CHARACTERIZING EMERGING MARKETS

. This article looks at Emerging Markets and Low Income Sector characteristics within the scope of understanding the generalizability of the market-based approaches developed in High Income Countries. The literature review highlights that existing studies have not presented clear classifications of characterics and that current listings are partial. The article adopts and adapts the market environment theory classification and summarizes the pub-lished and documented characteristics of EM and LIS. In the process it highlights that it is necessary to distinguish between primary and secondary characteristics and that many of these characteristics overlap. Finally, it builds on the organizational theory distinction between objective and enacted environment to discuss low income sector’s emerging market environments as constraints or opportunities.


Introduction
seminal article, e Fortune at the Bo om of the Pyramid, highlighted the opportunities associated to the Low Income Sectors (LIS 1 ) of BRIC's. Furthermore it argued that market-based approaches should be adopted to address the LIS (Simanis & Hart, 2008). In Hammond et al. 's (2007) terms, "being poor does not eliminate commerce and market processes" (p.6).
Marketing is "context dependent" (Sheth & Sisodia, 1999, p.72), thus translating strategies and practices from developed markets into emerging markets (EM) is not always possible. Particularly, when adopting market-based approaches to address the LIS, since macro environmental conditions are o en dysfunctional and consumption habits di er from those in advanced markets (Sheth, 2011). Additionally, EMs include coun-1 e term LIS (low income sectors), is used encompassing other terms adopted in the literature such as BOP (bo om of the pyramid) and LIC (low income consumers). tries as diverse as Peru, India, China, and Ghana, just to mention a few. ese countries not only show heterogeneity in di erent aspects of the market constitution but also the four billion people that constitute the LIS are not a "monolith" (Prahalad 2010, p.6). As Portocarrero and Delgado (2010) highlight, LIS living in remote regions in the Andean Plateau di er from those in the thick Amazonian rainforest or those living in densely populated neighborhoods located around urban areas. us, understanding the EM environmental characteristics is relevant because it allows scholars to assess the "generalizability of marketing theories and the extent to which they are bounded by the institutional context of HIC 2 " (Burgess & Steenkamp, 2006, p. 341).
e literature review shows that complete characterizations are missing (Burgess & Steenkamp, 2006;Gradl et al., 2008;Márquez et al., 2010;Sheth, 2011) and that it is necessary to transcend the prevailing beliefs and stereotypes surrounding the emerging markets (Sheth, 2011). In short, it is necessary for the future of marketing science and practice to conduct more research in the so-called emerging markets (Burgess & Steenkamp, 2006). is paper aims at addressing this gap.
McInnis (2011) adopts the astronaut analogy, "whose view from the spaceship allows him or her step back from the mountains, deserts, cities, and seas to see Earth in its entirety" (p.144), to exemplify a particular type of conceptual contribution, labeled summarizing. is paper will summarize the LIS and EM environmental characteristics. e paper adopts the market environment theory as it provides an overall categorization that can be used as a framework to characterize the EM and the LIS. e remainder of this article is organized as follows. First, the market environment and EM literature is reviewed to suggest an overall framework. Next, the EM characteristics are presented and discussed. e paper closes with the future research and managerial and academic implications sections.
An overall framework to characterize the emerging market and the low income sector is section reviews the market environment literature to suggest an overall framework to portray the EM-LIS. e discussion of the environment-organization relationship is not restricted to the eld of marketing. Moreover, organizational theorists and strategic management scholars have had a leading role in documenting the importance of the environment. e 60's highlighted the importance of the environment (Dill, 1958;ompson, 1967), the 70's looked at the determinants of the environment (Duncan, 1972;Pfe er & Salancik, 1978) and the 80's tried to answer the question of whether an external objective environment existed (Bourgeois, 1980;Weick & Da , 1983;Smircich & Stubbart, 1985;Mintzberg, 1987). Duncan (1972) de ned the environment as "the totality of physical and social factors that are taken directly into consideration in the decision-making behavior of indi-2 High income countries (HIC) viduals in the organization" (p.314). He distinguished between internal and external environment; the internal environment consists of "those relevant physical and social factors within the boundaries of the organization or speci c decision unit that are taken directly into consideration in the decision-making behavior of individuals in that system", whilst the external environment is "the relevant physical and social factors outside the boundaries of the organization or speci c decision units that are taken directly into consideration" (p.314). e external environment has been decomposed in two layers that have distinct in uence on policy-makers: the task environment and the general environment (Dill, 1958).
