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MARKET CONVERGENCE
By Nick B. Fontanila (word document)

            The defining element of the 21^st century is the empowerment of the individual.  Empowerment of the individual has become a touchstone of the development of a country’s civilization (Mercer, 1998).  The individual, wherever that individual is, has the capability that before only social groups could perform. 

            This is the environment that marketers and advertisers face now and in the future.  David Mercer describes this future: First, the future of humanity is, in general, no longer constrained by any significant shortage of resources. Second, that future is now being progressively determined by social decisions, taken not just by a few leaders but by millions of us taking billions of small decisions as part of our daily lives.

            In this environment, a classless consuming sector emerges setting the stage for market convergence. 

            What is market convergence?  To illustrate, let me cite three examples:  the trend towards connectivity, the trend towards eating convenience, and the trend towards a shopping community.

            Trend Towards Connectivity

             By the end of 2004, Globe Telecom expects the number of cell phone subscribers to increase to around 30 million. About ten years ago, that was less than one million.  Fifteen years ago, that was less than 200,000.  The vast majority of cell phone usage is pre-paid.

             These 30 million subscribers cut across all income classes and market profiles.  Each one has the same goal – to be connected.  Each one uses the same solution – a cell phone.  Each one exhibits cost consciousness – by using SMS.  Each one wants better control of usage – through the pre-paid plan.  Each one has the same aspiration – to get a better, more modern cell phone unit.  Amazingly, this market has converged. 

             Trend Towards Eating Convenience

             The latest Family Income and Expenditures Survey, a survey that the National Statistics Office conducts every three years, reveals that more couples eat out and that expenditure for eating out has increased.  This is expected considering our propensity to eat (about five times a day) and external conditions such as traffic and increasing cost of home cooking.

             Synfood, a study conducted by M & S Sigma Dos in June 2003, gives us an indication as to which stores they frequent.  This is in response to the question “when you feel like eating out, where do you usually go?”  I will present only the top five 

            Source:  PMA Agora Digest, Volume I, 2^nd issue

             Millions of these convenience eaters crowd the same places.  Like the cell phone users, convenience eaters cut across all segments and profiles.  This market, too, has converged.

             The convenience eaters, regardless of income class and lifestyle classification, go to the same places, consume the same food and the same amount of food, crowd the same spots at about the same time and during the same days, grab the same bonuses and perks, sit side by side sometimes even sharing the same table, and demand the same level of service from the store crew.

             This market has become undifferentiated.  Major players try to differentiate.  But as soon as one does, the elements of competition bring the market to a state of equilibrium.

             Trend Towards A Shopping Community

             While the crisis that started in 1997 took its toll on the economy, SM, Ayala, Robinsons and other major retailing giants continued building more retail spaces.  What they built during this period added to what they already had before the crisis. 

            In 2000, I started partnering with an Indian IT company to offer IT solutions to the financial services industry.  The company sent a young marketing executive to Manila.  That was the first time he traveled overseas.  On his first free day, he went around and was so awed by the size of the mall that he visited.  He was referring to the Robinsons Mall in Manila.  He commented that he had never seen anything like that in India.

            The availability of retail spaces and the experience that goes with the space have created a mall culture.  A study conducted by Dr. Leonardo Garcia of De La Salle University reveals a high frequency of usage among a cross-section of the consuming public.

            Source:  PMA Agora Digest, Volume I, 1^st Issue

            Like the cell phone users and convenience eaters, mallers cut across all segments and profiles. They all go to malls and crowd popular shops for the same reasons -- to be entertained, to shop, and to eat/dine. 

             The above cases are indicative of converged markets.  What is the principle of market convergence?  Convergence of previously disjointed markets can be viewed as the erosion of boundaries that define and isolate industry specific knowledge where the cross elasticity that might be invoked to conveniently separate markets no longer holds and firms become more proximate in their technological platforms (Pennings and Puranam, 2001).

             What is the significance of the market convergence theory? 

             Thomas Friedman writes that people around the globe are pretty much pursuing the same goal: “the basic human desire for a better life; a life with more choices as to what to each, what to wear, where to live, where to travel, how to work, what to read, what to write, and what to learn (Moore and Simon, 2000).  In the process of pursuing the same goal and pursuing individual wants, people converge. 

Bibliography

1.  David Mercer, Future Revolutions: Unravelling the Uncertainties of Life Work in the 21^st Century  (London: Orion Business Books, 1998)

2.  Johannes M. Pennings & Phanish Puranam, Market Convergence & Firm Strategy: New Directions for Theory and Research (Paper presented at the ECIS Conference, The Future of Innovation Studies, Eindhoven, Netherlands, 20-23 September 2001. We gratefully acknowledge support from the Jones Center of the Wharton School, IIB of the Stockholm School of Economics and Nanyang Business School, Singapore)

3.  Stephen Moore & Julian Simon, It’s Getting Better All the Time: 100 Greatest Trends in the Last 100 Years (Washington D. C.: Cato Institute, 2000)