By Steve Burgess*
Business DayJune 26, 2003
The concept of consumer sovereignty developed by University of Cape Town commerce professor William Harold Hutt in the early 1930s is now recognised as the fundamental premise of marketing. In SA, national diversity adds a new dimension to the notion of consumer sovereignty with significant implications for the country's prosperity in a changing world.
Marketing orthodoxy defines a "market" as people with (a) needs, (b) resources and (c) the ability and authority to exchange the resources to satisfy their needs. By this measure, only a small stratum of wealthier South Africans represent the market in SA. The other, less affluent, groupings do not feature as they do not have much, if any, disposable income.
However, it is becoming clear that this orthodoxy must be expanded and a broader view of the domestic market must be adopted if marketers in SA want to ensure their competitive advantage going forward. In a multiyear study on SA identity a summary of which findings were published in the recent book, SA Tribes: Who We Are, How We Live and What We Want from Life we identified 16 groups or "tribes" based on shared social identity characteristics. These include values, personality traits and observable characteristics such as living standards, age, gender, race and other socio-demographics. Although a few of the tribes are ethnically homogeneous, as one might expect given our history, there is an impressive racial and ethnic heterogeneity within many of the tribes.
For convenience, we clustered the 16 tribes into four groups:
The first two of these groupings capture two-thirds of the population in SA. The research suggests that all four of these groups can be substantial markets. More importantly, they also are a tremendous laboratory in which firms in SA can discover the innovative strategic competencies (for example, financing, distribution, marketing) required for global competitive success in the 21st century. It is a laboratory with global implications. According to the United Nations (UN), most of humanity resides in just 15 middle human development emerging economies, which we describe as emerging consumer markets.
These countries are growing faster, both demographically and economically, than the Organisation for Economic Co-operation and Development (OECD) countries, and share many characteristics with SA. And they are big markets. Chinese consumers, for example, have been buying more refrigerators, televisions, microwaves and other household appliances than the Americans for more than a decade, and there are about 60million Indian households with a living standard similar to A-income South Africans.
Many of the UN-classified transitional economies (former communist nations) are, like this country, also emerging economies. Research is identifying shared characteristics. Note, for example, that nearly all of these countries can be characterised as having a "dual economy" in which a wealthier and globally connected "first world" population is embedded in a larger "third world" population. Consider also that products and services developed in the US, European and Japanese markets which focus on the special problems of the richest elderly population that ever lived are becoming more and more irrelevant in the emerging economy mass markets. In response, global marketers that focus on early life stage products from baby and educational goods to household electronics are increasingly forced to shift their vision to emerging markets and are racing to beef up their grasp of these markets. Europe and the US remain at the centre of export marketing plans globally, and competition is higher, growth slower and sustainable competitive advantage harder to establish in these regions. Yet a recent study by the UCT Graduate School of Business and the International Trade Institute of Southern Africa suggests exporters believe western Europe and north America will remain the most important markets for our exports.
SA business should be wondering if we are letting an important knowledge advantage slip away. At the very time when industrialised nations are rapidly building up an understanding about emerging consumer markets and rushing to build competitive advantage there, we are rushing to do business in slower-growth and more competitive industrialised markets. I am not arguing that we should ignore OECD countries, but rather that our home market distinctive competencies may not be best utilised, and our probability of building long-term superior sustainable customer solutions may not be as high, in those markets. I am arguing that, in addition to digging stuff up for export, we mine our rich diversity to build global competitive advantage.
All the conditions that characterise the incredible diversity of emerging economies are visible and capable of being studied in the SA economy. And if businesses are prepared to do the necessary groundwork, a true understanding of wider South African society can lead to global competitive advantage, as has been demonstrated by SA Breweries in the emerging economies of Asia and Europe. A new world is waiting to be built by organisations with the courage to seize the opportunities to understand sources of supply, sources of demand and methods of effective management in a truly global context. Mining these opportunities will require researchers and practitioners to work together and begin a revolutionary discussion within SA boardrooms about market orientation and the competitive advantage of the country. It will encourage us to become more innovative and entrepreneurial, show us how to earn new profit streams and teach us lessons that will no doubt enhance our global competitiveness in a rapidly changing world economy.
About the Author: Burgess is professor of business administration at the University of Cape Town's Graduate School of Business. This research was published recently in the International Journal of Advertising in London.
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