Online ISSN 2345-0037. ORGANIZATIONS AND MARKETS IN EMERGING ECONOMIES, 2014, VOL. 5, No.

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ECONOMIC DEVELOPMENT
AND MARKETING STRATEGIES:
A COMPARATIVE LENS
Ravi Sarathy*
Northeastern University, D’Amore-McKim School of Business

Elitsa R. Banalieva
Northeastern University, D’Amore-McKim School of Business

Abstract. We analyze two core models of economic development in emerging markets: socialism (i.e.,
the “visible hand” of the state in directing the country’s socio-economic life) and capitalism (i.e., the
“invisible hand” of the markets implemented through pro-market reforms). We further distinguish
between two types of socialist economic development: Soviet Communism (as experienced in the pre-
1990s Central and Eastern European transition economies) and Fabian Socialism (as experienced
in pre-1991 India). We then suggest that companies can adapt to the evolution from socialism to
capitalism in their countries through the implementation of more sophisticated marketing strategies
that can ensure a sustainable competitive advantage. Thus, we study the marketing strategies of
companies from emerging markets operating under both models of economic development. We analyze
the opportunities and challenges that emerging market companies face under each model of economic
development in terms of deploying various marketing strategies, and provide useful venues for future
research.
Key words: economic development, socialism, capitalism, marketing strategies, emerging market
companies

1. Introduction
How has the economic development of emerging markets over time affected their
companies’ marketing strategies? From an economic development perspective, this is
an important and timely research question as it highlights the opportunities and threats
that the external institutional environment presents to companies from emerging
markets. Emerging markets are “low-income, rapid-growth countries using economic
liberalization as their primary engine of growth” (Hoskisson, Eden, Lau, & Wright,

* Corresponding author: Northeastern University, D’Amore-McKim School of Business, 360 Huntington

Avenue, 313 Hayden Hall, Boston, MA 02115-5000, phone: 1-617-373-4806, e-mail: [email protected]

49
2000, p. 249). Economic growth is pivotal for countries’ competitiveness and success
in the global arena (for a general overview of the literature on economic development,
see Baumol, Litan, & Schramm, 2009; Naude, 2011; and Perkins, Radelet, & Lindauer,
2013). “[I]t is only through growth that people’s living standards… can improve”
(Baumol et al., 2009, p. 25).
There are two broad approaches to economic development that countries pursued
in the 20th century: capitalism and socialism (Kornai, 2000; Rapley, 1996). While
capitalism involves the “invisible hand” of market-based economic liberalization,
socialism encompasses the “visible hand” of state-led intervention in and planning of
the country’s economy (Inoguchi & Newman, 1998, p. 134). Economic liberalization
includes the implementation of government policies that aim to open up the domestic
economy to foreign competition, stabilize the country’s macro-economic indicators,
and privatize enterprise ownership so as to stimulate the development of a private sector
(Henisz, Zelner, & Guilllen, 2005; Williamson, 1990, 2004). Such government policies
have been referred to as pro-market reforms, structural adjustment policies, or the
Washington Consensus, as they were supported by the IMF and the World Bank, both
based in Washington, D.C. (Cuervo-Cazurra & Dau, 2009; Williamson, 1990, 2004).
Such a pro-capitalist form of economic development has been pursued by emerging
market governments since the early 1990s in the hope of catching up economically with
their advanced market counterparts, e.g., the U.S., Western Europe, or Japan (Rapley,
1996).
As economies evolve, underpinned by pro-market reforms, marketing increasingly
becomes a core activity for the firm. This centrality of marketing is based on three
features of an economy adopting pro-market reforms: one, that consumer needs are
paramount, and that a firm needs to understand and respond to consumer needs; two,
that firms will increasingly operate in a competitive environment wherein competitors
will also seek to understand and satisfy customers; and three, consumers will have
choices in deciding which firm to patronize. Accordingly, firms will find themselves
under pressure to differentiate from competitors in a bid to win the customer’s loyalty.
Hence, marketing represents a critical capability that companies need to develop and
deploy successfully within the evolving institutional environment. In fact, marketing
has been argued to be of even greater importance to firms than R&D or operational
capabilities (Krasnikov & Jayachandran, 2008).
Prior to the initiation of pro-market reforms, many emerging markets had had a
history of state-led economic development. The state-led economic development
model involved the state becoming an active “agent of social transformation” (Rapley,
1996, p. 1) through various socialist policies. These socialist policies were pursued to
different extents depending on the initial economic conditions of the emerging market:
i.e., whether the countries were transition economies or (post-colonialist) developing
countries (Hoskisson et al., 2000; Rapley, 1996). Transition economies are “countries

50
in Central and Eastern Europe that had a central planning regime until 1990 but since
then have begun moving toward a market-based economy with weakened bureaucratic
control and widespread private ownership” (Kriauciunas & Kale, 2006, p. 659).
Developing countries were at different stages of economic development at their start
of pro-market reforms. They are typically defined as the “fast growing and liberalizing”
countries in Asia, Latin America, Africa, and the Middle East (Hosskisson et al., 2000,
p. 249). Thus, the socialist regime in the Central and Eastern European (CEE) countries
experienced a more extreme version of socialism, often referred to as State Socialism
or Soviet Communist or central planning, than developing countries like India, whose
socialist version was referred to as Fabian Socialism (Desai & Bhagwati, 1975; Kornai,
1992; Rapley, 1996).
While these institutional changes have been unfolding over time, we know less
about how local companies have been adjusting to these major shifts in economic
development, especially in terms of their marketing strategies. Accordingly, the goal
of our paper is to analyze how the economic transformation of emerging markets
toward increasingly capitalist model of development over time has affected their
companies’ marketing strategies. We aim to make the following three key contributions
to the literature on economic development and marketing strategies of companies from
emerging markets.
First, we analyze the co-evolution between the changing institutional environment
in the emerging markets and companies’ use of various marketing strategies to adapt
to these institutional changes over time. Thus, our focus is on how the economic
development model of the emerging market impacts the existence and implementation
of firms’ marketing strategies. This complements prior research that has focused
on analyzing how marketing affects firm performance (e.g., Appiah-Adu, 1999;
Krasnikov & Jayachandran, 2008; Luo, Sivakumar, & Liu, 2005) and supports superior
performance (e.g., Chari & David, 2012).
Second, prior research has focused on analyzing the relationship between marketing
and firm performance mostly under the countries’ capitalist period of economic
development (e.g., Appiah-Adu, 1999; Chari & David, 2012). Thus, little remains known
about the relevant marketing strategies of emerging market firms prior to the start of
pro-market reforms. Accordingly, we complement this prior research by analyzing how
the institutional environment both before the start of pro-market reforms (i.e., the
socialist period of economic development) and after the start of pro-market reforms
(i.e., the capitalist period of economic development) affects firms’ marketing strategies.
Third, in so doing, we also contribute to the literature by distinguishing explicitly
between two models of socialist economic development: Soviet Communism (as
experienced in the pre-1990s CEE transition economies) and Fabian Socialism
(as experienced in the pre-1991 India). We further explore to what extent the local
companies operating under each of these two socialist models implemented marketing
strategies to meet the needs of their consumers.

