Economic Development and Shrinking the Divide

Wedged between stalls of dried fish and mounds of plastic goods, a red shipping container is loaded with Coca Cola bottles. The local distributor for Soweto market, located in a tatty corner of Zambia’s capital city, Kusaka, sells all its stock every few days. A full load costs 10 m kwacha (about $ 2,000). In cash this amount can be hard to get hold of, takes ages to count and being 10 times the average annual wage is tempting to thieve. So Coca Cola now tells its 300 Zambian distributors to pay for deliveries not in cash, but by sending text messages from their mobile phones. The process takes about 30 seconds, and the driver issues a receipt. Faraway computers record the movement of money and stock. Coca Cola is not alone. A round the corner from the market, a small dry cleaning firm lets customers pay for laundry using their phones. So do Zambian petrol stations and dozens of bigger shops and restaurants.

This is just one example of the many innovative ways in which mobile phones are being used in the poorest parts of the world. Anecdotal evidence for mobile phones’ ability to boost economic activity is abundant: They enable fisherman or farmers to check prices at different markets before selling produces, make it easier for people to look for jobs, and prevent wasted journeys. Mobile phones reduce transaction costs, broaden trade networks and substitute for costly physical transport. They are of particular value when other means of communication (such as roads, post, or fixed line phones) are poor or nonexistent.

This can be hard for people in the rich world to understand, because the ways in which mobile phones are used in the poor world are so different in particular, phones are widely shared. One person in a village buys a mobile phone, perhaps using a micro credit loan. Others then rent it out by the minute; the small profit margin enables its owner to pay back the loan and make a living. When the phone rings, its owner carriers it to the home of the person being called, who then takes the call. Other entrepreneurs can set up as text message interpreters, sending and receiving text messages (which are generally cheaper than voice calls) on behalf of their customers, who may be illiterate. So although the number of phones per 100 people is low by rich world standards they still make a big difference.

For example, commercial contracts can be entered into with a Chinese company or individual only if that company or person is considered a “legal person” To be a legal person in China, the company or person must have registered as such with the Chinese government. To complicate matters further, binding negotiations may take place only with “legal representatives” of the legal person. So if your company enters into negotiations with a Chinese company or person, you must ask for signed legal documents establishing the right to do business. The formalities of the signature must also be considered. Will a signature on a contract be binding or is it necessary to place a traditional Chinese seal on the document? Even when all is done properly, the government still might change its mind. Coca Cola had won approval for its plan to build a new facility to produce product for its increasing Chinese market share, but before construction bean the Chinese parliament objected that Coca cola appeared to be too successful in China, so negotiations continue. Such are the uncertainties of the uncontrollable political and legal factors of international business.

The more significant elements in the uncontrollable international environment include political / legal forces; economic forces; competitive forces level of technology structure of distribution, geography and infrastructure and cultural forces. These constitute the principal elements of uncertainly an international marketer must cope with in designing a marketing program.