A comparative analysis of environmental effects on marketing activity in developing countries

Multinational Business Review, Fall 1997 by Ojah, Kalu, Han, Dongchul

When a marketer is about to enter a new market, he must first evaluate the environment of the target market, especially when it is a distant and unfamiliar one. Second, the marketer should devise a means to ensure success once in the target market. This study points to a vital requisite for sustainable international marketing success in unfamiliar markets such as those of Sub-Saharan Africa. A survey of the expectations of environmental effects on marketing activity from managers in four countries is used to show similarities and differences in market environmentalism between African and Asian markets and how such knowledge can be instructive for international marketing strategy. We find that marketing activity in emerging markets is highly susceptible to environmental effects, and that there are no clear differences in market environmentalism between African and Asian markets. Further, we document results which suggest that a similar marketing plan employed in the more familiar market of the Philippines can be used in the little known market of Kenya.

INTRODUCTION

The 1980s witnessed one of the most phenomenal shifts in international production and specialization in modern history from developed market economies to developing economies (Plasschaert and Van Den Bulcke, 1991; Dicken, 1992; and Ojah and Ueng, 1995). With these shifts has come an increased movement of firms into foreign countries for marketing (exporting) purposes. Some of the international marketing activities are done in developing countries by firms based in both developed and newly industrializing countries (NICs) (Lall, 1983; Lecraw, 1993; and Li, 1994). The success or failure of these international marketers depends on the extent to which they understand the environmental nuances of the new and alien markets into which they choose to expand (Peterson, 1990; and Cateora, 1990). Among the potentially alluring markets of developing economies, Sub-Saharan African markets have received the least attention. However, given the current pace of business globalization, it is not far-fetched to suppose that African markets will soon begin to receive increased attention, at least, as product markets. Therefore, prospective international marketers to this long-neglected region of the world's markets need some knowledge of the region's market environment. And such knowledge can be more insightful when viewed in the context of a onceneglected region of the world's markets--i.e., a comparison of the Sub-Saharan African market environmentalism with East Asia's.

In addition to the need for understanding business environments of a target market, some knowledge of the vagaries of those environments is necessary for a sustainable marketing success in the target market. This knowledge is crucial mainly because marketing activities are quite susceptible to the vagaries of environmental factors. It has been documented, for instance, that governmental policies have a significant relationship to changes in business environments, especially in developing countries (Cho, 1992; and Han and Ojah, 1995). Thus, this study uses local marketing managers' perceptions of governmental policy effects on their business environments as a proxy for the potential fluctuation in business environment(s) that can affect marketing activities of firms. Specifically, this study reports on a survey of one NIC and three developing countries with respect to business environments that affect marketing in these countries. Hence, the objectives of the survey analysis are (1) to revisit market environmentalism in the context of developing countries, with a focus on local marketers' expectations of how government policy would affect their business environments; and (2) to compare two representative "neglected" SubSaharan African markets, Kenya and Malawi, with two representative Asian markets, Hong Kong and the Philippines, that were once neglected, with a goal of gaining useful insights into the unknown via the known.1 Such use of expectational data for a study of market environmentalism suggests another way marketing strategy can be improved upon. For instance, using such an expectational survey to learn about environments of a market that are more susceptible to change than others, allows marketing strategists to be anticipatory in their plan. That is, strategists would now be equiped with knowledge that permits them to instruct marketers to "beef up" contingency plans for the susceptible environments of their individual new markets while advising the application of a general strategy to sets of similar markets.

Section I presents the background discussion of why this exploratory analysis is important. Section II describes the data. Section III presents the empirical results. Section IV provides a summary of documented results with a discussion of their implications.

BACKGROUND ISSUES

Prerequisite for Entering Foreign Markets "Screening is the first step in evaluating foreign markets," asserts Peterson (1990). This assertion is very important when considering markets as unfamiliar and less studied as Sub-Saharan African markets. Failure to screen before entering into a foreign market could produce undesirable results. (1) A potential international marketer's failure to identify economic indicators that correlate with his products, for instance, can be disastrous. For example, an international marketer of big-ticket household items should know that population growth (which is characteristic of African economies) correlates with staples such as food items, while increase in per capita income correlates with bigticket items such as cars and refrigerators. Hence, the economic environment that motivates the marketer's decision to enter a market must be evaluated in the context of such economic nuances. (2) The ignorance or non-acceptance of local business customs that can facilitate marketing transactions would impede an international marketer's success in that local foreign market. For instance, in Nigeria, it has become an accepted norm to, at various stages of a transaction, give gifts to employees involved in facilitating one's business. This is especially true when a government unit is concerned. A USbased marketer, who for instance, views such practice as bribery would have a difficult time effecting transactions in that market. (3) An international marketer who ignores consideration of a target market's religion, language, and culture can needlessly waste advertising funds. If for example, McDonalds advertises hamburgers as its main product in India, the campaign risks failure as customers in India might consider it a socio-cultural affront given that the large Hindu population of India does not eat beef; emphasizing non-beef meals would be a better way to enter the Indian fast-food market (Pfeiffer, 1988; Cateora, 1990; and Kraft and Chung, 1992). African cultures are not as conspicuously sacrosanct as implied in these examples, nor are its people so unaccommodating of foreigners and their custom. However, marketing in Africa does require some level of sensitivity to cultural concerns. Thus, a detailed screening of the environment is a must for entering foreign markets. After screening geographically dispersed markets for possible entery, a multinational marketer ususlly groups them into segments of similar markets for ease of planning. In the following paragraphs, we address how this segmentation should be handled in markets as disparate as those of developing countries.