.

Markets for cars and motorbikes Rising disposable income and a wide array of choice – from the world‟s cheapest car or bike, to the most luxurious, has made India the second fastest growing auto market in the world. 2

Atiqah Ismail

2011

With easy availability of finance, people with two-wheelers have increasingly started to switch to four-wheelers. Small cars are the most popular among Indians as they are more affordable. The growth in the population of those in their twenties and thirties, and a rise in their disposable income, there is now a niche consumer segment for luxury motorcycles. Since the slowdown in the economy, Indian car and bike manufacturers have witnessed impressive growth in 2010, with some firms clocking their „best ever' monthly sales. This growth is expected to continue and is driven by the increase in the number of urban middle class households and their increasing disposable income. With increased concerns about car security, demand for in-car security systems, such as Passive Keyless Entry (PKE), has increased significantly in India. This has contributed to a 32% volume growth in “other in-car electronics” in 2009.

Market for premium products The number of US dollar millionaires in India rose to 51% on a y-o-y basis with the total figure being around 127,000 US dollar millionaires. Even people with fairly high incomes, which fall just below the US dollar millionaires, also travel abroad on either work or business at least once in two years. These rich Indians gain exposure to luxury services and products such as premium foods while travelling abroad. Various lifestyle channels and niche programmes focus on premium services and products, adding to further exposure and making richer Indians demand the best of what is available around the world. Recognising the growing importance of India as an emerging, and one of the fastest growing luxury products/services market, leading worldwide luxury brands such as Armani, Noraletto, Raymond Weil, and Burberry have entered into India over the last couple of years through joint ventures with Indian retail players. Travelling abroad has developed a taste for international brands of clothes and other personal goods such as perfumes and watches. As discussed earlier in the report, luxury cars and bikes have already found takers among a niche consumer segment.

A very brief and incomprehensive example of organisations which target India with products and services: Harley Davidson offers motorcycles to the India market, along with other brands such as Ducati, Suzuki and Hyosung have already established their presence in India. In July 2010, Harley Davidson opened its first dealership outlet in Hyderabad. According to the Director of 3

Atiqah Ismail

2011

Marketing, Harley Davidson India, the market for super premium bikes in India is estimated to be around 1,000 units a year, with a growth rate of about 20%. This translates into Indians spending upwards of Rs 0.5-1billion every year on such bikes. Mercedes Benz, Audi and BMW flock to India to sell their high-end automobile models. All of these car manufacturers are registering a considerably high growth in the sales of their cars over the past year. Sales for Mercedes-Benz India increased from 178 units in April 2009 to 321 units in April 2010. The Volkswagen Beetle was launched in India in December 2009 and was priced at around Rs 2 million, which makes it one of the most expensive cars in the Indian market. Despite the high price tag, the car sold a total of 284 units in a period of less than five months with 92 units in April 2010.

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