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Book
Summary:The Marketing of Nations
A Strategic Approach to Building National Wealth
Printed
with permission from TCI
Management Consultants. A group of senior-level management
consultants, offering strategic planning and marketing services
to a wide range of public and private sector clients.
The
Marketing of Nations A Strategic Approach to Building
National Wealth
by Philip Kotler, Somkid Jatusripitak and Suvit Maesincee
The Free Press, New York, 1997
ISBN 0-684-83488-X
At the
outset of this book the authors are at pains to explain
why yet another treatise on economic development is necessary
or even desirable:
"This
book does not present a unique prescription on how economies
are supposed to build their wealth or national welfare.
There is no single prescription that all countries should
follow... what is needed instead is a systematic methodology
that a particular nation can apply to assess its starting
conditions, its major opportunities, its strengths and weaknesses,
and the most promising available paths to achieving economic
progress or economic revitalization. If the focus here was
a business firm instead of a nation, we would call this
methodology strategic market management. We wish to take
the view that a nation can be thought of as running a business
and, as such, can benefit from adopting a strategic market
management approach. This is not to ignore the much greater
cultural and political complexity of running a nation. Nor
is this the same as saying that a nation should run itself
as a planned economy, as did the countries in the Soviet
bloc. Strategic market management is a continuous self-correcting
process that consistently considers where a nation is heading,
where it wants to be heading, and how best it can get there."
(p ix)
The
book is divided into four sections. The first deals with
understanding the challenges of national economic development;
the second with how a nation's overall strategic thrust
can be formulated; the third with developing the nation's
strategic posture (i.e. policies in specific areas such
as trade, infrastructure investment, etc.); and the fourth
with how business enterprises can work with national governments
in the pursuit of their interests.
In the
first section, the authors outline the particular challenges
that countries face in building their national wealth. These
include:
low
levels of living (per capita incomes, large gaps between
rich and poor, malnutrition and disease)
rampant population growth
job shortage
the 'infrastructure problem' low government revenue
leading to low levels of infrastructure development which
leads to low investment, leading to low productivity, therefore
low profits... which perpetuates low government revenue
They
also discuss the major trends and forces affecting today's
nation states:
global
interdependence
protectionism and growing economic blocs
the transnationalisation of multinational corporations
(MNCs)
rapid technological advances
conflicting politics and tribalism
the growth of environmental concerns
Chapter
2 in the first section of the book outlines some of the
traditional conflicts or tradeoffs that nations must consider
in developing their economies. Eight major dilemmas and
trade-offs are considered:
growth
vs. income distribution orientation
sectoral balance vs. sectoral unbalance (i.e. something
for everyone vs. backing the winners)
shock therapy vs. gradualism
high employment vs. high inflation
state ownership vs. private ownership
large private companies vs. small entrepreneurs
interventionism vs. free markets
inward investment facilitation vs. bootstrapping (i.e. encouraging
foreign investment vs. encouraging domestic investment)
These
tradeoffs will characterize the sorts of economic development
and investment policies that are pursued by nations. In
Chapter 3 of the book, the authors identify eight "paths
to development" or models that various countries have
taken, based upon decisions relating to these tradeoffs.
These are summarized in the following chart:
Model
Examples
Characteristics
1)
Selectivist Approach
-
South Korea
-
emphasis of government intervention (support) on pivotal
sectors in the economy (heavy industry; chemical industries)
2)
Fundamentalist Approach
-
Hong Kong
-
emphasis of government policy is on fundamentals for
all businesses: few regulations, no state-owned enterprises
to provide competition, low and uniform taxes
3)
High-Technology and Service Development Approach
-
Singapore
-
selectivist emphasis upon certain sectors (high technology
and related service industries), and courting of foreign
investment in these sectors
4)
Free Market Development
-
Chile
-
trade liberalization and removal of trade barriers,
which leads to a restructuring of the domestic economy
5)
Primary Sector Development
-
China
-
certain key (primary) sectors were freed from price
controls and administrative control; limited capitalism
allowed
- primary sectors treated this way were manufacturing,
trading, consumer goods, and foreign trade
6)
Heavy Industry Development
-
former Soviet Union
-
centralized planning
- agricultural sector is subservient to industry
- emphasis on certain key sectors (heavy industry)
that are inputs to other economic activity
7)
Gradualist Approach to Restructuring Economy
-
Hungary
- slow transition from a command economy to a market
economy
- incremental privatization of state-owned enterprises
8)
'Shock Therapy' Approach to Restructuring Economy
-
Poland
-
rapid introduction of three related policies: economic
liberalization, macroeconomic stabilization, and privatization
of the economy
The authors discuss the specific history of these examples,
then outline the advantages and disadvantages of each of
these pathways.
With
this background into the policy options and development
pathways actually chosen by some nations, the second part
of the book discusses the actual process of developing a
national approach to economic development and marketing.
