Reflection on Impact of Emerging Markets Essay

Custom Student Mr. Teacher ENG 1001-04 19 December 2016

Reflection on Impact of Emerging Markets

The world of business has changed in recent years. Usually, the firms of developed countries dominated the globe and developed countries’ markets were the most attractive. However, new attractive markets and new players have emerged from areas outside the developed world. These new markets such as the BRICs and the MISTs have large populations, high economic growth and increasing demands for goods. Also, they are expected to surpass the developed economies by 2050 (Goldman Sachs, 2003). According to Jagdish N. Sheth, the emerging markets have impacted both the theory and the practice of marketing. The reason is very simple; marketing is a discipline that was developed in the concept of industrialized (developed) markets meaning that most of the marketing tools are designed to work specifically in industrialized markets (Sheth, 2011). Therefore, adapting most of what is known about marketing is necessary to succeed in new markets and new marketing research approaches need to be taken.

The article Impact of Emerging Markets on Marketing: Rethinking Existing Perspectives and Practices covers some of the most important characteristics of these markets such as their growth, market heterogeneity, sociopolitical governance and comparative advantages. Also, the author suggests some changes that need to be made to the existing marketing theory, marketing strategy, marketing policy and marketing practice. Moreover, Sheth argues that companies (from developed countries as well as from the emerging countries) who succeed in the mentioned markets are becoming global competitors. The reason is that these firms have to innovate to overcome challenges such as shortages of resources, inadequate infrastructure and unbranded competition. As a result, innovation makes these firms more efficient as well as it creates a competitive advantage which allows them to compete globally.

Having grown up in Mexico, one of the so called MISTs, I can relate many of Sheth’s marketing suggestions with some strategies used by Mexican companies. Some of these companies are already global players such as Grupo Bimbo, Cemex and America Movil (Inter-American Developing Bank, 2008). They are strong competitors in the bakery industry, building materials industry and telecom industry respectively. However, there is another rising player named Coppel S.A. de C.V. that already started to expand to other emerging markets outside Mexico, aiming to become a global competitor in the retail business.

Coppel is family owned business with 1,000 stores and 80,000 employees in Mexico. Also, it has eight stores in Argentina and eight in Brazil. I will like to focus on Coppel, 2011’s biggest retailer in Mexico (El Economista, 2012), and how this company has already applied some of Sheth’s suggestions to marketing perspectives and practices. Even though the article mentioned many good points to succeed in emerging markets, the most important are purpose driven marketing, resource improvisation, and market development.

Purpose driven marketing

According to Sheth, purpose driven marketing is going beyond highlighting the benefits of a product or service, creating a lifetime value among the customers, employees and other stakeholders. Coppel wins its customers’ hearts with the slogan “Coppel Mejora tu vida” which translates to “Coppel improves your life”. Along with the slogan, Coppel offers a range of products such as clothes, furniture, electronic appliances and financial services to the 68 percent of the Mexican population whose monthly income is less than 2,743 pesos, close to 165 EUR (DigitalPersona, 2012). Most of the products sold by Coppel are products that fulfill the customers’ needs. At Coppel’s stores, it would be difficult to find expensive shoes or clothes. Also, Coppel guarantees all the furniture and any electronic product regardless of the brand sold at their stores up to 2 years; while most manufacturers only guarantee the first year.

This warranty is very important to the customers since a washing machine or refrigerator can be equivalent to ten or eleven months of salary. In the financial services part, Coppel offers credit to buy goods in the store and cash loans up 1,000 EUR (loyal customers who have been Coppel’s clients for more than a year). Coppel is not as strict as many of the different financial institutions in Mexico which would never lend a single peso to any of Coppel’s customers. In other words, Coppel has a marketing policy of inclusive growth which means including in their policies those markets that marketers would have left out.

In addition, Coppel extends its marketing to its stakeholders such as the community, employees, channel partners and suppliers. For the employees and their children, Coppel offers to pay half of their school tuition up to the master degree level as well as provide school supplies for them. Also, Coppel encourages its employees to get married by giving employees up to two months’ salary as a wedding present. Marriage is seen as a very important tradition in a conservative country such as Mexico. As a result, Coppel does improve the life of its customers as well as their stakeholders. It focuses on creating a lasting value to position itself as a company that offers more than just quality products and services. For this reason, Coppel has better financial performance than its competitors.

Resource improvisation.

“If necessity is the mother of invention, then resource shortage is the father of innovation” (Sheth 2011). For that reason, firms operating in emerging markets gain advantage by improvising with scarce resources, making them more innovative relative to their competitors. Coppel’s most innovative process is the use of a fingerprint biometrics in the point of sale (POS) and in all operating systems (DigitalPersona 2012). This system has helped to improve the verification process of purchases for 20.6 million customers since a customer can buy on credit (in the store) using just his or her fingerprint without using any type of identification.