is classi cation of the dimensions of the external environment has been adopted in the marketing literature. orelli (1995), building on organizational ecology theory, describes the environment as a continuum that starts with the extra-environment identied as those areas of the total environment that are negligible or have zero relevance to the organization, the macro-environment that includes such factors as the general social, economic, political and technological climate in which the organization nds itself operating, the task environment seen as that part of the total se ing within which the organization is transacting and competing, the auto-se ing sees the broader organization of which the unit under study is a semi-autonomous part and, nally, the proper organization. e paper focuses on the task and general 3 environment. eir di erences and categorization are discussed below. e task environment ( ompson, 1967) is the part of the total se ing with which the organization is transacting and in which it is competing, speci cally: consumers (end-users), suppliers (material, labor, capital, equipment and workspace), competitors (markets and resources) and distributors.
e general environment (Hatch & Cunli e, 2006) is divided into di erent sectors: social sector (class structure, demographics, mobility pa erns, life styles, social movements, amongst others), cultural sector (history, traditions, normative expectations for behavior, beliefs and values), legal sector (legal practices, laws, etc.), political sector (distribution and concentration of power, nature of political system), economic sector (labor, nancial and goods/services markets, private vs. public, scal policies, consumption habits, banking system, etc.), technology sector (knowledge and information, scienti c developments and applications, etc.), and physical sector (natural resources, e ects of nature).
When this categorization is applied to EM-LIS, the physical in astructure aspects need to be added. Whilst the physical variable (Hatch & Cunli e, 2006) refers exclusively to natural in uences, the physical infrastructure variable refers to the roads, logistics, transportation, electricity, running water, etc. (Gradl et al., 2008;Sheth, 2011). Additionally, in order to hold a clear dialogue with the EM literature, the terms used by the EM authors to describe general environment are adopted: a itudes, habits, norms and behaviors" (Burgess & Steenkamp, 2006, p. 341). Cultural value priorities underlie most aspects of everyday life and relate to generalized beliefs people hold about themselves, their social and physical environment, and the spiritual world (Bond et al., 2004). characteristics that appear due to the in uence of diverse socio-political institutions (Sheth, 2011). and demographic characteristics, levels of within country diversity and dynamics caused by rapid social, political, and economic change. " (Burgess & Steenkamp, 2006, p. 341).
mal rules, inspect society member's conformity to them, and if necessary, impose sanctions. It includes the presence and e cacy of regulatory intuitions and the associated legal system that exist to ensure stability, order and continuity of societies. " (Burgess & Steenkamp, 2006, p. 342).
tural characteristics that provide communication, transportation, data transfer and provision of utilities (Gradl et al., 2008). Figure 1 presents a visual synthesis of the task and general environment categorization.  (Burgess & Steenkamp, 2006); however, these institutions do not provide in-depth descriptions of the EM characteristics.
Before presenting the EM-LIS characteristics it is necessary to make some clari cations. First, aspects listed are relevant characteristics that need to be taken into consideration when carrying out market based approaches in emerging markets; yet it is necessary to clarify there is a huge variance between countries. Second, the criterion adopted to classify each characteristic has been to follow most habitual categorization of a given aspect. ird, many of these aspects are interrelated; this point is further discussed in the next section. Fourth, a distinction has been made between primary and secondary characteristics; this distinction will be further discussed in the next section. e listing only includes primary characteristics. Finally, as any criterion, it always implies a certain degree of arbitrariness; our focus is to provide a simple but thorough listing. e characteristics are presented and discussed next and reproduced in a table format in Appendix I.

