Emerging Markets and International Business

International Businesses and the Opening up of Emerging Economies

The previous articles in this module have discussed the contours of international business and the key drivers of the phenomenon.

This article discusses how international businesses are affected by the rise of the emerging markets especially the BRICS (Brazil, Russia, India, China, and South Africa) and the next “Breakout Nations” from the second tier of the emerging markets.

The point to note is that ever since the emerging markets opened up their economies and liberalized their procedures, international businesses have found a readymade market for themselves in which they can operate in, make, and sell goods.

Often, it is the case that emerging markets provide the international businesses with the right opportunities to expand and grow further. When considered against the backdrop of falling growth rates in the West, the western multinationals could not have asked for more with countries like China and India opening up like never before.

For instance, the recent decision by the government to push for FDI (Foreign Direct Investment) in most sectors is a step in the direction of benefit to western multinationals.

Growth of International Businesses in the Opening Decades of this Century

Though globalization picked up in the 1990s and gathered steam subsequently, the recession following the dotcom bust proved to be a setback to international businesses. Further, the 911 attacks proved to be another obstacle to the expansion of international businesses.

The closing years of the first decade witnesses the 2008 Great Recession, which dealt a decisive blow to international businesses.

In this gloomy scenario, the growth in the emerging markets was the silver lining for the international businesses, which was captured well by experts like Ruchir Sharma in his book, The Breakout Nations, who pointed out that western capital had no choice but to migrate to countries like India and China.

The Future Prospects of International Businesses in the Emerging Markets

If we look into the future (though predicting the future is hazardous in these fast changing times) we find, the next frontier for international businesses is the tier two emerging economies like Vietnam, Ireland, and African countries.

Without being too optimistic, it is clear that the growth in these markets would drive the expansion plans of international businesses. it is also clear that international businesses can leverage on the demographic dividend that these countries.

To explain the term, the higher proportion of young people in the country’s population is called the dividend that these countries get because of their demography. Hence, with so many young people joining the workforce, it is apparent that the emerging economies offer the best possible means of growth for the international businesses.

Closing Thoughts

Finally, western multinationals have to contend with the international ambitions of emerging market companies as well. in recent years, there has been a trend wherein companies from India and China as well as Brazil and Russia have started to make rapid strides in their expansion plans overseas. Hence, it cannot be said that the flow of capital is unidirectional alone.

In many ways, it can be said that the global economy is now at a stage where it is anybody’s game and hence, the world is indeed flat for those with the innovative edge, hard work, and sustainable business models.

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International Business