STAGES OF ECONOMIC DEVELOPMENT

STAGES OF ECONOMIC DEVELOPMENT

Seattle Port

The United Nations classifies a country’s stage of economic development on the basis of its level of industrialization:

• More-developed countries: industrialized countries with high per capita incomes.  These countries include Canada, England, France, Germany, Japan, and the U.S.
• Less-developed countries: industrially developing countries just entering world trade with relatively low per capita incomes.  For example, Asia and Latin American countries.
• Least-developed countries: industrially underdeveloped, agrarian, subsistence societies with rural populations, extremely low per capita income levels, and little world trade involvement.  These countries include Central Africa and parts of Asia and are often associated with violence.

Newly Industrialized Countries are experiencing rapid economic expansion and industrialization and do not fit as LDCs or MDCs, have shown rapid industrialization of targeted industries and have per capita incomes that exceed other developing countries, attracting both trade and foreign direct investment.  These countries are Chile, Brazil, Mexico, South Korea, Singapore, and Taiwan.

Growth factors include political stability, economic and legal reforms, entrepreneurship, planning, outward orientation, factors of production, industries targeted for growth, incentives to force a high domestic rate of savings, privatization of state-owned enterprises that had placed a drain on national budgets, large accessible markets with low tariffs, and regional cooperation and open markets.

Economic growth factors for newly industrialized countries include political stability in policies affecting their development.  Economic and legal reforms of a country or how they enforce contracts & property rights.  These countries also tend to have a high concentration of Entrepreneurship.  The planning is a central plan with observable & measurable development goals linked to specific policies.

Outward orientation is the production for domestic & export markets with an increase in efficiencies & differentiation of exports from the competition.  Factors of production, if deficient in land, labor, capital, management, and technology can come easily from outside the country.  Their industries are targeted for growth and incentives exist to force a high domestic rate of savings and direct capital to update the infrastructure.  Privatization of state-owned enterprises.

Infrastructure are those types of capital goods that serve the activities of many industries, includes paved roads, railroads, seaports, communication networks, financial networks, and energy supplies, important for economic growth of a country because it affects the ability of an enterprise to engage effectively in business

Bottom of the Pyramid Markets:

There exist 4 billion people across the globe with annual incomes of less than $1,200, have been relatively ignored by international marketers because of misconceptions about their lack of resources, and the lack of appropriateness of products and services usually developed for more affluent customers that they should be teeming and slake.

Big Emerging Markets (BEMs) have half the worlds population and account for 25% of the industrialized world’s GDP today.  Characteristics they share are that they are physically large, have a significant populations, represent considerable markets for a wide range of products, have strong rates of growth or the potential for significant growth, have undertaken programs of significant economic reform, are of major political importance within their regions, are “regional economic drivers”, and will engender further expansions in neighboring markets as they grow.  The Big Emerging Markets are India, China, Brazil, Mexico, Poland, Turkey, and South Africa; specifically Latin America, Eastern Europe, and the Baltic States, and Asia.  BEMs differ from other developing countries in that they import more than smaller markets and economies of similar size.  Most of their growth will be in the industrial sector to tout, or solicit business, employment, votes, or the like, importunately.

Four Asian Tigers

The most rapidly growing economies in the Asian-Pacific Rim region are Hong Kong, South Korea, Singapore, and Taiwan.

Newest Emerging Markets: 

The US decision to lift the embargo against Vietnam and the UN lifting the embargo against South Africa resulted in rapid expansion of their economies.  Because of their growth and potential, the US Department of Commerce designated both as BEMs.  Vietnam has an educated population and highly motivated, and a government committed to economic growth.  However, UN factors dragging on development are poor infrastructure, government restrictions, minimal industrial base, and lack of capital and technology.

South Africa’s economic growth has increased significantly now that apartheid is officially over and the UN embargo has been lifted.  Its industrial base will propel it to rapid growth and developed infrastructure.  It has a domestic market of nearly $500 billion but has yet to develop its full potential because of years of isolation, former inward-looking trade, a low savings rate, and largely unskilled labor force with low productivity.

The Internet accelerates economic growth by new industries, lowering transaction costs, facilitating education, converging global markets, opening communication, and diffusing innovation much faster and efficiently (product lifecycle becomes shorter).  For example, look at Airbus.  Healthcare (outsourcing x-rays, harder to forge scripts because they are electronic, advice to doctors more attainable).  As a country passes the 5,000 per capita GNP level, people become more brand conscious and forgo many local brands to seek out foreign brands they recognize.

Infrastructure variables that affect the growth of an economy are roads, railroads, communication networks, and energy systems.  Countries begin to lose economic development ground when their infrastructure cannot support an expanding population and economy.  An economy’s arbitrator between productive capacity and consumer demand is marketing.  Information technology can jump-start national economies and allow them to leapfrog from high levels of illiteracy to computer literacy.

If a country is in the marketing phase (mass distribution sub-stage) of the evolution of the marketing process, its distribution channels are controlled by the producer or retailer.  The companies that will benefit in emerging markets are the ones that invest when it is difficult and initially unprofitable. Since the collapse of the Soviet Union, many countries in Eastern Europe have not fared well with respect to GDP (gross domestic product). However, countries that instituted market reforms have done better than those that did not.