General Environment
Regulative system formal labor Discussion of the emerging market and low income sector characteristics is section discusses three points considering the previous characterization: interrelatedness or overlapping of characteristics, primary vs. secondary characteristics and objective vs. subjective environment. Discussing these three aspects is relevant because it provides a clearer picture of the complexity in the EM-LIS environment.

Interrelatedness or overlapping of characteristics
Although organization theorists separate the general environment into clear and distinct dimensions, the in uences of each aspect overlap (Hatch & Cunli e, 2006). is interdependence is even more intertwined in EM involving aspects of both the general environment and the task environment (see Figure 2). In this sense, there can be three types of overlapping: between aspects of the general environment, between aspects of the task environment, or between aspects of both environments. A couple of examples are provided to help visualize this interrelatedness: Geographically disperse population is related to lack of physical infrastructure (roads, communications, etc.).
come. Prevalence of unbranded products is related to low income.
tion networks. Unemployment is related to production of homemade products.

Socio-economic System
Di erentiating primary om secondary characteristics As in any new area of study, initial works o en describe the most outstanding characteristic. It is only in later works that distinctions between causes and consequences can be made. Some examples are presented below.
access to opportunities (Márquez et al., 2010), is best considered a consequence from diverse primary characteristics such as poor legislation, unemployment, low formal education, etc.
income, low product knowledge, poor health services, etc.
2006), is an e ect from variable income, lack of storing space, poor or unstable provision of electricity, etc.
unemployment, poor educational and health services, etc.
e Objective Environment vs. the Subjective Environment As stated above, organizational theorists and strategic management scholars tried to answer the question of whether an external objective environment existed. Two approaches have been identi ed: objective environment and subjective environment. Scholars on which this paper has based its literature review have studied and characterized emerging market environment implicitly adopting one of these two approaches. For example, Karnani (2011) looks at low technical skills, illiteracy and diseconomies of scale and concludes that microcredit and entrepreneurial initiatives from the LIS fail and that "employment is the solution" (Karnani, 2011, p.145). Burgess and Steenkamp (2006) look at institutional context and conclude that the absence of conditions in the institutional context enables markets to function e ciently. ese scholars advocate environmental determinism. ey imply that an objective environment exists; i.e., they see the environment as external and given, and believe that organizations need to adapt to contingent realities in order to survive (Grönroos, 1991;Sheth & Shah, 2003;Sharma & Pillai, 2003). e underlying assumption is that if a rm were culture-free and perfect information were possible then the organization could scan the relevant factors in the task and general environment and achieve (through changes in organizational structure and/or strategy) an optimal t. Alternatively, Prahalad (2004) recognizes the LIS fragile income condition yet concludes that the BOP, when considered from an aggregated point of view, represents a 'fortune' . Yunus (2007) looks at the LIS's lack of physical guarantees yet contemplates the LIS's social capital and collective responsibility as an alternative. Yunus (2010) also looks at low product knowledge yet concludes that LIS are able to consume consciously. ese scholars advocate the enacted environment approach. ey imply that a subjective environment exists; i.e., they see the environment as social construction (Berger & Luckmann, 1967), allowing for creativity. e underlying assumption is that di erent environmental enactments result from various social constructions and images of the environment. In this way, the general environment is the in nite set of possible combinations an organization could envision, while the enacted environment is the combination of physical and social factors a given rm is actually considering.
In other words, the listing in the previous section and their interrelatedness can be considered either as a set of given constraints or a set of enacted opportunities.

Future research and managerial implications
According to McInnis (2011, p. 145), summarization implications "identify knowledge gaps and lay out research priorities (Folkes, 1988;Rind eisch & Heide, 1997)" and they may also develop managerial implications that pertain to the summarized ndings (Gardner, 1985). e understanding of the EM-LIS characteristics has both academic and managerial implications.
In the academic eld, this article highlights the EM-LIS characteristics and invites scholars to develop comparisons with HIC characterizations in order to analyse if traditional business models and theory that have embedded assumptions from HIC may be generalizable to this new context. Except for Burgess and Steenkamp (2006) comparison of institutional subsystems, no such studies have been found. is paper also introduced the concept of interrelatedness. However, the full implications of overlapping of characteristics have not been fully discussed or explored. e literature on collective impact (Kania & Kramer, 2011) might be useful to look at how to address complex multidimensional phenomena. Finally, a conceptual di erentiation between primary and secondary characteristics has been suggested. e topic has only been introduced; further work on which characteristics pertain to the EM-LIS and which result from primary characteristics should be further studied. Moreover, clearer criteria should be developed.
In the managerial eld, this article invites managers to review their market based approaches and strategies to the EM-LIS by consciously acknowledging their subjective or objective environment approaches. When addressing EM-LIS characteristics, managers that see EM-LIS as market constraints, will agree with the authors that argue that the absence of conditions that enable markets to function e ciently (Burgess & Steenkamp, 2006) make it di cult to apply current business practices (Gradl et al., 2008), leading to very high costs to serve this market (Karnani, 2011), and di culties in reaching economies of scale . On the other hand, managers that see EM-LIS market as opportunities, will feel comfortable with the authors such as Prahalad (2010), who argues that there are 'biased assumptions' associated to EM-LIS. ese managers will focus on the growth rates (Sheth, 2011), aggregated purchasing power of the LIS (Prahalad, 2004), social capital (Yunus, 2007), and show "how the 'impossible' can be made 'possible" (Mashelkar, cited in Munshi 2009, p. xiv).
Finally, the core concept of bounded rationality (Simon, 1957) is particularly relevant to managers operating in EM-LIS environments. Managers rely on cognitive maps to organize issues and events into manageable sets of categories; the challenge is to minimize the gap between awed perceptions of these environments. is does not mean that there is an external objective environment; it implies recognizing that is difcult to achieve a perfectly rational decision. is article has adopted and adapted the market environment theory classi cation and provided an EM-LIS characterization. In doing so, it has closed a conceptual and factual gap. Moreover, marketing knowledge has been further enriched as it has moved from a colonial mind-set to a global mind-set (Sheth, 2011).