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Emerging Markets

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A presentation about the Emerging Market Era

A presentation about the Emerging Market Era

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Emerging Markets Emerging Markets Presentation Transcript

  • Emerging Markets
    • Definition of Emerging Markets
    • List of top 25 Multinationals
    • Characteristics of BRIC economies
    • Table showing Developed and Emerging Markets
    • BRIC Countries
    • Non BRIC Countries
    • Challenges
    • According to Chuan Li of University of Iowa's Center for International Finance and Development, "Emerging Markets are countries that are restructuring their economies along market-oriented lines and offer a wealth of opportunities in trade, technology transfers, and foreign direct investment.
    •   The term "emerging markets" was coined by Antoine van Agtmael and dates back to 1981.
    • Emerging market economies - "BRIC" economies or the economies of Brazil, Russia, India, and China.
    • BRIC - Termed by Jim O’ Neil – Goldman Sachs
    • Goldman Sachs –
    • By 2050, the combined economies of the BRICs could eclipse the combined economies of the current richest countries of the world.
    • These countries encompass over 25% of the world's land coverage, 40% of the world's population and hold a combined GDP (PPP) of 15.435 trillion dollars.
    • These 4 countries are among the biggest and fastest growing Emerging Markets.
    • Definition of Emerging Market
    • List of top 25 Multinationals
    • Characteristics of BRIC countries
    • Table showing Developed and Emerging Markets
    • BRIC Countries
    • Non BRIC Countries
    • Challenges
  • Top 25 World Class Emerging Multinationals
    • Definition of Emerging Market
    • List of top 25 Multinationals
    • Characteristics of BRIC economies
    • Table showing Developed and Emerging Markets
    • BRIC Countries
    • Non BRIC Countries
    • Challenges
    • Some of the key characteristics of the BRIC economies are:
    • Firstly
    • They are regional economic powerhouses with large populations, large resource bases, and large markets.
    • Their economic success will spur development in the countries around them; but if they experience an economic crisis, they can bring their neighbors down with them.
    • Secondly
    • They are transitional societies that are undertaking domestic economic and political reforms.
    • Thirdly
    • They are the world's fastest growing economies, contributing to a great deal of the world's explosive growth of trade.
    • By 2020, the five biggest emerging markets' share of world output will double to 16.1 % from 7.8 % in 1992.
    • They will also become more significant buyers of goods and services than industrialized countries.
    • Fourth
    • They are critical participants in the world's major political, economic, and social affairs. They are seeking a larger voice in international politics and a bigger slice of the global economic pie.
    • Definition of Emerging Market
    • List of top 25 Multinationals
    • Characteristics of BRIC economies
    • Table showing Developed and Emerging Markets
    • BRIC Countries
    • Non BRIC Countries
    • Challenges
  •  
  • Brazil Hungary Mexico Poland South Africa Taiwan
  • Argentina Malaysia Chile Morocco China Pakistan Columbia Peru Czech Republic Philippines Egypt Russia India Thailand Indonesia Turkey
  • Bahrain Mauritius Bangladesh Nigeria Botswana Oman Bulgaria Qatar Croatia Romania Cyprus Serbia Estonia Slovakia Cote d’ Ivoire Slovenia Jordan Sri Lanka Kenya Tunisia Lithuania Vietnam Republic of Macedonia
    • Definition of Emerging Market
    • List of top 25 Multinationals
    • Characteristics of BRIC economies
    • Table showing Developed and Emerging Markets
    • BRIC Countries
    • Non BRIC Countries
    • Challenges
    • B – Brazil
    • R – Russia
    • I – India
    • C - China
    • Largest and most populous country in South America.
    • 5th largest country by geographical area.
    • 5th most populous country in the world.
    • 4th most populous democracy in the world.
    • Moderate free market and export-oriented economy.
    • Nominal per capita GDP has surpassed US$10,500 in 2008, due to the strong and continued appreciation of the real for the first time this decade.