51
 In the following sections, we first review the two broad types of economic
development in emerging markets—socialism and capitalism—and then review how
each type of economic development has affected the marketing strategies of local
companies. We illustrate the firm-level effects of the socialist and capitalist models of
economic development with examples from local companies.

2. Two Core Models of Economic Development in Emerging Markets

Socialism and capitalism are the two core models of economic development
(Alexander, 1967; Inoguchi & Newman, 1998; Kornai, 2000; Rapley, 1996). They have
been identified as “two competing visions of development policy—one that trusts the
state, the other that trusts freedom” (Dorn, 1998, p. 3). Within the socialist model,
we distinguish between the Soviet-style communist model of socialism and the less
intrusive models of socialism found in many developing countries. In particular, we
focus on comparing the socialist model in the pre-1990s CEE transition economies
with that of a key developing country, India, prior to its start of pro-market reforms in
1991. We then compare these two types of socialism to the capitalist model of economic
development adopted in India after the start of pro-market reforms in 1991. We follow
this discussion with how the type of economic development model adopted by the
emerging market government influenced the marketing strategies of local companies
operating in these emerging markets during these historical periods. We summarize
these two broad models of economic development—socialism and capitalism—and
the distinction between Soviet Communism and Fabian Socialism as two forms of
socialism, in Table 1, elaborating on each of these next.

The Soviet Communism model of economic development in the pre-1990s

CEE transition economies
The Soviet model of economic development used central planning based on the
philosophies of Karl Marx and Vladimir Lenin (Napier & Thomas, 2004). The ex-ante
goal of Soviet communism was “to avoid the vagaries of a boom-and-bust market-based
system” such as, e.g., the Great Depression in the Western economies, “which could
harm workers’ livelihoods and affect employment predictability” (Napier & Thomas,
2004, p. 25). Thus, Soviet communism aimed to achieve basic economic security for
the majority of the population, which put a greater emphasis on the collective and
minimized the importance of the individual interests.
The CEE transition economies adopted this philosophy of the Soviet-style socialist
model of economic development at different points in time. For instance, while
countries like Bulgaria and Hungary became communist in 1948, other countries in
the former Soviet Union adopted communism as early as 1918 (Cata, 1998, p. 300).
Across these countries, three key features characterized the Soviet-style communism:
an “undivided political power of the ruling party” (Napier & Thomas, 2004, p. 17), state

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TABLE 1: A STYLIZED COMPARISON OF THE SOCIALIST AND CAPITALIST MODELS OF ECONOMIC DEVELOPMENT IN EMERG-
ING MARKETS
SOCIALISM CAPITALISM
Soviet Communism Fabian Socialism
Logic of The “Soviet Man”* Fabian Society The “Economic Man”*
economic system
Goals of Attain full employment, independence Protect key industries from foreign compe- Allow firm failure, business freedom for
economic system from Western influence, government five- tition for a period of time; aim to become firms to determine their own strategies,
year plans, and production quotas; do not self-sufficient and independent from for- incentivize market-based entrepreneur-
allow firm failure or individual initiative- eign influences; achieve economic growth ial behavior
taking through a mixed economy system
Mechanisms Central planning, ownership, & distribu- Nationalization of existing capital stock Pro-market reforms implemented to
of economic tion of factors of production; nationaliza- ruled out; instead, the state seeks to increase liberalize and stabilize the economy;
development tion of existing capital stock pursued; state- the share of public sector in overall invest- resources distributed based on competi-
owned enterprises dominated key sectors ment; private sector allowed to contribute tion,
of economy, but other types of enterprise to industrialization; use of industrial target- supply and demand; profit maximiza-
ownership existed too (e.g., agricultural ing and import substitution to control pri- tion and performance incentives en-
cooperatives, small family firms); profit vate sector industrial production; emphasis couraged
maximization and performance incentives on heavy industry
discouraged; emphasis on heavy industry
Stakeholder focus State, community, society State, community, society Individuals, consumers, companies, me-
dia, NGOs
Formal Underdeveloped Underdeveloped Developing through pro-market re-
institutions forms to advanced country status
Informal High priority in business exchanges; High priority in business exchanges; Low priority in business exchanges; ex-
institutions favor-seeking favor-seeking plicit contracts; formalized rules of the
game
Representative Transition economies in Central & Eastern Pre-1991 India Post-1991 India;
countries Europe (CEE) prior to the early 1990s CEE countries after the fall of commu-
nism in the early 1990s
*Source: Tverdohleb (2012). Additional sources used for this table: Desai & Bhagwati (1975), Heilperin (1960), Kornai (1980, 1986, 2000), Napier &

53
Thomas (2004), North (1990), Peng (2003), Rapley (1996), and Shinkle & Kriauciunas (2012). NGOs stands for non-governmental organizations.
ownership of key elements of the economy, and bureaucratic coordination (Kornai,
1992). The single-party system set the formal legal constraints and norms of human
behavior. “The Communist Party and the state were interwoven in a way that insured
that the party was the dominant force in their common activities” (Napier & Thomas,
2004, p. 18). The state controlled most key sectors of the economy, especially the
heavy industry, by nationalizing enterprises and transforming them into state-owned
enterprises (SOEs). In some CEE countries, however, some minimal private ownership
was allowed: e.g., agricultural cooperatives or small family businesses. Lastly, the
bureaucratic coordination ensured that there was a “strong vertical coordination of
central planning,” which resulted in the central government making production and
sales decisions on behalf of individual enterprises.
While the ex-ante goals of the Soviet model of economic development were social
and economic stability, self-sufficiency and independence from foreign economic
uncertainties, the ex-post effects assumed a different, albeit unintended, direction. Over
time, the three core elements outlined above led to underdeveloped product and factor
(labor and capital) markets across the CEE countries during this period.
With respect to the product market, SOEs had to fulfil government quotas and adopt
prices for their products as set by the central government (Kornai, 1980). The state also
failed to provide sufficient raw materials for the production of the designated products.
The production of consumer goods was not a priority, as the State emphasized the
development of the heavy industry. Thus, chronic shortages of consumer products of
generally low quality were typical under Soviet communism. “The sense of satisfaction
a consumer derived in obtaining a product, often after queuing all day long, frequently
was dissipated by it not being the product the buyer originally wanted” (Napier &
Thomas (2004, p. 23).
With respect to the labor market, the Soviet-style of communist development
emphasized the importance of full employment and strong education (Kriauciunas
& Kale, 2006). Both were perceived as necessary to support the growing Soviet
economy with people with high skills and knowledge. Accordingly, individuals’
choices of education were channeled toward developing technical skills such as, e.g.,
engineering. Workers could not be fired easily for underperforming. Workers were also
paid according to the principle “to everybody according to his work” and “equal pay for
equal work” (Kornai, 1980, p. 149). Thus, personal initiative-taking and responsibility
were discouraged in favor of keeping “a low profile” and following state orders (Puffer,
1994). This led to severe labor market problems such as absenteeism from work (Pearce,
1991).
Lastly, with respect to the capital market, the Soviet-style of communist development
led to the softening of the budget constraints. The state frequently came to the rescue
by paying the excess expenses over the companies’ earnings (Kornai, 1986). The state
used different mechanisms to soften the budget constraint: e.g., special subsidies, tax
exemptions, or favorable bank terms. SOEs were not expected to be profit-maximizers;

