Thesis: Marketing in a Less Developed Country

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Less Developed Country

The Kyrgyz Republic, also known as Kyrgyzstan is a poor, mountainous country in Central Asia. Formerly a part of the U.S.S.R., the country was one of the first former Soviet states to open its economy. A lack of resources, poor industrial production and its landlocked status have meant that economic progress has been slow, however. The GDP of Kyrgyzstan is $11.64 billion, ranked 144th in the world. This equates to a GDP per capita of $2,200, ranked 184th in the world (CIA World Factbook, 2009). This paper will outline the challenges of dealing in the Kyrgyz market, and attempt to shed light on how those problems may be overcome.

Today's Kyrgyzstan was carved out of the U.S.S.R.'s central Asian territories by Joseph Stalin. The Kyrgyz are one of many ethnic groups to inhabit Central Asia. In this corner of the region, native ethnic groups can be either settled or nomadic; and either Turkic, Persian or Mongol in ancestry. The Kyrgyz are Turkic nomads. They live in the valleys by winter and tend livestock in the mountains by summer. The Kyrgyz were only settled under Soviet rule and maintain many of their nomadic traditions, including summers away from work in the mountains, tending livestock.

The modern nation began life as the Kyrgyz SSR, the borders of which were determined by Stalin. His version of Central Asian borders was specifically gerrymandered to disrupt ethnic unity. Thus, modern Kyrgyzstan has a Kyrgyz population in the north and east of the country, but in the Fergana Valley, including the second-largest city of Osh, the population is mainly Uzbek, a settled Turkic group. Mountain regions south of Osh have a high percentage of Tajiks, a Persian nomad group.

After independence from the U.S.S.R., Kyrgyzstan adopted market reforms. The country has struggled to develop an economy, however, in light of relatively poor resource base and limited market access (CIA World Factbook, 2009). The nation is cut off from the world by mountains and desert, connected by flat land only to Uzbekistan, an equally impoverished landlocked nation. Although Kyrgyzstan borders China, road links are poor and the region of China to which it is connected (Xinjiang) is remote, some 2-3 days to China's major markets.

Demographics

The population of Kyrgyzstan is 5,431,000. It is concentrated in the relatively industrial north of the country, and in the area around Osh in the Fergana Valley in the southeast of the country. Other areas are sparsely population, rural and largely nomadic. The majority of Kyrgyzstan's citizens are ethnic Kyrgyz (64.7%) with sizeable minorities of Uzbek (13.6%) and Russian (12.5%). The Uzbeks live around Osh and the Russians are concentrated in the north, especially the capital of Bishkek and the area around Lake Issyk-Kul and the Tian Shan mountains. There are a variety of other, minor ethnic groups, in particular other Central Asia groups such as Kazakh and Tajik. The population is relatively young, with an average age of 24.4 years. The population growth rate, however, is slow at just 1.396%, the 96th fastest in the world. Kyrgyzstan is a net loser of people, with a migration rate of -2.57 per 1000. The Russian minority in particular is prone to exit.

Language

The Kyrgyz speak a Turkic language. This gives them relatively close linguistic ties with Turkey, Uzbekistan, Kazakhstan and the Uyghur population in neighboring Xinjiang. Written communication is made difficult by the fact that the Kyrgyz use Cyrillic script while the Uyghurs use Arabic script and the Uzbeks use the Turkish version of Latin script. The Uzbek minority tends to know some Kyrgyz, but they dominate the population of their area and may not be fluent. The Russian minority is monolingual, whereas the other groups tend to speak Russian as their second language.

Religion

The nomadic Kyrgyz nominally converted to Islam, which was introduced from the west by traders along the Silk Road. The Kyrgyz are not committed to the religion, however, rarely attending mosque and having a secular government. What little Islam the Kyrgyz practice is mixed with animist beliefs. The Uzbeks in the Fergana Valley are far more serious about their Islam and the region is one of the most conservative in Central Asia. The Russians practice the Russian Orthodox of Christianity.

