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Chapter

9
Local Marketing
in New Growth Markets

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved


Outline
Basic Marketing in New Growth Markets
Marketing in Latin America
Major Country Markets in Latin America
Marketing in New Asian Growth Markets
Major Country Markets in Asia
Takeaways.
Two Kinds of New Growth Markets

1. Those rich in NATURAL RAW MATERIALS but where most


people have suffered under authoritarian political regimes &
colonial domination (e.g. Latin American countries, South
Africa)

2. Those rich in LOW COST LABOR have turned to Western-


style capitalism recently, with the help of FOREIGN DIRECT
INVESTMENT (e.g. Asian countries, Israel)
Marketing in New Growth Countries

2 REASONS WHY MEMBERSHIP IN TRADE BLOCS IS IMPORTANT

1. Membership in trade blocs makes the country more


attractive to foreign investors
(e.g. Malaysia & Thailand through ASEAN)

2. Trade blocs enlarge market potential for members


(e.g. Argentina & Brazil through MERCOSUR)
New Growth Markets: MSPP

MARKET SEGMENTATION PRODUCT POSITIONING

• New growth markets are in • Core middle class emerges


the growth phase of the • Well known brand names
product life cycle are favored
• Certain markets may be • Foreign capital and
mature but there is a lot of technology fuels economic
room for new variants & growth, hence foreign
international offerings brands are considered the
• As incomes rise people “real thing”
demand variety & • Neo-colonialism emerges
experiences offered by as consumers shun
more mature markets domestic products
The Importance of a Middle Class

MASS
MARKET
FOCUS
Strong core
middle class

Few One-to-one
strong marketing
NICHE segments
MARKET
FOCUS

EMERGING NEW GROWTH MATURE


MARKETS MARKETS MARKETS
New Growth Markets: The 4Ps
PRODUCT PRICING

• Basic localization to • Status positioned


ensure that the product products must be high-
functions well priced
• Being positioned as a • Price must not be too
“foreign” brand attracts limiting, despite increase
certain segments purchasing power of
consumers
• Brand name must be
strongly supported. • Pricing must foster brand
loyalty
New Growth Markets: The 4Ps (cont’d)

DISTRIBUTION PROMOTION

• Firms must think long- • Products must


term, setting up service communicate their future
centers and more outlets potential benefits
• Expansions are suggested • Strong brand images must
in order to counter be created
competitive threats
• Good relations with local
• Cash flow is sacrificed in sales/staff should foster
the short-term, awaiting brand equity
long-term gains
Marketing in Latin America
Marketing in Latin America
MARKET BACKGROUND

Large geographical area, Indian background with Spanish,


Portuguese, and Catholic influences,varied ethnicities,
relatively poor, monetary and price instability, political
upheavals.
Language is Spanish, except for Brazil’s Portuguese.
Total population is 537 million people, with Brazil largest
at 176 million followed by Mexico at 102 million.
Marketing in Latin America
MARKET BACKGROUND (CONT’D)

 Growth fueled by regional trading blocs, a political


shift toward increased democracy, and a gradual
emergence from a large debt burden in several of
the countries.
 Free trade is surging.
 A movement toward pan-regional marketing.
Marketing in Latin America

REGIONAL TRADE AGREEMENTS

•LAIA - Latin American Integration Association.

•ANCOM - Andean Common Market.

•MERCOSUR - Southern Cone Common Market.

•NAFTA - North American Free Trade Area.

•FTAA - Free Trade Area of the Americas


Marketing in Latin America: MSPP

MARKET SEGMENTATION

• Urban versus rural (80% purchasing power in urban areas).

• Age and income level.

• Large young, style-conscious segment.

• Religious, tradition-bound, family-oriented.


Marketing in Latin America: MSPP (cont’d

PRODUCT POSITIONING

• Status-conscious urban markets means brand names matter.

• Upgrading quality of life with consumer durables.

• Successful mass marketing through creative packaging (small


volume, low-price units), taking new product roll-outs
incrementally, and spending heavily on advertising.
Marketing in Latin America: The 4Ps
PRODUCT PRICE

• Continuous upgrading of • Foreign companies price


products and services higher than locals.
because of increased • Top-to-midrange for global
competition from foreign brands (not only skimming
producers and new trade prices), low-end local
agreements between Latin brands.
American countries. • Midrange core market
• Localization changes but increasing as middle class
only limited product expands.
adaptations. • Plans for a common
• Pent-up demand for global Mercosur currency.
brands.
• Increase in pan-regional
products.
Marketing in Latin America: The 4Ps
(cont’d)
DISTRIBUTION PROMOTION

• Towards larger units, • Brand TV advertising high,


hypermarkets, integrated sponsorship of daytime
chains. soap operas.
• Rural areas have weak • Religions, political, ethnic,
infrastructure. and cultural issues are
• Foreign entrants investing sensitive.
(including joint ventures) to • Detailed product
help improve efficiency. information, with colorful
• Some regulatory barriers. and lively presentation,
including popular music.
• Many retailers do not
handle manufacturers'
coupons.
Major Country Markets: Argentina