Adopting a portfolio approach (where one axis is the degree
of industrialization, and the other is the level of wealth)
the authors identify eight groups of nations. These are:
The
Industrial Giants (US, Germany, France, UK, Italy, Japan),
which have high levels of industrialization and high levels
of wealth
The Rising Stars (South Korea, Taiwan, Hong Kong, Singapore,
Thailand, Malaysia, Indonesia), which are approximately
in the middle on both dimensions
The Latin Americans, also in the middle, but slightly
lower on each dimension than the Rising Stars
The Populous Countries (India and China), which are well
down in the low end of both dimensions
The Former Socialists (Czechoslovakia, Hungary, Poland,
Albania, Romania, Yugoslavia, Estonia, Latvia, Lithuania),
who are clustered with the Latin Americans in the middle
The Industrial Nichers (many of the European countries
not already mentioned) who are near to the Industrial
Giants at the top of both dimensions - these countries
exploit certain industrial niches, but are hampered by
domestic markets that are not large enough to permit the
development of scale economies
The Commodity Nichers (the oil nations of Saudi Arabia,
Kuwait, Iraq, Iran and Syria) who are relatively high
on the 'level of wealth' dimension but low on the 'industrialization'
dimension
The Subsistents (the remaining half of the world's nations)
who are very low on each dimension
This
categorization scheme then sets the stage for a discussion
of a strategic approach to identifying a nation's most appropriate
development path. Here a standard SWOT (strengths, weaknesses,
threats and opportunities) approach is taken. In assessing
strengths and weaknesses (chapter 5) the following factors
are assessed:
the
nation's culture, attitudes and values;
social cohesion within the nation;
factor endowments (e.g. natural resources, human capital,
technology, etc.) and the national economy;
the organization of industry in the country; and
government leadership (where factors such as corruption,
high levels of military spending, and political instability
are taken into account).
Turning
to threats and opportunities, the following factors are
discussed:
the
exploitation of situations that are threatening to other
countries (the authors use the example of Singapore taking
advantage of the uncertainty surrounding Hong Kong's transfer
from the British to the Chinese in 1997 to attract investment)
vulnerability to external developments (e.g. South Korea's
vulnerability to US trade retaliation)
opportunities to enhance competitiveness through economic
alignments (e.g. NAFTA)
threats and opportunities posed by the increasing international
division of labour (globalism)
opportunities presented through the development of multinational
corporations as ways to tap into export markets, or to attract
investment
for countries in certain situations, opportunities presented
by unification
opportunities that may be presented through changing alliances
opportunities that may be created through the exploitation
of technological niches
Chapter
7 next discusses the development of the nation's strategic
thrust. Developing the strategic thrust is a matter of undertaking
an environmental analysis (i.e. the SWOT analysis referred
to earlier), determining the goals of the nation, and then
charting a course of action.
"A
nation needs to set a strategic thrust in order to fulfill
its goals. Conceptually, the nation's strategic thrust is
the nation's grand strategy, in which both its strategic
vision what is the nation going to do? and its
strategic posture how is it going to do it?
are incorporated.
Differences
in initial positions in wealth and competitiveness result
in different nations' strategic thrusts. Countries that
command a leading position have the mission of sustaining
their current positions. Countries that lose their competitiveness
have the mission of revitalizing their competitiveness.
Countries whose current wealth and competitiveness are strong
have the mission of extending their competitiveness to further
build their nation's capabilities. Countries whose current
wealth and competitiveness are weak face a turnaround mission.
(pp. 179, 180)
The
third section of the book discusses the development of the
nation's strategic postures. Several areas of national initiative
are discussed in this section:
national
investment policies (Chapter 8), including the stances taken
towards foreign direct investment, and the requirements
for technology transfer
the
development of the nation's basic infrastructure, including
physical infrastructure such as transportation and communications,
human capital infrastructure which is dependent upon the
educational system and incentives for training and skills
upgrading, and the bureaucratic infrastructure (Chapter
13)
the
selection and development of industrial clusters (defined
as a set of industries that have vertical and horizontal
linkages toward each other) is discussed in Chapter 9
the
management and development of the nation's industrial portfolio
(i.e. a set of industrial clusters within the nation, managed
in conceptually the same way as a conglomerate company might
manage its various businesses and divisions) is discussed
in Chapter 10
national
trade policies that basically determine whether the nation
is inward or outward-looking in its orientation (Chapter
11)
the
nation's macroeconomic policies, which are (ideally) a coordinated
set of fiscal and monetary policies aims at enhancing the
efficiency of resource allocation, the equalization of wealth,
and price stability (Chapter 12)
the
institutional framework of the nation (comprising property
rights protection, industrial regulation and deregulation,
privatization policy, industrial relations, and social policies
relating to such matters as women's rights, income redistribution,
etc.) is discussed in Chapter 14
These
areas of national policy shape the international view of countries
and regions as places to live, invest in, and visit, and thus
are central to the marketing of nations. Clearly, national
policy in each of these areas should be consistent and integrated.
The fourth and final section of the book discusses how individual
companies can benefit from aligning themselves with the nation's
overall wealth-building strategy. A basic process for a company
to work through is suggested, consisting of three steps: 1)
assessing the company's business portfolio; 2) identifying
the company's goals; and 3) redefining (if necessary) the
company's business domain. This process can ensure that the
company is taking maximum benefit from (or at the very least,
not harmed by) the nation's strategic postures vis a vis trade,
infrastructure development, or any of the other areas earlier
discussed.
The Marketing of Nations
is a good attempt to throw a framework around a very complex
process and set of concepts. If it has a fault, it is that
it tries too hard to be prescriptive rather than being content
merely to be descriptive. One can never really imagine a
group of policymakers sitting round a table thinking through
all of the processes outlined in the book, generating textbook
policy - the real world is far too encumbered with history
and disjointed incrementalism for that. However, in terms
of articulating the dimensions that are involved in developing
the economy of a nation, and which are in turn reflected
in how that nation is perceived on the world stage, the
book is excellent.
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