marketingmanagement INTERNATIONAL MARKETING Such a shift leads to a more systematic The eff ects of sector approach by producers, greater selectivity by consumers, and more specifi c attention and measures taken by Consumption, Production policymakers, all of which contributes to substantial GDP growth. During such a growth process, exports and Temporal Migration oft en “prime the pump” and become a magnet for urban migration, but on Global Markets aft er the infl ection point, blazing GDP growth is powered by domestic sales to domestic consumers and understood by policymakers. Marketers propose, but BY MICHAEL R. CZINKOTA & ROGER BLACKWELL consumers dispose, therefore determining [email protected] the growth of economies and health of [email protected] individual fi rms. U.S. GDP grew rapidly in past decades mostly because the proportion istory discloses that the most important people of urban baby-boomer women working shaping global markets, employment and outside of their homes went from minus- cule to massive. Food preparation, child HGDP are consumers. Media tend to attribute care, home maintenance and transpor- economic health to political leaders, parliament or tation changed from non-monetized to measured. GDP soared with mountains central banks, but marketers know that consumers of markets for goods and services rang- control 70% or more of GDP in mature economies. ing from autos, refrigerators and auto- matic washing machines to restaurants, Traditional economic analysis focuses on fi scal prepared foods and grocery stores, and monetary policies. Marketers and behavioral along with health care, lawn services, economists focus on consumers dominating global child care and cleaning, mostly bought by consumers formerly producing those markets now and in the future, heavily shaped by products themselves. temporal migration. Around the turn of the current century, China activated a similar conversion from self-production to Th e European industrial revolution two Japan, the ultimate victors were Seibu industrial production for 125 million centuries ago transformed agricultural and Takashimaya; in Europe, they were consumers moving to cities. Th e urban workers, producing most of their own Ikea and Carrefour. In the U.S., it was population in China is projected to consumption needs, to city dwellers, Wal-Mart, and specialty chains as varied reach 700 million by 2020. With relaxed buying products and creating markets. as Th e Home Depot and Victoria’s consent for foreign direct investment Marketing evolution began with Secret. Firms from three continents and a projected population in India of 2 small retailers and service providers. duke it out today for similar segments billion by 2050, the axis of GDP growth Th ey spawned department stores around the world, serving consumers moves east fast. and eventually gave birth to major recently converted from self-produced Urban migration is igniting emerging chains, hypermarkets, global brands, goods and services, (both unseen and markets ranging from Vietnam, Ghana and international supply routes and non-monetized) to marketer-produced and other African nations to countries manufacturing, serving similar segments products. While home-produced in Latin America and the Middle East. across multiple cultures in the U.K., products are “unseen” in a nation’s Monetary and fi scal policies provide France, Germany and other countries. GDP, that does not mean that they the rails for GDP growth, but the Th e rural-urban migration surfaced do not exist. Rather, once recognized locomotive is urban consumers. When in North America during the past (usually over time), production and hyper-stimulation of easy credit and century, fueled by the automobile. Th ese consumption become visible because excessive debt stokes the engine too shift s channeled European retailing into they are monetized and measured, and fast, the economy risks a train wreck, U.S. department stores and chains. In therefore now recognized in the GDP. as the United States, Greece, Spain 16 MARKETING NEWS | OCTOBER 2013 AMA_Oct2013_Final.indd 16 9/26/13 4:25 PM INTERNATIONAL MARKETING marketingmanagement “A century ago, 70% of the labor force worked on the farm. Today, 1.8% of the labor force produces so much output that the nation’s greatest health problem is obesity, with ample surplus to export. Manufacturing employed 30% of the nation’s workers in 1950, and by 2010 that number dropped to 9%. Even banks, which are rising in terms of revenue and profits, project substantial job reductions of 25% in five years. Productivity produces higher-paying jobs but fewer of them, a major social concern.” and other nations have discovered. Naïve critics complain that the Bangladesh is prototypical of the When economists do not understand U.S. no longer produces anything, transition from agrarian to industrial the behavior and temporal role of hoping to return factory jobs to economies. In a nation the geographic consumers, they risk prescribing the past levels. In fact, U.S. factories are size of Iowa with more people (more wrong cure for the new norm in