54
in fact, profit was perceived as immoral and clashing with the socialist ethics of equality
for everyone. SOEs were expected to maximize the welfare of their workers and that of
the state as the key stakeholders.

The Fabian Socialism model of economic development in pre-1991 India

The socialist model of economic development in developing countries in Asia, Africa,
Latin America, and the Middle East was, in general, less restrictive than the one in
the CEE transition economies. In these countries, state intervention in the economy
followed an import substitution path, whereby the state engaged in protectionist
policies to limit imports and help local industries take off (Rapley, 1996). We focus
on India’s experience with such socialist economic development, as a representative of
an alternative approach to developing a socialist economic system, particularly given
the current importance of India as a key emerging market in the modern global arena
(Chari & David, 2012).
Prior to its pro-market reforms in 1991, India underwent a period of its own version
of socialism. It combined features of the Soviet central planning and the principles of
the British Fabian Society1 (Desai & Bhagwati, 1975; Milburn, 1958). Thus, India’s
version of socialism aimed to promote community ownership of the different factors of
production but while preserving the democratic institutions in the country (Milburn,
1958). Accordingly, unlike the CEE transition economies which were generally one-
party systems governed by the Communist Party, India preserved its democratic
political system during its socialist period. The government espoused the “socialist
industrialization” approach as “the best model for India’s economic development”
(McKern & Denend, 2005, p. 3).
Specifically, India implemented the Industrial Policy Resolution, which provided
majority state control over the country’s infrastructure and other key industries. The
state also established a Central Planning Commission to execute the country’s five-year
plans of development. The government subsidized inefficient enterprises, set prices in
many industries, imposed major restrictions on imports, increased the size of the public
sector investments, oriented the economy toward heavy industry manufacturing,
extended the licensing and control of private investments and production, and
established significant economic relationships with the Soviet Union (Desai & Bhagwati,
1975; McKern & Denend, 2005). Yet, a key distinction between the Indian version of
socialism and the Soviet communism in the CEE transition economies was that the
Indian government did not aim to nationalize existing capital stock. India’s main goal
was to increase the share of the public sector investment in the overall economy, while
allowing yet restricting the growth of the private sector capital investments (Desai &
Bhagwati, 1975).

1 The Fabian Society originated in Britain in the late 1880s out of concerns of poor worker conditions and
concentration of wealth in the hands of few (for a detailed overview, see Milburn, 1958). Thus, poverty
alleviation was at the heart of Fabian Socialism (Milburn, 1958).

55
 A prominent feature of the Indian version of socialism between 1947 and
1991 was the “License Raj” system. The License Raj system put India on a planned
industrialization path focused on transforming its agrarian economy into a “self-
sufficient industrial state” (Elango & Pattnaik, 2007, p. 544). For this purpose, the Indian
government consolidated key manufacturing industries under government control. It
provided special exemptions and tax breaks to state-owned Indian firms to help them
lead India’s industrial transformation (Elango & Pattnaik, 2007). It also limited foreign
imports by imposing extensive license and quota requirements on foreign companies
(Kotwal, Ramaswami, & Wadhwa, 2011). Additionally, the Indian government divided
industries into three types (Soo, 2008). The first type involved industries under the
exclusive regulation of the government. The second type involved industries that
were to become progressively state-owned. The third type involved some (non-heavy
industry) sectors that were left to be managed by private enterprises.
The combined effect of these government regulations on industry was that they
ultimately required firms to obtain a government license “to start a business, expand
it or even to change its product range,” which significantly increased the costs of
doing business for Indian firms (McKern & Denend, 2005, p. 4). Firms would face
the regulatory burden of “armies of untrained bureaucrats” examining for months
the firms’ license applications, often rejecting them for “ad hoc reasons” (McKern &
Denend, 2005, p. 4). These excessive regulations stifled product market innovation and
entrepreneurship to the point that obtaining “licenses became more important than
the underlying products or services that they permitted” (Nobrega & Sinha, 2008,
p. xv), with political skills at obtaining licenses functioning as a barrier to entry and as
a competitive advantage.
The Indian labor market was rigid prior to reforms in 1991. For example, labor
unions, allowed by the Trade Union Act of 1926, had dominated in virtually all
industrial negotiations (Pellissery, 2008, p. 12). This reduced the labor market flexibility
for employers, especially when seasonal demand would intensify the need for worker
redeployment. Labor market inflexibility increases once firms go beyond 50 employees,
resulting in firms unwilling to directly expand their manufacturing workforce and,
instead, hiring more contract labor (Economist, 2013).
Prior to 1991, India also followed a policy of fixed exchange rates and government-
allocated foreign exchange, with restrictions on foreign currency capital transactions.
Foreign investments were prohibited in many sectors. The focus of the government was
to expand the banking services to “underbanked” sectors in the rural Indian economy
such as, e.g., agriculture, and maintain control over the interest rates (Kotwal, 2011,
p. 1159).
In sum, while India’s “policy framework was considered by most observers at the
time to be socialist in its main thrust” (Desai & Bhagwati, 1975, p. 216), it also differed
from the CEE countries’ Soviet Communist model in several key ways, as synthesized
in Table 1. For instance, India allowed the development of the private sector, albeit

