Global Emerging Markets

What is “Emerging Markets” (EMs)?

 An emerging market is a country that has some characteristics of a developed
market, but does not satisfy standards to be termed a developed market.
 EM = Transitional Phase, where countries are considered to be in a transitional
phase between developing and developed status.
 The four largest emerging economies by GDP are the BRIC countries (Brazil, Russia,
India and China)
Characteristics of EMs
 Intermediate income: its PPP per capita1 income is included between 10% and 75%
of the average EU per capita income.
 Catching-up growth: during at least the last decade, it has experienced an abrupt
economic growth that has narrowed the income gap with advanced economies.
 Institutional transformations: during the same period, it has undertaken deep
institutional transformations which contributed to integrate it more deeply into the
world economy.
Emerging Markets’ Classifications
In recent years, new terms have arisen to describe the Emerging markets countries such as;
 BRIC: Brazil, Russia, India, and China,
 BRICET: BRIC + Eastern Europe and Turkey,
 BRICS: BRIC + South Africa,
 BRICM: BRIC + Mexico,
 MINT: Mexico, Indonesia, Nigeria and Turkey,
 Next Eleven: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the
Philippines, South Korea, Turkey, and Vietnam
 CIVETS: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa
BBVA Classification
In March 2014, BBVA (multinational Spanish
banking group based in Madrid and Bilbao)
introduced a new classification of
developing economies, the groupings are as
follows:
 EAGLEs (emerging and growth-
leading economies): Expected
Incremental GDP in the next 10

1
PPP per capita : purchasing power parity) per capita, i.e., the purchasing power parity (PPP) value of all final
goods and services produced within a country in a given year, divided by the average (or mid-year) population
for the same year.

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 years to be larger than the average of the G72 economies, excluding the US.
o Brazil, China, India, Indonesia, Mexico, Russia & Turkey
 NEST: Expected Incremental GDP in the next decade to be lower than the average of
the G6 economies (G7 excluding the US) but higher than Italy’s.
o Argentina, Bangladesh, Chile, Colombia, Egypt, Iran, Iraq, Kazakhstan,
Malaysia, Nigeria, Pakistan, Peru, Philippines, Poland, Qatar, Saudi Arabia,
South Africa, Thailand, Vietnam
Investing in EMs
 EMs are attractive markets for investors
 Still, some investors remain optimistic on emerging markets and their profit
potential.
 Because emerging markets are so focused on growth (and, on average, have a higher
growth rate per year than developed countries like the U.S.), they often deliver
higher return potential and higher capital gains.

2
The Group of Seven (G7) is an informal bloc of industrialized democracies—Canada, France, Germany, Italy,
Japan, the United Kingdom, and the United States—that meets annually to discuss issues such as global
economic governance, international security, and energy policy.

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Operation Management in Global Environment
Global Operation Management
Definition: Refers to managing operations in a global context with focus on firm’s ability to
effectively collaborate with its supply chain partners in order to remain competitive in a
global economy.
Challenges for global operations to overcome
 Cultures,
 local regulations
 political barriers
 language
 local labors requirements
 foreign laws
Advantages of global operations management:
 Extend organization distribution channels and supply chains globally.
 Significant business opportunities
 Innovative strategies where firms compete
Six Reasons domestic business operations decide to change to Global Operations
1. Improve the supply chain
2. Reduce costs and exchange rate risk
3. Improve operations (Learning does not take place in isolation)
4. Understand markets
5. Improve products
6. Attract and retain global talent
Global Sourcing
Procurement of products or services from suppliers located abroad for consumption in the
home country or a third country
Benefits of Global Sourcing
 Cost Efficiency due to lower wages abroad and improved profitability
 Ability to Achieve Strategic Goals
o Faster corporate growth
o Access to qualified personnel
o Improved productivity
o Access to new markets
Risks in Global Sourcing
 Lower-than-expected cost savings
 Environmental factors: such as exchange rate fluctuations, trade barriers, and labor
strikes
 Weak legal environment: which can affect protection of intellectual property
 Inadequate or low-skilled workers

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  Risk of creating competitors
 Erosion of morale and commitment among home-country employees due to
outsourcing jobs
Strategies for Minimizing Risk in Global Sourcing
 Go offshore for the right reasons.
 Choose carefully between a make or buy decision; i.e make in house or outsource
 Invest in supplier development and collaboration.

