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Evan Octviamen

case: the BRICs: vanguard of the revolution
1. Estimate the likely market evolution of the BRICs over the next decade? What
economic indicators might companies monitor to best guide their investment and
They are in the speedy growth of their end user markets. (Experience indicates that
consumer demand takes off when Gross National Income per capita reaches levels
between $3,000 and $10,000 per year.) From 2000 to 2008, the BRIC countries'
combined share of total world economic output rose from 16 to 22 percent. Together,
the BRIC countries accounted for 30 percent of the increase in global output during
the period. As BRICS observed as emerging market, many investors recognize the
potentially attractive return characteristics and diversification benefits of this asset
class. However, most
pension plans and other institutions currently allocate less than 5% of their overall
portfolio to emerging market equities. In Russia there is by now momentous
verification of the growth of consumerism throughout the history decade. Parallel
trends are observing in China and India,
where middle classes growth is very quick. It is anticipated that within a decade, each
of BRIC countries will demonstrate higher profits, amplified demand for capital, and
stronger state currencies. As a result, overseas firms will desire to observe foremost
financial pointers, as Purchasing Power Parity, Gross National Income and Human
Development Index, in addition to developments in the cultural, political, and legal
environments of those countries.
2. Identify the three implications of the emergence of the BRICs for careers and
companies in your country.
The BRIC thesis posits that China and India will become the world's dominant
suppliers of manufactured goods and services, respectively, while Brazil and Russia
will become similarly dominant as suppliers of raw materials. It's important to note
that the Goldman Sachs thesis isn't that these countries are a political alliance (like the
European Union) or a formal trading association - but they have the potential to form
a powerful economic bloc. BRIC is now also used as a more generic marketing term
to refer to these four emerging economies. Due to lower labor and production costs,
many companies also cite BRIC as a source of foreign expansion opportunity.
Developing countries like us may face challenged and higher stresses in the labor
market and the declining cost competitiveness of their countries companies. Students
from Bangladesh may be encouraged because their states variety and compete for the
investment capital and those business actions that lead to important monetary growth
and the increasing international competitiveness of our countries firms. Nevertheless,
there is sufficient scope of comparative advantage in our country.
3. Do you think recency bias has led overestimating the potential of the BRICS?
Howwould you as a manager for a company assessing these markets, try to control

this bias?
With the economic performance and potential of the BRICs, There may be some
uncertainty. In principle, observe note the endemic problem of recency bias, which is
the dubious expectationthat the current trend will continue into the future. Repeatedly,
companies, executives, investors, and officials extrapolating the present into the future
have made mistakes. here are a number of qualitative issues that investors must
consider when contemplating an allocation to emerging market equities. One of the
most decisive factors is liquidity, as plan sponsors may shy away from markets with
lower volume and smaller market caps. Many of these issues are incorporated in the
classifications of MSCI Emerging Markets Index, which consider economic
development, size and liquidity requirements, and market accessibility. Per MSCI,
market accessibility integrates qualitative measures reflecting the investment
experience of international investors in a given market, focusing on liberalization,
level playing field, competitive landscape, information flow, and stability. In addition,
emerging markets may involve a multitude of other political, social, legal and
regulatory risks.
4. How might managers interpret the potential for their product in a market that is, in
absolute economic terms, large but, on a per capita basis, characterized by a majority
of poor to very poor consumers?
However, we believe the best active managers may be able to identify opportunities in
smaller markets, and build portfolios that are more diversified than the index. As such,
manager selection is critical given the volatility in the asset class and wide dispersion
of outcomes. In all, we believe institutional investors should consider establishing or
increasing allocations to emerging market equities.
Managers might interpret the potential for their product in a market. If there is
innovation in the interaction with other firms and with knowledge infrastructure
including universities and technological institutes .so that it can clarify the
specialization, and competitiveness .Growth performance can also go a long way.
5. In the event that one BRIC country, if not all, fails to meet its projected performance,
what would be some of the implications for the economic environment?
Macro stability, institutions, openness, education is the indicator of economic growth.
If one of the BRIC country fails to meet the projected performance, the standard of
BRIC countries performance will be hamper to some extent. As every country have
microeconomic and macroeconomic environment. The elements of economic
environment as gross national income (GNI), per capita income, purchasing power
parity, human development index will be hampered. So there can be inflation,
unemployment, debt, inequality in income distribution, poverty and mbalance in
payments. Again maintenance of strong political institutions that endorse
transparency, fairness, and the rule of law will not also possible. On the other hand
openness to trade, capital flows, FDI cant be increased. If these economies can fulfill
their potential for growth, they could become a dominant force in generating spending

6. Compare and contrast the merits of GNI per capita versus the idea of purchasing
power parity, human development, and green economics as an indicator of economic
potential in Brazil, Russia, China and India.
The GNI consists of the personal consumption expenditures, the gross private
investment, the government consumption expenditures, the net income from assets
abroad (net income receipts), and the gross exports of goods and services, after
deducting two components: the gross imports of goods and services, and the
indirect business taxes. The GNI is similar to the gross national
product (GNP), except that in measuring the GNP one does not deduct the indirect
business taxes. In economics, purchasing power parity (PPP) asks how much money
would be needed to purchase the same goods and services in two countries, and uses
that to calculate an implicit foreign exchange rate. Using that PPP rate, an amount of
money thus has the same purchasing power in different countries. Among other uses,
PPP rates facilitate international comparisons of Income, as market exchange rates are
often volatile, are affected by political and financial factors that do not lead to
immediate changes in income and tend to systematically understate the standard of
living in poor countries, The Human Development Index (HDI) is a comparative
measure of life expectancy, literacy, education, and standards of living for countries
worldwide. It is a standard means of measuring well-being, especially child welfare. It
refers life expectancy, education (primarily the adult literacy rate), and income per
person and is designed to capture long-term progress rather than short-term changes.
Thus, by combining indicators of real purchasing power, education, and health, the
index offers a comprehensive measure of a countrys standard of living that
incorporates both economic and social variables.