56
entrepreneurs faced the high burden of the License Raj system. However, the key goal
of this “licensing machinery” was not just to regulate industrial production; “it was
also considered necessary as an instrument for preventing the concentration of wealth
and economic power within a limited number of large Industrial Houses in the private
sector” (Desai & Bhagwati, 1975, p. 214). The Indian government also did not aim to
nationalize existing companies, but to limit the new capital investments in the private
sector. India also preserved its democratic system during the process. Furthermore,
while the commanding heights of the economy were reserved for the government to
expend capital to develop the steel and heavy industry typical for Soviet economies,
the reason this occurred in India was “quite aside from ideological reasons” common in
the Soviet economies: “it was difficult to persuade the private sector to invest in heavy
industry and the public sector had to step in” (Desai & Bhagwati, 1975, p. 214). Thus,
a key goal of the Indian version of Socialism was to achieve a long-term rise in people’s
incomes and provide jobs for the unemployed through targeted state investments
in order to overcome India’s poverty problem. As a result, India’s policy framework
during its socialist period of development was of a mixed economy type: India’s non-
agricultural sectors were promoted by the government with heavy public investments
and extensive licensing, while the agricultural sector was only modestly controlled.

The Capitalist model of economic development in the post-1991 India

The capitalist period of economic development began in the emerging markets with
the fall of the socialist regime and the start of pro-market reforms (Henisz et al., 2005;
Williamson, 1990, 2004). In the CEE transition economies, this drastic institutional
change occurred in the early 1990s when the countries abolished their communist
regimes (for an overview of the transition to market in formerly communist countries,
see Napier & Thomas, 2004). Developing countries around the world also implemented
pro-market reforms. In India, in particular, the reforms began in 1991 (Chari & David,
2012).
Specifically, as part of its economic liberalization package, India introduced a new
industrial policy shifting the country’s development to the market-based capitalist
model of supply and demand. This included significant changes in the country’s
economic and legal institutions that aimed to liberalize and stabilize the economy
(McKern & Denend, 2005). Accordingly, India introduced various pro-market reforms
in its product and factor markets that aimed to bring India closer to the advanced
countries’ level of capitalist development.
For instance, after 1991, India lifted many of its former product market restrictions
imposed by the License Raj. It significantly decreased its tariff barriers to foreign
imports (Kotwal et al., 2011, p. 1157; OECD, 2007). Additionally, while 99% of the
consumer goods imports were subject to non-tariff barriers during 1980-1985, that
ratio has been declining dramatically after reforms to 46% during 1991-1995 and to
33% during 1996-2000 (Kotwal, 2011, p. 1158). Price controls were also abolished in

57
the early 1990s in key industries. Additionally, the government deregulated most of
the industries that were reserved for the public sector during the License Raj period
(Kotwal, 2011, p. 1159).
India liberalized its labor markets too. For instance, in 2001, the Indian government
amended the Trade Union Law to limit the influence and interference of outside
political interests in the union. The amendment stipulated that all office bearers of the
union should be employed in the establishment (Pellissery, 2008). India also reformed
its capital markets by lifting many of its former capital market restrictions. For instance,
while the maximum foreign equity ownership of an Indian company, prior to the reform,
was capped at 40%, it was lifted to 51% in 1991 and later to 100%. Many previously
closed sectors were now opened to foreign direct investment.

3. Marketing Strategies of Local Companies Operating Under Different

Economic Development Models
Srivastava, Shervani & Fahey (1998) suggest that marketing strategy is concerned with
developing and managing market based assets – relational and intellectual – so as to
increase shareholder value. Relational assets are defined as extending to “key external
stakeholders including distributors, retailers, end customers, strategic partners,
community groups and even governmental agencies” (Srivastava et al., 1998, p. 5).
Intellectual assets are knowledge that the firm develops about the environment (e.g.,
market conditions, customers, competitors, channels, suppliers, and social and political
interest groups). Thus, customer, channel, and partner relationships are all key aspects
of a company’s marketing strategy. Hanssens, Rust, & Srivastava (2009) show that
customer equity and brand valuation are two important drivers of the firm’s value. Luo
& Bhattacharya (2009) further demonstrate that advertising and R&D strategy are two
strategic marketing levers. Luo (2008) found that marketing creates shareholder value,
with this effect enhanced when firms have superior cost reduction efficiency.
Earlier research studied marketing capability broadly, with marketing capability
representing “a firm’s ability to understand and forecast customer needs better than
its competitors and to effectively link its offerings to customers (market sensing
and customer-linking capabilities; Day 1994)” (Krasnikov & Jayachandran, 2008,
p. 1). Indeed, Kumar et al. (2011) found that market orientation had a positive
effect on business performance in both the short-term and the long-term, and this
sustained advantage in business performance was greater for firms that developed
market orientation early in their existence. Thus, marketing strategy can be seen
as encompassing capabilities and actions concerning customers, suppliers, and
distribution channel relationships. It focuses on developing and managing marketing
assets such as customer equity, brand valuation, and R&D assets, which can facilitate
new product development.
As markets develop, local companies begin to develop a market orientation (the
ability to focus on customers and competitors, and coordinate across functions) (Narver

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TABLE 2: A STYLIZED COMPARISON OF MARKETING STRATEGIES UNDER SOCIALIST AND CAPITALIST MODELS OF ECONOMIC
DEVELOPMENT IN EMERGING MARKETS
SOCIALISM CAPITALISM
Soviet Communism Fabian Socialism
Key marketing Marketing was not needed as the state Balance between State-controlled indus- Markets growing in importance, greater space
premise; was the primary buyer and supplier of tries, and private sector; entry into industry for private sector, newer industries (e.g., IT)
the presence of company products; managers lacked controlled by ministries, licenses often free of state control; expanding the
markets marketing skills consumer base both globally and locally
Marketing Consumer choices limited, unheed- Industrial markets favored over consumer Growing middle class, greater materialism, con-
orientation ed; focus on meeting State needs and markets; some attention to consumer needs, sumerism; greater awareness of new products
production targets; consumer prod- affordability, low-income consumers; stress & technology, increased competition (FDI and
ucts of lower importance consumer staples, price controls imports); attention to new stakeholders (e.g.,
community & media)
Innovation, Innovation at the service of the State; Innovation at both state and large private Imitation and adaptation of foreign technology
product focus on defense preparedness, heavy firms, state-sponsored R&D flowing to and products; increased R&D in private sector,
development, industry industry, imitation of foreign technology, R&D partnerships with foreign firms, spillovers,
& product line products process & reverse innovation
breadth
Branding & Country brand focus, patriotic ap- State-owned enterprise branding, business Significant brand development, in synchronicity
advertising peals; traded mostly with other Soviet group branding, some consumer branding with growth of new media (e.g., TV, Internet,
countries and some Western coun- of staples- basic foods, toiletries, textiles social media); brand development for overseas
tries to obtain hard currencies markets to withstand foreign brands entry
Distribution Under-developed distribution chan- State investment in physical infrastructure Significant growth in physical infrastructure, in
channels & nels and physical infrastructure; State (e.g., roads, ports, rail); improved distribu- channel depth, knowledge and breadth, includ-
logistics investment to improve physical infra- tion to rural areas and exports ing online retailing & e-commerce; rise of super-
structure markets, big-box stores, hypermarkets
Marketing State agencies, ministries, industry Large private sector organizations with Rise of learning organizations, professionaliza-
organization & departments marketing knowhow, human resources, tion of marketing activity, growth of specialized
planning marketing budgets, complementing SOEs marketing service providers (e.g., export trading
houses), advertising agencies, 3rd party logistics
Sources used for the table: DasGupta & Datta (2004), Desai & Bhagwati (1975), Gupta & Neela Radhika (2004), Hamilton (1986), Hurt et al. (2000),
Shinkle & Kriauciunas (2012), Soo (2008), and Terpstra & Sarathy (2000). FDI stands for foreign direct investment.

