The world’s economies are divided into three main groups

Advanced Emerging Markets

Economies Developing Economies

Rapidly growing
Highly developed, Nations with low income economies transitioning
industrialized nations. and limited industrial from developing to
development. advanced status.

United States India

Nigeria
➢ Advanced / Developed Economies
• Advanced economies are wealthy and industrialized nations.
• Characteristics:
✓ Strong focus on service industries (e.g., finance, healthcare, and technology).

✓ High incomes and strong purchasing

power.
✓ Open markets with minimal restrictions on
trade and investment.
➢ Developing Economies
• Developing economies are nations with low income and limited industrial growth.
• Key challenges:
✓ High poverty rates (e.g., ~10% live on less than $2 per day).
✓ Poor access to healthcare, education, and infrastructure.
✓ High debt levels that slow economic growth.

❑ In many Sub-Saharan African

countries, the average income is
less than $2,000/year, and only
50% of children complete primary
school.
➢ Emerging Markets

• Emerging markets are countries that are growing rapidly and improving living standards.
• Features:
✓ Rising middle class with increasing income and spending.
✓ Urban areas are more developed than rural areas.

❑ Brazil, India, China, and

South Africa.

• Sectors: Moving from

agriculture to industries like
manufacturing and technology.
➢ Role of Technology in Economic Development
• Technology drives progress in advanced and emerging markets.
• Includes:
✓ Hardware: Computers, phones, and machinery.
✓ Infrastructure: Education systems, skilled workers, banking.
• Impact:
✓ Increases productivity and innovation.
✓ Improves living standards and global competitiveness.
❑ China’s use of technology transformed its economy from
agriculture-based to industrial and tech-driven.
➢ The Rise of Emerging Markets
• Emerging markets contribute to global economic growth.
• BRIC countries (Brazil, Russia, India, China) are leading the way.

• Factors driving growth:

✓ Low-cost labor and knowledge workers.
✓ Government support for open markets and investment.

❑ India has become a global IT hub due to its skilled workforce and
low labor costs.
➢ Future Outlook for Global Economies

• Emerging markets are expected to lead

future global GDP growth.

• Key contributors: BRIC countries and

other transitioning economies.

• Urbanization and a growing middle class

will drive consumption.

❑ China and India will remain major players in

global trade and investment.
• Emerging markets are increasingly attractive to international businesses
due to their unique characteristics and rapid growth.
These markets serve as:
1. Important target markets for products and services.
2. Cost-effective manufacturing bases with high-quality labor.
3. Sourcing destinations for business activities such as production and IT services.
 ➢ Emerging Markets as Target Markets
• Emerging markets have a growing middle class with increased
purchasing power.
❑ In Mexico, around 25% of the population enjoys an income
comparable to middle-class families in advanced economies.

• There is rising demand for consumer goods and services like

electronics, automobiles, and healthcare.
❑ Companies like Pfizer and GlaxoSmithKline have introduced
affordable medications to cater to this demand.

• Many industries experience their fastest growth in

emerging markets.
❑ Black & Decker and Bosch have growing markets
for power tools in regions like Asia, Latin America,
and Africa.
➢ Governments and Enterprises as Customers

• Emerging markets require machinery,

technology, and infrastructure to support their
development.
❑ India has a high demand for textile
machinery, while China focuses on
agricultural tools.

• Governments invest heavily in infrastructure-related

products and services.
❑ Power transmission equipment, transportation
systems, and high-tech machinery.

• State enterprises play a key role in purchasing

products for national development.
➢ Emerging Markets as Manufacturing Bases

• Emerging markets offer low-wage, high-quality

labor, making them ideal for manufacturing and
assembly operations.
❑ Mexico, India, and China are major hubs for
manufacturing cars and electronics.
• Many emerging markets have rich reserves
of natural resources.
❑ South Africa is a leading source of
diamonds, and Brazil is a key supplier
of bauxite for aluminum production.

• Some industries thrive in specific markets due to

expertise or specialization.
❑ Taiwan and Malaysia excel in producing
personal computers.
➢ Evolving Manufacturing Locations
Shifting Manufacturing Locations

• As wages rise in some emerging markets,

businesses relocate to maintain cost efficiency.
❑ Nike and Adidas moved manufacturing from
China to Vietnam, where wages are one-third
of those in China.

• Managers evaluate factors like labor costs,

quality, and logistical efficiency when selecting
production sites.
❑ Vietnam has become a leading destination for
low-cost footwear production.
➢ Emerging Markets as Sourcing Destinations
• Outsourcing helps companies focus on their core
competencies by relying on specialized suppliers.
❑ Call centers are commonly located in India, the
Philippines, and Eastern Europe.

