The paper "Possible Opportunities and Challenges for Firms in Emerging Markets" is an outstanding example of marketing coursework. An emerging market is an economy with some features of a developed market but has not reached the standards of a fully developed economy. These are countries with trends of becoming developed in the future (Luo & Tung 2007). They include countries which are having the BRIC acronym meaning Brazil, Russia, India and China. South Africa also falls under this category of economies. These countries have been having characteristics associated with the opportunities they have for new firms to venture into as well as sustaining the ones that are there.
The opportunities include having positive demographic trends, some positive economic factors, and good ownership models. They also offer a variety of diversified markets as well as showing a positive technological advancement in their production methods. In spite of the opportunities, the markets are also faced by challenges here and there that usually scare away investors (Manktlow 2014). Challenges such as inflation, political instability, cultural differences and adoption of democracy usually challenge investors in the regions as they are capable of interfering with the outcome of firms.
It is therefore advisable for a firm to put into consideration both the opportunities and the challenges before making an investment decision on emerging markets. This essay will try to analyze the possible opportunities and challenges for firms in emerging markets and compare them with those in developed economies. Opportunities available for firms in emerging markets Positive demographic trends Demographic trends are changes or rather developments in a population. This may include changes in the age, geographical locations, acquirement of education income of the households, the health of the people as well as their religion.
When these changes are positive in relation to investment opportunities in emerging markets, they attract more investors and market for the products produced hence creating an opportunity for firms in these markets (Mathews 2006). Most emerging markets such as China and Brazil have a growth in population that is increasing the number of people in the workforce in these economies. This is contrary to the developed markets where the population is aging at a relatively higher rate (Manirov and Manirova 2012).
In emerging markets, the domestic consumer’ s base is being increased by the migration of the working population from their rural areas into the cash economy. They provide a market for their locally manufactured products and become less reliant on what they get from other countries. The provision of this demand is very significant as it acts as an engine for the growth of the firm in emerging markets. According to estimates of the United Nations in March 2010, 1.7 billion people in emerging economies have an income between the US $5,000 to US$2000 per year.
In consumption, the emerging markets have been estimated to outdo their counterparts in the developed markets (McFarlin and Sweeney 2014). Economic factors Government’ s debt all over the world increased dramatically following the credit crisis of 2008, but the developed markets were more affected than their counterparts in the developing markets. This is because they had to maintain their levels of competitiveness with one another as well as continue with their normal production activities (Char 2010). A good example is Japan’ s 220% debt/GDP ratio compared to China’ s 69%.
While there have been forecasts to diminish budget deficits globally in the next five years, developed markets are likely to continue taking more debts than the emerging economies. According to Chaise and Gugler (2009), developing markets will, therefore, be at an advantage as the banking sector in the developed markets has been negatively impacted by the subprime debt market collapse. Due to this, banks in the emerging markets have been free of financial liability by lending restrictions that have been there in the developed markets giving investors an advantage to invest in or develop firms in emerging markets.
In addition firms in emerging markets enjoying the advantage of high saving rates and low household debt levels, their penetration of financial products has been at nascent levels meaning there is room for more development and access of capital in emerging markets (Char 2010).
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