Chapter9EconomicDevelopmentandtheAmericas?McGraw-HillEducation.Allrightsreserved.Authorizedonlyforinstructoruseintheclassroom.

NoreproductionorfurtherdistributionpermittedwithoutthepriorwrittenconsentofMcGraw-HillEducation.LearningObjectives1of29-1 Theimportanceoftimezonesfortraderelationshipsandmarketingoperations9-2 Thepoliticalandeconomicchangesaffectingglobalmarketing9-3 Theconnectionbetweentheeconomiclevelofacountryandthemarketingtask9-4 ThevarietyofstagesofeconomicdevelopmentamongAmericannationsLearningObjectives2of2

9-5 Growthfactorsandtheirroleineconomicdevelopment9-6 Marketing’scontributiontothegrowthanddevelopmentofacountry’seconomy9-7 ThefoundationalmarketmetricsofAmericannations9-8 ThegrowingimportanceoftradingassociationsamongAmericannationsInternationalTimeZonesImportantinBusinessInternationalmarketersdealwiththreekindsofdistanceMiles,timezones,culturaldistanceTimezoneshavegreatestimpactonsuccessabroadUsuallygoodrelationshipsamongcontiguouscountriesAssociatedpatternofeconomicgrowthandglobaltradeThreemarketregionsortradingblocsbasedontimezone:theAmericas,Europe,andAsiaIndustrialized,industrializing,underdevelopedcountriesineachblocExhibit9.1ThreeRegionalTradingAreasRoughlyDefinedbyTimeZonesRegionPopulationGDPTheAmericas1.01billion$25.2trillionEuropeandAfrica2.00billion$21.2trillionAsiaPacific4.55billion$28.7trillionMarketingandEconomicDevelopment1of9CountriesoncehostiletoforeigntradeNowseeitasnecessarytoeconomicgrowthTradethrough21stcenturychangingTransitionfromsocialisttomarket-driveneconomiesLiberalizationoftrade,investmentpoliciesindevelopingcountriesTransferofpublic-sectorenterprisestoprivatesectorRapiddevelopmentofregionalmarketingalliancesMarketingandEconomicDevelopment2of9EconomicLevelThestageofeconomicdevelopmentinacountryAffectsconsumerbehaviorMarketermustadjustmarketingtaskaccordinglyEconomiclevelthesinglemostimportantfactorUnitedNation’sstagesofeconomicdevelopmentMore-developedcountries(MDCs)Less-developedcountries(LDCs)Least-developedcountries(LLDCs)MarketingandEconomicDevelopment3of9NewlyIndustrializedCountries(NICs)UNclassificationsystemhasbeencriticizedNolongerseemsrelevantinrapidlyindustrializingworldLDCsindustrializingquicklyarecommonlycalledNICsChile,Brazil,Mexico,SouthKorea,Singapore,TaiwanexamplesNolongeruserestrictivetrade;nowfreemarketreformsAttractbothtradeandforeigndirectinvestmentHavebecomeformidableexportersofmanyproductsMarketingandEconomicDevelopment4of9EconomicGrowthFactorsPoliticalstabilityinpoliciesaffectingdevelopmentEconomicandlegalreformsEntrepreneurshipPlanningOutwardorientationFactorsofproductionIndustriestargetedforgrowthIncentivestoforceahighdomesticrateofsavingsanddirectcapitaltoupdateinfrastructurePrivatizationofstate-ownedenterprises(SOES)thathadoncedrainednationalbudgetsLarge,accessiblemarketswithlowtariffsCompetitioninCoffeeProductionBrazilianproductionofcoffee(onleft)hasalmostalwaysdeterminedworldpricesforthebrew.Nowthiscommercialdominanceisbeingchallengedintwoways.First,Vietnam’sburgeoningnewproduction(onright)causedworldcoffeepricestocrashinrecentyears,fromahighof$1.85perpoundin1997toabout$.50in2001.Circa2015pricesarenowbacktoabout$2.00perpound,afterpeakingat$3.00in2010.AndStarbucksischangingtheglobalgameinretailcoffeedistribution—includinginitsstoreintheheartofS?oPaulo,thehistoricalcenterofcoffeeproductioninBrazilandtheworld.?BenjaminLowy/GettyImages?imageBROKER/Alamy?JohnGrahamMarketingandEconomicDevelopment5of9InformationTechnology,theInternet,andEconomicDevelopmentInvestmentininformationtechnology(IT)importantKeytoeconomicgrowthInnovationcanleadtosustainablefuturefordevelopedanddevelopingnationsInternetcutstransactioncosts;increasesglobalreachSpeedsupthediffusionofnewtechnologiesMobilephonesandwirelesstechnologiesreduceexpenseofcostlytelecominfrastructureMarketingandEconomicDevelopment6of9ObjectivesofDevelopingCountriesIndustrializationfundamentalobjectiveformostAllowsforachievementofbotheconomicandsocialgoalsForeigninvestorsnowseenasvitalpartnerstoprocessSometimesfearedashavinggoalsthatconflictwithhostcountryButmanycountrieswelcomeforeigninvestmentTrendtowardprivatizationamajoreconomicphenomenoninindustrializedanddevelopingcountriesMarketingandEconomicDevelopment7of9InfrastructureAssortmentofcapitalgoodsServeactivitiesofmanyindustriesSupportproductionandmarketingImpactsbusinessefficiencyofenterprisesCrucialcomponentofuncontrollableelementsfacingmarketersDirectlyimpactscountry’seconomicgrowthpotentialStronginfrastructurenecessaryforexportinggoodsMustsupportcountry’sexpandingpopulationandeconomyBusinessDevelopmentInJamaica,Pepsipartnerswithalocalfast-foodcompany,co-brandingandsupportinglocaldevelopmentefforts.?JohnGrahamMarketingandEconomicDevelopment8of9Marketing’sContributionsMarketingvitalfornation’sgrowthEfficiencyofdistributionakeycomponentManyeconomicplannersdon’tseeitsimportanceMoreproductionorientedthanmarketingorientedEconomy’sarbitratorbetweenproductivecapacityandconsumerdemandEffectivelyutilizingproductionresultingfromeconomicgrowthMarketingandEconomicDevelopment9of9Marketing’sContributionscontinuedFiveweaknessesthatindicateneedforadjustmentinemergingmarkets(Sheth)MarketheterogeneitySocialpoliticalgovernanceUnbrandedcompetitionChronicshortageofresourcesInadequateinfrastructureMarketinginaDevelopingCountry1of3MarketingStrategiesareSituationalEffortsmustbecustomtailoredforeachcircumstanceTechnicallyelegantstrategiesineffectiveinunderdevelopedcountriesPricingshouldvarydependingonaffluenceofsocietyMarketermustevaluatepotentialindevelopingcountryExistinglevelofmarketdevelopmentReceptivenesswithinthecountryFirm’sowncapabilitiesandcircumstancesMarketinginaDevelopingCountry2of3LevelofMarketDevelopmentRoughlyparallelsstagesofeconomicdevelopmentButmarketingstructurescanbesimultaneouslyatmanystagesThesystemisinaconstantstateoffluxCharacteristicsofamoredevelopedeconomyGreatervarietyofmarketingfunctionsdemandedMoresophisticatedspecializedinstitutionstoperformfunctionsMoredevelopeddistributionchannelsMarketinginaDevelopingCountry3of3DemandinDevelopingCountriesThreedistincttypesofmarketscoexistineachcountryTraditionalrural/agriculturalsectorModernurban/high-incomesectorLargetransitionalsector;usuallow-incomeurbanslumsMakesmarketingeffortsdifficultEstimatingmarketpotentialofdevelopingcountryDevisingusefulsegmentationstrategiesThoughinitiallyrisky,investmentworththerewardMonopolyinEcuadorTheironyofParkerBrothers’introductionofMonopolytoEcuadorisratheramusing,givenPresidentRafaelCorrea’sannouncementofnewanti-monopolylawsjustayearearlier.HewasreactingtoCarlosSlim’sgiantMexicanTelmextakeoverofEcuadorTelecom.?JohnGrahamBigEmergingMarkets(BEMs)1of2ShareimportanttraitsAregeographicallylargeHavesignificantpopulationsRepresentsizablemarketsforwiderangeofproductsHavestrongratesofgrowthorpotentialforsignificantgrowthHaveundertakensignificantprogramsofeconomicreformOfmajorpoliticalimportancewithintheirregionsAre“regionaleconomicdrivers”EngenderexpansioninneighboringmarketsastheygrowBigEmergingMarkets(BEMs)2of2GrowthfromBEMsImportmorethansmallermarketsandeconomiesofsimilarsizeDevelopmentincreasesdemandforcapitalgoodsMuchofwhichmustbeimportedWillbeinindustrialsectorsInformation,environmental,transportation,energy,andhealthcaretechnologyFinancialservicesTheAmericas1of6UnitedStates-CanadaFreeTradeArea(CFTA)Wasworld’slargestbilateraltradeagreementEachcountrywastheother’slargesttradingpartnerCreatedsingle,continentalcommercialmarketWorkedfortradeofallgoodsandmostservicesEliminatedtariffsandtradebarriersDidnotnecessitateanypoliticalunionMexicosoonexpressedinterestinfreetradewithU.S.TheAmericas2of7NorthAmericanFreeTradeAgreement(NAFTA)UnitedStates,Canada,andMexicoRatifiedandbecameeffectivein1994Singlemarketof360millionpeoplewitha$6trillionGNPRequiredalltoremovebarriersandtariffsover15yearsHelpedtoamelioratelong-standingareasofconflictEconomicrelationshipsinNAFTAcontinuedtogrowTheAmericas3of7UnitedStatesMexicoandCanadaAgreement(USMCA)UnitedStates,Canada,andMexicoProposedinOctoberof2018BasedonNAFTAwithseveralproposedadjustmentsMoreaccesstoCanada’sdiarysectorIncreasedhourlywagesinMexico’sautomotivesectorarerequiredDigitaleconomyelementshavebeenadjustedFollowUpnegotiationsarerequiredTakeseffecton1January2020,pendinglegislativeapprovalNAFTAandMexicoGeographicproximityallowsMexicansfromBaja,California,toattendPadresbaseballgamesinclose-bySanDiego.TheteammaintainsthissuccessfulstorejustacrosstheborderinPlazaRioshoppingcenterinTijuana.Andofcourse,historically,PadreJuniperoSerrahadvisitedbothplacesinthelate1700swhileestablishingthechainofmissionsinoldSpanishCalifornia.NAFTAalsogaveTacoBellasecondshotatmakingitinMexico;thisstorewasinMonterrey.Thecompany’s1992,pre-NAFTAincursionfailed.?JohnGraham?MonicaRueda/APImagesTheAmericas4of7DR-CAFTAFreetradeagreementpassedin2005U.S.,DominicanRepublic,andCentralAmericancountriesIncludesawidearrayoftariffreductionsAimedtoincreasetradeandemploymentamongsignatoriesSteptowardgoaloffreetradeacrossallAmericasTheAmericas5of7SouthernConeFreeTradeArea(Mercosur)TreatyofAsunciónprovidedlegalbasisCallsforcommonmarkettoallowfreemovementofgoods,capital,labor,andservicesamongmembersUniformexternaltariffIncludessixcountriesArgentina,Bolivia,Brazil,Chile,Paraguay,UruguayMembershipgrowing;lookingtoextendfreetradewithEuropeanUnionMostsuccessfulfreetradeareainSouthAmericaTheAmericas6of7LatinAmericanProgressPoliticalandeconomicrevolutionoverlast3decadesShiftf