59
& Slater 1990; Slater & Narver 1994). Hence, there is likely to be a positive correlation
between the degree of economic development of an emerging market and the value of
marketing used by the local companies from these emerging markets. The reason is that
marketing becomes a powerful differentiation capability for firms to counter the free
entry of rivals into the industry, withstand the more dynamic interplay between supply
and demand, and meet the growing consumer expectations for better quality products.
We next describe some key marketing strategies that local companies from emerging
markets used while operating under each model of economic development in their
countries. Table 2 summarizes these different marketing strategies, grouped by the
different models of economic development in the emerging markets.

Marketing strategies of local companies under Soviet Communism in the pre-1990s

CEE transition economies
Prior to the start of pro-market reforms in the early 1990s, the CEE transition
economies suffered from underdeveloped market systems that created excess capacity
and shortages and prevented creative destruction (Vichas,1994). As most enterprises
were state-controlled, the emergence of new businesses and new products was
discouraged by the State, although some smaller private shops and entrepreneurs did
exist (Malnight & Moncef, 2007). Competition was generally limited and constrained,
which promoted the creation of monopolies (or oligopolies) with strong Party ties
(Hurt et al., 2000; Peng & Luo 2000). Distribution was also difficult due to physical
infrastructure shortcomings, compounded by the fact that most companies preferred
the state-owned distributors to the smaller entrepreneurial companies (Malnight &
Moncef, 2007).
Product innovation was discouraged by the State as it was considered to stifle the
fulfilment of the State production plan and quotas by the enterprises (Hurt et al.,
2000). Indeed, “new product development had little relation with market research but
was rather production-driven” (Hurt et al., 2000, p. 6). Most innovation efforts and
expenditures emanated from government and state-sponsored research institutions and
labs, with an emphasis on State needs, such as defense preparedness, heavy industry, and
manufacturing processes. Consequently, enterprises had little connection with the end
consumer, leaving limited product choices and chronic shortages. A related problem was
“a lack of familiarity with Western market needs and, even more, a conceptual framework
for utilizing that knowledge”. Drawing on studies of Hungarian firms such as Budaprint,
a state-owned textile enterprise, Gedeon Richter, a state-owned pharmaceutical firm in
the process of being privatized, Müszertechnika, a privately owned firm engaged in the
manufacture of computers and electrical equipment, and Szim, a state-owned firm in
the machine-tools sector, both before and after the start of pro-market reforms, it was
suggested that a lack of strategic thinking that would combine market analysis and an
understanding of the firm’s competitive advantages was a key weakness (Brada, Singh
& Torok, 1994).

60
 Thus, companies operating under Soviet Communism did not have to pursue
aggressive marketing strategies in their domestic markets as the State was the primary
supplier and buyer of the products. Companies had limited knowledge of how to
do market research, as well as limited motivation to seek additional consumers, or
make better quality products and packaging (Hurt et al., 2000). Quality standards
for products were also not common (Vichas, 1994) and the number of locations to
buy products or services was also limited (Ismakova & Roberts, 1998). Additionally,
companies often had one product only: e.g., Eris, the Polish-based cosmetics company,
“had one employee and produced one cream” in 1983 (Malnight & Moncef, 2007,
p. 3). Companies also typically did not have a marketing or sales department as the State
considered production and administration to be the key positions in a company: “there
was simply a person waiting for pick-up sales—everybody else was in administration or
production” (Hurt et al., 2000, p. 21). The typical “second in command” was the technical
director, “a further evidence of the primacy of production” (Vichas, 1994, p. 6).
Accordingly, many enterprises operating under Soviet Communism did not
appreciate the needs of regular (non-State) consumers to a point where it became
common to perceive of the customer as “the one who came to ‘beg’” to the enterprise
to produce enough for everyone (Hurt et al., 2000, p. 25). The government would
provide the customers; e.g., in the case of Hotel ‘Uzbekistan’, the government could
ensure high occupancy rates: Hotel Uzbekistan’s core customers prior to 1991 were
tourists from Eastern Europe (Ismakova & Roberts, 1998). Local companies were also
not used to facilitating the commercial exchanges with their customers. For instance,
in Hotel Uzbekistan, there were different procedures adopted depending on whether
the customer paid cash or with a credit card. Paying in cash was more difficult as the
customer had to first change the hard currency into local currency “at an approved
branch of the State Bank” and obtain a certificate proving legal exchange, without
which the payment could not be processed (Ismakova & Roberts, 1998, p. 3). Hotel
Uzbekistan was among the few places where credit cards were accepted, so customers
preferred this payment option, increasing the hotel’s occupancy rates.
An additional problem companies had during Soviet Communism was that their
countries’ currency was inconvertible (Hamilton, 1986). To obtain hard Western
currency such as Deutsche Marks or British Pounds, such companies had to export to
the West. This put severe pressures on companies like Siauliai Factory of Nonwoven
Fabrics from Lithuania, which could not afford to purchase necessary equipment for
production from the West. “Hard currency earned from exports could buy imports
from Western countries” (Vichas, 1994, p. 5). A further problem with this approach
was the limited demand in the West for Soviet-made goods due to their generally lower-
quality than their Western-made counterparts. Under these circumstances, barter and
countertrade became important modes of operation (Cohen & Zysman, 1986).

