Anotherimportant characteristic of emerging country is that, they have higher GDP(Gross Domestic Product) rate than developed countries which means, they areproducing more. Higher GDP rate also increase investments to country’s economybecause international firms try to produce more to increase their market share.Emerging countries also less affected from global financial crisis becauseinvestments and production are high. International Monetary Fund (2015)reports that in 2013, emerging markets continued to grow by 5.
0%, compared tothe stagnation or contraction experienced by major developed markets (1.4%) andalthough the growth in emerging markets was lower in 2014 (4.6%), this contrastedwith the U.S. (2.
4%), Japan (-0.1%) and the Euro area (0.8%). There are a serious number of producers makingmoves into emerging markets in recent times, including companies like Unileverthat turns into online sales platform to expand its existence of products inChina market (Forbes, 2015), and Ikea’s continued expansion into countries likeIndia, China, and Brazil (Kowitt, 2015). Emerging countries have weak distribution channels,and this is one of the negative character of emerging countries. In emerging markets, regionaldifferences in shopping behaviour based on brands are more likely to reflectdifferences in distribution systems (Schlagerand Maas, 2013).Weak channels create disadvantage for supplying products by the internationalfirms.
In large cities of emerging countries, distribution channels areoften through small, hole-in-the-wall shops such as the ”paanwalla”shops in India, the ”tiendas de la esquinas” in Mexico, and ”sari-sari”stores in the Philippines (Banga & Mahajan, 2005). The lack of railways, roadways forbig lorries, securities and electricity of roads creates serious barriers forinternational firms because they cannot flow products across country. AsJean-Luc Chereau, head of Carrefour in China suggests, lack of distributionchannels (railways) effected seriously on this issue because they try to servefresh foods and vegetables to their customers across the country, but transportationtime is 3-4 days between each big city reason to this is, always they weretrying to transport their products with big lorries. In some developing countries, villages don’thave retail outlets at all, and some distribution opportunities, such as marketdays or carnivals, are temporary in these areas. Egede E. (2013) argue that governmentrequirements have a significant impact on distribution channel selection,because “Local Content” Laws may require products be manufactured (fully orpartially in the local countries). Agents may be forced on manufacturers ratherthan own their distribution network. The standard channels of retail andwholesale organisation are not many and the agency, traders, merchant dealersand distributors are all government-controlled structures that do not supportthe market operations as obtain in the developed economises.
In emerging countriesthere are few end-to-end logistics providers, which allow manufacturers to reducecosts. Decreasing cost will increase international firms trade with emergingcountries.Most of the product markets are sole becausecustomer’s needs and tastes are unique to each country. Local companies in emergingcountry are the first to understand that and to build businesses around typicalnational features. According to this, international brands tries to customizetheir products according to emerging country’s characteristics. For example,Nando’s is growing in South Africa by producing and supplying cooked chickenthat suits local palates by doing this they increase their profits and marketshares (Khanna & Palepu, 2006). The best way for internationalfirms to serve appropriate products to suitable groups is segmenting customers.Consumers in emerging markets havedifferent demographic and psychographic profiles from their developed marketcounterparts, which leads to the need to segment these groups using differentvariables (Cui and Liu, 2001; Dou et al.
, 2006). For example,Unilever segmentation and targeting strategy in Brasil was interesting. Theirresearch and observations let them to target low income people which is generalcharacteristic of developing countries but especially main characteristic ofIndia. Unilever created new washing powder brand according to women’s clothwashing culture and they are successful.Source: Harvard Business Review To begin, customers from emerging country ishighly demand to different products from global world. Emerging countriestrying to connect their local market to global markets and they are doing thisby increasing importing and exporting with developed countries.
Customers fromdeveloping countries wants to consume higher quality products with cheap pricesbut problem is customer preferences are changeable because more productopportunities available for them. According to this, customers from emergingcountries have not yet developed culture of consumerism (Banga & Mahajan,2005). For the international firms’ market research is getting harder andharder because marketers cannot do predictions, they should be effective andtry to apply best marketing strategies. Moreover, primary source of data neededby the companies because quickly changeable preferences creates unreliablesecondary data. To solve these problems company managers tries to hire expertsfrom local citizens. Most of the experts from foreign countries are failed todo beneficial research for their companies. Reason to this is culturaldifferences which includes different norms and beliefs. People from emergingcountries emigrate to developed countries because of better life but when theyturned back to their home country they have opportunity to work as an expert.
