Class Distinctions

Magazine Contributor
6 min read

This story appears in the January 1996 issue of Business Start-Ups magazine. Subscribe »

Now that America is saturated with stuff, everyone's talking about the growing middle class in developing countries as the hot new market. But does the term "middle class" really mean the same thing in Paraguay as it does in Peoria? Are these consumers, many of them brand spanking new to the concept of disposable income, international versions of the Joneses? Or does rising income in, say, China simply mean more people can now afford refrigerators?

Entrepreneurs, being bottom-line types by nature, want to know which international markets are home to consumers with the purchasing power to afford their products. Yet this seemingly simple question has stumped even the best industry analysts.

"We're in the realm of estimations on top of estimations," says Robert Avila, chief economist of The Futures Group, which has created a database of income information for 85 countries. "We all want data about the [foreign] equivalent of people in the $40,000 or $50,000 household range in the United States. But we're nowhere close to [knowing] that."

"Data that's both comprehensible and usable has been hard to find," says Paul Seever, owner of Global Business Opportunities, a Pound Ridge, New York-based global marketing consulting firm. "We're trying to fill a gap between the broad averages and the detailed, primary research for getting into a particular market."

Seever's solution is a world map measuring household consumption, based on a popular analysis method called purchasing power parity (PPP). PPP measures the cost of a "basket" of products in each country, translated into U.S. dollars.

However, Seever, like other entrepreneurs on the quest to define purchasing power in developing countries, has bumped up against some frustrating blockades.

In many developing countries, for example, tax evasion is rampant, while government census information is spotty at best, erroneous at worst.

Convoluted statistics erect a major wall separating exporters' burning questions from feasible answers. Consequently, most information on developing countries' demographics is "highly fragmented and highly suspect," says John A. Holcombe, contributor to the 1995 Latin American Market Planning Handbook (Strategy Research). "A lot of it just doesn't make any sense."

Bare-bones data has been compiled in a dangerously simplified fashion-dividing a country's gross domestic product by its population to come up with a median income. As Avila points out, "That doesn't tell you how many people are affluent, middle income or poor."

Information, Please

Ironically, even if private companies find a way to pinpoint markets' purchasing power, small businesses may still have problems obtaining the information. "The small-business owner today is at a disadvantage because there's a lot of demand for this information and not a lot of supply," says Holcombe. "When information is at a premium, it's very costly. Small-business owners are faced with limited options to help them export and enter these markets. Typically, they have to work through local chambers of commerce, area world trade centers and other organizations that provide excellent data about exporting, but they don't have access to more costly demographic and marketing data."

To get a better picture of a country's purchasing power, small-business exporters must take matters into their own hands. Avila recommends getting a breakdown of markets according to age group from the World Bank. He also recommends not just thinking in terms of the overall country but concentrating on the large cities.

"The best way to find out how good the market is is to find out what's selling there now," says Avila. "Contact people in advertising agencies in those cities-they can tell you what's selling and what's hot."

And don't let all this statistical gobbledegook mess up your head. "If you're going abroad for the first time, it's important to familiarize yourself with the numbers," says Peter Kennedy, director of emerging markets with The Futures Group. "But then you should put that aside and think about some very basic indicators, things you can get your hands around. How many cars are in the country, what is the growth of computer use, what is the number of credit card users relative to the population? All these things will give you another glimpse of the potential size of the market."

Avila agrees. "Ultimately, nothing beats looking around the country yourself," he says. "Go to a large city, walk around, see what it feels like. If you see people driving around in cars, middle class to affluent people, you can probably find consumers for your product. You'll never get the same sense of what's going on just from the data."

Worldly Wise

Expensive consultants-who needs 'em? Now you can get inside information for less than $40 per country. The International Straight Talk series by cross-cultural trainer Bill Drake consists of multimedia kits exploring the top global markets.

The software program poses questions on everything from legal to cultural scenarios; you're prompted to choose the best of four answers. Yet this isn't just a list of do's and don'ts, which Drake believes "gives people a false sense of security. This program provides challenges, not checklists. There are no right or wrong answers, only options and consequences." The kit also includes videotaped testimonies of business owners who have been there and done that in each country.

"This [series] concentrates on the culture, the history, the atmosphere and the people," says Drake.

For more information on the 10-part series, which costs $695, fax your request to (214) 938-2927.

Special Delivery

With the latest international express options, delivery services are going the extra miles. The following organizations promise business owners the world via a variety of services:

  • DHL: DHL's WorldMail program offers cost savings to the more than 30,000 cities it serves; special rates are available for documents of up to 30 letter-sized pages.
  • FedEx: Delivering to 220 countries, FedEx can access 99 percent of the world's population.
  • United Parcel Service: UPS claims to be the only service to offer an inbound early morning service from international locations on a widespread basis. UPS also offers guaranteed overnight delivery to Latin America, Europe, Canada and Asia.
  • United States Postal Service: The Postal Service's Worldpost Priority Letter service, designed to be faster than air mail but less expensive than overnight services, can get your envelope to Western Europe, the Pacific Rim or Canada in an average of four days.

Contact Sources

DHL, (800) 225-5345;

Fed Ex, (800) 238-5355;

The Futures Group, 80 Glastonbury Blvd., Glastonbury, CT 06033, (203) 633-3501;

Global Business Opportunities, 17 Shad Rd. W., Pound Ridge, NY 10576, (914) 764-4398;

House Small-Business Committee, (202) 225-5821, fax: (202) 225-3587;

Strategy Research Corp., 100 N.W. 37th Ave., Miami, FL 33125, (305)649-5400;

UPS, (800) 742-5877;

USPS, (800) 222-1811.


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