    • 10th largest economy in the world, 2 nd largest in the Americas measured by purchasing power parity, in the Americas, after the United States.
    • Attracted $248.9 billion worth of FDI - 16 th biggest recipient of FDI, ahead of countries like Japan & South Korea.
    • Agriculture: 5.5%
    • Industry: 28.7%
    • Services: 65.8%
    • Agriculture & Commodities
    • In the foreign markets, it answers for 25% of global exports of raw cane and refined sugar; it is the world leader in soybean exports and is responsible for 80% of the planet’s orange juice.
    • A pioneer and leader in the manufacture of short- fibre timber cellulose, Brazil has also achieved positive results within the packaging sector, in which it is the fifth largest world producer.
    • Brazil accounts for three fifths of the South American economy’s industrial production.
    • Accounting for one-third of GDP, Brazil's diverse industries range from
    • Automobiles, Steel
    • Petrochemicals, Computers
    • Aircraft, Consumer durables.
    • Top companies among these diversified industries are:
    • Embraer
    • Aracruz Celulose
    • Brazil has a diverse and sophisticated services industry as well.
    • During the early 1990s, the banking sector accounted for as much as 16% of the GDP.
    • Top performers in this sectors are:
    • Banco Bradesco
    • Banco do Brasil
    • Embraer ( NYSE: ERJ)
    • Headquartered in São Paulo, Brazil.
    • Embraer is a Brazilian aerospace conglomerate. The company produces commercial, military, and corporate aircraft, as well as providing related aerospace services. It also has maintenance and commercial sites in the USA and commercial offices in France, Singapore and China.
    • It recently replaced Canada based Bombardier Inc. to become the 3 rd largest producer of aircrafts.
    • As of July 8, 2008, Embraer had a workforce of 23,885 people, and a firm order backlog totalling US$20.7 billion.
    • Its key products are:
    • It has delivered more than 1000 of these aircrafts.
    • In 2003, Embraer entered a partnership with the Harbin Aircraft Manufacturing Corporation of Harbin, Chinato produce ERJ 145 for the Chinese market.
    • Some of its key customers are: the air forces of Brazil & Colombia.
  • Source: http://www.embraer.com/english/content/imprensa/embraer_numeros.asp
    • Petrobras (NYSE: PBR)
    • Is a semi-public Brazilian energy company headquartered in Rio de Janeiro founded in 1953.
    • It is ranked 81 by Forbes global list 2000, by an annual ranking of the top 2000 public companies in the world by Forbes magazine.
    • It is a significant oil producer, with output of more than 2 million barrels of oil equivalent per day, as well as a major distributor of oil products.
    • It operated the world's largest oil platform - the Petrobras 36 Oil Platform - until an explosion on 15 March 2001 led to its sinking on 20 March 2001.
    • Petrobras is a world leader in development of advanced technology from deep-water and ultra-deep water oil production.
    • Petrobras works extensively with foreign acquisitions too, buying and controlling the most important energy companies in South America and exploring huge deep-water fields of West Africa and the Gulf of Mexico.
    • Is a major Brazilian manufacturer of pulp. It is headquartered in Sao Paulo.
    • The company is the world's leading supplier of bleached eucalyptus pulp.
    • Its yearly revenue as of 2007 was US$ 2.079 Billion (2007)
    • Is a diversified mining multinational corporation and one of the largest logistics operators in Brazil.
    • In addition to being the second-largest mining company in the world, it is also the largest producer of iron ore, pellets, and second largest of nickel.
    • In the electric energy sector, the company participates in consortia and currently operates nine hydroelectric plants.
    • Vale has managed to establish itself as a global mining company through joint ventures and acquisitions abroad.
    • Vale has participation on mining operations in Finland, Canada, Australia, Mongolia, China, India, Angola, South Africa, Chile, Peru and other countries.
  •  
    • B – Brazil
    • R – Russia
    • I – India
    • C - China
    • 10 th biggest Economy
    • Currency: Russian Ruble (RUB)
    • GDP: $2.076 trillion (2007 Est.)
