Download emerging markets - Putra Selaparang

EMERGING MARKETS
SEMINAR IN MANAGEMENT
Emerging Economies
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Relatively new concept, and most Western managers look at
these economies only as large, untapped markets
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The reality is that countries with emerging economies are also
becoming competitors and sourcing locations for Western
nations
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So called emerging economies are:
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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
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The US Department of Commerce (2000) has identified the
“10 Biggest Emerging Markets”:
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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
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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
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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?
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Two potential causes for the creation of
emerging markets:
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The failure of state-led economic development
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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
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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
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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)
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•
High risk for foreign business
Economically and technologically
backward
Consumer had poor purchasing
purchasing power
Few opportunities for business
* Risks are increasingly manageable
* Technologically competitive
* Increasing purchasing power
among consumers
* Higher income growth than
developed nations
* Offer many opportunities as large
untapped markets and low-costs,
high quality sources
Emerging Economies as Growing Markets
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Approximately 75% of the world’s population lives in
emerging economies
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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
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The effects – many MNCs successfully established presence in China:
Coco-Cola, Caterpillar, Carrefour, And Ericsson
Emerging Economies as Growing Markets
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Industrialized countries are relying on expanding their markets
in developing and emerging economies to increase their
exports
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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
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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
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Lack of Infrastructure
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‘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).
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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
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Environmental Issues
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Environmental and social responsibility
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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
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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
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Fundamental problems associated with
traditional economic and political systems
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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
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To guarantee a disciplined and stable economy that
is relatively free of political disturbances and
interference
WHAT ARE THEIR
PROSPECTS?
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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