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Furthermore, in keeping with its strategy to target emerging economies, the company debuted in India by launching its brand on Amazon Fashion earlier this year. At present, through its dedicated Amazon store, Under Armour sells more than 330 styles of clothing and footwear in the country. Like China, sportswear is a high growth market in India. According to Euromonitor, this market is likely to grow at a CAGR (compounded annual growth rate) of 12% over the next few years and reach around $8 billion by 2020. With economic growth, increasing disposable income, and rapid urbanization in the country, demand for branded sportswear is increasing. Accordingly, this presents a significant opportunity for Under Armour. Unit 1 Portfolio Task

Part 1-
South Africa-Comparative Levels of Inequality

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Jack
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South Africa is the largest economy in Africa, “with the
government’s commitment to market economy making it a business hub for foreign
investment”, (Cavusgil et al., 2013).
Large mineral reserves and incredibly advanced manufacturing facilities have
led to increased economic growth. However, “history has shown that the economy
was built on systematically enforced racial division in every area of the
country, leaving deep scars of inequality and economic inefficiency”, as told
by (Swartz, 2009).

Poverty

Although a rapidly advancing developing economy, like any
developing country, poverty is a problem seen far too often, proven by the
Human Development Index falling from 0.73 in 1995 to 0.67 in 2003 (Perumal,2004). The increasing number
of people who do not have access to basic healthcare and education, can be seen
with upwards of two million people dying from AIDS (PlusNews, 2006). The mortality rate of AIDS victims who cannot access
medical attention is 100%, leading to a crisis with regards to health and social
care problems and increasing population of orphans in the country,
approximately two million of them in 2010,
(Department of Social Development, 2005)

Education

There has been increased investment in education reform since the
end of apartheid. Introduction of education to black citizens has led to a dramatic
increase in the black population completing higher level education. Investment
in education is still necessary, as the core text outlines, as people who come
from underprivileged neighbourhoods are being held back, with 27% of 6th
grade students being illiterate, compared to 4% of the wealthier population,
according to (Spaull, 2013). He
bases this research on the income inequality still faced by people and the
segregation implemented during apartheid, as an area that still needs to be
addressed.

Income Inequality

Reforms have been introduced to evenly distribute public finances
and allow for widespread income equality. Sadly, there is still an unequal
distribution of wealth, with the expanding informal sector allowing the rich to
stay rich and the poor to stay poor. As stated in the core text, there is a
parallel 1st and 3rd world economy within a single
nation, which, unless merges together, will allow for unemployment rates and
income inequality to rise. Black people are still largely discriminated
against, accounting for 90% of the country’s poor population (Anon., 2004). (Babarinde, 2009) goes
on to state that the level of income equality is “particularly acute and based
mainly upon racial stratification”.

Unemployment

Nearly quarter of a century since the abolition of apartheid, in
the third quarter of 2017, unemployment was reported to be at 27.7%. Black
South Africans are still discriminated against, accounting for 85% of the
unskilled workforce and 40% of those unemployed in 2014, (StatsSA, 2014). While unemployment in low-skilled manufacturing
may have increased due to many manufacturing companies relocating to developing
countries that offer higher incentives for business, as found by (Seria and Cohen,2009), the government
is not doing enough to encourage development of the manufacturing sector,
predominantly associated with the black population.

As an economy, South Africa has grown rapidly over the last twenty
years. However, as a nation, divisions among the population remain. As
resources are plentiful, it is the bridging of these differences that will
decide the economic future and development of the nation.

Part 2

Toyota- To
Invest or Not Invest

1)     
Rising levels of Inequality

As mentioned before, rising levels of inequality will allow the
rich to stay rich and the poor to stay poor. The pyramid scheme commonly seen
in developing countries where the smallest block occupies the rich, the mid-level
middle class earners and the large base group of low income earners is a
problem for Toyota and our investors. As a business, sales and profits will not
grow in an economy segmented by income inequality. “Greater inequality reduces
our incentive to create new products and establish positive marketing
strategies”, according to (Yurko, 2011).
In a report carried out by KPMG, it is stated that if the wealth within a
country is occupied by a small percentage of people, it is saved rather than
spent (borgenproject.org, 2015). Yet
without increased expenditure by the overall population, businesses as well as
the economy will not grow. This is a disaster for our company. Unlike in
developed countries, “where a new product can be marketed to early adopters and
then decrease its price and content to offer it to the majority”, in developing
countries where the wealth is so unevenly distributed, we cannot market to the
lower or middle classes. If we invest into an economy that is wrought with
financial instability we fail to interact with wider society as we only look to
market to the rich. This could negatively impact our branding.  As claimed by Bex Dawkes, impoverished people at the bottom of the ladder, “will not buy
anything deemed unnecessary for survival, limiting the ability for growth of
organisations within the consumer-goods market”, (blueprintforbusiness.org, 2017).