    • GDP per Capita: $14,600
    • GDP by sector:
      • Agriculture 4.6%
      • Industry 39.1%
      • Services 56.3%
    • Inflation: 11.9%
  • Exports: $365 billion
  • Imports: $260.4 billion
    • 1998: Russian Financial Crisis
    • 2007: Boom in Capital Investments
    • Oil and gas dominate Russia Exports; Heavily depends on price of energy
    • The aggregate fixed capital investment grew by 21.2 percent in 9-M of 2007 (from 11.8 percent growth in the same period in 2006)
    • Oil & Gas
    • Power
    • Engineering
    • Financial Services
    • Automotive
    • Transport
    • Information and Communications Technology
    • Construction
    • Creative Industries
    • Health Care
    • Biotechnology
    • Pharmaceuticals
    • Food & Drink
    • Sport & Leisure Infrastructure
    • World’s 2 nd largest oil producing country, with up to 14% of world proved oil in reserves and 36% of world gas reserves.
    • Growth requires development of major deposits in inaccessible regions in the Arctic zone.
    • Would need world’s best technologies, equipment and engineering.
    • 2006 growth in manufacturing industries was 4.8%, with some engineering companies recording an annual growth of 14%.
    • Need to upgrade or replace old production equipment and technologies.
    • Looking for suppliers of relevant equipment, as they believe that foreign equipment and technologies are advanced and more reliable.
    • (ICT): fastest developing sectors in the Russian economy
      • Annual growth rate of 20-25%
    • Russian mobile telecommunications market is the 3 rd largest in the world
    • One of the most dynamic industries in the world.
    • 2006: 5 th largest passenger car selling country in Europe.
    • Airports:
      • Growth in air traffic numbers
      • 360 airports---needs restructuring and investment
    • Railway:
      • 2 nd largest rail network
      • 100% state owned
  •  
    • Growth is likely to remain robust. With energy prices set to remain high, booming domestic demand will continue to translate into strong growth in services and manufacturing
    • Lowest P/E’s in the global emerging market arena.
    • Remarkable degree of economic stability over the past 5 years.
    • B – Brazil
    • R – Russia
    • I – India
    • C - China
    • 2 nd fastest growing economy.
    • 2 nd most populous country.
    • 4 th largest economy in purchasing power.
    • Worlds 12 th largest economy at market exchange rates.
    • Has most populous democracy in the world.
    • Before 1991: Semi- socialist approach - strict government control over private sector participation, foreign trade and foreign direct investment.
    • Since 1991: India has gradually opened up its markets through economic reforms and reduced government controls on foreign trade and investment.
    • Privatization of publicly owned companies and the opening of certain sectors to private and foreign participation has continued amid political debate.
    • Average GDP growth rate of 5.7% for the past two decades.
    • Automotive
    • Information Technology
    • Pharmaceuticals and Biotechnology
    • 10 th largest sector in the world with an annual production of approximately 2 million units.
    • A number of domestic companies produce automobiles in India and the growing presence of multinational investment, too, has led to an increase in overall growth.
    • Size of the market
    • Structure of the market
    • Major Domestic and International Players
    • Opportunities and growth potential
    • A US$34-billion industry, exports constitute 5% of revenues.
    • 11 million vehicles produced in India in 2006-07
    • However, India still has low vehicle penetration
      • Only 3 cars, 50 two-wheelers per 1000 individuals.
    • Structure of the market
    • Industry has a mix of large domestic private players (Tata Motors, Mahindra & Mahindra, Ashok Leyland, Bajaj Auto, Hero Honda) and major international players including Suzuki, GM, Ford, Daimler, Toyota, Honda, Hyundai, Renault, VW and Volvo
    • All major international players have set up manufacturing capacities in India
  • Source: SIAM, Annual Reports
    • Advantage for investing:
      • Low-cost, high-skill manpower with an abundance of engineering talent – the second largest in the world.
      • Established automobile testing and R&D centers.
