For consumer goods, perhaps the most important factor influencing the per capita (or ‘per head’) demand for a product in a given country is the real disposable income per capita. ‘Real income’ means the monetary value of income adjusted for inflation. ‘Disposable income’ nets out tax liabilities from the gross income of individuals. Presumably, the higher the per capita income in a particular market, the greater the demand for (and the higher the price that can be charged for) goods and services in that region. It is interesting to note how eating habits change in response to rising incomes. The basic trend in a country with rising incomes is towards increasing consumption of packaged, convenience foods which save time for the housewife and add variety to menus.
While the existing level of per capita income gives an indication of the current size of a potential market, the potential growth prospects for that market should also be interesting. After all, it will take some time to formulate and implement plans to enter a market. Furthermore, given the often substantial costs of commencing international operations of the company’s involvement in international business should be considered a long-term commitment.
A variety of publications provide estimates of current income levels in different countries and regions, e.g. the United Nations’ Statistical Yearbook, and The Economist. There is, however, a growing tendency for published income statistics to understate true per capita income levels. This is due to the widespread phenomenon of unreported economic transactions – even in industrialised countries. In many cases, the existence of this so-called ‘underground economy’ is motivated by the incentive to avoid paying taxes, while in developing countries, an efficient mechanism for the collection and processing of national income statistics often does not exist.