Top Global Emerging Economies & Characteristics of Emerging Markets
Definition of Emerging Economies.
Emerging economies can be defined as a country that is going through rapid economic growth because of changes in markets, business culture, technology, and social practice. Emerging Markets are sometimes referred to as emerging markets or developing economies, but it’s all the same concept.
We’ll highlight the emerging markets that businesses might want to penetrate and, crucially, will have a look at why emerging economies might be attractive propositions.
Characteristics of Emerging Markets
Emerging Economies have a large population.
Developing economies are country that’s in some case, has a population in the billions but certainly will have huge populations, potentially over 100 million people living there, which means there are lots of potential customers in that market.
Emerging Economies have High Economic Development Growth
The gross domestic product or GDP in that nation is growing quite rapidly.
For example, GDP growth that the UK experiences is just under 3% per year, but emerging economies will have much faster-growing economies.
They might not be the overall size that the UK economy has, but then growing much faster, they’re catching the UK economy’s size up. Typically, they may be experiencing growth rates above 7 or 8% per year.
In China’s case, they typically have GDP growth is over 10% per year. Again, this makes them an intriguing little proposition for businesses.
Emerging Economies have High Growth Potential
Not only is their economy is growing rapidly in terms of their GDP, but they haven’t maxed out their potential either, they’re growing very rapidly, but they haven’t reached their full capacity.
Emerging markets are places where there is plenty of growth potential that could still be utilized.
Emerging Economies have Rising Incomes of The People
Another feature of emerging economies is the incomes of the people who are residents in these economies.
The first thing we should say is that these incomes might not be as high on average, as they might be in more developed nations, but again, they are incomes that are rising quite quickly. The people who are residents in these emerging economies are experiencing rapidly growing incomes.
They have more disposable cash at the end of each month that they might look to spend on consumption, which again might just get businesses thinking.
Emerging Economies are associated with Volatility
Emerging economies are often associated with Volatility, that could be political Volatility
Those nations’ political scene might not be that stable and something that businesses are wary and might also be prone to economic Volatility
Because of the growth rates they’re experiencing, they might be experiencing quite high inflation rates and fluctuating exchange rates.
These features might just make some businesses more cautious when choosing whether emerging economies are worth trying to penetrate.
Emerging Economy Countries
The famous emerging economies that we have worldwide form part of what we call the BRIC and the mint groups. The BRIC group of nations are the economies of Brazil, Russia, India, and China on the addition of South Africa as well
India and China have very typical emerging economies with huge populations, high economic growth rates, plenty of potential for more, and high rising incomes for the consumers and the workers in those nations.
The Main group of countries in Mexico, Indonesia, Nigeria, and Turkey, which are newer additions to the emerging economies around the world that businesses might seek to penetrate
Why Emerging markets are significant.
One reason why emerging economies might be quite attractive is that the growing GDP in those nations means a growing band of middle-class consumers.
There’s going to be a growing group of consumers that have been lifted out of very low average wage rates and now enjoying much higher incomes, and when people have higher incomes, they look to try and spend that income on consumption.
But it may well be that businesses find there’s less competition to serve those middle-class customers in emerging economies than there might be in that own domestic market. Your own domestic market might be very established, and there might be lots of competing businesses.
They’re competing businesses from your own domestic nation or international rivals that are trying to compete in the global marketplace.
But emerging markets might be more of a blank canvas. It might be that rivals haven’t decided to try and penetrate or to try and attract customers in that emerging economy.
It and it crucially might mean that there aren’t already domestic firms in that nation trying to sell the goods and services that middle-class consumers want in those nations.
There might be a real opportunity you might be able to take your business to that emerging market and one of the first firms to compete in that industry, maybe even trying to benefit from first-mover advantages.
This less competition might mean that businesses are able to try and establish quite a large market share in this nation. Because those populations are particularly significant, the growth potential that firms might be able to benefit from in emerging economies might be far greater than they could hope to achieve by continuing to expand and grow in their own domestic market.
They might have reached near full capacity or their full sales in the domestic markets they operate.
But these vast populations and growing middle classes in emerging economies might just mean that these are nations that provide businesses with opportunities for much higher growth.
Much higher growth is, of course, going to give the potential for much higher profits. Much higher profit is obviously going to mean that we could reward the shareholders and investors with greater dividends.
But these huge populations also provide the potential for increased economies of scale as well. So, businesses might have to penetrate emerging economies and the massive growth in the volume of sales they can make.
It creates economies of scale for the organization driving down the unit cost of that business, meaning that profits can be higher but potential profitability.
All of these reasons mean that many businesses are particularly attracted to trying to penetrate emerging economies.
But these emerging economies, as we mentioned earlier, can be volatile, which means that businesses might have to incur the cost of marketing and to try to attract customers in these markets.
But because of the Volatility that exists, it’s more challenging to plan a long-term strategy in these markets.
In some cases, businesses might find rising costs; trying to sell to these markets fluctuating exchange rates might mean that their profits suffer from trying to target these markets.
Political stability might even mean that some businesses have to withdraw their efforts from these markets.
Emerging markets have some distinct reasons that make them very attractive places for western firms to want to sell. Still, they might also come with some particular risks that mean businesses might be very cautious about selling there.