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Global Human Resources Management
Definition:
Is the process of staffing, allocating and effectively utilizing human resources in
multinational corporation
Differences between Global HRM & domestic HRM
 Different labor markets
 Mobility problems: legal, economic, cultural barriers
 Varied compensation practices
 Different Labor laws
Global HRM Practices:
 International staffing
 Pre-departure training for international assignments
 Repatriation
 Performance management in international assignments
 Compensation issues in international assignments
International staffing:
International Staffing uses three different sources:
 Home country or Parent Country Nationals (PCN)
 Host Country Nationals (HCN)
 Third Country Nationals (TCN)
Global HRM Approaches:
 Ethnocentric:
o Managerial positions are filled with Parent country nationals
o Maintain unified corporate culture
o Eg. Toyota & P&G
 Polycentric:
o Decentralized control
o Key positions are filled with Parent company nationals
 Geocentric:
o Staffing could be PCNs, HCNs or TCNs
o Capabilities not nationalities are the key to staffing
Pre-departure Training for International Assignments
 To make it easier for the employee to perform job responsibilities and be effective in
the foreign country as soon as possible
 Elements of Training program:
o Language training
o Cultural training
o Managing personal and family life

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Repatriation
It is the process of bringing an expatriate home after completing the international
assignment.
Performance Management in International Assignments:
Performance is the combination of several factors
 Compensation Package
 Task Assigned to the Expatriate
 Headquarter’s Support
 Environment
 Cultural Adjustment
Compensating Managers in International Assignments:
 Home leave and travel allowances / Relocation allowance
 Children’s education allowance
 Currency differential payments
 Housing allowance
 Cost of living adjustment

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Chapter 6: Cultural Environment
Definition:
“Culture is the integrated sum total of learned behavioral traits that are shared by members
of a society”
“ Culture is that complex which includes knowledge, belief, art, morals, law, custom, and
any other capabilities and habits acquired by individuals as members of society”
Characteristics:
 It is learned: from family, society, media, observations …etc
 It is interrelated: and all affect each other; so music affects cloths ..etc
 It is shared: so people from one community share same culture, eg. Most Egyptians
shares same cultures, Japanese share same cultures …etc
High-versus low- context cultures
High- Context culture Low- context culture
 Wordings can have more than one  Language is explicit, so wording has one
meaning in the context meaning in the context.
 Focuses on group development.  Focuses on individual development.
 Eg. Arab countries and Japan  Eg. Western hemisphere, specially USA

Culture and Time:

 Monochronic (M-Time): Time is fixed; linear thinking; so it is one thing at a time
 Polychronic (P-Time): time is flexible; spiral thinking; multi things at a time.
Ex: time so spend a cheque: 1 min in Switzerland compared to 26 mins in middle east.
Ex: accuracy of public clocks in streets and public sectors such as airports, train station,
banks ..etc
Cultural Values: (Dimensions)
 Individualism/Collective Index (IDV): Hofstede divided cultures into two main types;
individual culture (eg. USA), Collective culture (eg. Japan)
 Power Distance Index (PDI):
o High power: uneven distribution of power (pyramid distribution), so they
appreciate hierarchy
o Low Power: equally or even distribution of power; so managers and
subordinates are the same.
 Uncertainty Avoidance Index (UAI):
o High uncertainty avoidance: high tendency to avoid unknowns; (what we
know is what is we don’t know) eg. Asian countries
o Low uncertainty avoidance: take risks; eg. Western countries
 Masculinity/Feminity Index (MAS):
o Muscular society: males and females are sharing muscular values such as
competition & materialism; eg. USA.

