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Chapter 09 – Economic Development and the Americas
9-1
Chapter 9 – Economic Development and the Americas
Teaching Objectives
This is the first of three chapters that include discussions of key topics – economic development,
economic integration, and burgeoning economic growth – all discussed in the context of the market
regions most appropriate. First we discuss Economic Development in the Americas.
Barring a major political and economic shift in the developing world, evidence is strong that through the
first decades of the 21st century emerging markets will be where the majority of world’s total trade
growth will occur. Growth will occur on a variety of fronts: development of infrastructure, opportunities
of foreign investors, and a spectacular growth of the consumer market. The events taking place in
emerging markets make international business exciting and will create opportunities and challenges for
multinational firms.
The impact of trends that are sweeping the developing countries—transition from socialist to market-
driven economies, the liberalization of trade and investment policies in developing countries, the transfer
of public-sector enterprise to the private sector, and the rapid development of regional market alliances—
should be the emphasis of this chapter. The teaching objectives of this chapter are to:
1) Stress the importance of the political and economic changes affecting global marketing, and
particularly the Americas.
2) Illustrate the connection between the economic level of a country and the opportunities created as
economic growth occurs.
3) Explore the various developing markets in the Americas and the diversity represented across the
continents.
4) Discuss the growth of new market segments and the emerging middle class in the Latin America
and other emerging markets.
Comments and Suggestions
1. The growing importance of new market segments is reflected in the number of studies on
consumers that are being conducted. A recent Roper Starch Worldwide global study of 40,000
consumers in 40 countries identified four major styles of shopping. Deal Makers (29%), who love
the process of buying; Price Seekers (27%), who place primary value on the product they are
buying; Brand Loyalists (23%), who purchase name brands and remain true to them; and Luxury
Innovators (21%), those who seek the new, prestigious brands.
The following is a breakdown by country.
Chapter 09 – Economic Development and the Americas
9-2
Brand
Loyalists
Price
Seekers
Luxury
Innovators
Deal
Makers
U.S.
11.3%,
35.5%,
16.6%
36.6%
Mexico
19.1
23.4,
19.9
35.0
China
27.9
23.4
22.8
25.7
India
34.6
7.4
35.8
22.2
Japan
23.5
41.0
7.9
27.1
Saudi Arabia
14.8
8.9
34.4
40.3
France
19.5
45.5
8.5
26.6
Germany
16.9
43.7
15.7
21.9
Spain
27.0
34.4
18.1
19.6
U.K.
28.7
27.2
17.5
25.5
Czech Republic
23.9
26.9
25.7
22.61
2. “Cases 1-2 (Nestle) and 4-5 (Aids, condoms) provide a backdrop for a discussion of the everyday
realities in emerging markets. Both go into great detail how consumer behaviors, products, and
promotion interact to have huge impacts on public health.
3. At this writing the Trump administration is arguing to transform the brand NAFTA to USMCA.
What was his purpose? Has he succeeded?
Lecture Outline
I. Global Perspective: Wal-Mart, Tide, and Three-Snake Wine
II. Marketing and Economic Development
A. Stages of Economic Development
B. NIC Growth Factors
C. Information Technology, the Internet, and Economic Development
D. Objectives of Developing Countries
E. Infrastructure and Development
F. Marketing’s Contributions
III. Marketing in a Developing Country
A. Level of Market Development
B. Demand in a Developing Country
C. Big Emerging Markets (BEMs)
IV. The Americas
A. NAFTA
B. DR-CAFTA
C. Southern Cone Free Trade Area (Mercosur)
D. Latin American Progress
E. Latin American Economic Cooperation
F. NAFTA to FTAA or SAFTA?
Chapter 09 – Economic Development and the Americas
9-3
V. Strategic Implications for Marketing
Discussion Questions
1.
Define:
BEM
Economic development
Infrastructure
NICs
2. “It is possible for an economy to experience growth as measured by total GNP without a
commensurate rise of the standard of living.” Discuss fully.
A country’s “gross national product” is the total of its economic output and assets. However, the GNP
3. Why do technical assistance programs of more affluent nations typically ignore the distribution
problem or relegate it to a minor role in development planning? Explain.
4. Discuss each of the stages of evolution of the marketing process. Illustrate each stage with a particular
country.
The marketing institutions which develop as a country passes from one stage to another are as
follows:
Chapter 09 – Economic Development and the Americas
9-4
EXHIBIT 9–4
EVOLUTION OF THE MARKETING PROCESS
Stage
Substage
Marketing Functions
Agricultural and raw materials
Self-sufficient
None
(MK. (f) = Prod.)2
Surplus
Commodity producer
Small-Scale Merchants, Traders,
Fairs
Manufacturing
(Mk. = Prod.)
Small-Scale
Merchants, Wholesalers, Export-
Import
Mass Production
Merchants, Wholesalers,
Traders, and Specialized
Institutions
Marketing
(Prod. (f) = Mk.)
