This lecture reviews emerging markets, which historically have been labelled as quickly growing markets in Asia and South America (often also including South Africa and Russia). The BRICS (BRIIC) economies are discussed, and the concept of the 'global challenger' is introduced. Lastly, we review developing economies, primarily those in Sub-Saharan Africa, and the struggles they continue to face in their economic development.

1. Lecture 7
Understanding Emerging Markets
Lecturer: Dr. Preston Teeter
BUSS 2067
International Business Environment

2. Before we start:
1) Phones/electronics silent, off, and away!
2) Say hello to the people around you;
you need a small group to discuss
questions
BUSS 2067
International Business Environment

3. Outline
• Lecture 6 quiz
• Emerging markets
• Global challengers
• Developing economies

4. LECTURE 6 QUIZ

5. Question 1
True or False:
The U.S. government intervened in its cotton
industry mainly by imposing high tariffs on
imports.

6. Question 2
True or False:
Australia and New Zealand have an economic
and monetary union in which a central authority
sets monetary and fiscal policy.

7. Question 3
Why did the U.S. government choose to
intervene in its cotton industry?
A. To raise government revenue
B. Infant industry and FMA arguments
C. To protect jobs and promote cotton exports
D. Retaliation against Brazil’s cotton subsidies

8. Question 4
Why did Norway repeatedly vote to not enter the
EU?
A. They felt membership was a threat to their
sovereignty and key industries.
B. They wanted more regional power.
C. They wanted greater political cooperation.
D. They wanted less complexity in foreign affairs.

9. EMERGING MARKETS

10. Emerging
markets
Consider the case of Russia, an emerging market
with great potential for future growth. Over the past
few decades, Russia has attracted a lot of interest
from foreign investors and multinationals. However,
investment in Russia is certainly not easy.
Watch video
And see the following article…

11. Source: https://www.nytimes.com/2015/03/19/business/international/gm-exiting-russia-
for-the-most-part.html?_r=0

12. With a large population and numerous scientific
achievements over the past hundred years, though, isn’t
Russia an advanced economy?
1) Why is Russia classified as an emerging market?
Distinguish b/w advanced, developing, and emerging
economies.
2) Why is Russia an attractive place for business?
3) What are some of the risks and challenges of operating in
Russia?
Emerging
markets

19. Source: http://www.doingbusiness.org/rankings

20. Source: http://www.transparency.org/news/feature/corruption_perceptions_index_2016

21. Source: http://www.xe.com/currencycharts/?from=RUB&to=USD&view=10Y

22. Attractive
• Large population
• Growing middle class
• High economic growth
• Large potential for more
industrialization
• Competition less intense
• Trade being liberalized
• Low-wage, high quality labor
• Untapped natural resources
Risks and challenges
• Political/legal instability
• Red tape
• Corruption
• Fluctuating currencies
• Weak IP protection
• Partner availability
• Dominance of local firms
• Herd behavior
Emerging
markets

23. GLOBAL CHALLENGERS

24. Global
challengers
Consider the case of Lukoil, Russia’s largest oil
company. Founded in 1991 through the merger
of three state-run companies, Lukoil is one of the
world’s largest producers of oil, with operations
in more than 40 countries.
Watch video

25. But didn’t we just discuss a host of problems confronting
Russia? Answer the following:
1) What precisely is a “global challenger”? How are they
different from a family conglomerate?
2) How do you think Lukoil has become so competitive in
world markets?
3) Do you think Lukoil can continue its rapid growth? Why
or why not?
Please discuss in small groups, or, if online, consult your
textbook and other sources. We will reconvene in 5 minutes to
discuss as a class.
Global
challengers

26. Global
challengers
Global challengers are top firms from emerging markets
that are fast becoming key contenders in world markets.
Ex. Hong Kong’s Johnson Electric
Family conglomerates are large, highly diversified
companies that are privately owned.
Ex. South Korea’s Hyundai Group
*Many global challengers are, in fact, family conglomerates.

27. Source: https://www.businessinsider.com.au/russias-lukoil-wins-huge-iraqi-oilfield-2009-12

28. Source: https://www.theguardian.com/environment/2016/aug/05/the-town-that-reveals-
how-russia-spills-two-deepwater-horizons-of-oil-each-year

29. Typical advantages:
• Low-cost, highly skilled labor
• Ability to make decisions quickly
• Access to low interest and emergency loans
• Large, growing domestic consumer base
– Often protected from foreign competitors
– Lax domestic regulations
• Ample, untapped natural resources
• Gov’t and network support to enter high risk areas
Global
challengers

30. Source: http://www.macrotrends.net/1369/crude-oil-price-history-chart

31. Source: http://rbth.com/business/2017/03/31/russias-largest-oil-company-to-sell-1-3-
of-gas-stations-in-country_732007

32. DEVELOPING ECONOMIES

33. Developing
economies
Despite the emergence of numerous high-growth
economies in Asia, Eastern Europe, and South
America over the past few decades, many African
nations remain stuck in a relatively undeveloped
state.
See video
And the following slides…

34. Source: http://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=Z4-ZG-ZJ

35. Source: http://data.worldbank.org/indicator/SP.DYN.LE00.IN?locations=Z4-ZG-ZJ

36. But many African nations have plentiful resources
and a low-cost workforce, so why the stark
difference? Answer the following:
1) In contrast to emerging markets, why have many
African nations remained in a relatively
undeveloped state?
2) Thus, what are their keys to future growth?
Developing
economies

37. Source: http://www.nber.org/papers/w9865.pdf

38. Source: http://money.cnn.com/2016/04/15/news/economy/africa-economy-
south-africa-nigeria-kenya-angola/

39. Source: http://foreignpolicy.com/2015/12/31/africas-boom-is-over/

40. Why still undeveloped
• Illiteracy, lack of highly
skilled workforce
• Inadequate sanitation and
water supply
• Lack of basic infrastructure,
electricity
• Historical reasons,
colonialism, exploitation
• “Resource curse”
Keys to future growth
• Greater political and legal
stability
• Foreign help with
affordable infrastructure
and eradicating disease
• Educational changes and
investment
• Freeing up agricultural
trade
• Economic diversification
Developing
economies

41. Source: http://data.worldbank.org/indicator/SE.PRM.UNER.ZS?locations=Z4-ZG-ZJ

42. Questions?