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Synopsis

Globalization is one of the most critical challenges business leaders face today. But while it's a challenge, globalization offers a superabundance of opportunities. Our 100% customizable Emerging Markets deck eases your efforts to analyze all pitfalls and benefits associated with foreign economies and decide whether or not now is the time to enter an emerging market.

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25 questions and answers
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Investing in emerging markets can offer several long-term benefits. These include potential for high returns as these markets grow and develop, diversification of investment portfolio, and the opportunity to invest in new and innovative industries. However, it's important to note that investing in emerging markets also comes with risks, including political instability, economic volatility, and regulatory uncertainties.

A business can leverage globalization for higher returns by tapping into new markets, accessing a larger customer base, and taking advantage of cost efficiencies in different regions. This could involve setting up operations in countries where labor or materials are cheaper, or selling products in countries with high demand. It's also important to understand and adapt to local cultures and regulations to be successful.

Key considerations for a business planning to enter an emerging market include understanding the local culture and business practices, assessing the political and economic stability of the country, evaluating the market size and potential growth, analyzing the competition, and considering the legal and regulatory environment. It's also important to consider the infrastructure and logistics, potential partnerships, and the availability of skilled labor.

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Slide highlights

With this slide, list all threats that emerging markets may pose. These may include: foreign exchange rate risk, non-normal distributions, lax insider trading, restrictions, lack of liquidity, difficulty raising capital and more.

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Use this slide to apply PESTEL Analysis to your emerging markets evaluation. PESTEL Analysis is a tool used to analyze and track the macro-environmental factors that may impact a venture's performance.

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To know whether or not you are going to go after an emerging market, it is critical to determine its Gross Domestic Product (GDP). GDP provides information about the size of the country's economy and, most importantly, the economy's health.

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25 questions and answers
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An organization can effectively track and analyze the macro-environmental factors of emerging markets by using tools like PESTEL Analysis. This tool helps in analyzing and tracking the macro-environmental factors that may impact a venture's performance. It's also critical to determine the Gross Domestic Product (GDP) of the emerging market, as it provides information about the size and health of the country's economy.

Social factors that influence the growth of emerging markets include cultural norms and values, population growth rates, age distribution, education levels, and social mobility. These factors can affect consumer behavior and demand, labor markets, and business practices, among other things.

The legal framework of a country can significantly impact its attractiveness as an emerging market. A strong legal framework provides stability and predictability, which are crucial for businesses. It ensures the protection of property rights, enforcement of contracts, and fair dispute resolution, which are essential for attracting foreign investments. Moreover, it also affects the ease of doing business, regulatory compliance, and overall business environment. However, a weak or unstable legal framework can deter investors due to the risks associated with legal uncertainties, corruption, and lack of enforcement.

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Overview

According to a financial services company, Charles Schwab Corporation, emerging markets are countries undergoing rapid economic growth and industrialization. These countries, Charles Schwab website states, make up 59% of the world's population and 40% of the world's economic output. Also, it's worth mentioning that per the April 2019 International Monetary Fund (IMF) estimate, emerging market economies are expected to grow faster than developed economies, at 4.8% in 2020, compared to 3.6% for their developed peers.

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25 questions and answers
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Emerging markets, undergoing rapid economic growth and industrialization, have the potential to significantly impact global wealth distribution. As they make up 59% of the world's population and 40% of the world's economic output, their growth could lead to a shift in wealth from developed to emerging economies. This is especially likely considering the projected growth rates, with emerging economies expected to grow at a faster pace than developed ones.

The economic performance of emerging markets significantly impacts international trade. As these markets grow and industrialize, they increase their demand for imports, thus stimulating global trade. Additionally, as their economies develop, they also increase their production capacity, leading to an increase in exports to other countries. This not only boosts global trade but also affects the balance of trade between different countries. Furthermore, the economic growth in these markets can lead to increased investment, both domestic and foreign, which can further stimulate international trade.

Emerging markets play a significant role in the global economic balance. They represent a large portion of the world's population and economic output. These countries are experiencing rapid economic growth and industrialization, contributing to the global economy. Furthermore, emerging market economies are projected to grow faster than developed economies, indicating their increasing influence and importance in the global economic balance.

