An analysis of emerging markets

An analysis of emerging markets Introduction According to Jensen, T.H and Larsen, J.A.K (2004) from Denmark National Bank, emerging markets are defined as â€Å"sets of markets where by its economic and financial potential become sharper, an average of 5% of annual growth, an improving purchasing power-adjusted exchange rate due to lower price levels in these emerging markets and a fluctuated economic growth which explains a relatively larger share of the global cyclical fluctuations than their economic weight would indicate†. According Cavusgil, S.T (2002) the main characteristic of an emerging economy is it has started economic reform process to alleviate problems and have achieved steady gross national product (GNP) per capita growth, regional economic powerhouse with large populations, large resources bases, and large markets, increasing middle income population and governments tend to promote easy fiscal and expansion monetary policy to encourage Foreign Direct Investments (FDI) and improve the living standards of its people. In this assignment, I have chosen China and Brazil as my choice of emerging markets. In my findings, I will discuss about business environments when doing business in these countries, suitable entry modes when dealing with different emerging markets and major business issues when entering emerging markets. In my conclusion, I will provide a conclusion and some recommendation when entering different emerging markets and justification on using different entry modes when dealing with different emerging markets. Findings These days, multinational companies are rushing into emerging markets for very obvious reasons. Emerging markets are full of potential with its untapped markets which has the ability to create new demand for consumer goods. This new wave of demand would help these multinational companies to gain more market shares and profits as liberalisation and globalisation forces are bringing the competition for customers into a higher level. With the satur ation of markets in developed economies such as US, multinational companies such as Ford’s Motor has turn to emerging markets such as India to maintain its position as one of the leaders in the automobile industry. (The Economists, 2009). Why are emerging markets so attractive to international companies? the worthiness of these emerging markets. PEST analysis will be conducted on China and Brazil. Political China has a fairly stable political stand these days. Its central government went through a political reform in 1978 and since promote openness in having political relationship with foreign countries. However even with its political reform, China remained as a communist State with high intervention by the central government on economy issues. (CIA FactBook, 2009). With its political reform, liberalisation forces sweep through the country where by exports, imports and FDI are moving in and out smoothly without much interference from the central government comparing to befor e its political reform. China also gained entry into World Trade Organisation (WTO) in 2001 and this represents that China has the obligation to act within the context of WTO when dealing with trade issues. China is country which emphasize on â€Å"guanxi† or good relationship. According to Financial Times Limited (2002), having bad relationship with the government officials mean cutting down the chances of entering China or having any good business prospects in this country as can be seen in the PepsiCo case.