Competitiveness of Emerging Market Firms
Pervez N. Ghauri
Professor of International Business
King’s College London
United Kingdom
Email: [email protected]
www.pervezghauri.com
Five Issues
1. Performance of emerging markets
2. Potential of Emerging markets
3. Western economies / firms and the emerging markets
4. Strategies for emerging market firms from EEC
5. Emerging research topics
Performance of Emerging Markets:
World in Figures
US
Breakdown of Exports
World Population
4%
10%
4%
38%
41%
Japan
2%
China
19%
Russia
10%
Brazil
3%
1%
2%
3%
6%
17%
26%
5%
2%
India
Other
Emerging
Markets
Euro Area
7%
RoW
Source: The World Bank 2014 (2012 figures)
Potential of Emerging Market: GDP Growth
GDP Growth Projections
14
12
10
8
China
6
India
4
Transition Economies
2
Latin America
North America: US
0
1990
2000
2005
2009
-2
-4
-6
-8
Source: The Economist Intelligence Unit, 2010
2010
2011
2012
2013
2014
2015
Western Europe: EU15
Global FDI inflows into different economies, 20002012 (in Billions of US-Dollars)
(Source: UNCTAD, 2012)
According to UNCTAD (2014) the FDI inflow in developing countries plus
transition economies reached a record of $886 billion (778+108) in 2013.
Emerging Market Vs Developed Market
Growth- Outlook
Exhibit (1.5): Emerging Market Growth
Breakdown of GDP
Breakdown of GDP in terms of PPP
1990
BRIC
1995
Other EM
2000
RoW
2005
2009
Major Developed
1990
BRIC
1995
Other EM
Data from World Bank Database (WorlddataBank, 2011)
Data from IMF: World Economic Outlook Database(IMF, 2011a)
2000
RoW
2005
2009
Major Developed
Western Economies and Emerging Markets
• 84 % of the world population in emerging markets
48.0 % of the world GDP
33.5 % of the world exports
Reasons for Emerging Market Growth
and Attractiveness
•
•
•
•
•
•
Market potential*
Huge investments in infrastructure
Government support
Information revolution
Rising middle classes
Efficient markets for outsourcing*
Western Firms and Emerging Markets:
Citigroup, retail-banking net profit
North America
4%
Latin America
40%
Total: $2.2
bn
Asia
52%
Europe, Middle
East and Africa
4%
Source: Company reports January-June 2013
Offshore
location
attractiveness
index
A word of caution: Institutional void
• Capital markets : Small and inefficient with limited
presence of financial intermediaries*
• Product markets: Business environment, lack of efficient
institutions and law enforcement*
• Labour markets: Limited supply of skilled personnel due
to lack of services middlemen – recruitment firms.
Financial Markets in EM
12
Time to Do Business
13
Strategies for Emerging Market firms
• Emerging markets that were not connected with the
Western firms / economies have escaped the economic
crisis!
• Global crisis has provoked debate about how much to rely
on exports to the Western markets and how much on
domestic or emerging market demands.
• At the recent annual meeting of the Asian Development
Bank, minister after minister said emerging countries
should rely more on each other and less on selling to the
West.
How to Enhance Competitiveness of EEC Firms Lessons from Asian Emerging Markets
• Rely less on the Western markets – trade more with other
emerging markets
• Have a systematic approach – do market research
• Learn to collaborate with other domestic / regional firms
– be part of a global factory
• Develop your own brands – move from being commodity
/ component providers to product producers
• Policy makers need to stimulate domestic firms and
simplify regulatory systems
Emerging Research Topics
• Internationalization of emerging market firms
• Most IM theories based on Western firms’ activities - Do
we need new theories?
• Branding and its impact on firms and consumers
• Increasing complexities in marketing abroad – New
Challenges due to e-commerce and social media
• The importance of CSR and ethics in doing business
abroad
• How to serve masses at the Base of the Pyramid (BOP) –
Social Entrepreneurship
Thank you
[email protected]
www.pervezghauri.com