Emerging market is used to describe an economy in the process of rapid growth and industrialisation.
Common Features of Emerging Markets
- Economies making a transition
- Rapid industrialisation
- Have potential to become developed economies
- Faster long-term economic growth than most developed countries
- Many inhabitants still in poverty, though economic growth is taking many out of poverty
- Businesses struggle to access global markets (ie, trade barriers)
The Four Classic Original Emerging Markets (BRIC)
- Brazil
- Russia
- India
- China
What happened to the BRICs
- China is now one of the world’s largest economies
- Russia has suffered heavy sanctions after invading Ukraine and has lost a lot of market power
- India continues to grow, now having the largest population of any country
- Brazil has not accelerated ahead or changed course massively, but still represents a potential economic power of the future
Perceived Business Threats from Emerging Markets
- Increasingly large pool of skilled, but low-cost labour
- Undervalued currencies make their exports cheaper
- Inadequate protection of brand and other intellectual property
- State subsidy of industries to make them more competitive globally
Key risks and threat of emerging markets
- Political instability
- Cultural differences / sensitivities
- Variable approaches to financial and legal dealings
- Corruption and bureaucracy still an issue
- Emerging markets becoming major exporters
- Low-cost production makes developed economies uncompetitive in some markets
Case Study (Plan): Myface and Emerging Markets
- Emerging markets have different dynamics to the developed markets that Myface is used to operating in, meaning that their current strategies may prove ineffective. However, there are many people in these markets who could be added to Myspace’s user base quite smoothly if they can correctly attract users.
- An emerging market is very volatile and could leave a business like Myface in a difficult situation if they do not adapt quickly to the changing market conditions
- If there are weaker copyright/IP laws, then Myface may have to consider the problem of dealing with clones and other blatant copies, as well as the impact these sites may have on their business.
- Different countries will have different data protection regulations, so it may be required that Myface invest in local infrastructure to run their operations in the country, this could lead to much higher costs and therefore risks associated with entering a developing economy.
- Neglecting to deal with their problems in the west won’t make those go away, so they cannot only focus on growth into new markets, they must also work on improving their performance within existing markets or they may end up in a situation where their core market is at risk.
- Myface may benefit from buying out potential competitors such as Instagram (cough cough) to secure the younger market and a future for their company even if their main platform is lost.
- Getting into these markets earlier may give them a first mover advantage.
- If the market already has companies operating in it, then they may be looking at saturation and the issues with being yet another solution to a problem that no longer exists.
- If the country has poor internet infrastructure, then there may not be many people who can actually use Myface, meaning that the investment may be poor if they don’t also invest in internet connectivity for the country.