IBUS1101 Lecture Notes - Lecture 8: Target Market, Outsourcing, Per Capita Income
5 Jun 2018
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Department
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Understand advanced economies, developing economies, and emerging markets.
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Know what makes emerging markets attractive for international business.
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Learn how to assess the true potential of emerging markets.
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Evaluate the risks and challenges of emerging markets.
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Learn the success strategies for emerging markets. 8.6 Understand corporate social
responsibility, sustainability, and the crisis of global poverty.
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LO:
Advanced Economies, developing economies and emerging markets
Each economy is at a different technological development stage and different GDP's e.g.
emerging
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The developing economies are at a very early stage, whereas the emerging markets are quickly
catching up to the advanced economies.
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Post-industrial countries characterized by high per-capita income, highly competitive
industries, and well-developed commercial infrastructures.
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They are the world’s richest nations and include Australia, Canada, Japan, New Zealand,
the United States, and most European countries.
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Having reached a mature state of industrial development, advanced economies have
largely evolved from manufacturing economies into sophisticated, largely service-based
economies.
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democratic, multiparty systems of government.
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Their economic systems are usually based on capitalism.
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Advanced economies
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Low-income countries characterized by limited industrialization and stagnant
economies.
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They make up the largest group of countries and include Bangladesh, Nicaragua, and
Zaire.
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hindered by high infant mortality, malnutrition, short life expectancy, illiteracy, and
poor education systems (Africa)
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Often indebted
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Developing economies (underdeveloped/third world)
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they are former developing economies that have achieved considerable
industrialization, modernization, and rapid economic growth since the 1980s.
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Some 35 countries are considered emerging markets and are found mainly in Asia, Latin
America, and Eastern Europe.
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The largest are Brazil, Russia, India, and China (sometimes abbreviated BRIC).
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r economies have transformed so dynamically, Hong Kong, Israel, Singapore, South
Korea, and Taiwan have moved beyond the emerging-market stage
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Transition economies = Certain emerging markets that have evolved from centrally
planned economies to liberalized markets ( China, Russia, and several Eastern European
countries)
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In addition to proactive market liberalization, several factors contributed to the rise of
emerging markets. The presence of low-cost labor; knowledge workers; government
support; low-cost capital; and powerful, highly networked conglomerates also helped
make these countries formidable players in the global economy
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These countries were once socialist states but have been largely transformed into
capitalism-based systems, partly through a process of privatization (the transfer of state-
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Emerging markets (emerging market economies):
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Chapter 8: Understanding Emerging Markets
Wednesday, 18 April 2018
2:12 PM
Textbook Page 1
capitalism-based systems, partly through a process of privatization (the transfer of state-
owned industries to private concern)
new global challengers = leading firms from emerging markets that are fast becoming
key contenders in world markets
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What makes emerging markets attractive for international business?
Emerging markets have become important target markets for a wide variety of products and
services.
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The largest emerging markets have doubled their share of world imports in the past few years.
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The growing middle class in emerging markets implies rising demand for various consumer
products, such as electronics and automobiles, and services such as health care.
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Emerging markets as target markets:
Firms from Japan, Europe, the United States, and other advanced economies have invested
vast sums to develop manufacturing facilities in emerging markets.
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These markets are home to low-wage, high-quality labor for manufacturing and assembly
operations.
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some emerging markets have large reserves of raw materials and natural resources
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MNE's use these locations for manufacturing processes
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Emerging markets as manufacturing bases:
Many companies outsource (subcontract their noncore business activities to specialized
suppliers, the procurement of selected value-chain activities, including production of
intermediate goods or finished products, from independent suppliers or company-owned
subsidiaries)
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Outsourcing helps firms become more efficient, concentrate on their core competencies, and
obtain competitive advantages.
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Global sourcing/offshoring = relies on suppliers or production bases located abroad
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Emerging markets as sourcing destinations:
Textbook Page 2
Document Summary
Understand advanced economies, developing economies, and emerging markets. Know what makes emerging markets attractive for international business. Learn how to assess the true potential of emerging markets. Evaluate the risks and challenges of emerging markets. 8. 6 understand corporate social responsibility, sustainability, and the crisis of global poverty. Each economy is at a different technological development stage and different gdp"s e. g. emerging. The developing economies are at a very early stage, whereas the emerging markets are quickly catching up to the advanced economies. Post-industrial countries characterized by high per-capita income, highly competitive industries, and well-developed commercial infrastructures. The(cid:455) are the world"s ri(cid:272)hest (cid:374)atio(cid:374)s a(cid:374)d i(cid:374)(cid:272)lude australia, ca(cid:374)ada, japa(cid:374), new zeala(cid:374)d, the united states, and most european countries. Having reached a mature state of industrial development, advanced economies have largely evolved from manufacturing economies into sophisticated, largely service-based economies. democratic, multiparty systems of government. Their economic systems are usually based on capitalism. Low-income countries characterized by limited industrialization and stagnant economies.
