INTB320 – A+ International
Economics and Business
Strategies
Emerging Markets, FDI &
Currency Risk Analysis
Latest Updated 2025–2026
Advanced economies
Post-industrial countries with high per capita income, competitive industries, and developed
commercial infrastructure. Typically the richest countries, including Australia, Canada, Japan, United
States, and nations of Western Europe.
Developing economies
Low-income countries characterized by limited industrialization and stagnant economies. e.g.
Bangladesh, Bolivia, Zaire.
Emerging market economies
Former developing economies that achieved substantial industrialization, modernization, and
remarkable economic growth. E.g., Indonesia, Mexico, Poland, Turkey.
Market Size
The country's population, especially those living in urban areas.
Market Growth Rate
The country's real GDP growth rate.
Market Consumption Capacity
Income of the middle class.
Commercial Infrastructure
Density of telephone lines, number of personal computers, density of paved roads, population per
retail outlet, and other such characteristics.
, Economic Freedom
The degree to which government intervenes in business activities.
Country Risk
Degree of political and macroeconomic risk.
Political instability
Corruption, weak legal systems, and unreliable government authorities increase business risks and
costs, and hinder forecasting.
Weak intellectual property protection
Discourages producing or selling goods that entail valuable assets.
Bureaucracy
Burden of excessive requirements for licenses, approvals, and paperwork; not accountable legal and
political systems.
Poor physical infrastructure
Lower quality roads, drainage systems, sewers, and electrical utilities are often a factor in emerging
markets.
Partner availability and qualifications
MNEs that seek alliances with well-qualified local companies may find such partners in short supply in
emerging markets.
Resistance from family conglomerates
Economies may be dominated by privately-owned local firms that are highly diversified, and control
supplies and employment.
Example: Euro vs. The Dollar
Suppose, last year, the exchange rate was 1 = $1. Now, suppose the rate has gone to: 1.50 = $1.
Emerging Markets as Target Markets
Many have huge middle classes, with significant income for buying electronics, cars, health care
services, and countless other products.
Emerging Markets as Manufacturing Bases
Home to low-wage, high-quality labor for manufacturing and assembly operations.
Emerging Markets as Sourcing Destinations
MNEs have established numerous call centers in eastern Europe, India, the Philippines, and elsewhere.
Investments from abroad
Benefit emerging markets, leading to jobs, technology transfer, and linkages to the global
marketplace.
Effect on European Firms
European firms pay more for inputs from the U.S., which reduces profitability and requires higher
prices.
Increased Exports to the U.S.
European firms can increase their exports to the U.S., leading to higher revenues.
Market Psychology
Refers to investor behavior, such as herding behavior or momentum trading.
Government Action
Governments intervene to influence the value of their own currencies, e.g., the Chinese government
intervenes to keep the renminbi undervalued.
Balance of Payments
The nation's balance sheet of trade, investment, and transfer payments with the rest of the world,
reflecting the difference between total money coming in and going out.
Investment Banks
Underwrite stock and bond issues and advise on mergers.
Merchant Banks
Provide capital to firms in the form of shares rather than loans.
Private Banks
Manage the assets of the very rich.
Offshore Banks
Located in jurisdictions with low taxation and regulation.
Commercial Banks
Deal mainly with corporations or large businesses.
Capital Structure
Economics and Business
Strategies
Emerging Markets, FDI &
Currency Risk Analysis
Latest Updated 2025–2026
Advanced economies
Post-industrial countries with high per capita income, competitive industries, and developed
commercial infrastructure. Typically the richest countries, including Australia, Canada, Japan, United
States, and nations of Western Europe.
Developing economies
Low-income countries characterized by limited industrialization and stagnant economies. e.g.
Bangladesh, Bolivia, Zaire.
Emerging market economies
Former developing economies that achieved substantial industrialization, modernization, and
remarkable economic growth. E.g., Indonesia, Mexico, Poland, Turkey.
Market Size
The country's population, especially those living in urban areas.
Market Growth Rate
The country's real GDP growth rate.
Market Consumption Capacity
Income of the middle class.
Commercial Infrastructure
Density of telephone lines, number of personal computers, density of paved roads, population per
retail outlet, and other such characteristics.
, Economic Freedom
The degree to which government intervenes in business activities.
Country Risk
Degree of political and macroeconomic risk.
Political instability
Corruption, weak legal systems, and unreliable government authorities increase business risks and
costs, and hinder forecasting.
Weak intellectual property protection
Discourages producing or selling goods that entail valuable assets.
Bureaucracy
Burden of excessive requirements for licenses, approvals, and paperwork; not accountable legal and
political systems.
Poor physical infrastructure
Lower quality roads, drainage systems, sewers, and electrical utilities are often a factor in emerging
markets.
Partner availability and qualifications
MNEs that seek alliances with well-qualified local companies may find such partners in short supply in
emerging markets.
Resistance from family conglomerates
Economies may be dominated by privately-owned local firms that are highly diversified, and control
supplies and employment.
Example: Euro vs. The Dollar
Suppose, last year, the exchange rate was 1 = $1. Now, suppose the rate has gone to: 1.50 = $1.
Emerging Markets as Target Markets
Many have huge middle classes, with significant income for buying electronics, cars, health care
services, and countless other products.
Emerging Markets as Manufacturing Bases
Home to low-wage, high-quality labor for manufacturing and assembly operations.
Emerging Markets as Sourcing Destinations
MNEs have established numerous call centers in eastern Europe, India, the Philippines, and elsewhere.
Investments from abroad
Benefit emerging markets, leading to jobs, technology transfer, and linkages to the global
marketplace.
Effect on European Firms
European firms pay more for inputs from the U.S., which reduces profitability and requires higher
prices.
Increased Exports to the U.S.
European firms can increase their exports to the U.S., leading to higher revenues.
Market Psychology
Refers to investor behavior, such as herding behavior or momentum trading.
Government Action
Governments intervene to influence the value of their own currencies, e.g., the Chinese government
intervenes to keep the renminbi undervalued.
Balance of Payments
The nation's balance sheet of trade, investment, and transfer payments with the rest of the world,
reflecting the difference between total money coming in and going out.
Investment Banks
Underwrite stock and bond issues and advise on mergers.
Merchant Banks
Provide capital to firms in the form of shares rather than loans.
Private Banks
Manage the assets of the very rich.
Offshore Banks
Located in jurisdictions with low taxation and regulation.
Commercial Banks
Deal mainly with corporations or large businesses.
Capital Structure