mature producing more than at any other time than 160,000,000) than Russia, millions economies of slow-growth GDP and in history. Output doubled over the past moved from rural regions to Dhaka and fewer jobs. three decades, but factory employees its factory-filled environs fulfilling global Inter-market segmentation, the process declined by a third. The way for mature demand for quality apparel at low prices. of reaching similar groups of customers economies to compete with emerging GDP soared, and millions of new city transcending national or geographic countries is to reduce labor content, dwellers now spend their meager wages boundaries, helps formulate marketing continuing exactly what the U.S. has on groceries and restaurants, store- strategies to serve global segments in already done in both agriculture and bought clothing and CNG-fueled vehicles. different stages of temporal migration. manufacturing. The by-product is copious numbers of In markets already evolved from self- A century ago, 70% of the labor force merchants, marketers and manufacturers production to industrial production, worked on the farm. Today, 1.8% of the in a newly prosperous middle class. Many effective strategy focuses on minimizing labor force produces so much output companies are based in Bashundara, a within-segment variance in customer that the nation’s greatest health problem towering 22-story shopping mall. The behavior and maximizing between- is obesity, with ample surplus to export. 2,500 mostly family-owned firms in segment variance. Homogeneity of Manufacturing employed 30% of the Bashundara are beneficiaries of and consumer behavior (or the lack thereof) nation’s workers in 1950, and by 2010 contributors to prosperity. exists locally, regionally and globally, that number dropped to 9%. Even banks, In Bangladesh and elsewhere, market- linked profoundly (and predictably) to which are rising in terms of revenue and ing historians see market segments simi- temporal stages of market development. profits, project substantial job reductions lar to the early 1900s in America with The transition from agrarian of 25% in five years. Productivity harsh working conditions and frequent economies (emphasizing self-production produces higher-paying jobs but fewer deadly accidents, exposed in books such of consumer goods, not measured in of them, a major social concern. as Upton Sinclair’s The Jungle. Even GDP) to urban societies with marketer- The rural-to-urban migration of when based on low wages and unsafe produced products (in GDP) not only jobs permits Chinese consumers now factories, prosperity lifts boats but not transforms segmentation, but also greatly to eat pork once a day instead of once all equally (or safely). History demon- affects GDP and jobs. Most markets in a month. There now is the creation of strates that the inevitable consequence of Europe and North America have reached enormous markets not only for retailers, increased prosperity is increased inequal- the upper limits of asymptotic growth restaurants and producers in China, ity. Bangladesh, once the poorest nation in rural-urban migration, suggesting but also for Chinese-acquired global in the world, now offers market segments the same conclusion about GDP growth. brands such as Smithfield in the United similar to others around the world. Simi- Failure to recognize these limits invites States. Rapid increases in GDP and lar booms of a prosperous middle class unrealistic expectations of GDP and global branding made the Ford Focus are identifiable in India, Mexico, Turkey, the failure of economic policies chasing the top-selling auto brand in the world, Colombia, Thailand, Ghana, Nigeria and growth. Analysts failing to understand thanks partly to high Chinese sales. other nations. the cause of growth risk prescribing Context and customs matter, but they Daron Acemoglu and James Robinson futile and potentially even harmful cures evolve in response to temporal shifts in document why markets with similar for slow growth. production and consumption. geography, culture and resources vary OCTOBER 2013 | MARKETING NEws 17 AMA_Oct2013_Final.indd 17 9/26/13 4:25 PM marketingmanagement INTERNATIONAL MARKETING FULL PAGE BLEED AD greatly in prosperity in their book, and Esther Duflo in Poor Economics: A also must understand the temporal Why Nations Fail: The Origins of Power, Radical Rethinking of the Way to Fight nature of societal shifts and migration, a Prosperity, and Poverty. They compare Global Poverty. Inter-market strategies to reversal or limitation of which is likely to British-based economies in North poor consumers will find similar buying ring in major changes, as well. m America and Australia with Spanish patterns, Poor Economics demonstrates, colonies, revealing nations in which whether in the United States, Latin entrepreneurs “bubble up” from the America, Africa or Bangladesh. masses to produce prosperity and It will be very valuable for MICHAEL CZINKOTA researches international modern market segments. They conclude international marketers to identify marketing issues at Georgetown University.