Emerging markets are attractive for international businesses for different reasons depending on what way an international business intends to engage in business in the emerging market. It is often easier for a business to become a more well organized business in an emerging market than many of the domestically owned businesses and then becomes easier to partner with proportionally more well integrated businesses in a foreign emerging market. Global sourcing and exporting goods and services from an emerging market then becomes a very attainable business goal along with manufacturing. There are also issues of Currency Exposure that are beneficial in the exchange of business dealings between Countries especially if the Currency of an Emerging Market Country continually devalues with respect to the USD. There are Currency Risks as well as Political, Legal and Industrial Issues to deal with as well when an International Business does business in an Emerging Market. The three main aspects of Emerging Markets that International Businesses are attracted their usefulness as Target Markets to sell products and services to, as Manufacturing Bases and as Sourcing Destinations (Cavusgil, Knight & Riesenberger 2017: p. 210-211).
Some of the Largest Emerging Markets have doubled their amount of imports from other countries (p. 210). Products and services can vary in a range from Power Tools to Electronics to Health Care. The growing dollar amount spent by importers and type of import transactions worldwide is of obvious interest to exporters who stand to profit from developing a niche and/or developing a set of export relationships with different import businesses in different countries. Rising income levels in growing emerging market economies creates a growing consumer market where the citizens are now able to afford products and services which they could not in the recent past. Businesses in these very same emerging market economies are excellent target import consumers for machinery, equipment and technology exports by exporters (p. 210)
Because of relatively low labor costs emerging markets are also excellent host countries for Manufacturing Operations (p. 210-211). Businesses in Japan, Europe and the United States as well as in other advanced economies have invested considerable amounts of money into manufacturing and shipping facilities and infrastructure in different emerging market countries (p. 210). The ease of access to natural resources and other raw materials available in emerging market economy countries also make them excellent choices for manufacturing (p. 210).
Because Emerging Market based businesses know that they exist inside of an economy with a Currency Advantage for many foreign businesses, know that they can complete noncore business activities in an exporter’s value-chain set of activities for less due to labor cost arbitrage, and also have different strategic shipping locations, they tend to connect with export businesses and in the best situations these connections become mutually beneficial business arrangements in which the profitability of the exporter increases and the growth cycles of the emerging market business and consequently country end up both trending upward (p. 211). This growth cycle can increase the income and size of the middle class in the emerging market country creating a double strengthened set of business activities because of the increase of importation into the emerging market country as well as the increase of value-chain activities done by the country for foreign exportation businesses.
There are a set of considerations that must be taken into consideration when evaluating any one particular emerging market country as a potential import or export business location. Political Instability, Intellectual Property Protection Issues, Bureaucracy, Red Tape, and Lack of Transparency, Poor Physical Infrastructure, Partner Availability and Qualifications, and Likely Resistance from Family Conglomerates are all issues that must be dealt with (p. 215-216). Relatively parallel to these considerations are a set of success strategies for Emerging Markets. Example Success Strategies include: Customization of Offerings to Unique Market Needs, Partnering with Family Conglomerates, Targeting Governments in Emerging Markets, Skillfully Challenging Emerging Market Competitors (p. 217-220).
Very Closely related are a duo set of philosophical business paradigmatic goals. The first is fostering economic development which is done by providing jobs and making economic advantage in a country or region that in turn create profitability by social and economic transformation. The second is using microfinance to facilitate entrepreneurship in the form of small loans on the order of magnitude often of less than $100 to purchase things like mobile phones that are rented out to villagers or cows to use for milk sold at market (p. 220-221).
Bibliographic Information
Cavusgil, Knight, & Riesenberger (2017). International Business, the New Realities (4th ed., pp. 210-221). Pearson.