61
Marketing strategies of local companies under Fabian Socialism in pre-1991 India
There were significant marketing challenges that Indian companies faced prior to
the start of pro-market reforms in 1991. As Table 1 showed, a key feature of Fabian
Socialism was the emphasis on the collective and community goals and the eradication
of poverty and social injustice. Thus, Indian companies operating during this period
were also “imprinted” (Kriauciunas & Kale, 2006, p. 660) by these community goals
such that they adopted marketing strategies developing affordable products aimed at
the mass market, which would allow the firms to not only sell to consumers but also
alleviate poverty, in line with the socialist economic goals of the period.
For this purpose, Indian companies had to adapt and devise creative strategies to
reach the underserved rural population in remote Indian villages. As far back as 1983,
CavinKare, a leading cosmetics company in India, identified rural markets in India
as its key growth opportunity. A key challenge was poor infrastructure, including
communications media availability, which hindered efficient access to consumers in
rural areas. To reach remote consumers in these villages, CavinKare had to purchase
radio advertising spots featuring its shampoo products, on radio stations that played
popular tunes whose frequencies reach and could be heard in the villages with potential
customers (Gupta & Neela Radhika, 2004).
An additional challenge that Indian companies had to overcome prior to the start
of reforms was the lack of sophistication of their potential consumers. “The average
consumer lacked sophistication; cloth was sold by the yard, tea leaves by the kilo, and
soap was cut into chunks to be sold by weight” (Datta, 1997, p. 3). Rural consumers
in India in the early 1980s were not as accustomed yet as their urban counterparts to
using liquid shampoo for their washing needs (rural consumers preferred the hard soap
bars) but were open to shampoo “as long as it was within their means” (Gupta & Neela
Radhika, 2004, p. 4). Hence, to supplement the radio spots, CavinKare showed two-
minute clips of the benefits from using shampoo during intervals at popular movie
screenings for these rural and small town citizens, so as to educate consumers about
how to use the shampoo products.
Another barrier was the meager discretionary income of poor consumers, especially
in rural areas. Accordingly, CavinKare conducted a survey across Indian villages to
identify the number of households where people washed their hair at least once a week.
Based on this research, they began offering 1 free shampoo sachet for every 5 empty ones
to such consumers. These marketing strategies helped CavinKare gain appeal among its
customers and capture more than 50% of the underserved rural Indian market by 1990.
In other sectors of the economy, other Indian companies were also trying to help
citizens achieve their social and economic goals for their families. For instance, as farmers
were considered “the spine of nation’s democracy” (Gupta & Neela Radhika, 2004,
p. 2), the agricultural sector was another area for important marketing innovations to
help farmers become more self-reliant and to reach the underserved population. Prior

62
to the start of reforms, Indian farming was fragmented and suffered from exploitation
from numerous strong middlemen along the distribution channel. To prevent the
continuous selling of their perishable milk products to the strong middlemen at rock-
bottom prices, the Indian farmers decided to unite resources and market their own
products by forming a milk union in 1946, popularly known as AMUL. They also
decided collectively to supply milk to the Bombay Milk Scheme to guarantee a ready
market and incentivize more farmers to join AMUL. The farmers also collectively
decided to share a portion of the year-end profits as patronage bonus to their highest-
quantity producers.
AMUL was collectively owned, operated, and controlled by the farmers who needed
only pay a small entrance fee and commit to sell their surplus milk (after meeting
their families’ needs) to the union. AMUL consisted of village societies (producing
and collecting milk), district milk union (procuring technical inputs), and the milk
federation (marketing milk). Specifically, the milk federation “helped to enhance
the role of a consumer in the buying process” and prevented consumers from being
exposed to milk shortages, high milk prices, lower quality milk, and unethical practices
by middlemen (Gupta & Neela Radhika, 2004, p. 6). AMUL engaged also in backward
integration (by bringing in better quality veterinary and husbandry practices) and
forward integration – invested to build a plant to produce milk powder and butter -
thus providing better quality and variety of milk products at more affordable prices
to the consumers. As a result, “coordination and cooperation across the ethnic and
social strata for a common cause helped in the eradication of many social inequalities”
in India (Gupta & Neela Radhika, 2004, p. 6). Such initiatives also created jobs and
ensured employment and substantial income for many poor people in India. They also
promoted the role of women in the economy.

Marketing strategies of local companies under Capitalism in post-1991 India

A fundamental issue marking the transition from socialism to capitalism is whether
markets emerge and are allowed to develop, replacing State-governed allocation
mechanisms. The advent of pro-market reforms necessitates the creation of strong
marketing capabilities by the emerging market firms to withstand the growing
competition, both from foreign and domestic rivals. Thus, both post-communist
and developing country companies begin to actively seek to understand and satisfy
customer needs using a variety of marketing strategies: e.g., innovation, new product
development and product adaptation, promotion and communication (Golden et al.,
1995).
Emerging market companies started using new digital infrastructure and social
media to reach the end consumer faster. For instance, Yandex, incorporated in 2004,
is a search engine in Russia that generated 63.3% of all search traffic in Russia as of
December 2011 by offering national and international content tailored to a variety of

63
digital platforms (Reuters)2. Using a similar approach, EKO India Financial Services
leveraged high mobile phone penetration rates in India to develop cell phone-based
banking solutions for the vast unbanked population of India, helping achieve a national
government objective (Gupta, 2013). A necessary element of successful marketing
strategy is facilitating payments, which is difficult in countries such as India, where 59%
of households lack bank accounts. EKO India Financial Services saw this as a business
opportunity and attempted to overcome this basic financial infrastructure gap by
creating and facilitating a system of payment and collection through mobile phones,
using a nationwide system of agents to allow individuals separated by vast distances to
make and receive payments from one another via mobile phones, often in rural areas,
with the amounts then easily withdrawn from any State Bank of India ATM. Developing
countries as a group face the same problem, and only a few successful mobile payments
systems have emerged – M-Pesa in Kenya, G-Cash and Smart Money in the Philippines,
Vodacom in Tanzania, with each country’s specific situation requiring a somewhat
different solution. EKO had to develop a solution that could work across ten different
mobile network operators in India, and meet the Indian government’s requirement
that a bank be involved in the payment transaction (unlike Kenya which has allowed
Safaricom, the mobile network operator, to take on some banking functions).
India has become well-known as a software exporter and firms such as HCL India
are a good illustration of how both relationships and knowledge-based marketing assets
can be deployed to good effect in overseas markets. HCL developed and offered multiple
modes to provide IT outsourcing and custom software development to its overseas
clients (Loveman & O’Connell, 1996). First, HCL used a “body shop” approach, in
which HCL personnel were sent overseas to work as contract labor at client premises
in overseas locations, developing and delivering the requested software, with HCL
receiving fees and paying its employees assigned to temporary overseas postings at client
sites. Second, HCL allowed clients to contract with HCL to develop software, but with
the development carried out at the client’s preferred geographic locations, often in the
client’s home country and city offices. This required HCL to set up overseas subsidiaries
and development sites at various cities where its major clients were located. Third, the
lowest-cost alternative, where clients contract with HCL and allow HCL to develop
software offshore, in India, using HCL personnel paid at Indian salary scales, typically
less than half of a developed country pay scales. However, productivity could be lower,
and supervision and coordination costs could be higher, with cultural differences and
geographic distance affecting quality and customer satisfaction.
Similarly, the start of pro-market reforms led to more opportunities for developing
e-commerce marketing capabilities in Indian companies. For instance, ITC, one of
India’s largest consumer product and agricultural business companies, created internet-

2 Source: http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=YNDX.O. Accessed

March 30, 2014.

