BUSS2067 - Lecture 7 - Emerging Markets
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Lecture 7 focuses on understanding emerging markets, specifically examining Russia's potential as a global challenger despite its challenges. The lecture discusses the characteristics of emerging markets, risks associated with them, and the traits of global challengers like Lukoil. Additionally, it contrasts the development status of many African nations compared to faster-growing economies and highlights keys to future growth.
BUSS2067 - Lecture 7 - Emerging Markets
- 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
- 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.
- 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…
- 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
- 20. Source: http://www.transparency.org/news/feature/corruption_perceptions_index_2016
- 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
- 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.
- 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
- 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…
- 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
- 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
- 42. Questions?