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International Business Strategy LON301BUSUnderstanding Emerging MarketsUnit: 10 Knowledgecast: 1DO NOT ADD FURTHER SLIDES TO THIS PACKSAVE FILE USING THE FOLLOWING FORMAT: MODULE CODE UNIT NUMBER.PPT (E.G. LCM001U1.PPT)PLEASE DO NOT CHANGE TEMPLATE OR FORMATTINGModule Learning OutcomesCommunicate an in-depth understanding of the complexity of the environment and its applications on decision-making process Assess current developments in the organisational environment and alternative responses related to strategy

This Knowledgecast focuses on the growing importance of emerging markets in international business.Classifying Countries based on Economic DevelopmentAdvanced economies: post-industrial countries characterized by;high per-capita income, highly competitive industries, and well-developed commercial infrastructure. E.g., Australia, Canada, Japan, United States, and Western European countries.

Classifying Countries based on Economic DevelopmentDeveloping economies: low-income countries characterized bylimited industrialization and stagnant economies. E.g., most low income countries in Africa, Latin America, and Asia, such as Bangladesh, Nicaragua and Zaire.

Classifying Countries based on Economic DevelopmentEmerging market economies: a subset of former developing economies that have achieved substantial industrialization, modernization, improved living standards, and remarkableeconomic growth.

They are some 27 countries in East and South Asia, Latin America, Middle East and Eastern Europe.

Examples: Brazil, Russia, India, China. Key Differences

Emerging MarketsMost distinguishing characteristic: countries are enjoying rapidly improving living standards and a growing middle class with rising economic aspirations. Evolving towards wealthy nation status.Importance in the world economy is increasing as attractive destinations for exports, FDI, and sourcing.Account for over 40% of world GDP, over 30% of exports, and receive over 20% of FDI.In mid-2000s, collectively had average annual GDP growth rate of nearly 7%, much faster than advanced economiesBenefit from low-cost labour, knowledge workers, low-cost capital, government support, and powerful conglomeratesWhy Emerging Markets Matter.

Challenges of Doing Business in Emerging MarketsPolitical stabilityAbsence of reliable government authorities increases business costs and risks, and reduces ability to forecast business conditions. Corruption and weak legal frameworksE.g., Argentina, Indonesia, Russia, and Venezuela experience substantial corruption.Challenges of Doing Business in Emerging MarketsWeak intellectual property protectionEven if they exist, laws that safeguard intellectual property rights may not be enforced, or the judicial process may be painfully slow. E.g., in China, Indonesia and Russia, counterfeiting is common, especially of software, DVDs, CDs. In India, weak patent laws discourage investment by foreign firms.Challenges of Doing Business in Emerging MarketsBureaucracy and lack of transparencyBurdensome administrative rules, as well as excessive requirements for licenses, approvals, and paperwork, delay business activities. Lack of transparency implies that legal and political systems are not open and accountable. Lack of transparency is associated with corruption.Challenges of Doing Business in Emerging MarketsPartner availability and qualificationsAlliances with local partners helps gain access to local markets, supplier and distributor networks, and key government contacts. May be critical in complex markets.But qualified business partners are not readily available.Challenges of Doing Business in Emerging MarketsDominance of family conglomeratesLarge, highly diversified, privately-owned firms that control much economic activity and jobs in emerging markets. Enjoy government support, extensive networks, access to capital, market knowledge.South Korea chaebols; the top 30 FCs account for nearly half the assets and industry revenues in the Korean economy. Samsung, the most famous Korean FC, has annual revenues of $140 billion.India business housesLatin America gruposCommunicate an in-depth understanding of the complexity of the environment and its applications on decision-making process Emerging markets are increasingly important to MNEs but prove challenging to analyse and manage due to lack of valid, reliable informationAssess current developments in the organisational environment and alternative responses related to strategyEmerging markets typically require an export or joint venture entry strategy

Knowledgecast SummaryMAXIMUM THREE LEARNING OUTCOMES TO REVIEW: ONE REVIEW SUB BULLET PER LEARNING OUTCOMEUnilevers Emerging Markets Strategy

Having toured Unilever earlier in the module and understood itsstrategic position and the influence of its stakeholders; now considerthe role of emerging markets in Unilevers current strategy.

1.In which emerging markets is Unilever currently operating?2.How do the emerging markets contribute to Unilevers corporate strategy?3.Can you find examples of the nature of Unilevers market entry strategies?

SeminarModule ReviewIn this session you will be required to give feedback on the module viathe usual course evaluation mechanisms. This may include aconsideration of the following questions.

1.Which of the units of the module have been most interesting to you?2.How will your study of international business strategy affect your future business practice?3.What do you consider to be the challenges for those involved in international business strategy?

Group Activity