2)     
Wealth Redistribution

The idea of wealth redistribution in developing countries has the
potential to allow for increased investment by our business. While many
emerging economies possess vast quantities of valuable resources that can also
attract FDI’s, the need for wealth redistribution is the major factor that will
influence economic growth, as outlined by (Alesina
and Rodrik, 1994), as they concluded that “initial inequality seemed to be
empirically associated with lower growth rates”. The KPMG report mentioned
above, goes on to state that, of a developing nations population, if the
poorest of society are empowered through economic growth, it can increase
consumption and open new competitive markets which will increase economic
growth (borgenproject.org, 2015).
With a nation’s wealth more evenly distributed, we have a larger target market
to advertise and sell our products, as those who earn less tend to spend more.
Increased consumption leads to increased sales and profits, while wealth
redistribution ultimately leads to reduced poverty. By following the plan of
Palmolive in India who set up small, local supply chains and distribution
systems, we can create “long term relations” with small-scale enterprises. The
poor want better opportunities, want to be employed and want to work to create
a better life for their family. Chief economist (Francois Bourguignon, 2004) outlined that countries with high
levels of wealth inequality who failed to redistribute wealth and attend the
needs of the poorest in society, “underutilize their productive and growth
potential to a greater degree than countries with fewer poor people or with a
more equitable distribution”.

In conclusion, the impact upon our organisation and our future
marketing goals by the headings above, will vary greatly. On one hand, rising
levels of inequality will mean that our company cannot attract a wider market
of consumers as the wealth of the economy is so concentrated to one sector. The
wealth of society tends to invest rather than spend, meaning our product will
not generate large sales. However, the apparent solution of wealth
redistribution can create a more disperse target market ranging from lower
level earners to the highest. With those who earn less tending to spend more of
their income, we can generate much higher profit margins as market specifically
priced goods to subsequent consumers.

 

 

 

 

 

References:

Alesina, A. and Rodrik, D. (1994)

Distributive Politics and Economic Growth

The Quarterly Journal of Economics,
109(2), pp.465-490

 

Anon. South African Correspondent (2004)

United Nations
report highlights growing inequality in South Africa

http://www.wsws.org/en/articles/2004/05/safr-m21.html

 

Bourguignon, Francois (2004)

“The Poverty Growth
Inequality Triangle”

World Bank

http://www.siteresources.worldbank.org/INTPGI/Resources/342674-1206111890151/15185_ICRIER_paper-final.pdf

 

Cavusgil, S. Tamer, Ghauri, Pervez N. and Akcal, Ayse
A. (2013)

Doing
Business in Emerging Markets 2nd Edition

Core Text, pp 145-203

 

Dawkes, B. (2017)

The Role
of Business in Inequality – A Blueprint for Better Business

The Role of Business in Inequality

 

Department of Social Development (2005)

 

Policy
Framework for Orphans and Other Children Made Vulnerable by HIV and AIDS in
South

 

Africa:
Building a Caring Society Together

 

https://www.gov.za

 

 

Perumal, A. (2004)

 

United Nations Development Programme

 

A compact among
nations to end human poverty

 

Oxford University Press, July 2003, pp. 384.

 

 

PlusNews (2006) 

 

HIV/AIDS
barometer

 

Mail and Guardian November 17–23

 

 

Rotsky, N. (2015)

Why Inequality is Bad for Business

Why Inequality is Bad for Business

 

Spaull, N (2013).

 

Poverty
& privilege: Primary school inequality in South Africa

 

International Journal of Educational
Development. 33(5): 436–447.

 

 

StatsSA (2014)

 

https://www.statssa.gov.za/presentation/Stats%20SA%20presentation%20on%20skills%20and%20unemployment

 

 

Swartz, A. (2009)

AN
EVALUATION OF THE SCHOOL FEEDING PROGRAMME AS A SERVICE DELIVERY MECHANISM TO
IMPROVE ACADEMIC PERFORMANCE OF NEEDY LEARNERS IN BONTEHEUWEL

Working paper, pp15 Cape Peninsula University of Technology

 

Yurko, Anna V. (2011)

How does income inequality affect market
outcomes in vertically differentiated markets?

International Journal of
Industrial Organization

Volume 29, Issue 4, July 2011,
Pages 493-503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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