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

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

Grouping of Developing Countries as Potential Product Markets

In testing the contingency theory of organization, Negandhi and Reimann (1972) state, ". . . the optimum organization structure is primarily dependent on the external environment of the enterprise. Stable environmental conditions call for centralized structures, while dynamic environments require a decentralized structure. . . .a slightly modified contingency theory is appropriate in the context of a developing country." The implication of their observation is that environment-organization strategy that works in developed countries does not precisely work in developing countries. This observation is especially important in our study in light of the fact that developing countries are not nearly as homogenous as industrial countries (Krugman and Obstfeld, 1992). Developing countries are disparate groups in many respects, as, for example, targets for real asset investments and as targets for product markets (Dickens, 1992; Lecraw, 1993; Li, 1994; and Ojah, 1995). Therefore, a marketing organizational structure designed to optimize external environments, for instance, should be modified to incorporate differences within clusters of similar developing countries. Table 1 presents evidence which highlights clear differences between the countries surveyed in this study. The choice of such seemingly dissimilar countries is deliberate (see endnote #1). The important question now is whether or not there are yet similarities between these surveyed markets, despite appearances of disparity.

It is evident in Table 1 that the Philippines and Kenya share some similarities (e.g., economic openness and inflation level), whereas Hong Kong, Malawi, and Kenya or the Philippines are dissimilar in many respects. Thus one can expect developing countries, as potential product markets, to be similar or dissimilar with respect to the following environments: level of economic development, speed of incorporating latest technology, degree of political stability, adequacy of legal frameworks, and uniqueness of socio-cultural identity, among others. Requisite for Sustainable International

Marketing Success

Is sustainable marketing success ensured if one follows the first step of screening the foreign market before entering it and recognizes potential clustering of target markets? The answer is not always clear. Some of the possible sources of input for evaluating foreign markets in the contexts highlighted above include the Department of Commerce publications, overseas business reports, foreign travel guides, and anthropological write-ups. These sources have information that is largely based on past data or trends. Such "as-is" knowledge about a potential market only suggests to an international marketer whether or not he would be successful if he got into that market today. To ascertain whether or not the marketer would be successful after entering that market, the marketer's information source must be forward-looking. The survey in this study suggests a means of acquiring such knowledge. We use local managers' expectations of how target markets' environments might be susceptible to external influences (such as government policy) to provide insight into a potential marketer's future prospects in those markets.2 Such knowledge can also be used to build a cost-effective contingency marketing plan in the form discussed below.