Emerging Markets

Emerging Markets

The business world is strong and contains many risks in competition. Whoever wants to be successful always has to seize the opportunities to run the businesses growth over that of competition. From the past until now, the whole world is heading to the developed countries such as the United State of America, Europe or Japan. So these may make business concentration in only few countries. These may be risk because some countries may have to rely on the developed countries. To spread the risk, it's necessary to look for new markets which known as “Emerging Markets”. This essay will outline the main characteristics and examples of advantage and disadvantage from emerging markets.

Tarahiranchod (2012) described that in the 1980s, emerging markets is the term that was legislated by World Bank’s economist, Antoine van Agtmael. The main characteristics of emerging markets are country, which are not yet developed, but they are nations in the process of rapid growth and industrialization. Besides, they typically have higher growth expectations, whereas a greater risk profile, than developed countries. In addition, they have an increase in both local and foreign investment especially investments in infrastructures such as transportation, public utilities. Moreover, foreign direct investment strongly flows in emerging markets, which can be a good sign of expected economic growth (Kuepper 2012, Heakal 2012 and Tarahiranchod 2012).

        Emerging Markets are attractive markets for businesses because they represent not only large areas and populations but are also continuously growing economically. Moreover, emerging markets make up the new middle class. K-connect group (2012) stated that ‘it is estimated that 20% of the new middle class in the future will certainly come from emerging market countries. These ones will become the important roles because they have purchasing power’. Consequently, they will be sources for the investors who want to be successful in the long-term investment and trade.

        An example of an emerging market is India, which had the largest population of two-wheelers (around 41.6m vehicles) in the world. Ramaswamy and Sankhe (2002: p. 73, 76) described that ‘70% of the country’s automobile market were accounted in volume terms’. Two-wheelers were the normal standard of transportation in many parts of India such as rural areas, also urban or central.

        According to Ramaswamy and Sankhe (2002: 77), in the early 1940s the Munjals, owners of the Hero Group and promotes of HHM, had made a humble beginning as suppliers of bicycle components. In 2002, however, more than 16,000 whole bicycles were manufactured per day and had sold over 86 million by Hero Cycles, the group’s bicycle company. In 1986, this company over took the United State of America’s bicycle manufacturer. As a result, this company had been acknowledged and represented as the world’s largest bicycle manufacturer.

        Similarly, Honda Motor Company from Japan had related origins like this company, the Hero Group, in India. Mr. Soichro established the Honda Technical Institute which produced the first bicycle engine. He wanted to expand the company and the company was always motivated to access into joint ventures in India. But that was not easy to do either because of regulatory constraints or a desire to access local market knowledge.

To construct plants in the local areas in India, Honda Motor Company called the global strategy as glocalization which was used to represent its strategy because the company wanted to meet local demand. Owing to this network of localized operations, Honda Motor Company had been obtained cooperation for research, construction and developing the products with local people in India (Ramaswamy, Sankhe 2002: p. 77-78).

Therefore, Honda Motor Company had been searching for partner companies. The first plan which was called for attending to the two-wheeler market. A short list of Indian companies were identified by Honda Motor Company which would make good partners of Honda. Finally, it chose the Hero Group for its motorcycle venture. Because it had both prosperous bicycle business and a fairly strong moved business as well. Being Hero Group’s partner would help Honda Motor Company achieved its ambition of dominating the market of two-wheeler motorcycle market in India (Ramaswamy, Sankhe 2002: p. 79).

        However there may have been many advantages for investing in emerging markets, there have been disadvantages too. For example, the latest Bloomberg Emerging Markets reported ranked Thailand in the second after China which country was the most-promising emerging and frontier markets for investors (Mellow and Suwannakij 2012).

        An unexpected situation occurred in Thailand in 2011, when the country experienced flooding crisis which was the worst crisis in five decades. The flood began in the North of Thailand in January and continued through to mid-May. The flood emergency was ranked as the world’s fourth most severe natural disaster by the World Bank (Winijkulchai 2012).