Learned experience from developed countries can gives them chance to research differentmarkets opportunities in their home countries and work as a research expert forinternational firms. Foreign experts cannot set up research methods, which isappropriate for the consumers because reactions of consumers are unpredictableand risky. For example, most of the middle-east countries are Muslim countries,so jewellery companies cannot obtain healthy results from their marketresearches because of religion barriers.
Local women are closing their hair andfaces so you cannot do observational researches or questionnaires about productpreferences. This also effects which products should exist in these markets. Buyerbehaviour and brand preferences are important for international firms. Highquality products and good brand name is major for every international companybecause they try to supply appropriate goods or services to emerging countries.In emerging markets product groups divided into 4. First one is ”global tier”which means that customer segment that wants to consume products of globalquality and with global features- that is, offerings with the same quality andfeatures that goods in developed countries have and willing to pay same prices fromglobal markets. Second product market group is ”glocal”. This means thatsegment group that demands products of global quality but with local features(and local values) at less than global prices.
Example to this segment isMcDonalds which is localize their food menus according to every country. Thisbrand is global, but their marketing strategies are localised. Third segment iscalled ”local” which is consumers wants local products with local features atlocal prices. For example, customers happy to buy local products, this does notmean that they are trying to buy cheap products. Local product qualities andfeatures increase their satisfaction. Final segment is ”bottom” which isbottom of the pyramid (Khanna & Palepu, 2006). In this customer groupimportant point for them is cheap products.
People try to buy least expensiveproducts from the market. Preferred products are always cheapest ones and doesnot matter the quality. To give example to this segment is most of the Turkishcustomers buys electronical products from China because of cheap prices and qualityis not matter. Table below shows pyramidof market structure in developing countries.
Emerging and developing countries havetheir own characteristics, this means that their market structures and company’smarketing strategies are different from each emerging country and fromdeveloped countries. Emerging marketsare often characterized by political instability, cultural barriers,technological gaps, inaccurate information and inconsistent data across varioussources. Understanding of the most emerging markets requires the expertise andthe understanding of customers in transition (SIS International Research, 2017). Moreover,essay will continue with detailed characteristics of emerging markets, marketresearch barriers, information about what are the mistakes that internationalcompanies doing in emerging markets and how can they improve their strategies. Emerging markets are fast-growing economiesthat is concentrated on economic developments and reform programs for tradingwith global world (Reference, 2017).
These markets started to ”emerge” intothe global scene. Emerging countries are moving from traditional economy to marketeconomy which means normally, they are earning their money from agriculture andexport of raw materials. These are thecountries that are typically transitioning to a market economy, such as MSCI Emerging Market Index lists23 countries.
Theyare Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Qatar, Peru,Philippines, Poland, Russia, South Africa, South Korea, Taiwan, Thailand,Turkey, and United Arab Emirates. Nowadays, these countries try to adopt andwork in free market or mix market economies. Emerging markets enjoying demandfrom other countries, like capital inflows because of increasing exports andincreasing demand to products raises prices. Mostof the emerging markets had locational advantages in natural resources and lowerlabour cost because of that most of the international firms try to trade with them.
Nowadays, globalisation creates significantopportunities for international firms to increase their market shares.International firms trying to decrease their production costs and increasetheir profits. They are doing this by trading with emerging markets. Their reasonis produce products with lower costs or selling their imported products tolocal customers. This essay will include, information about marketingstructures of developing and emerging countries which is chosen byinternational firms for trading. Firms can be successful but on the other handcompanies are facing with some problems to understand nature of markets andpreferences of customers and this cause them to launch unsuccessful marketingstrategies.
My research is about what are the characteristics of emergingmarkets, what are the barriers that international firms are facing in emergingcountries, how can they set up their marketing strategies and solve theirproblems about market researches. Moreover, this essay will give details about marketingdiscussions on this topic and new ideas for international firms who are tryingto trade with developing countries.