      • Among the lowest-cost producers of steel in the world
    • Opportunity to address the global auto market while leveraging the domestic market.
    • Size of the market
    • Structure of the market
    • Major IT and ITES companies
    • Opportunities
    • India is the leading destination for providing IT and IT-Enabled Services (ITES), with revenues of about US$40 billion in 2006-07
    • Exports constituted 79% of the total IT and ITES revenues
    • The industry has 3 broad categories of companies:
    • Indian IT and ITeS companies ranging from large companies
    • (Tata Consultancy Services, Infosys, Wipro, HCL) to small niche companies.
    • Global IT companies such as IBM, Dell, Microsoft, HP, Accenture, etc. - all of whom have set up development centers in India.
    • Captive back office operations of large global corporations like JP Morgan, American Express, GE, HSBC, British Airways, etc.
  •  
    • India’s inherent IT capabilities - talented workforce and world-class companies:
      • Availability of technically skilled and English-speaking labor force at a fraction of the costs in USA and Europe.
      • Quality orientation, project and process management expertise.
    • International recognition.
    • Opportunity to supply to the global market in addition to serving the growing domestic demand.
    • Size of the market
    • Major IT and ITES companies
    • Opportunities
    • The Indian Pharmaceutical industry is about US$13 billion (2006-07 revenues)
    • India occupies a significant position in the world pharmacy market
      • 8% by volume (fourth largest in the world) and 1% by value.
      • The pharmacy industry exports over US$6 billion.
      • It ranks 17th in terms of export value.
    • India accounts for 22% of the global generics market.
  •  
    • India is an attractive global sourcing destination for pharmaceuticals:
      • Availability of low-cost, high-quality production and regulatory compliance.
      • Low cost of research and world-class testing facilities.
      • Cost of a research scientist in India is only about 1/6th to 1/4th of that in USA.
    • Many international biotech companies like Chiron Corp, GSK and Sigma Aldrich Corp have expressed interest, especially in Bio-manufacturing.
    • B – Brazil
    • R – Russia
    • I – India
    • C - China
    • World's most populous and third largest nation
    • Fourth-largest economy
    • Fastest increases in income levels
    • World’s factory- World’s #1 Exporter of IT Goods
    • Communist party-led state.
    • One of the strongest economies in the world
    • China remains one of the strongest economies in the world.
    • 3 forces for economic growth :
    • the communist government continues to open up the country to free markets and privately owned businesses.
    • China has entered the global markets by joining the WTO . Foreigners can invest money there to build plants and take advantage of the cheap labor.
    • The country continues to spend to build out infrastructure, like new highways, power plants and phone networks which is good for the economy.
    • China remains awash in liquidity, with $1.68 trillion in foreign reserves.
    • Risk-management strategy:
      • Look for companies that generate revenue “from” China, even if they’re not based “in” China .
    • China's government has the resources to spend their way through the external slowdown.
    • Inflation is down - providing room to spur growth through spending.
    • Still not a free market. (fixed exchange rate, license.)
    • Pension plans are underfunded. (aged population)
    • State banks have lots of bad loans to government entities.
    • Chinese Yuan appreciated.
  •  
    • Education
    • Tourism
    • Manufacturing
    • Size of the market
    • Structure of the market
    • China's education and training is a sunrise industry.
    • Chinese education and training market reach $ 43.9 Billion US
    • Potential education and training market is approximately 58.5 Billion US.
    • Market structure
    • Industry has a mix of public and private players.
    • A poor match between supply and demand
    • Size of the market
    • Domestic tourism
      • Income from domestic tourism stood at 113.8 billion US$.
    • International tourism
      • Income from International tourism: 41.9 billion US$.
    • China's tourism industry will keep growing at a rate of 10.4%.
    • Revenue proportion of China's tourism industry to GDP will jump to 8% in 2010 from 5.44% in 2002.
    • Automotive
    • House hold appliances
    • Electronic
    • 7.189 million motor vehicles were manufactured in China, surpassing Germany as the third largest automobile maker, after Japan and the United States.
