Welcome to class of Emerging Markets

byDr. Satyendra Singh

University of WinnipegCanada

Characteristics of EM• GNI per capita per year < $10,000• High birth rate• Undeveloped infra structure• Several languages/dialects• Close family ties• Less women in workforce• Cultural issues• 2/3rd of the world is either developing country

or emerging markets.

Common Traits of Big EM

• Physically large• Significant populations• Represent markets for a wide range of products• Strong rate/potential of/for growth• Undertaken programs of economic reform• Major political importance within their regions• Regional economic drivers• Engender neighbouring markets as they grow

Eastern European EM

Asian EM

Four-Tigers of Asia• South Korea, Taiwan, Hong Kong, SingaporeSouth Korea, Taiwan, Hong Kong, Singapore

• ↑ QOL deregulating their domestic economies and opening up to global markets

• Industrialization by assembling products from the U.S., Japan, and other developed countries. Learning is important

• They are now major world competitors.

Brazil• Japan one of the largest trading partner• World’s sixth-largest weapons exporter• Steel and agricultural compete Canada• Embraer (Brazilian aircraft manufacturer)

competes with Canada’s Bombardier. • Ships cars, trucks, and buses to EM annually• Volkswagen produced 3 million VW Beetles.• Auto makers invested $3b in Mercosur

– 200m population– Argentina, Brazil, Paraguay, Uruguay, Venezuela– 5 full member, 5 associate, 2 observer (NZ/Mexico)– Common market

India…

• Improving the investment climate

• Reforming agriculture, food processing, and small-scale industry

• Eliminating red tape

• Instituting better corporate governance

India…

• Privatizing state-owned companies as opposed to merely selling shares in them.

• Strategic investors can have 51% mgmt control

• Deregulating telecom sector’s

• Demolishing monopolies of state-owned companies.

India

• Maintaining the momentum to reform the – petroleum sector– long-distance phone services– housing– real estate– retail sectors to foreign direct investment

China…• China’s dual economic system

– socialism and capitalism economic boom

• GNP 8-10% since 1970– This growth is possible for the next 10-15 years– If so, China’s GNP > USA

• This growth depends on China’s ability to– deregulate industry– import modern technology– privatize overstaffed– inefficient state-owned enterprises, and– continue to attract foreign investment

China…• It has 6 regions size, diversity, and political

organization different (6 regions vs single country).

• There is no one-growth strategy for China, each region:– is at a different stage economically– its own link to other regions and world– has its own investment patterns– is taxed differently– has substantial autonomy in how it is governed

• While each region is separate enough to be considered individually, each is linked at the top to the central government in Beijing

China’s 6 regions

China--Issue

• Corruption

• Human rights issues (working conditions…)

• Foreign exchange rate (controversial)

• Reform of legal system

Research shows that

• If per capita income/year > $5,000– people become more brand conscious– forego local brands; seek foreign brands

• At $10,000– they join the same income group elsewhere who

are exposed to the same global information sources.

– they join the “$10,000 Club” of consumers with homogeneous demands who share a common knowledge of products and brands.

• If >$10,000, they become global consumers