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 o Feminity: males and females are adopting family respect, spiritual more than
materialism, acceptance for others …ect, eg. Asians.
 Long term orientation vs. short term orientation:
o Long term: plan for the future; eg. Japan
o Short term: plan on a daily basis, eg. USA
 Fatalism vs. Determination
o Fatalism: everything is according to fate; eg. Arab countries
o Determination: your destiny is between your hands, so all accidents are
avoidable. Eg. Western countries.
Self-Reference Criterion vs Acculturation
 Self-Reference Criterion is the unconscious reference to one’s own culture values
and is the root of most international business problems.
 Acculturation is the process of adjusting and adapting to a specific culture other than
one’s own. It is one of the keys to success in international operations.
Eg. MacDonald’s managed to adapt to each culture
Elements of Culture
 Language
o Language is the mirror of culture; if a country has several spoken languages,
it has several cultures. e.g. Switzerland, India.
 Material Life
o Refers to the results of technology and how a society organizes its economic
activity. Eg. availability of basic economics infrastructure for the international
business in a market.
 Aesthetics
o The meanings of colors and symbols vary from country to country.
 Education
o Education, either formal or informal, plays a major role in sharing of culture.
 Religion
o Religious holidays vary greatly among countries.
o Consumption patterns may be affected by religious requirements or taboos.
 Attitudes and Values
o Our values and attitudes help determine what we think is right, important or
desirable.
 Social Organizations
o Social organization refers to the way people relate to each other.
o In the U.S, the key unit is the nuclear family. In other societies, the family unit
is larger including more relatives.

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Chapter 8: Global Marketing Strategy:
The Shift Towards Globalization
Economist Robert Reich says “National economies doesn’t exist anymore, most economies
are integrated and connected to some extent”.
Ohmae says “borderless world”; so companies may be by origin from specific country, eg.
Sony is originally from Japan, but by time it invest in many places.
Ohmae goes to the extent that he says “ I am a citizen of universe”
Levitt says “ we are living in a global village”, so demands are driven by global standard
products.
What is globalization?
A global company may have manufacturing facility in Germany, get spare parts from Japan,
finance from Switzerland, and sell in USA, so the company sees the whole world as one
market.
Thus globalization is a stage of development in the firm's strategy and culture where it
allocates resources with global objectives to access the desired market with the highest
quality product and lowest cost
Forces driving companies to globalize
1. Customers
o Naisbitt said that 21st century customer will eat succii, drink cappuccino while
driving his Hyundai car to MacDonald’s
2. Markets
o Triad markets: world income and buying power are 90% in Americas, Asia
and Europe, thus global company shall be in the Triad markets as losing one
means losing 1/3rd of available markets.
3. Technology
o Technology also comes from one of the Triad; eg. Silicon valley in USA,
Munich in Germany, Bangalore in India.
4. Competition
o Global company shall be selling to the Triad market and getting technology
from there; otherwise competition will do!
Dimensions of a global strategy
1. Building global market participation.
o
2. Design
o Ex: design a mobile phone that fits customers everywhere, Pepsi is the same
everywhere
3. Creating global marketing.
o Using same product mix that fits everywhere; EX: MacDonald’s: I love it,
Giellete: what men deserves.
4. Location:

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 o Where to locate: Ex: R&D in Germany, design in Italy, finance in Switzerland
…etc, Ex Honda manufacture in Japan and assemble in Turkey.
5. Making global competitive moves.
o Being able to move money and manpower between countries, ex: Orascom
in Algeria
Global Integration and local adaptation of corporate functions.
Globalization is not standardization; standardize when possible, localize when needed.
Balance
 Think Global, Act Local
o Global Integration
 R&D
 Raising Capital
 Production
 Sourcing
o Local Variation
 Pricing
 Packaging
 Promotion

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