Growth, Opportunities and Challenges Emerging Markets: Growth, Opportunities and Challenges By Philip Guarino June 12, In the not so distant past, military coups, hyperinflation and crippling foreign debt dominated our headlines when developing nations were discussed. The past decade has brought remarkable changes; a monumental shift in the economic balance of power that is already radically changing how and where we conduct business. Choice of words aside, emerging markets have become integral players in the world economy.
The global market was dominated by multinationals from developed economies.
Recently, this context has changed with the rise of companies from rapidly developing economies. Multinationals in rapidly developing economies RDEs: Rapidly developing economies, such as the BRICS, have been shaping the global market in several ways.
Companies from developing countries have been growing at an increasing rate for the past decades, expanding from their home countries to international markets, becoming large employers, main investors and strong competitors, hence changing the international landscape, making it a globally challenging environment.
As previously mentioned, multinationals from first world countries have been attracted to third world or developing countries. These multinationals have been interested to invest in developing countries for several reasons; mainly economic liberalization, low cost resources, access to new customers, and to develop their portfolios.
So these countries lowered the restrictions and regulations through decreasing corporate and business taxes, reducing barriers to entry and trade. In addition to that, these markets were opportunities since they had the largest population size. Multinationals were broadening their portfolios through these investments, increasing market shares, and becoming cost efficient competitors.
Rise of Emerging Market Multinational Enterprises: Technology has re-dimensioned our world to a small village through the introduction of the Internet and innovation of technology. Technology has broken the barriers of time and distance making it simple and possible for multinationals to deal with emerging economies.
On the other hand, it has given emerging economies the opportunity to communicate and gain exposure to the developed world. One of the most significant agreements and impacts was the joining of China the World Trade Organization.
Expansion Strategies by Multinationals: Seeking to expand their businesses and further acts as global competitive players, multinational enterprises have broadened their activities to the emerging economies.
Having plenty of raw materials, low labor costs and capital, emerging economies were attractive virgin markets for multinationals. Developing countries became major hubs for foreign investments. China has made a breakthrough by taking part in the World Trade Organization in Throughout history, it has been a communist country with closed boundaries, delaying it to innovate and take part in the international economy.
Having low labor cost, China has been a competitive cost-leader specialized in the manufacturing and production industry. Many multinationals from various countries have outsourced their productions from China. For the past few years, China has been losing grounds with its cost competitive advantage.
Many other emerging countries are competing with the Chinese market on the cost leadership grounds. Due to the rise of labor costs, Chinese multinationals have been facing a lot of competition from their emerging market counterparts such as Vietnam and India, were labor costs are still maintained at low stagnant levels.
In addition to that, Chinese companies are being faced with major competition from the service sector from developed and developing economies; such as American and Indian multinationals, respectively.
BCG, Due to the large domestic market, companies have been dependent on the local market rather focusing on the international market. In order to grow, they have to adapt to the international market needs. But in addition to that point, China has witnessed a high investments rate in the research and development sector.
One reason for this increase in investments on research is due to the rise of the middle class. Another reason for investing in research is in order to compete with westerners on qualitative basis rather than only cost basis, maximizing their opportunities in the global market.
EMME, or emerging market multinational enterprises, are either expanding to foreign markets in order to bring back knowledge and resources home in order to compete domestically, or to seek for expansion and growth in the international market.
Lenovo is one example of a Chinese multinational, partly government owned, that has fought to be recognized as a global brand.
They dealt with this issue by competing, learning and dominating the domestic market. At first they focused on selling to corporate customers, learning and establishing a name in this segment and then moving on to the consumer market.Emerging-market MNEs integrate with MNEs from developed market using resources and reputation of the specific MNEs to enter foreign market -TCL, a Chinese consumer-electronics company, broke into Europe by buying the French Thomson TV brand.
Emerging markets multinational enterprises Posted on May 6, by zvictoria Emerging market multinational enterprises (EMME) is a key term being discussed by .
development in emerging markets, and the threats this represents to developed market MNE’s. Instead I want to investigate how a multinational enterprise from a developed market succeeds in an emerging market, by looking at companies that are already doing this.
Growing economy of emerging markets: Growing economy of developing countries is a key success factor for MNEs to utilize the opportunities of emerging market.
In current scenario, GDP of several developing countries is more than $14 trillion that is as big as US economy (Kuil, ). Emerging markets multinational enterprises Posted on May 6, by zvictoria Emerging market multinational enterprises (EMME) is a key term being discussed by economists and analysts for the past decade.
countries for study, the emerging markets have a good chance to catch up with the developing countries (Cavusgil, Ghauri & Agarwal, ).
The barriers for direct investment are vanishing more and more and therefore countries in emerging markets are becoming a more emerging markets and the rates of growth are twice as high as the .