Economy in emerging markets

Having looked at importance of globalization and the efforts taken to gain cultural sensitivity to reduce chances of initial failure, it is now time to understand the economic factors influencing the desire to expand in globe. Why would any company choose to globalize in a particular country? What makes it stand out of the crowd? We aim at gaining an insight into these questions in this article.

The International Journal of Emerging Markets indicates that emerging markets such as Brazil, Russia, India, China and South Africa account for 20% of the world’s GDP and two-thirds of world’s population. With the IT market improving, technological advancement resulted. This has led to India having a vast pool of resources that are highly skilled. India which initially served as a low-cost labor provider is now being targeted as a resource-rich country. It is estimated that 70% of the world’s growth will come from emerging markets and 40% of that is accounted for by India and China.

With the tremendous growth, many local companies that previously offered no competition are now major competitors to transnational corporations. The shift of economic power to emerging markets has led to many transnational firms that are already established in India to initiate activities to acquire a share in the growth. The symbiotic relationship between global economies are so tightly interconnected due to these exchanges that governments and industries will have to cooperate their ways to adapt to these evolutions.

Looking at it from economic perspective, the key factors driving this change need to be identified. This is necessary to introduce changes in business strategy to reflect localization. It is quite obvious by now that the biggest factor driving economic changes in emerging market such as India is population growth. Increase in their urbanization and the growing divide between youth and aged has created space for large fraction of people who are skilled and eligible to work. The recent recession has strengthened relationships between local companies and government further as new initiatives have been launched to enable better connectivity, which has attracted more interest thereby creating gradual balance in global economic power. It is obvious that the emerging markets will soon create space for new entrepreneurs who are identifying gaps in market for services targeting low-income consumers all over globe. Internet marketing and e-commerce has led us into a new era. Disruptive innovation is now a common trend in emerging markets.

It is quite probable that the growth will result in winners and losers. What decides winning factor in emergent companies in the current context? Entrepreneurs will have to look outward as adaptations in technology and regulatory changes are inevitable while introducing a new product and creating a global market for it by adopting global workforce. Adaptations to external environment and embracing technology to reflect these changes are critical to remain trendy and visible. Supply chain management will play a critical role in the way goods are packaged and priced reflecting changes in raw-materials’ price fluctuations and labor cost structures. The trend is further influenced by national governments trying to reduce cost structures and focusing on growth agendas. With the advent of ‘cleantech ideas’ emerging companies have started incorporating green transportation, renewable energy, recycling, green chemistry and other energy efficient appliances right from initial stages to gain a ‘Competitive advantage’ in long run. According to Ernst and Young, by 2020, Brazil, Russia, China and India are expected to account for nearly 50% of all global GDP growth. This has created scope for high investment activities by investors who are trying to secure a strong base here.

In the next issue we will be discussing more about Economic factors driving changes in IT product development industry in India and how this influences Corporate Strategy.

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