Opportunities and Trends in Emerging Markets Flashcards Preview

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Flashcards in Opportunities and Trends in Emerging Markets Deck (32)
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How is the middle income class classified?

Population with income between $6000 and $30,000 per annum


How are middle income countries distributed globally?

Diverse group by size/population/income

5 of the world's 7 bullion people

73% of the world's poor people live in middle income countries

1/3 global GDP


What to GDP and GNI per capita graphs show since 1960?

People are becoming wealthy, huge rise in GDP since 1960

A few shocks to the rise due to nationalism but trend remains positive


How has the middle class experienced exponential growth and how is it expected to grow?

2016 - 3.2 billion in the global middle class

160 million will join the middle class annually over the next 5 years


How have India and China experienced growth of the middle class?

88% of the next billion entrants into the middle class will be in Asia

By 2030, Asia could represent 2/3 of global MC


Why and how is there stagnation in advanced countries in terms of middle class growth?

MC market in the US, Eurozone and Japan expected to grow at 0.5% p.a compared to 6% in China and India
due to Western world already having significant middle class population


What does GINI coefficient measure?

Inequality - lower the ratio = more equal society is

E.g Brazil (2005-2015) 56.3 to 51.3, improvement in inequality


What opportunities does a growing middle income class offer?

- High incomes
- Governments - will be trying to improve infrastructure to attract FDI and business
- Higher tax = infrastructure and development


How much do the middle income class spend p/a and how is this expected to grow?

$35 trillion --> 20.2% of global GDP

Projected to spend $64 trillion by 2030


How are consumption habits due to change?

India set to overtake US by 2030.

Mexico is going to push France out of the top 10 consumers by 2030


Where are some of the most populous urban cities and what does their growth mean?

- Tokyo - 37 million people
- New Delhi - 28 million: due to be most populous city by 2028
- Shanghai - 26 million
- Means there is increased need and investment into infrastructure


How is urban population growth distributed globally?

World - 2% p/a
Africa - 4.1% p/a
Asia - 2.2% p/a
- India, China and Nigeria expected to account for 35% of projected growth of the worlds urban population by 2050


What opportunities does urbanisation in emerging markets offer to firms?

- Real estate: housing/infrastructure
- Concentrated market
- Increased labour force
- Demand for value added goods
- Higher incomes
- Economic growth
- Unemployment/cheap labour
- Education: growth in private schools


How do housing and slum dwellings pose a challenge for governments in emerging countries?

Sub-Saharan Africa has the highest proportion of slum dwellers (65%)

Only 20% of SSA's population have electricity access

= crime, insecurity, health and sanitation, disease


How is real estate emerging as a high growth market in emerging markets?

Housing shortages e.g India facing urban housing backlog of 18 million housing units, shortfalls in South Asia amount to 38 million

= opportunities for real estate and construction companies


How is technology penetration dispersed throughout the BRICs?

China has greatest proportion of telephone users and internet users

Russia has greatest proportion of people with mobile phones and personal computers

India has fewest people with PCs and phones

Brazil has fewest internet users


Which region has a significant proportion of the world's internet users (2018)?

Asia (50.7%) - 2000 million compared to Europe's 750 million and North America's 350 million

Africa's has growth 11,481% since 2000.


How has smartphone ownership risen substantially in emerging economies since 2015?

Russia 14% increase,
South Africa 14% increase,
Brazil 13% increase


What opportunities does technology penetration in emerging economies present?

- E-commerce e.g Jumia is the Amazon of Africa
- Financial services; online banking
- Better info access
- Mobile payment services (68% all phone users make/receive mobile payments in Kenya)


What do gender inequality trends show?

EM gols are acting to address inequality:
- Laws and policies (quotas - women leadership)
- Girls education
- Support for women entrepreneurs
- Work-life support for mothers
E.g Singles day in China 11/11 is the biggest e-commerce day of the year


How have the BRICs shown a decline in gender inequality?

India's ins't particularly steep - gentle decline due to cultural issues and societal structure

Marked decline for China 2000-2005


What are the opportunities associated with gender equality for business?

- Spending power of women
- Labour market
- Economic growth - household spending, employment
- Diversity and innovation
- Soft skills and business leadership


How does high population growth present opportunity in emerging markets in terms of markets, offshoring and cheap labour?

EMs account for 90% of world population under 30

77% of world's population live in Africa and Asia

India and Chine account for 37% of population


Do institutional voids present opportunities in emerging markets?

- Can fill IVs
- Exploit them: pay bribes to overcome bureaucracy, get contracts, pay lower/no tax
- Get away with bad behaviour


What are the requisites for exploiting or filling voids?

Market knowledge: research, local partners

Resources and capabilities: capital, know-how

Networks: connections


How are FTSE100 companies distributed in emerging markets?

33% of revenues from FTSE100 companies come from EMs.
- 62% of HSBC revenues
- 40% of Unilever's


What are the present institutional voids in EMs?

Legal/regulatory - absent/weak rule of law, inefficient systems, uncertainty

Cognition - illiteracy, poor education systems, poor entrepreneurial intelligence

Norms - corruption, bribery, piracy, espionage, weak entrepreneurial appreciation


What is institutional duality?

The simultaneous need to conform to both external legitimacy forces and internal legitimacy forces i.e parent company demands and host country pressures


What is institutional distance and how does it impact duality?

Differences in the institutional conditions between countries, worse when the difference is so vast between the home and host country


What is corruption and how does it impact business in emerging markets?

The abuse of public power for personal gain. Part of EM culture. Roots are both formal and informal.
e.g JBS largest beef processing company has HQ in Sao Paulo and pays bribes to avoid bureaucracy