How these stages can be useful in finding market opportunities

A good starting point for estimating present and future market potentials in a country or part of a country is to estimate its present stage of economic development and how fast it’s moving to another stage. The speed of movement, if any, and the possibility that stages may be skipped may suggest whether market opportunities exist or are likely to open. But just naming the present stage can be very useful in deciding what to look at and whether there are prospects for the firm’s products.

Producers of cars, expensive cameras, or other consumer durables, for example, shouldn’t plan to set up a mass distribution system in an area in Stage 2 (pre-industrial) or even Stage 3 (primary manufacturing). Widespread selling of these consumer items requires a large base of cash or credit customers, but as yet too few people are part of the money economy.

On the other hand, a market in the nondurable products manufacturing stage (Stage 4) has more potential, especially for durable products producers. Incomes and the number of potential customers are growing. There’s no local competition yet.

Opportunities might still be good for durable products imports in Stage 5 even though domestic producers are trying to get started. But more like­ly, the local government will raise some controls to aid local industry. Then the foreign producer has to license local producers or build a local plant.

Areas or countries in the final stage often are the biggest and most profitable markets. While there may be more competition, many more customers have higher incomes. We’ve already seen how income distribution shifted in Canada, leading to more families with middle and upper incomes. This should be expected during the latter stages when a mass market develops.

Other market dimensions may sugges topportunities too

Considering country or regional differences—including stages of economic development—can be useful as a first step in segmenting international markets. After finding some possible areas (and eliminating consideration of unattractive ones), we must look at more specific market characteristics.

We discussed potential dimensions in the Canadian market. It’s im­possible to cover all possible dimensions in all world markets. But many of the ideas discussed for Canada certainly apply in other countries too. So here we’ll outline some dimensions of international markets and we’ll show some examples to emphasize that depending on half-truths about «foreigners» won’t work in increasingly competitive international markets.

Although the cities may seem crowded with people, the Canadian population of over 25 million is only one half of one percent of the world’s population, which is over 5 billion.

In terms of proportion and population Canada looks unimportant because of its small population in relation to land area. This is also true of Latin America and Africa. In contrast, Western Europe is much larger, and the Eastern countries are even bigger.

People everywhere are moving off the farm and into industrial and urban areas. Shifts in population combined with already dense populations have led to extreme crowding in some parts of the world. And the crowding is likely to get worse. It’s expected that more than 50 percent of the world’s population will live in urban areas by the year 2010.

In addition, birth rates in most parts of the world are high—higher in Africa, Latin America, Asia, Australia, and New Zealand than in Canada. And death rates are declining as modem medicine is more widely accepted. Generally, population growth is expected in most countries. But the big questions are: How rapidly and will output increase faster than population? This is important to marketers. It affects how rapidly these countries move to higher stages of development and become new markets for different kinds of products.

Developing inter-urbias in Canada show up as densely populated areas. Similar areas are found in Europe, along the Nile River Valley in Egypt, and in many parts of Asia. In contrast, many parts of the world have few people.

Profitable markets require income as well as people. The best available measure of income in most countries is gross national product (GNP) (the total market value of goods and services produced in a year). Unfortunately, this may not give a true picture of consumer well-being in many countries because the method commonly used for figuring GNP may not be accurate for very different cultures and economies. For instance, do-it-yourself activities, household services, and the growing of produce or meat by family members for their own use aren’t usually figured as part of GNP. Since self-sufficient family units’ activities aren’t included, GNP can give a false picture of economic well-being in less-developed countries. At the other extreme, GNP may not do a good job measuring service-oriented out­put in highly developed economies.

But gross national product’s useful—and sometimes it’s the only available measure of market potential. The more developed industrial nations have the biggest share of the world’s GNP. This is why so much trade takes place between these countries—and why many companies see them as the more important markets.

GNP per person is a useful figure because it gives some idea of the income level of people in a country. But GNP per person can be a misleading estimate of market potential. When GNP per person is used for comparison, we assume that each country’s wealth is distributed evenly among all consumers, which is seldom true. In a developing economy, 75 percent of the population may be on farms and receive 25 percent or less of the income. There also may be unequal distribution along class or racial lines.