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Application

Professors at Harvard Business School, Tarun Khanna and Ross Graham Walker, recommend the following three approaches to strategy analyses for emerging markets:

Adapt your Current stratedies

To succeed, the scholars say, business models need to be tailored to each new nation's particularities. "[Business leaders] may have to adapt to the voids in a country's product markets, its input markets, or both. But companies must retain their core business propositions even as they adapt their business models. If they make shifts that are too radical, these firms will lose their advantages of global scale and global branding," Khanna and Graham Walker write in their article for "Harvard Business Review" ("HBR").

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To deal with economic differences when entering new markets, businesses need to tailor their models to each new nation's particularities. They may need to adapt to the voids in a country's product markets, its input markets, or both. However, it's crucial for companies to retain their core business propositions even as they adapt their business models. If they make shifts that are too radical, they risk losing their advantages of global scale and global branding.

Some strategies for dealing with regulatory differences when entering new markets include understanding and adapting to the local regulations, maintaining the core business proposition while making necessary adjustments, and leveraging global scale and branding advantages. It's also important to tailor the business model to the specificities of each new nation, which may involve adapting to the voids in a country's product markets, its input markets, or both.

Companies can ensure their business model is sustainable in emerging markets by tailoring their business models to each new nation's particularities. They may have to adapt to the voids in a country's product markets, its input markets, or both. However, companies must retain their core business propositions even as they adapt their business models. If they make shifts that are too radical, these firms will lose their advantages of global scale and global branding.

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change the contexts

Alter the contexts in which you operate, as the products or services your venture offers can force dramatic changes in local markets. For example, when Asia's first satellite TV channel, Hong Kong-based "STAR," rolled out in 1991, it transformed the Indian marketplace in several ways, Khanna and Graham Walker write. According to them, "not only did the company cause the Indian government to lose its monopoly on television broadcasts overnight, but it also led to a booming TV-manufacturing industry and the launch of several other satellite-based channels aimed at Indian audiences."

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Stay away

In some cases, going after emerging markets might be risky and irrational. Home Depot, for instance, has always been careful about entering developing countries' markets. The scholars explain: "The company offers a specific value proposition to customers: low prices, great service and good quality. To pull that off, it relies on a variety of U.S.-specific institutions. It depends on the U.S. highways and logistical management systems to minimize the amount of inventory it has to carry in its large, warehouse-style stores."

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They continue: "It relies on employee stock ownership to motivate shop-level workers to render top-notch service. And its value proposition takes advantage of the fact that high labor costs in the United States encourage homeowners to engage in do-it-yourself projects."

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Case Studies

One key factor to keep in mind when analyzing emerging markets is the localization strategy. Localization is very specific and tricky, but you can learn from the brands that are killing it in the global arena.

Uniqlo

In the past few years, the Uniqlo clothing brand opened over 1,500 stores worldwide. According to Shutterstock, the company's secret lies in the fact that it takes creating content for its social media for the varied, growing markets worldwide very seriously. Thus, Uniqlo localizes its Facebook pages by country, which then allows for simple customization of the content they promote by region. "If the marketing team needs to spread the word about a promo on winter coats in Australia while running ads for its new line of summer dresses in Macau, it's easy to run that localized content simultaneously," Shutterstock notes.

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Netflix

In 2017, Netflix was available in over 190 countries, which is mind-blowing, considering that in 2015, the video-streaming services operated in only 50 countries. Per "HBR," Netflix, "[must have] secured content deals region by region, and sometimes country by country. It also [must have] faced a diverse set of national regulatory restrictions, such as those that limit what content can be made available in local markets."

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To satisfy its ambition for global expansion, Shutterstock writes, Netflix had to launch an impressive localization program for the local-language programming curation and content for viewers in different countries. This move required the strategic release of programming with localized subtitles, local languages and dubbing. And recently, Netflix started creating original programming in 17 different markets, which helps not only promote content to the local customer base but also attract new audiences globally.

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