As mentioned, Coppel has close to 20 million registered customers’ fingerprints in their database. That represents almost 20 percent of the entire Mexican population, which allows Coppel to generate a reliable source of information about its customers. Reliable information about customers is not easy to have in emerging markets. For that reason, Coppel has an advantage over its competitors since it can use that information to create new marketing strategies to target a specific customer behavior. Also, the fingerprint system has reduced the possibility of fraud since every single customers information is linked to his or her fingerprint. This system has proved very useful in Argentina and Brazil where most customers (low income class) hardly carry an ID with them.

Another innovating process is Coppel’s distribution system. The reason is that Coppel has 19 warehouses with 127 distribution centers to supply all its stores in 337 different cities in Mexico (DigitalPersona 2012). The distribution system is in-house designed which means that Coppel can modify it whenever is needed without having aid from an external provider. This decreases the response time when a challenge is raised. Also, Coppel’s system updates in real time. This means that the company knows exactly what products are being sold at any given time and what products are on the delivery trucks.

In addition, Coppel daily supplies all the stores just with the right amount of goods that were sold the day before using small trucks with low gasoline consumption or pressured gas to keep down the cost. It also offers free delivery to its customers. This is a competitive advantage since other competitors do not offer it free of charge and almost half of the Mexican population does not have cars. Moreover, the distribution system is very efficient that some other retailers like Wal-Mart Mexico have tried to replicate it. In Mexico, Coppel is known as an innovative firm due to its distribution and fingerprint systems.

Market development.

While developed markets’ firms target customers’ needs using market intelligence, firms in emerging markets such as Coppel create customers’ needs by shaping customer expectations. In other words, create a “Field of Dreams” and customers will come. “Coppel mejora tu vida” is a statement that brings the customers to that “Field of Dreams”. Since customers in emerging markets are seeking to improve their life condition within their limited economic capacity, Coppel offers accessible and affordable products and services.

Coppel has created and developed its own market over the last 70 years. The firm took care of the expectations of the poorest segment in Mexico and that segment has become Coppel’s most loyal customers. Therefore, developing a market brings more financial benefits than market orientation since the firm that develops a market gets the advantage and creates barriers for new entrants. Huawei in China and Avon in Brazil used marketing development to shape the customers’ expectations to positioning themselves in those markets. Nowadays, both of them are strong global competitors.

Conclusion

Coppel has the widest profit margin of any major Latin American retailer (Bloomberg 2012) because its strategies are based on purpose driven marketing, resource improvisation, and market development. Also, Coppel has developed a market as a result of a lifetime value that is attractive to all the stakeholders while innovating to overcome the challenges generated by the characteristics of operating in an emerging market.

As mentioned by Sheth, new ideas from the emerging markets are impacting what we know about marketing. In the 1980s there was the belief that “The products and methods of the industrialized world play a single tune for all the world, and the world eagerly dances to it” which was written in the 1983’s article The Globalization of Markets by Theodore Levitt.

This statement suggests that no adaptation was needed to Marketing practice and theory. On the other hand, Sheth says “the rise of emerging market is inevitable and it will have a disruptive impact on the marketing practice and theory” in 2011. Sheth’s article creates the bases of what is going to be new approaches for marketing research. The emerging markets will become the focus of the next generations of marketers and firms such as Coppel will be an example of how the emerging firms are shaped by their surroundings.

References

Sheth, J.N. (2011). Impact of emerging markets on marketing: Rethinking existing perspectives and practices. Journal of Marketing, 75 (July), 166-1

Levitt, T. (1983). The globalization of markets. Harvard Business Review, 61 (May/June), 92-102

Goldman Sachs (2003). “Dreaming with BRICs: The Path to 2050.” Goldman Sachs. N.p., n.d. Web. 11 Dec. 2012. http://www.goldmansachs.com/our-thinking/topics/brics/brics-reports-pdfs/brics-dream.pdf

Inter-American Development Bank (2008). “From Multilatinas to Global Latinas The New Latin American Multinationals.” Http://www.iadb.org. N.p., 2008. Web. 11 Dec. 2012. http://www.iadb.org/intal/intalcdi/pe/2009/03415.pdf

El Economista (2011). “En El 2011, Coppel “abarató” a Liverpool”. En El 2011, Coppel “abarató” a Liverpool. N.p., 15 Mar. 2012. Web. 11 Dec. 2012. .

“Coppel.” Coppel. N.p., n.d. Web. 11 Dec. 2012. .

DigitalPersona (2012). “Coppel Corporation Uses DigitalPersona Fingerprint Biometrics for Customer and Employee Security and Convenience.” Coppel Corporation Uses DigitalPersona Fingerprint Biometrics for Customer and Employee Security and Convenience. N.p., 21 Sept. 2012. Web. 12 Dec. 2012.

Bloomberg News (2012). “Mexico’s Coppel Brothers Emerge With $16 Billion Fortune.” BusinessWeek. N.p., 15 Nov. 2012. Web. 17 Dec. 2012.

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