MN20599
Business & strategy in emerging markets
Lecture 1
Introduction to the course
Who are the Emerging Markets?
- BRIC: Brazil, Russia, India, China
- New Frontier Economies: Chile, Egypt, Indonesia, Malaysia, Mexico, Pakistan, Peru,
Philippines, South Africa, Thailand, Turkey
o Frontier markets are less than capital markets in the developing world
o Countries that are more established than the least developed countries but
still less established than the emerging markets.
o Also known as “pre-emerging markets”
- Collectively, emerging markets are also developing countries
,Varied classification
Different index have different interpretations of what an EM is
https://www.ftserussell.com/blogs/what-we-mean-emerging
https://www.msci.com/market-classification
https://frontera.net/news/2-what-constitutes-an-emerging-market/
https://www.spglobal.com/spdji/en/indices/equity/sp-emerging-markets-core/
#overview
https://www.goldmansachs.com/what-we-do/investment-management/private-wealth-
management/intellectual-capital/isg-insight-2013.pdf
What are the characteristics of the emerging markets?
Fast economic growth
Liberalisation of trade, integration of countries in
Fast industrialization
Poor infrastructure development but improving
Political instability
High workforce
Market potential
High investment return
Information asymmetry
Do you feel secure when buying a used car in your country?
Differences between developed markets and EMs
,- Doing business in EMs
o Less efficient
o Low quality of production
o Poor infrastructure
o Lack of expertise, need more time to learn
o Takes longer
- Features of well-functioning markets
o Greater degree of transparency
o Relatively low transaction costs
o Shorter time period to complete transactions
Defining EMs
Emerging markets: countries experiencing a transition phase from developing markets
to developed markets due to rapid growth and industrialization
Features:
- Started an economic reform process aimed at alleviating problems, e.g., poverty,
poor infrastructure, and overpopulation
- Achieved a steady growth in GDP per capita
- Increased integration in the global economy
- New challenges: economic growth slow down, political uncertainty
Institutional features in EMs
- Challenges in EMs:
o Uncertainty
o Information asymmetry
o High transaction cost
o Lengthy bureaucratic process
o Relationship-based transaction
Negative externality
Exclude everyone who isn’t in the relationship
Not based on the competition or the capabilities
o Buyer and seller are not easily or efficiently able to come together
But why should we still do business in EMs?
, Lot of issues in EM (huge inflation, government power, lots of money, unemployment)
But high growth
OECD video:
Growth stronger and faster in emerging markets than in the developed countries of the
OECD
China which produces 17% of global GDP today is expected to pass the US and become
the world’s biggest economy with 28% of the global GDP in 2030
China and emerging countries’ fast development will be driven by a better educated and
more productive workforce
Learning achievements: example
- Attain familiarity with business contexts in EMs, understand business opportunities
and challenges
o e.g., What are some new business opportunities arising from changes in
EMs?
- Develop analytical and creative skills to support decision-making in these contexts
o e.g., As a manager, how are you going to negotiate deals with your Chinese
business partners?
- Develop solutions to strategic and operational challenges in these contexts
o e.g., Discuss the criteria involved in selecting partners in EMs
o How do MNEs compete in EMs?
Business & strategy in emerging markets
Lecture 1
Introduction to the course
Who are the Emerging Markets?
- BRIC: Brazil, Russia, India, China
- New Frontier Economies: Chile, Egypt, Indonesia, Malaysia, Mexico, Pakistan, Peru,
Philippines, South Africa, Thailand, Turkey
o Frontier markets are less than capital markets in the developing world
o Countries that are more established than the least developed countries but
still less established than the emerging markets.
o Also known as “pre-emerging markets”
- Collectively, emerging markets are also developing countries
,Varied classification
Different index have different interpretations of what an EM is
https://www.ftserussell.com/blogs/what-we-mean-emerging
https://www.msci.com/market-classification
https://frontera.net/news/2-what-constitutes-an-emerging-market/
https://www.spglobal.com/spdji/en/indices/equity/sp-emerging-markets-core/
#overview
https://www.goldmansachs.com/what-we-do/investment-management/private-wealth-
management/intellectual-capital/isg-insight-2013.pdf
What are the characteristics of the emerging markets?
Fast economic growth
Liberalisation of trade, integration of countries in
Fast industrialization
Poor infrastructure development but improving
Political instability
High workforce
Market potential
High investment return
Information asymmetry
Do you feel secure when buying a used car in your country?
Differences between developed markets and EMs
,- Doing business in EMs
o Less efficient
o Low quality of production
o Poor infrastructure
o Lack of expertise, need more time to learn
o Takes longer
- Features of well-functioning markets
o Greater degree of transparency
o Relatively low transaction costs
o Shorter time period to complete transactions
Defining EMs
Emerging markets: countries experiencing a transition phase from developing markets
to developed markets due to rapid growth and industrialization
Features:
- Started an economic reform process aimed at alleviating problems, e.g., poverty,
poor infrastructure, and overpopulation
- Achieved a steady growth in GDP per capita
- Increased integration in the global economy
- New challenges: economic growth slow down, political uncertainty
Institutional features in EMs
- Challenges in EMs:
o Uncertainty
o Information asymmetry
o High transaction cost
o Lengthy bureaucratic process
o Relationship-based transaction
Negative externality
Exclude everyone who isn’t in the relationship
Not based on the competition or the capabilities
o Buyer and seller are not easily or efficiently able to come together
But why should we still do business in EMs?
, Lot of issues in EM (huge inflation, government power, lots of money, unemployment)
But high growth
OECD video:
Growth stronger and faster in emerging markets than in the developed countries of the
OECD
China which produces 17% of global GDP today is expected to pass the US and become
the world’s biggest economy with 28% of the global GDP in 2030
China and emerging countries’ fast development will be driven by a better educated and
more productive workforce
Learning achievements: example
- Attain familiarity with business contexts in EMs, understand business opportunities
and challenges
o e.g., What are some new business opportunities arising from changes in
EMs?
- Develop analytical and creative skills to support decision-making in these contexts
o e.g., As a manager, how are you going to negotiate deals with your Chinese
business partners?
- Develop solutions to strategic and operational challenges in these contexts
o e.g., Discuss the criteria involved in selecting partners in EMs
o How do MNEs compete in EMs?