    • The Automobile Manufacturing Industry in China is comprised of establishments mainly engaged in manufacturing complete automobiles or automobile engines.
    • The major products manufactured in this industry include: complete and non-complete passenger and commercial vehicles, and automobile engines.
    • Major Domestic Player Market
      • Dongfeng Motor Co., Ltd.
      • Chana Auto Group
      • Share Shanghai Automotive Industry Corporation
      • China FAW Group Corporation
      • Beijing Auto Industry (Holding) Corporation
      • Domestic brands occupied nearly 27% of the market share in China.
    • Dongfeng Motor is one of the 3 giant auto makers in China. Its main businesses include passenger vehicles, commercial vehicles, engine, auto parts & components, and equipment.
    • As of 2007, DFM has gained an annual output of 1,137,000 vehicles, a sales income of ¥ 164,800,000,000, 12.94% market shares and 121,000 registered employees.
    • Joint ventures
      • Dongfeng Motor Company — With Nissan produces
      • Dongfeng Honda Automobile Company
    • Toyota - 4 manufacturing factories
    • Nissan
    • Honda
    • Suzuki
    • Mazda
    • Daihatsu
    • Mitsubishi
    • FIAT
    • Isuzu
    • Ford
    • General Motors – 8 joint ventures
    • Industry Revenue 2007 is 8,443.5 US Million Dollars and the Revenue Growth is 25.6  %.
    Market Shares of China Top Ten house hold Electrical Appliance Producers, 2007
    • Haier is the world’s 4th largest white goods manufacturer and one of China’s Top 100 IT Companies.
    • Haier has 240 subsidiary companies and 30 design centers, plants and trade companies and more than 50,000 employees throughout the world.
    • Haier specializes in technology research, manufacture industry, trading and financial services.
    • Haier 2006 global revenue was RMB107.5 billion.
    • Major china electronic products
      • Electronic and electrical products
      • IT
      • Health Care
      • Safety & Security
    • Lenovo Group Limited is China's largest and the world's fourth largest personal computer manufacturer, after Hewlett-Packard and Dell of the U.S. and Acer of Taiwan.
    • Lenovo annual revenue is about 130 billion U.S. dollars, the annual production capacity is about 14,000,000 Taiwan.
    • In 2005, Lenovo purchased IBM's PC Division.
    • As a result of the acquisition, Lenovo gained the rights to the product lines as well as licensed trademarks such as Think Vision, ThinkPad, Think Vantage, Think Centre, Aptiva, and Net Vista.
  •  
    • Definition of Emerging Market
    • List of top 25 Multinationals
    • Characteristics of BRIC economies
    • Table showing Developed and Emerging Markets
    • BRIC Countries
    • Non BRIC Countries
    • Challenges
    • Mexico
    • Turkey
    • CIA World Fact book - 13 th largest economy in the world as measured in GDP in purchasing power parity.
    • World Bank - Considers the Mexican economy to be an Upper-middle-income economy [ rated higher than Brazil and China, which are considered Lower-middle-income economies ] and they have the highest per capital income in Latin America.
    • According to the International Business Report, Mexico has edge over Brazil in terms of investment and development.
    • Mexico is growing at par for top reasons such as:
    • International trade ( combined exports and imports are second only to China).
    • Relatively high standard of living.
    • GDP per head comes out ahead of BIC countries is close to Russia.
    • Country has 12 free trade agreements with 43 countries and exports have surged.
    • Benefits from well qualified labor , powerful manufacturing and assembling lines.
    • Tourism
    • Oil
    • Manufacturing
    • Fonatur, Mexico Tourism Secretariat - Federal Agencies that regulate the Industry
    • Tourism is a major source of foreign currency and plays a vital role in Mexico’s economic development.
    • Tourism accounts for 8%of Mexico’s GDP, making it one of the top revenue sources.  It employs one in five workers.
    • Cancún earns 25% of Mexico’s tourist revenue.
