EMERGING MARKETS

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					EMERGING MARKETS

  SEMINAR IN MANAGEMENT
               Emerging Economies
   Relatively new concept, and most Western managers look at
    these economies only as large, untapped markets

   The reality is that countries with emerging economies are also
    becoming competitors and sourcing locations for Western
    nations

   So called emerging economies are:
       Started an economic reform process aimed at alleviating problems, for
        example, of poverty, poor infrastructure, and overpopulation;
       Achieved a steady growth in gross national product (GNP) per capita
              Emerging Economies
   The US Department of Commerce (2000) has identified the
    “10 Biggest Emerging Markets”:
       China Economic Area (PRC, Taiwan, and Hong Kong)
       India
       Indonesia
       South Korea
       Turkey
       Poland
       Mexico
       Brazil
       Argentina
       South Africa
             WHAT MAKES THEM
               DIFFERENT?
   Emerging markets stand out due to four major
    characteristics:
       They are regional economic powerhouses with
        large populations, large resource bases, and large
        markets
            Economic success spurs development in neighboring
             countries, but if they experience economic crisis, they
             can bring their neighbors down with them.
WHAT MAKES THEM
  DIFFERENT?
   They are transitional societies that are undertaking
    domestic economic and political reforms
        Adopt open door policies to replace traditional
         state interventionist policies that failed to produce
         sustainable economic growth

   They are the world’s fastest growing economies,
    contributing to a great deal of the world’s
    explosive growth of trade
        By 2020, the five biggest emerging markets’ share
         or world output will double to 16.1% from 7.8% in
         1992.
        They will also become more significant buyers of
         goods and services than industrialized countries
          WHAT MAKES THEM
            DIFFERENT?
   They are critical participants in the world’s
    major political, economic, and social affairs
        Seeking larger voice in international politics and a
         bigger slice of the global economic pie.
        WHAT BRINGS THEM INTO
               BEING?
   Two potential causes for the creation of
    emerging markets:
       The failure of state-led economic development
            Failed to produce sustainable growth
            This failure and its tremendous negative impacts pushed
             those countries to adopt open door policies, and to
             change from rge state’s being in charge of the economy
             to facilitating economic growth along market-orientated
             lines
WHAT BRINGS THEM INTO
       BEING?
   The need for capital investment
        Desperately needed capital to finance their
         development, but the traditional government borrowing
         failed to fuel the development process
        As such, these countries began to rely on equity
         investment as a means of financing economic growth
        Seek to attract equity investment from private investors
         who will become their partners in development
             Create a conducive investment climate
               THE PARADIGM SHIFT OF
              INTERNATIONAL BUSINESS
    During the early 19902, a number of perceptional changes occurred within
    the realm of international business
Developing Countries                        Emerging Markets
(prior to 2000)                             (2000 and beyond)

•   High risk for foreign business      * Risks are increasingly manageable
•   Economically and technologically    * Technologically competitive
    backward
•   Consumer had poor purchasing        * Increasing purchasing power
    purchasing power                      among consumers
•   Few opportunities for business      * Higher income growth than
                                          developed nations
                                        * Offer many opportunities as large
                                          untapped markets and low-costs,
                                          high quality sources
    Emerging Economies as Growing Markets

   Approximately 75% of the world’s population lives in
    emerging economies
       The population growth rates of emerging economies are the highest of
        all countries
       India and China (1.2 billion and 1 billion respectively), outnumber
        those of many developed nations
       Africa’s population is also growing rapidly


   The Open Door policies of PRC and India have enhanced the
    importance of these markets even further
       The effects – many MNCs successfully established presence in China:
        Coco-Cola, Caterpillar, Carrefour, And Ericsson
    Emerging Economies as Growing Markets

   Industrialized countries are relying on expanding their markets
    in developing and emerging economies to increase their
    exports
       Although industrialized countries have most of the production of
        manufactured goods, developing and emerging countries represent a
        substantial and market for
Emerging Economies as Global Sources

   Western and American firms must look at emerging
    countries as potential sources (with sourcing niches)
    that may provide competitive advantages to buying
    firms
       Six countries best suited for building new plants, making
        acquisitions, or forming joint ventures: the United
        Kingdom, France, Canada, China, Mexico, and Malaysia
Major Concerns in Emerging Economies

   Lack of Infrastructure
       ‘infrastructure’ covers services from public utilities (power,
        telecommunications, piped water supply, sanitation and sewerage, solid
        waste collection and disposal, and piped gas), public works (road,
        dams, and canals), and other transport sectors (urban and interurban,
        ports and waterways, and airports).
            Some markets have already well-established local distribution systems
             (e.g. India, Brazil, and Malaysia)
            China and Russia perhaps are the only two countries that lack fully
             developed distribution systems
Major Concerns in Emerging Economies
   Environmental Issues
        Environmental and social responsibility
             Although environmental laws in emerging economies are not as stringent as they are
              in developed economies, the situation is changing fast
             Sustainable development : a concept that strives to balance economic growth with
              environmental management. Economic and industrial development as essential if
              people in developing economies are to rise out of poverty and that this development
              can be accomplished without destroying the environment
   Ethical Issues
        The desire to gain entry into an emerging market may temp Western managers
         to offer bribes or otherwise “grease palms” of government bureaucrats,
         politicians, or corporate buyers making purchasing decisions.
        Though unethical, bribery and corruption are a reality in many emerging
         markets
     Major Concerns in Emerging
             Economies
    Fundamental problems associated with
    traditional economic and political systems
       Redefine the role of government in the
        development process and to reduce the
        government’s undue intervention
   Corruption problem that distorts the business
    environment and impedes the development
    process
     Major Concerns in Emerging
             Economies
   Structural reforms – financial system, legal
    system and political system
       To guarantee a disciplined and stable economy that
        is relatively free of political disturbances and
        interference
            WHAT ARE THEIR
             PROSPECTS?
   The “key swing factor” in the future growth of world
    trade and global financial stability, and they will
    become critical players in global politics
   They have huge untapped potential and they are
    determine to undertake domestic reforms to support
    sustainable economic growth
   If they can maintain political stability and succeed
    with their structural reforms, their future is promising

				
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posted:7/13/2012
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