Emerging Markets in Developing Countries

Emerging Markets in Developing Countries

India is a less developed country (LDC), with a population exceeding one million, an average per capita GDP of $583, low literacy and high infant mortality rates. There are just five phones and two internet users for every hundred people. Yet it is one of the fastest growing knowledge-based industries in the world. With a GDP growth of about 4% compared to 2% for the USA. Likewise, China is even experiencing a growth not less than 8% of GDP annually. Emerging economies, like India, China, Brazil and Russia will become more important as a consequence of high growth rates combined with large populations.

These emerging economies are raided by what Harvard’s Dani Rodrik has called “export fetishism”. Meaning, foreign Multinational Enterprises (MNE’s) are trying to tap into these fast growing markets. The Boston Consulting Group (BGC) has identified several domestic firms that are a hit in the home market, not wanting to build out abroad and most importantly, countering foreign MNE’s entering their home market. They have labelled them “local dynamos”. (“The stay-at”) These Local Dynamos are successfully fighting off foreign MNE’s trying to gain a foothold in their domestic market due to three reasons.

First of all, domestic firms can use the benefit of knowing the specific consumer tastes of their fellow-countryman. According to Rugman and Collinson this is a Firm Specific Advantage (FSA): “Strengths and benefits specific to a firm and a result of contributions made by its personnel, technology and/or equipment.” (49) For instance, a Brazilian budget airline Gol lets their aeroplanes depart at unusual hours and make inter-flight touchdowns to remote locations, because, Brazilian customers are relatively money-bound and relinquish convenience and speed for an inexpensive ticket.