Are Emerging Markets Catching Up with
the Developed Markets in Terms of
Consumption?
WAHEEDUZZAMAN, A. N. M. (2011), “ARE
EMERGING MARKETS CATCHING UP WITH
THE DEVELOPED MARKETS IN TERMS OF
CONSUMPTION?" JOURNAL OF GLOBAL
MARKETING, 24 (2), 136-151.
Introduction
 Antoine van Agtmael, an officer of the International
Finance Corporation, is credited to have coined the term
“Emerging Markets” in 1981. He wrote a bestseller “The
Emerging Markets Century” in 2007 published by The
Free Press
 Consumption Revolution Emerging Markets-has grown
very fast in the last 3o years
 Consumption in Developed Nations-has slowed market
saturation
Rise of Emerging Markets
 May have begun during the colonial period, most
growth is recent, 1980-plus
 Reasons for their growth
globalization supported by stabilization 1970's
 Political Reforms in 1980's
 Opening Up/Liberalization of Markets 1980's
 End of Cold War/Fall of Berlin Wall 1989
 Internet Technology/Computer Revolution 1990's
 Networking of the multinationals

Characteristics of the Emerging Markets
Negative
Positive
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Rapid Economic Growth
Fast Paced Modernization
Urbanization
Large Middle Class
Increased Consumer
Expenditure
o
o
o
o
o
Growth of Urban Slums
Pollution
Environmental
Degradation
Increasing Inequality
Confrontational Politics
Top Ten Economies
PPP GDP, 2013 US Billion International Dollars
(Updated September 29, 2014)
Rank
1980
1990
2000
2010
2020
2030
1
USA
2,863
USA
5,980
USA
10,285
USA
14,964
China
28,372
China
62,797
2
Japan
1,005
Japan
2,379
Japan
3,261
China
11,797
USA
23,407
USA
37,205
3
Germany
769
Germany
1,452
China
3,020
Japan
4.351
India
8,905
India
19,733
4
France
542
France
1,031
Germany
2,148
India
4,130
Japan
6,048
Japan
8,901
5
Italy
514
Italy
980
India
1,607
Germany
2,926
Germany
4,237
Germany
6,180
6
UK
449
UK
915
France
1,535
Russia
2,222
Russia
3,455
Brazil
5,724
7
Mexico
348
China
914
UK
1,515
UK
2,201
UK
3,378
Russia
5,248
8
India
292
Brazil
789
Italy
1,406
Brazil
2,167
Brazil
3,341
UK
5,197
9
Canada
283
India
762
Brazil
1,236
France
2,115
France
2,829
Indonesia
5,069
10
Spain
275
Mexico
631
Russia
1,123
Italy
1,783
Mexico
2,737
Mexico
4,925
Rise of the Emerging Markets
List of Emerging Markets
Source
Naming and List of Countries
The Economist
Emerging Market Indicators: Argentina, Brazil, Chile, China, Colombia,
Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, South
Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland,
Russia, Saudi Arabia, South Africa, Taiwan, Thailand, and Turkey. [27
countries]
Morgan Stanley
MSCI Emerging Market Index: Argentina, Brazil, Chile, China, Colombia,
Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, South
Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland,
Russia, South Africa, Taiwan, Thailand, Turkey, and Venezuela. [26
countries]
U.S.
Department of
Commerce
Big Emerging Markets: Brazil, China, Egypt, India, Indonesia, Mexico,
Poland, Philippines, Russia, South Africa, South Korea, and Turkey. [12
countries]
Goldman Sachs/
Euromonitor
The Next Eleven: Bangladesh, Egypt, Indonesia, Iran, South Korea,
Mexico, Nigeria, Pakistan, Philippines, Turkey, and Vietnam. [11
countries]
MSU-CIBER
Market Potential Index: Argentina, Brazil, Chile, China, Colombia, Czech
Republic, Egypt, Hong Kong, Hungary, India, Indonesia, Israel, South
Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland,
Russia, Saudi Arabia, South Africa, Taiwan, Thailand, and Turkey. [27
countries]
Understanding Convergence
 Three approaches to determine convergence by the
economists
 β – convergence (growth rate of a country is negatively
correlated with level of income; income convergence,
countries at lower level grow faster)
 σ- convergence (dispersion) as countries converge over
time, dispersion decreases
 Conditional convergence (external variables) :
population, education, innovation, etc. influences
convergence; their influence is inconclusive
Convergence in International Marketing
 Meaning substantially different from the economists
 In international marketing closest theoretical association
can be found in two lines of research inquiry
 Standard Adaptation (S-A) –
 Focuses on 4 P’s of marketing
 “More standardized” = “More Convergence”
 Diffusion Research
 Innovators (leader)
 Imitators (follower)
 This study follows the economists’ notion of convergence
Study Focus and Objective
 Discuss the growth of emerging nations and their
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importance in the global economy
Define consumption convergence and elaborate on
models that explain the phenomenon
Investigate consumption convergence in emerging
and developed markets during a 30-year period and
determine the extent of convergence
Determine the influence of socioeconomic variables
on consumption convergence in emerging nations
Suggest the implications of the study in international
marketing and offer directions for future research
Methodology-1
 G7 (Developed) countries: Canada, France, Germany,
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Italy, Japan, United Kingdom, and United States.