Commercial-Transition
Large-Scale and Chain Retailers
Increase in Specialized
Middlemen
Mass Distribution
Integrated Channels of
Distribution Increase
Specialized Middlemen
5. As a country progresses from one economic stage to another, what in general are the marketing
effects?
6. Locate a country in the agricultural and raw material stage of economic development and discuss
what changes will occur in marketing when it passes to a manufacturing stage.
A country with little industry will not find it necessary to carry on extensive marketing. Most of the
agricultural products will be used for local consumption and the various facets of marketing will not
7. What are the consequences of each stage of marketing development on the potential for industrial
goods within a country? For consumer goods?
Chapter 09 – Economic Development and the Americas
9-5
Demand for industrial goods is affected by economic change and is tied to the economy’s stage of
industrialization. As a country progresses toward economic maturity, demand for industrial goods
8. Discuss the significance of economic development to international marketing. Why is the knowledge
of economic development of importance in assessing the world marketing environment? Discuss.
(2) the level of economic development also has an effect upon the acceptance of a foreign marketer
able to answer such questions as: (1) What are the objectives of the developing nations? (2) What role is
marketing assigning, if any, in economic growth plans? and (3) What contribution must marketing make
whether overtly planned or not in order for a country to grow successfully? The answers to these
9. The Internet accelerates the process of economic growth. Discuss.
In addition to growth factors discussed above, a country’s investment in information technology (IT) is
Chapter 09 – Economic Development and the Americas
9-6
It is argued that because the Internet cuts transaction costs and reduces economies of scale from vertical
integration, it reduces the economically optimal size for firms. Lower transaction costs make it possible
for small firms in Asia or Latin America to work together to develop a global reach.3 Smaller firms in
Virtual University links 24 African under-funded and ill-equipped campuses to classrooms and libraries
worldwide, and will soon grant degrees in computer science, computer engineering and electrical
engineering. South Africa’s School Net program links 1,035 schools to the Net while the government’s
Distance Education program brings multimedia teaching to rural schools.
Mobile phones and other wireless technologies greatly reduce the need to lay down a costly telecom
10. Discuss the impact of the IT revolution on the poorest countries
Substantial investments in the infrastructure to create easy access to the Internet and other aspects of IT
11. Select one country in each of the three stages of economic development. For each country, outline the
basic existing marketing institutions and show how their stages of development differ. Explain why.
Library project.
12. Why should a foreign marketer study economic development? Discuss.
Chapter 09 – Economic Development and the Americas
9-7
© 2020 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Economic development should be studied by a foreign marketer in order to (1) assess present demand
within a country, (2) to assess potential and future demand within a country, (3) become aware of the
probable consequences of his actions within a developing country, i.e., that is political reaction to his
involvement, and (4) determine what contributions as a marketer he can and should make to the
development of a particular country.
13. The infrastructure is important to the economic development of an economy. Comment.
One indicator of economic development is the extent of social overhead capital or infrastructure
within the economy. The quality of infrastructure directly affects a country’s economic growth
14. What are the objectives of economically developing countries? How do these objectives relate to
marketing? Comment.
15. Using the list of NIC growth factors, evaluate India and China as to their prospects for rapid growth.
Which factors will be problems for India? For China?
Chapter 09 – Economic Development and the Americas
9-8
• Planning. A central plan with observable and measurable development goals linked to
specific policies.
• Outward orientation. Production for the domestic market and export markets with increases in
16. What is marketing’s role in economic development? Discuss marketing’s contributions to economic
development.
Marketing is critical to economic development. Marketing is an economy’s arbiter between
productivity, capacity, and consumer demand. The marketing process is a critical element in
Chapter 09 – Economic Development and the Americas
9-9
© 2020 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Effective marketing leads to the higher levels of economic opportunity which can spawn local
entrepreneurs by creating the opportunities for small business and the stimulus for development of
professional management.
Finally, marketing contributes to the development of standards for economic behavior, integrity, and
product and service reliability. In many underdeveloped countries, there is a painful lack of standards of
morality in business and personal relationships.
17. Discuss the economic and trade importance of the big emerging markets.
they were in 1990; if services are added, the amount jumps beyond one trillion dollars.
18. One of the ramifications of emerging markets is the creation of a middle class. Discuss.
One of the ramifications of emerging markets is the creation of a middle-class household that
generates new markets for everything from disposable diapers to automobiles. Middle-class in
emerging markets differs from that in the United States. Whey they do not have two automobiles and
suburban homes, they have discretionary income that is income not needed for food, clothing and
When incomes rise, so do consumer appetites for everything from soap to automobiles despite low per
capita incomes. How can those who earn $100 a month be a lucrative consumer market? Officially, per
Chapter 09 – Economic Development and the Americas
9-10
© 2020 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
The statement recognizes the point that markets are not static, but are constantly changing, and that
change can be influenced by changes in the economy, changes in the culture, and, certainly, changes
brought about by businesses. For example, the very fact that a business offers a product for sale in a
market can and frequently does have an affect on the way that market perceives its needs and wants.