64
enabled kiosks called e-chopal placed in farmers’ villages to help the farmers search
for competitive prices and share product information with their various distribution
channel partners (DasGupta & Dutta, 2004; Vachani & Smith, 2008). While there were
only 6 e-chopal kiosks in India in 2000, the number grew to 1,200 by 2002 (DasGupta &
Dutta, 2004). Such innovative marketing initiatives created a direct marketing channel
for the farmers by eliminating the need for channel intermediaries, who would often
conceal important pricing information from both channel ends and “cream off a higher
profit margin for themselves” (DasGupta & Dutta, 2004, p. 8). Thus, the development
of such e-commerce marketing capabilities helped reduce logistics costs and increased
profitability and growth for the Indian farmers.
Greater pro-market reforms also enabled rising access to education in India, which
in turn enabled some consumers, especially those living in urban areas, to begin
appreciating and demand higher quality products. This created market segmentation
opportunities for the Indian companies. Cargill India was one such company that
sought to market to both industrial (B2B) and consumer markets. While traditionally
a supplier to large institutional buyers, Cargill India decided to target the consumer
market, developing a line of branded vegetable oils, tomato products and other food
items, to take advantage of a younger population segment with rising incomes. Cargill
India decided to focus on selling to consumers in India, as a way of reducing their
exposure to government price regulations and the volatility of commodity prices.
Larger consumer sales would help increase factory capacity utilization in its edible
oil processing plants. To achieve this changed strategy, it acquired Indian edible oil
processing firms, developed additional brands in cooking oils, sunflower oil, and
palm oil, and launched related products such as processed tomato products (Pirouz &
Chandrasekhar, 2013).
In another example, using price based segmentation, CavinKare developed two
types of products for its less and more affluent customers: single-use sachets priced
at 50 paise per unit for the price-conscious consumers and more sophisticated 50 ml
shampoo bottles priced at Rs 6 for the more quality-focused consumers. The company
also offered shampoo bottles for bulk buying as an alternative affordable option.
CavinKare also started expanding into holistic and herbal products for hair dye that
gave natural color and nourished the hair. The company advertised specifically the “no
harmful side effects” of the product, catering particularly for a new consumer segment,
healthy lifestyle conscious consumers. In 1998, CavinKare entered the perfume market
as well, making the perfume available in 4 variations (Mist, Wood, Dusk, and Storm)
after extensive market research on over 300 variations of fragrances. It made the
perfume available in “dab-on packs” (Gupta & Neela Radhika, 2004, p. 6) priced at Rs
10, the lowest price on the market in India. This marketing campaign was specifically
targeted at the lower- and middle-income consumer segment, which was not the focus
of foreign competition. CavinKare also entered the deodorant and talcum powder

65
markets targeting the urban youth market with Fun, Freedom, and Magic single-use
sachet scents. By 2003, CavinKare expanded further by diversifying into the food and
detergent business with new creative product offerings: it started selling pickles in
sachets and dish washer bars.
As the capitalist model of economic development settles as the new market reality
in emerging markets, competition intensifies. This creates the need for the emerging
market companies to diversify their product line portfolios and increase their product
line breadth. Ajanta Packaging, a major Indian glass-bottle manufacturing company
with leading market share was faced with this product diversification imperative
(Puri, 2014). Ninety percent of Ajanta’s revenue came from repeat customers, and
this repeat business was being threatened by newer, cheaper and environmentally as
well as aesthetically more attractive substitutes such as PET bottles, Tetra Pak cartons
and flexible foam packaging. Ajanta needed to develop industry-specific customer
segmentation strategies, such as developing PET bottles and packaging for the
pharmaceutical industry and for the shampoo, and toiletries segments of fast moving
consumer goods.
These changes do not reduce the attention paid to bottom of the pyramid customers
in India. For instance, Godrej Chotukool, one of India’s largest consumer durable
goods producers, was launching an unconventional alternative to refrigerators, aimed
at the “bottom of the pyramid” (BOP), operating on a 12 volt battery, and priced at
about half of the price of the lowest-priced refrigerator. Since 80% of Indian consumers
did not own refrigerators, Godrej had to target these non-consumers, while thinking
about distributing the product to rural consumers through NGOs, as opposed to
using traditional refrigerator distribution channels, balancing the likely higher cost and
possible inefficiencies of using NGOs against their greater reach and familiarity with
the target rural BOP segment (Dhanraj, Suram, &Vemuri, 2011).
The market-opening reforms that create opportunities for the local companies also
intensify competition at home, from new domestic firms. We earlier cited the successful
rise of the AMUL cooperative dairy group. With pro-market reforms in India, these
cooperatives have begun to face significant competition from private enterprises.
For example, since the early 1980s, the Bihar State Milk Cooperative Federation
(COMPFED) had been marketing dairy products gathered from about 4000 village
cooperatives. Rising competition from private firms who were offering higher payments
to some farmers, coupled with shortages of milk supply due to floods and other
environmental factors, began forcing COMPFED to re-examine its marketing strategy,
from milk procurement, to cost of service delivery, to dairy product pricing, and the
choice of distribution channels. To avoid losing dairy suppliers to the newer private
firms, it had to persuade its farmer-suppliers of the value of long-run sustainability
fostered by the cooperatives’ efforts (Adhikari & Jha, 2012). We next discuss the
implications of our findings.