Big Emerging Markets (12 countries): Brazil, China,
Egypt, India, Indonesia, Mexico, Poland, Philippines,
Russia, South Africa, South Korea, and Turkey.
BRIC nations: Brazil, Russia, India, and China.
Time period: 1980-2009
Data source: Most data came from the Global market
Information Database, Euromonitor; The World
bank, Heritage Foundation, Freedom House, and the
United Nations
Methodology-2
 Convergence hypothesis based on 8 consumption
variables
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First categories: Consumer expenditure - FOOD, HGS
Second categories: Actual Consumption - CAL, PROT - DSW,
MCW, REF, WSM.
 Exogenous influence variables: PCI, PCEC, LIFE,
PCTRD
 Time period: 1980-2009
Table 2: Decade averages of the variables
Time Growth Model (TGM)
• Growth in consumption for a particular item
• β-Coefficient (slope)
Yi = α + β1t + β2m
Yi= consumption in market i
t = discrete time interval t
m= group dummy
 If there is a difference between the developed and
emerging markets then the beta-coefficient of t is
expected to be positive and the dummy m is expected
to be significant
Table 3: Time Growth and Trend Difference Models
Findings-Time Growth Model
 All models are significant (see the F-values) and the
R-Squares are also reasonably good
 Consumption has increased significantly over time, t
shows a good rise
 Difference between G7 and BEM consumption is
significant (dummy m is significant)
 We got what we expected
Trend Difference Model (TDM)

Indicates convergence and divergence in
consumption over time
∆ Yi = F(YD-Yi)= α + β1t
 YD: mean score of consumption in G7
 Yi: in merging market i
 t: discrete time interval t
 In case of convergence, the difference between
developed and emerging nations will decrease, i.e.,
the beta-coefficients of t is likely to be negative
Table 3: Time Growth and Trend Difference Models
Findings-Trend Difference Model (TDM)
 All models are significant (see the F-values) and the
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R-Squares are also reasonable
The consumption convergence between G7 and BEM
is real, but very slow.
∆FOOD: BEM – catch up by $25.03 every year
∆HGS: $6.5 per year
Convergence on ∆CAL > ∆PROT
Table 4: Trend difference Models-BRIC Nations
Findings-TDM-BRIC Nations
 All models are significant (see the F-values) and the
R-Squares are very high
 The consumption convergence is taking place.
However, the rate of convergence varies among
nations
 Brazil and Russia have better convergence on FOOD
and CAL consumption
 Durable consumption such as refrigerator and
washing machine, China has the lead
Socioeconomic Influence Model (SIM)
 ∆ Yi = F(YD – Yi) = α + β1X1 + β2X2 + β3X3 + β4X4
 YD: mean score of consumption in G7,
 Yi : consumption in emerging market i,
 X1: PCI in market I,
 X2: PCEC,
 X3: LIFE,
 X4: PCTRD
 Explain why the convergence is taking place
Table 6: Socioeconomic Influence Model
Table 7: SIM-Full and Reduced
Findings-Socioeconomic Influence Models
 All models are significant (see the F-values) and the R-
Squares are very reasonable
 PCI, PCEC, LIFE, and PCTRD-all indicate significant
influence at the Univariate level (Table 6)
 Full and Reduced Model
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PCI is the most convincing of the four influence variables. All
negative β –coefficients indicates PCI has contribution to
increase consumptions.
LIFE has low R-squares but strongly influence FOOD and CAL
consumption.
PCTRD was dropped because it is highly correlated with PCI.
PCEC and LIFE influence some of the consumptions.
Summary of Findings
 This study investigates consumption convergence between
developed and emerging nations using three types of models.
Previous studies only examined economic development and
marketing but NOT consumption convergence.
 Consumption convergence between G7 and BEM is taking
place , but at a very slow rate: $25 in FOOD, $6.5 in HGS, 9
calories and 0.5 gram protein, and only 1% for durable
consumption category.
 Brazil and Russia are leading in consumer expenditure and
basic consumption. China leads in durable consumption.
 PCI as the most influence in consumption. Life expectancy has
more influence than energy consumption.
Implications
 Time Growth Models
 Forecasting, determine difference among countries
 Help understanding the lead-lag hypothesis
 Determine entry strategy-order of countries to enter
 Trend Difference Models
 Determine market saturation by setting TGMs to zero, managers can
estimate the level of saturation
 Determine the penetration strategy based on market saturation
 Socioeconomic Influence Models
 Socioeconomic variables can be used for market segmentation and
country profiling
 Causal variables for forecasting-income, energy consumption, trade
and life expectancy
Conclusion – Interpret with Caution
 The models are inherenly economic in nature and results
are data-driven.
 Consumption has both economic and social/cultural
aspects. Social cultural experience cannot be always
expressed by numbers. It is affected by our culture,
attitude, group membership, economic freedom and the
dynamics of the society in which we live
 Also, consider the impact of globalization, social media,
Internet, tourism and multinationals
Future Research
 Investigate using other time frames, more variables
and countries
 Plan economic strategies for different countries
 It is open for discussion…..
Discussion Questions
 Discuss the models of consumption convergence
presented in the study. Distinguish their similarities and
differences.
 Write a critique of the study.
 How would you extend the study? Offer future directions
on the topic.