The important part of this statement is the recognition of the dynamic nature of markets and the
interaction of all the efforts of business, the economy, and all the culture.
20. Discuss the strategic implications of marketing in Mexico.
America, Mexico is so close to the U.S. that economic volatility in the U.S. is exacerbate in its close
Although you would think that Mexicans reserve the most conflicted attitudes towards Spain because
of their invasion and the corresponding enslavement of the populace, they actually don’t. Rather, that
position is held by the U.S. That is, they often view Norte Americanos from the U.S. (Mexico is
also part of the Americas), as cold, materialistic and overbearing. But, they also admire the “gringo
democracy, prosperity and technological achievements.”
iii
Mexico may be divided into five distinct regions:
El Distrito Federal – Mexico City
El Norte – the Border Area
The Central Part – Guadalajara
The Southeast – Oaxaca and Yucatan
Chapter 09 – Economic Development and the Americas
9-11
the most native people. The first is a large, highly congested, mile-high urban metropolis, and the
21. Discuss the consequences to the United States of not being a part of the SAFTA.
Not to be an active participant in the FTAA and not to be able to influence the final architecture of the
FTAA could be a blow to the U.S. economy and trade. As a market for U.S. goods, the Western
Hemisphere is nearly twice as large as the European Union and nearly 50 percent larger than Asia.
22. Discuss the strategic marketing implications of NAFTA.
NAFTA affects a variety of strategic issues, the most important of which are:
Market Access. Within 10 years of implementation, all tariffs will be eliminated on North American
industrial products traded between Canada, Mexico, and the United States. All trade between Canada
and the U.S. not already duty free will be duty free by 1998 as provided for in CFTA. Mexico will
Chapter 09 – Economic Development and the Americas
9-12
Customs Administration. Under NAFTA, Canada, Mexico, and the U.S. have agreed to implement
uniform customs procedures and regulations. Uniform procedures ensure that exporters who market
their products in more than one NAFTA country will not have to adapt to multiple customs
23. Visit the Website for NAFTA and locate each group’s rules of origin. Which group has the most
liberal rules of origin? Why the difference?
Chapter 09 – Economic Development and the Americas
9-13
© 2020 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
D. Unassembled goods and goods classified in same (HS) Harmonized System category as their
parts, which do not meet the Annex 401 rule of origin but contain sufficient North American
regional value content. (Goods qualify in this category only in very limited circumstances.)
24. NAFTA has been in existence for several years, how has it done? Read the section in the text “North
American Free-Trade Area (NAFTA)” that discusses the initial provisions of the agreement, and,
using the Internet, evaluate how well the provisions have been met.
NAFTA is a comprehensive trade agreement that addresses, and in most cases improves, all aspects
representing the U.S. Library of Congress, says more than twice as many jobs have been created as
lost in the wake of NAFTA-73 5,000 jobs have been gained and 277,700 have been lost.
A Commerce Department rule of thumb is that for every $1 billion of US exports 14,000 jobs are
created; this translates into more than I million US jobs having been generated from exports to
4 Fast-track authority allows the President to negotiate trade agreements with the assurance that Congress will vote to either accept or reject the
agreement without amendments or changes. Without fast track, countries are reluctant to negotiate seriously since the President cannot assure that
agreements will survive Congressional approval intact.
Chapter 09 – Economic Development and the Americas
9-14
Another complaint of organized labor against NAFTA stemmed from the fear that new investments
would be made south of the border instead of in U.S. In fact, American direct investment in Mexico
has averaged less than $3 billion a year since 1994. That is less than 0.5 percent of American firms’
Mexico surpassed Hong Kong and China to become the U. S.’ top source of imported apparel. This is
a great boon for U.S. fabric and yarn makers. In years past they have supplied only minuscule
amounts of fabric to the vertically integrated Asian apparel markets, now they supply 70 percent of
the raw material going to Mexican sewing shops.
Total foreign direct investment in Mexico has averaged $11 billion a year since 1995 as companies
plants have been buying more components from U.S. suppliers, while cutting back on Asian sources.
Miles Press, a $2 million maker of directory cards, saw orders from Lucent grow 20 percent in just a
few months. Berg Electronics, a $700 million component maker, expects to triple sales to Lucent’s
Guadalajara plant next year. This ripple effect has generated U.S. service-sector jobs as well. Fisher
Price Inc. shifted toy production for the U.S. market from Hong Kong to a plant in Monterey.
Chapter 09 – Economic Development and the Americas
9-15
ii
Gringo (feminine, gringa) is a term in the Spanish and Portuguese languages used to refer to foreigners, especially