    • Mexico has more than 20million foreign visitors annually:
    • 9 out of 10 foreign visitors are from the USA
    • 4%  are from Europe
    • 3% are from Canada
    • 2% are from other Latin American countries.
    • Major source of revenue – owned and controlled by federal government.
    • Mexico is one of the top five oil-producing nations. 
    • 3rd largest supplier of oil to the USA.
    • Mexico’s oil production company is Pemex. 
    • Oil and natural gas production occur in the northeast and along the Gulf Coast.
    • The USA is Mexico’s most important trading partner. 
    • Reasons:
    • Lower wage costs - many U.S. manufacturers have assembly plants located in Mexico. 
    • The top five industries within the manufacturing sector in terms of foreign investment are:
    • Machinery and equipment (including auto manufacturing)
    • Chemicals
    • Food products
    • Base metals
    • Textiles and leather
    • Two-thirds of all foreign investment is in Mexico’s manufacturing sector. 
  • Automotive Consumer Electronics Food Real Estate Retail Toyota Polaroid Samsung Campbell’s Prudential Wal-Mart Nissan Singer Hitachi Kellogg's Remax Costco Ford GE Sanyo Carnation Realty Executives Sears GM Mattel Hewlett Packard Gerber C-21 Dillard’s Kimberly Clark Zerox Nabisco Coldwell Banker McDonalds Motorola
    • Mexico
    • Turkey
    • Population (2006): 70.5 million.
    • Work force (23 million): Agriculture--35.6%; industry--17.5%; services--47.2%.
    • Currency: New Turkish Lira (YTL)
    • GDP: (2007) $490 Billions
    • Annual real GDP growth rate: 4.6%
    • Major growth sector, types--automotive, electronics, food processing, textiles, basic metals, chemicals, and petrochemicals. Provides about 20% of jobs.
    • Trade: Exports (merchandise)- (2007) $106: textiles and apparel, industrial machinery, iron and steel, electronics, petroleum products, and motor vehicles.
    • A booming country with cumulative GDP increase of 187% between 2002 to 2007 totaling USD 663 billion.
    • Provide qualified, cost effective labor force.
    • Fast growing domestic market.
    • 65% of population is below 34 years old.
    • Joint in EU since 1996.
    • Centrally located between Europe, Central Asia and Middle East.
    • Textiles
    • Food processing
    • Mining (coal, chromites, copper, boron)
    • Steel
    • Definition of Emerging Market
    • List of top 25 Multinationals
    • Characteristics of BRIC economies
    • Table showing Developed and Emerging Markets
    • BRIC Countries
    • Non BRIC Countries
    • Challenges
    • Labour Markets
    • Difficulty to develop a product market
    • The capital and financial markets in developing countries are remarkable for their lack of sophistication.
    • Labour Markets:
      • In spite of emerging markets large populations, multinationals have trouble recruiting managers and other skilled workers because:
        • The quality of talent is hard to ascertain.
        • There are relatively few search firms and recruiting agencies in low-income countries.
    • It is difficult to develop a product market:
      • Because the data sources and credit histories that firms draw on in the West don't exist in emerging markets.
      • Market research and advertising are in their infancy in developing countries, and it's difficult to find the deep databases on consumption patterns that allow companies to segment consumers in more-developed markets.
    • The capital and financial markets in developing countries are remarkable for their lack of sophistication:
      • There aren't many reliable intermediaries like credit-rating agencies, investment analysts, merchant bankers, or venture capital firms.
      • Like investors, creditors don't have access to accurate information on companies.
      • Businesses can't easily assess the creditworthiness of other firms or collect receivables after they have extended credit to customers.
      • Because of poor corporate governance, transnational companies can't trust their partners to adhere to local laws and joint venture agreements.
    • http://www.youtube.com/watch?v=3eUbxJAud5w
    • Author and former World Bank executive Antoine van Agtmael forecasts what he calls the "Emerging Markets Century," in which the economies of the U.S. and Western Europe are eventually eclipsed by those of former "third world" countries such as China.
    • Questions!!!