66
4. Discussion, Future Research Venues, and Conclusion
We presented a stylized comparison between two broad models of economic de­
velopment in emerging markets: socialism and capitalism. We specifically distin-
guished between two types of socialist economic development: Soviet communism
(as experienced, e.g., in the pre-1990s CEE transition economies) and Fabian so­
cialism (as experienced, e.g., in pre-1991 India). We then analyzed the marketing stra­
tegies of companies from emerging markets operating under these different models
of economic development. While the general thrust is in the direction of pro-market
liberalization, Staehr (2011) notes that for several smaller Eastern European countries,
democratic reforms have been implemented at the expense of market-oriented eco-
nomic reform; the implication is that while reforms have regulated and attempted to
unify markets across borders within the enlarged European Union, there has been less
market-economic reform.
While our focus was specifically on the marketing strategies of CEE transition
economies and India, as key representatives of emerging markets, future research can
extend our ideas in several new directions and broader contexts. For instance, future
studies can analyze the marketing strategies of other developing countries such as,
e.g., China, which is also a transition economy but not post-communist yet. China is
yet to reform its political system to the extent that the CEE countries did after they
abolished communism. Thus, it would be interesting for future research to analyze if
and how emerging market companies based in the countries that have reformed both
politically and economically differ from their counterparts based in the countries that
have reformed primarily economically in terms of their marketing strategies.
More research is also needed to understand the marketing strategies of other non-
transition developing countries beyond India, e.g., countries in Africa, Latin America,
or the Middle East, which have also experienced their own versions of socialism
(Heilperin, 1960; Rapley, 1996). For instance, recent research has emphasized the need
to study the reverse innovation strategies of emerging market companies aiming to enter
developed country markets (Govindarajan & Trimble, 2012; Govindarajan & Euchner,
2012). Hang, Chen, & Subramian (2010) report on such reverse innovation strategies
at several Asian emerging market firms, noting the advantages arising from being forced
to consider dominant characteristics of emerging market consumers such as their
affordability constraints and the resulting innovation efforts addressed at improving
price-performance ratios so as to better serve the mass markets in these nations.
Obtaining sustainable competitive advantage from marketing strategy is often facilitated
when complemented with related strategies such as cost efficiency. Stojcic, Hashi, &
Telhaj (2013) found that market share of firms in transition economies was positively
related to restructuring behavior that included improvements in cost efficiency, labor
productivity, investment and increasing experience. Kaufmann & Roesch (2012) note

67
that the level of motivation, opportunity and ability can all constrain emerging market
firms as they attempt to ratchet up their marketing efforts, leading some firms to rely on
low-cost advantage alone in place of also building up marketing capabilities.
As firms in these liberalizing emerging economies become more adept at marketing,
they will naturally seek to extend their competitive advantage into foreign markets,
and several interesting research questions arise surrounding the choice of locations
for international marketing efforts. For example, Radlo (2012) found that Polish firm
marketing strategies had evolved through two phases, with home market success and
learning leading to regional expansion into neighboring Central and Eastern European
countries, often using equity-based modes of entry. Furthermore, while we focused
on the marketing strategies of home-grown emerging market companies, future
research may extend our reseach by analyzing the marketing endeavors of advanced
country companies entering the emerging markets. For instance, Kwon (2010), in a
study comparing the performance of Korean subsidiaries in India and China, found
that actions such as developing and maintaining networks with suppliers, customers,
distributors and government authorities helped the Korean subsidiaries understand
local customers better. Thus, it would be interesting to study if local or foreign
companies can meet domestic consumers’ needs better. For example, some emerging
market firms face difficulties in brand building because of negative country of origin
effects (Guzman & Paswan, 2009). The role of cultural brands has been suggested as a
possible way to counteract such negative country of origin effects as it builds the brand
around the group’s cultural identity, myths, roots, and future aspirations, which may be
better appreciated by the group’s consumers (Guzman & Paswan, 2009).
Within-country regional differences in marketing strategies can also be analyzed
by future research. For instance, some recent advances in this area suggest that there
are significant regional differences in brand perceptions in Russia. Residents in St.
Petersburg were more receptive than Moscow residents to corporate endorsements as an
indicator of quality, while residents of Moscow regarded international (market) success
as more indicative of a brand’s quality relative to St. Petersburg residents ( Jakubanecs
& Supphellen, 2010). Future research can examine other factors in such regional brand
perceptions beyond differences in economic and consumer culture development.
Improvements in media infrastructure and the growing ubiquity of mobile phones
across emerging markets provide an additional avenue for brand building, using social
media such as Facebook, Twitter and YouTube to create consumer communities which
can through peer support share product experiences and collectively enhance product
utility, benefiting individual firms in their customer orientation and differentiation
efforts (Berthon et al., 2012; Kaplan & Haenlein, 2010). There may also be regional
convergence taking place, alongside regional differences. Kholodilin, Oshchepkov, &
Siliverstovs (2012) point out that within Russia, there is strong regional convergence
among high-income regions located near other high-income regions, while the overall

68
speed of regional convergence is slow, with implications for adapting marketing
strategies within Russia, by regional profiles.
Overcoming channel inadequacies and underdeveloped physical distribution
infrastructure may offer additional promise for emerging market firms in their market
orientation drive. Under such conditions, both business and political ties may have
to be deployed to raise channel performance, as well as changing channel governance
structure to fit distributors’ role orientation (Dong, Li, & Tse, 2013; Dong, Tse, &
Hung, 2010). Further, emerging market firms could benefit from evolving their channel
intermediary use and the intensity of channel intermediary use, in line with changing
market and competitive conditions and with product life-cycle evolution (Low &
Cheng, 2009).
Lastly, more research is needed into how emerging market companies can develop
productive consumers through marketing; i.e., consumers who not only spend their
money on products but also become more constructive members of their communi-
ties (Letelier, Flores, & Spinosa, 2003). Letelier et al. (2003) suggest that companies
can develop productive consumers by stressing not just product innovation, but also
cross-selling, shared cultural values, customer retention, and involvement with com-
munity. For instance, Cemex’s Patrimonio Hoy aims to aid low-income consumers in
building affordable homes at a sustainable pace in Mexico. Similarly, Grameen Bank is
another salutary example of a company that helps develop productive consumers by
using microfinance programs to support micro-enterprises by women in Bangladesh.
In a similar vein, firms can benefit by educating their emerging market customers, so
that they have a sound basis for judging product performance and assessing their satis-
faction as customers. For instance, Dou, Li, & Su (2010) found that knowledge asym-
metry, in both professional knowledge and local knowledge, affected the satisfaction
or dissatisfaction of local clients of foreign advertising agencies, as it created goal in-
congruence, gaps in the goals set by local clients and as set by their advertising service
providers. Customer support investments are another means of enhancing customer
focus and consequently bolstering emerging market firm performance (Khavul et al.,
2010).
In sum, our study suggests that what can distinguish emerging market firms in
their marketing adaptation to pro-market reforms is their ability to become learning
organizations, closely tuned to the specific needs of the local consumers and adept at
maneuvering within the structures and competitive forces of a capitalist economy.

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