FHM Trimester 3 - Complete Scripts - Feb 2013.pdf - Angielski - Kaffin

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Englisch

Skripttitel: Globalization & Emerging Markets

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Robert Thomas:

MFA English, Goucher College, USA

Study materials are downloadable at www.englischcoach.us

Page 1

Emerging Markets

This term refers to the markets of countries that are at an early stage of their development, relative

to the mature markets of countries like the United States or Japan. Emerging markets are typically

much smaller than their developed counterparts and such markets tend to be less well established

than mainstream markets, often with less comprehensive regulations around how companies and

investors can operate.

Emerging markets include countries in Latin America such as Mexico and Argentina, the Far East,

including India and South Korea, and European nations such as Turkey and Poland. However the

world’s biggest emerging markets, Brazil, Russia, India and China, are now playing an increasingly

important role in the global economy, with this group of four powerful developing economies

sometimes referred to as the BRIC countries.

Emerging markets are generally regarded as bringing higher risk for investors than developed

markets, though this needs to be seen in the context of their higher potential rewards. Though

emerging markets have traditionally relied heavily on manufactured goods for exports to more

developed countries, signs have emerged in recent years that domestic consumers are becoming

increasingly important contributors to the success of companies in countries such as Brazil and

China.

From www.qfinance.com

The biggest, fastest-growing economies of the Third World are Brazil, Russia, India, and China.

But while the Big Four, also known as BRICs, have attracted the most investor attention in recent

years, there are also opportunities in less prominent but more promising emerging markets such

as Egypt, Mexico, Poland, South Africa, South Korea, and Turkey. They may not have the buzz of

billion-plus population markets, but their growth is impressive -- and their stocks, in many cases,

can offer superior value.

Business Week magazine

The term “emerging markets” is obsolete. The end of emerging markets has arrived, as the

distinction between emerging markets and developed markets has run the course of its usefulness

to investors. Eighty percent of the world’s population lives in emerging markets

Distinctions are disappearing between emerging and developed markets. Emerging markets

represent half of the world’s economy; they are large and show volatility similar to that of

developed markets. In addition, their corporate governance and government policies are no worse

than, and in some cases are superior to, those of developed markets.

There is one measure by which there is still a distinction between emerging markets and

developed markets: growth. We believe that, for the foreseeable future, this differentiation in

growth will remain, leading to more attractive investment opportunities in emerging markets than in

developed markets. For this reason, investors should focus more on emerging markets than

developed markets.

From an investment brochure by Everest Capital

Page 2

Questions on Emerging Economies...

1) Typically emerging markets have been different from mature markets. In what ways?

2) What are the BRIC countries?

3) What factors in recent years have reduced the importance of the mature markets' "stability"?

4. What is the opposite of stability, as used in the text?)

5) What percent of the world's population lives in emerging market countries?

What percent of the world's economy is produced by emerging market countries?

6) What factors in recent years (in addition to profit motives) have reduced the importance of the

mature markets' business and political governance?

Page 3

The world turned upside down

Adapted from Apr 15th 2010 - The Economist

IN 1980 American car executives were shaken to find that Japan had replaced the United States

as the world’s leading carmaker. Visiting Toyota factories in Japan, they discovered that the

answer was not industrial policy or state subsidies, as they had expected, but business

innovation. The Japanese had invented a new system of making things that was quickly dubbed

“lean manufacturing”.

Similarly, today in the emerging world developing countries are becoming hotbeds of business

innovation. They are coming up with new products and services that are dramatically cheaper

than their Western equivalents: $3,000 cars, $300 computers and $30 mobile phones that

provide nationwide service for just 2 cents a minute.

They are reinventing systems of production and distribution, and they are experimenting with

entirely new business models, and, as a result, merging-market champions have not only proved

highly competitive in their own backyards, they are also going global themselves.

The number of companies from Brazil, India, China or Russia on the Financial Times 500 list more

than quadrupled in 2006-08, from 15 to 62. The best of these companies produce products on

par with any in the world. At the same time Western multinationals see these countries as

sources of economic growth and high-quality brainpower. Over the past couple of decades China

and to a lesser extent India have been pouring resources into education -- in China over 5m

people graduate from university every year and in India about 3m, respectively four times and

three times a decade ago.

Not concentrating on the Gucci and Mercedes crowd

Both Western and emerging-country companies have also realised that they need to try harder if

they are to prosper in these booming markets. It is not enough to concentrate on the Gucci and

Mercedes crowd -- they must also learn how to appeal to the billions of people who live outside

Shanghai and Bangalore, from the rising middle classes in second-tier cities to the farmers in

isolated villages. That means rethinking everything from products to distribution systems.

Page 4

These emerging markets are among the toughest in the world. Distribution systems can be

hopeless. Income streams can be unpredictable. Pollution can be lung-searing. Governments can

be infuriating, sometimes meddling and sometimes failing to provide basic services. Pirating can

squeeze profit margins. And poverty is ubiquitous.

The islands of success are surrounded by a sea of problems, which have defeated some tough

companies. Yahoo! and eBay retreated from China, and Google too has recently backed out from

there and moved to Hong Kong. Black & Decker, America’s biggest toolmaker, is almost invisible

in India and China, the world’s two biggest construction sites.

But the opportunities are equally extraordinary. The potential market is huge: populations are

already much bigger than in the developed world and are growing much faster (see chart 1). And

in both China and India hundreds of millions of people will enter the middle class in the coming

decades. The economies are set to grow faster, too (see chart).

Because so many consumers are poor, companies have to go for volume. But because piracy is

so commonplace, they also have to keep upgrading their products. Again the similarities with

Japan in the 1980s are striking. Toyota and Honda took to “just-in-time” inventories and quality

management because land and raw materials were expensive. In the same way emerging-market

companies are turning problems into advantages.

Muscular emerging-market champions such as India’s Arcelor Mittal in steel and Mexico’s Cemex

in cement are gobbling up Western companies. And consumers in developing countries are getting

richer faster than their equivalents in the West. In some cases the traditional global supply chain

is even being reversed: Brazil's Embraer buys many of its component parts from the West and

does the assembly work in Brazil.

Budget-minded

In Chennai India, Ananth Krishnan, chief technology officer of Tata Consultancy Services (TCS), is

excited about a low-tech device: a water filter. It uses rice husks (which are among the country’s

most common waste products) to purify water. It is not only robust and portable but also relatively

cheap, giving a large family an abundant supply of bacteria-free water for an initial investment of

about $24 and a recurring expense of about $4 for a new filter every few months. Tata Chemicals,

which is making the devices, is planning to produce 1m over the next year and hopes for an

eventual market of 100m.

Page 5

FHM Trimester 3 - Complete Scripts - Feb 2013.pdf

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