Download 301LON U10K1

Understanding Emerging
Markets
International Business
Strategy
LON301BUS
Unit: 10 Knowledgecast: 1
Module Learning Outcomes
Communicate an in-depth understanding of the
complexity of the environment and its applications on
decision-making process
• Assess current developments in the organisational
environment and alternative responses related to
strategy
•
Classifying Countries based on
Economic Development
• Advanced economies: post-industrial countries
characterized by;
 high per-capita income, highly competitive industries, and well developed commercial infrastructure. E.g., Australia, Canada,
 Japan, United States, and Western European countries.
Classifying Countries based on
Economic Development
• Developing economies: low-income countries
characterized by
 limited industrialization and stagnant economies.
 E.g., most low income countries in Africa, Latin America, and Asia, such
as Bangladesh, Nicaragua and Zaire.
Classifying Countries based on
Economic Development
Emerging market economies: a subset of former developing
economies that have achieved substantial industrialization,
modernization, improved living standards, and remarkable
economic growth.
They are some 27 countries in East and South Asia, Latin
America, Middle East and Eastern Europe.
Examples: Brazil, Russia, India, China.
Key Differences
Emerging Markets
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Most distinguishing characteristic: countries are enjoying rapidly
improving living standards and a growing middle class with rising
economic aspirations. Evolving towards wealthy nation status.
Importance in the world economy is increasing as attractive
destinations for exports, FDI, and sourcing.
Account for over 40% of world GDP, over 30% of exports, and receive
over 20% of FDI.
In mid-2000s, collectively had average annual GDP growth rate of
nearly 7%, much faster than advanced economies
Benefit from low-cost labour, knowledge workers, low-cost capital,
government support, and powerful conglomerates
Why Emerging Markets Matter….
Challenges of Doing Business in
Emerging Markets
Political stability
• Absence of reliable government authorities
increases business costs and risks, and reduces
ability to forecast business conditions.
• Corruption and weak legal frameworks
• E.g., Argentina, Indonesia, Russia, and
Venezuela experience substantial corruption.
Challenges of Doing Business in
Emerging Markets
Weak intellectual property protection
• Even if they exist, laws that safeguard intellectual
property rights may not be enforced, or the
judicial process may be painfully slow.
• E.g., in China, Indonesia and Russia,
counterfeiting is common, especially of software,
DVDs, CDs. In India, weak patent laws
discourage investment by foreign firms.
Challenges of Doing Business in
Emerging Markets
Bureaucracy and lack of transparency
• Burdensome administrative rules, as well as
excessive requirements for licenses, approvals,
and paperwork, delay business activities.
• Lack of transparency implies that legal and
political systems are not open and accountable.
Lack of transparency is associated with
corruption.
Challenges of Doing Business in
Emerging Markets
Partner availability and qualifications
• Alliances with local partners helps gain access to
local markets, supplier and distributor networks,
and key government contacts. May be critical in
complex markets.
• But qualified business partners are not readily
available.
Challenges of Doing Business in
Emerging Markets
Dominance of family conglomerates
• Large, highly diversified, privately-owned firms that
control much economic activity and jobs in emerging
markets. Enjoy government support, extensive
networks, access to capital, market knowledge.
• South Korea – chaebols; the top 30 FCs account for
nearly half the assets and industry revenues in the
Korean economy. Samsung, the most famous Korean
FC, has annual revenues of $140 billion.
• India – business houses
• Latin America – grupos
Knowledgecast Summary
• Communicate an in-depth understanding of the
complexity of the environment and its applications on
decision-making process
 Emerging markets are increasingly important to MNEs but prove
challenging to analyse and manage due to lack of valid, reliable
information
• Assess current developments in the organisational
environment and alternative responses related to
strategy
 Emerging markets typically require an export or joint venture entry
strategy
Seminar
Unilever’s Emerging Markets Strategy
Having ‘toured’ Unilever earlier in the module and understood its
strategic position and the influence of its stakeholders; now consider
the role of emerging markets in Unilever’s current strategy.
1. In which emerging markets is Unilever currently operating?
2. How do the emerging markets contribute to Unilever’s corporate
strategy?
3. Can you find examples of the nature of Unilever’s market entry
strategies?
Group Activity
Module Review
In this session you will be required to give feedback on the module via
the usual course evaluation mechanisms. This may include a
consideration of the following questions.
1. Which of the units of the module have been most interesting to
you?
2. How will your study of international business strategy affect your
future business practice?
3. What do you consider to be the challenges for those involved in
international business strategy?