Government

In 2005, the Kyrgyz people overthrew their government peacefully. The previous regime had been in power since the Soviet days and was deemed corrupt. The new regime has been in power ever since. The government is democratically elected although there is some debate about the legitimacy of the elections. The nation is a republic, with its legal system not up to international standard. It is instead based on the French and Russian systems, but lacking the robustness of the former.

Value Systems and Business Culture

Family and the nomadic way of life are among the most cherished values in Kyrgyzstan. It is a clan-based society, with the forty families each represented on the nation's flag. Kyrgyz tend to prefer the nomadic lifestyle, with even city Kyrgyz spending their summers in the mountain pastures.

The business culture is based around high power distance. Leaders are transaction, rather than transformational. Hierarchy is important both in the family and in the work environment (Ardichvili & Gasparishvili, 2001). Business is Kyrgyzstan is formal, in line with the Russian model, but is also heavily dependent on the building of trust. Kyrgyz are friendly, and have a slow pace of life, so the expectation is that one will take tea or alcohol before discussing business. Russian business culture is pervasive as well. The Uzbek minority is moving towards closer links not just with Uzbekistan but with Turkey.

Kyrgyzstan has a positive attitude towards foreign direct investment. That there has been relatively little of it is more a reflection of the lack of opportunities than anything else. The nation's biggest employer is the Kumtor gold mine, which is owned by a Canadian firm, Centerra Gold, along with the government. The government's attitude has always been pro-mine, but at times has wavered with respect to ownership, taxation and other issues. Cases have gone to court for mediation and settlement, so it is not unusual for a foreign direct investor to have to fight vigorously to maintain its investments in the country (Khamidov, 2009).

Consumer Behavior

The Kyrgyz are driven by ethnocentrism in their Consumer Behavior (Kaynak, et al., 2001). They respond well to imagery and themes that related to the Kyrgyz identity. They will still purchase products that seem more geared to a Russian audience, but are less likely to embrace them.

Kyrgyz tend to shop in smaller stores close to home. Bazaars are typical for food and household items. There are a handful of Western-style stores in Bishkek, but otherwise the nation operates on the typical developing country model of small, family-owned retail. Consumers are price-conscious, owing to their limited budgets. Only elites and Russians are likely to purchase anything priced at a premium.

Consumer knowledge about basic products is high, but about unusual or sophisticated products the knowledge is low. Although the Kyrgyz are not moved by shows of wealthy, they are not above them either. With a stagnant GDP that is heavily reliant on the Kumtor mine, the citizens are unlikely to experience social mobility and therefore would likely avoid products out of their price range.

Four Ps

With respect to product, the Kyrgyz are most likely to adopt products that are useful to them on a practical level. This could be with respect to transportation, food or entertainment. They have low need for most services or luxury goods. Some potentially strong products may be those with respect to traditional outdoor activities, vehicles, consumer electronics and high end alcohol.

Price

Pricing policy in Kyrgyzstan should reflect the wealth of the local populace. Unlike some other developing countries, there is little tourism, only a small expat population and very few elites to purchase high-priced goods. Pricing is generally low, akin to provincial Russian standards. Consumers are price conscious. They know the price of the items they need and will not pay more. Owing to the Russian influence, there is lower prevalence for bargaining in Kyrgyzstan compared with many other developing nations.

Placement

There are only two cities in the country. In rural areas, the population is mainly poor. Osh is a very poor city, with little economy beyond its role as a transit point for Afghan and Tajik opiates making their way to Moscow. Bishkek is the only viable market, encompassing 1/5th of the country's population and most of its wealth. The route to market can come either from the west via Russia and Kazakhstan or the east via China. The majority of good comes in through the northern route, a function of the country's historical links with Russia and cultural links with Kazakhstan. Distribution within the country is relatively straightforward. Wholesalers/distributors sell and deliver the product to the small retail stores. Self-distribution is an option, although setting up relationships with the buyers can be a difficult process,… [END OF PREVIEW]

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