• IT firms benefit greatly from outsourcing in

emerging markets.
❑ Dell and IBM outsource technological
functions to knowledge workers in India.

• Sourcing from emerging markets benefits local

economies by creating jobs and transferring
technology.
 Risks and Challenges of Emerging Markets
Challenge Explanation Examples

Political Instability Unpredictable governance increases Russia: Favoritism for local firms;
costs and discourages investment. Brazil: Bureaucracy delays
business.
Weak Intellectual Property Poor enforcement of laws leads to China: Counterfeit retail stores;
piracy and counterfeiting. Argentina: Weak copyright
protection.
Bureaucracy & Lack of Excessive paperwork and corruption Russia & Venezuela: High
Transparency hinder operations. corruption; Bribes are common.

Poor Physical Infrastructure Insufficient roads, ports, and utilities India: Power outages, poor transport
disrupt business activities. systems.

Partner Availability Reliable local partners are often Small markets: Limited qualified
scarce, especially in smaller firms.
markets.
Family Conglomerates Dominant, government-backed South Korea: Hyundai; Turkey: Koc
firms create competition but can Group.
also serve as partners.
• Multinational enterprises (MNEs)
must create new strategies to
succeed in emerging markets
because traditional methods often
don't work.

❑ Toyota created low-cost cars (around $7,000)

for low-income countries and built factories
in India to increase its market share.
 1- Understand Local Needs: 3- Adapt Pricing and Products:
• Study buyers, suppliers, and distribution • Offer affordable options with creative
channels. solutions (e.g., General Electric’s
• Build trust with the local community. $1,500 ECG machine in India).
• Tencent created free messaging apps
2- Overcome Challenges: to cater to local demand for low-cost
• Many people in emerging markets can’t read or text communication.
don’t have internet access.
• Build your own supply chain if infrastructure is
lacking.

❑ Tencent developed a free ❑ General Electric

messaging app for designed a
Chinese consumers who lightweight ECG
preferred cheaper text machine for Indian
messaging. doctors.
Who Are Family Conglomerates?
• Large, influential firms with diverse business interests.
• Examples: Sabanci in Turkey, Astra in Indonesia, and Vitro in Mexico.

Benefits of Partnering with FCs:

• Share risks, costs, and resources when entering the market.
• Access their local market knowledge, political connections, and
distribution channels.
• Overcome challenges like poor infrastructure and bureaucratic hurdles.

Examples of Partnerships:
❑ Ford and Kia (South Korea): Ford used Kia’s strong distribution network to
introduce the Sable line of cars.
❑ Danone and Sabanci (Turkey): Danone brought expertise in packaging and health-
focused products, while Sabanci provided local market knowledge. This partnership
made Danone the top bottled water brand within a year.
Why Target Governments?
• Governments buy large quantities of products (e.g., vehicles, office supplies)
and services (e.g., consulting, construction).
• State-owned enterprises (e.g., airlines, railways) are major buyers.

How Governments Buy:

• Governments issue formal requests for proposals (RFPs) to find suppliers
for big projects like highways, power plants, or housing.
• Companies compete by offering complete solutions, including financing
or using local resources.

Examples:
❑ Bechtel, Siemens, and General Electric
participated in the $37 billion Three Gorges Dam
project in China.
❑ Construction firms lobby governments in India
for housing projects, providing jobs and local
benefits.
Know Your Competitors:
• Many emerging market firms have strong advantages: low-cost labor,
skilled workers, government support, and family conglomerates.
• Example: India’s Mahindra & Mahindra competes globally with
affordable, high-quality farm equipment.

Countering Competition:
• Research and Innovate: Invest in R&D to create superior products.
• Partner and Expand: Work with local firms and use low-cost resources.
• Adapt Strategy: Advanced firms like John Deere partner with local
suppliers or shift production to low-cost countries to compete effectively.

Examples:
❑ Mahindra tractors gained a foothold in the U.S., selling over 300 units
in Mississippi in just four months.
❑ Western firms increase R&D and leverage partnerships to match the
strengths of emerging market firms.
Key Takeaways for Success in Emerging Markets

Learn about the unique needs and challenges of emerging markets.

Understand the Market
Tailor products and services to meet local demands effectively.

Collaborate with family conglomerates to gain access to local

Leverage Partnerships
resources, networks, and expertise.

Target government tenders and align proposals with their priorities,

Engage with Governments
such as job creation and infrastructure development.

Study local competitors, innovate, and form strategic alliances to

Adapt to Competitors
strengthen your position.

Develop new business models and invest in research to remain

Be Flexible and Innovative
competitive.