ARGENTINA

• After WWII, was one of the 10 riches


countries in the world on a per capita
income basis
• Population = 38 million
• Peso devaluation led to a crisis
situation, now improved
• Highly sophisticated industrial &
agricultural sector
• Consumers oriented toward
western/global products/brands
Major Country Markets: Brazil

BRAZIL

• Largest Latin American country,


population = 176 million
• Generates a third of South
America’s economic output, & is
a major consumer of its exports
• Highly attractive to foreign
investors
• 10% of exports are manufactured
goods
Major Country Markets: Chile
CHILE

• Population = 15 million
• Most vigorous growth,
booming consumer markets
• Credit card issuers have
lowered application
requirements, encouraging
spending
• Shopping mall boom
Major Country Markets: Mexico
MEXICO

• Population = 102 million


• 2nd largest market in Latin
America
• Home to many foreign
manufacturing plants
• Mexico City: major market
for global brands & upscale
consumer goods
• NAFTA membership
encourages economic
come-back
Marketing in Asian Growth Markets
Marketing in Asian Growth Markets
MARKET BACKGROUND

• Annual growth rates between 5-10% (China is at 10%


plus, see ch.10).

• Size: from Indonesia's almost 200 million people to


Singapore's 3 million.

• Ethnic Chinese with economic leadership.

• Love-hate relationship with Japan: WWII vs. FDI.

• Output from raw materials and apparel to technology


products.
Marketing in Asian Growth Markets
REGIONAL TRADE AGREEMENTS

ASEAN (The Association of South East Asian Nations)

APEC (Asia-Pacific Economic Cooperation)

ARF (ASEAN Regional Forum)

AFTA (ASEAN Free Trade Area)


Asian Growth Markets: MSPP
MARKET SEGMENTATION

• Basics: cultural, ethnic, and religious roots.

• Significant middle class ("have some’s").

• Large metropolitan areas.

• Poor rural areas.

• Demographics: Age, marital status.

• Pan-regional marketing via trading blocs.


Asian Growth Markets: MSPP (cont’d)
PRODUCT POSITIONING

• Global luxury brands ("if you've got it, flaunt it")

• Imports: globally standardized products.

• Pent-up demand for Western products.

• Less affluent segments: less advanced, adapted products.

• Use of acquired local brand names.


Asian Growth Markets: The 4Ps
PRODUCT

• Product design. Localized by offering smaller


packages. Style and finish important.

• Product line. Achieve "a harmonious whole".


Full-line policies with interrelated products.
Material possessions clearly signify one's worth.

• New Products. Not lead markets, but followers


(except for emerging markets and selected
electronics products). Endorsement of brand's
success elsewhere is important.
Asian Growth Markets: The 4Ps (cont’d)
PRICE

• Natural positioning of a global brand


entering is at the upper end (skimming).

• Lower-end products alternatives through


acquired local or adapted brands
(penetration pricing). In Asia, the entry
price will lock in the brand's positioning
("harmony"). Risks of gray trade are
high.
Asian Growth Markets: The 4Ps (cont’d)
DISTRIBUTION

• Dynamic urban retail


sector.

• Rural areas have weak


infrastructure.

• Underdeveloped
transportation networks.
Asian Growth Markets: The 4Ps (cont’d)
PROMOTION

• Advertising minimally adapted from elsewhere


(pattern standardization).

• Local language and native endorsers, including


local sports heroes and television stars.

• Sales promotion tools adapted to local


regulations and culture. Ex: Few sales calls to
the home -- meet in the offices, and offer family
conveniences in dealerships.
Major Country Markets: South Korea
SOUTH KOREA

• Population = 45 million
• Per capita income on par with
many European countries (as of
1995)
• Market entry barriers are high
• Pent-up demand for western goods
as preferred over domestic
products
• Distribution regulations gradually
eased
Major Country Markets: Taiwan
TAIWAN ( aka REPUBLIC OF CHINA)

• Population = 23 million
• Political struggle with mainland China
• Vigorous export industry, through skilled
labor & high technology
• Entry barriers going down
• Large MNC activity
• Particularly exacting consumers, used to
test market products before Asian roll-
out
Major Country Markets: Hong Kong

HONG KONG

• Population = 6 million
• Most affluent of S. East Asian nations
• Geographic central hub for firms entering
Asian markets
• Very international consumers,
trendsetters for the rest of Asia
• High-end/luxury brands thrive
Takeaway

As western markets have matured, new growth markets in


Asia, Latin America, and elsewhere have become the new
sources of growth for global companies – and for their own
domestic firms as well.
Takeaway

Despite recent global turmoil, many of these countries still


have strengths as markets and producers, and sustained
potential for the longer run.
Takeaway

Trading blocs are good for these economies because as


stand-alone markets they tend to be too small for targeting - &
blocs provide advantages for their own exports.
Takeaway

Marketing in a high-growth market in a newly industrialized


economy is not the same as marketing in a high growth
market in a mature economy.
There is less stress on new product development and more
on generic market development for existing products.
Takeaway

Standardized global products & brands can be successful due


to pent-up demand in many of these markets.
As markets evolve and affluence grows, customers quickly
become fickle consumers requiring adaptation &
customization, much like consumers in mature markets.