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A TCI Book Review

The Marketing of Nations A Strategic Approach to Building National Wealth

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:

  1. growth vs. income distribution orientation
  2. sectoral balance vs. sectoral unbalance (i.e. something for everyone vs. backing the winners)
  3. shock therapy vs. gradualism
  4. high employment vs. high inflation
  5. state ownership vs. private ownership
  6. large private companies vs. small entrepreneurs
  7. interventionism vs. free markets
  8. 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:

  1. The Industrial Giants (US, Germany, France, UK, Italy, Japan), which have high levels of industrialization and high levels of wealth
  2. The Rising Stars (South Korea, Taiwan, Hong Kong, Singapore, Thailand, Malaysia, Indonesia), which are approximately in the middle on both dimensions
  3. The Latin Americans, also in the middle, but slightly lower on each dimension than the Rising Stars
  4. The Populous Countries (India and China), which are well down in the low end of both dimensions
  5. The Former Socialists (Czechoslovakia, Hungary, Poland, Albania, Romania, Yugoslavia, Estonia, Latvia, Lithuania), who are clustered with the Latin Americans in the middle
  6. 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
  7. 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
  8. 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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