Emerging markets (EMs) constitute the major growth opportunity in the evolving world economic order. Their potential has already effected a shift in multinational corporations (MNCs), which now customarily highlight EM investments when communicating with shareholders. Coca-Cola, for example, predicts that its $2 billion investment in China, India, and Indonesia, which together account for more than 40 percent of the world’s population, can produce sales in those countries that double every three years for the indefinite future, compared with Coke’s 4 percent to 5 percent average annual growth in the U.S. market in the past decade.1
In aggregate, the proportion of global foreign direct investment (FDI) inflows to developing countries has increased from 18 percent in 1992 to 33 percent in 1996, when it exceeded $100 billion.2 These investments are widely interpreted as heralds of a major restructuring of the global economy; a recent Delphi study of business, policy, and academic leaders placed overwhelming importance on EMs as the source of future growth.3 Governments too are jostling for attention in EMs: the U.S. administration’s export promotion strategy, for example, is centered on the “Big Emerging Markets Policy” launched in 1994 after the Department of Commerce was charged with answering the questions, “If we look toward the next century, where will we find the engines of American growth? What markets hold the most promise?”4
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The new perception of these countries as markets explains the surge of interest. The phrase “emerging markets” is being adopted in place of the previous lexicon of “less developed countries,” “newly industrializing countries,” or even “Third World countries,” which emphasized the countries’ sources of cheap raw materials and labor rather than their markets (see the sidebar).
1. “Coke Pours into Asia,” Business Week, 28 October 1996, pp. 77–81
2. United Nations Conference on Trade and Development (UNCTAD), World Investment Report 1996 (New York: United Nations Publications, 1996).
3. M.R. Czinkota and I.A. Ronkainen, “International Business and Trade in the Next Decade: Report from a Delphi Study” (Washington, D.C.: Georgetown University, working paper 1777-25-297, 1997).
4. J.E. Garten, “The Big Emerging Markets,” Columbia Journal of World Business, volume 31, Summer 1996, pp. 6–31. See also: United States International Trade Administration, The Big Emerging Markets: 1996 Outlook and Sourcebook (Lanham, Maryland: Bernan Press with the National Technical Information Service, 1996). The so-called “ten big emerging markets” are Mexico, Brazil, Argentina, South Africa, Poland, Turkey, India, South Korea, the ASEAN countries (Indonesia, Thailand, Malaysia, Singapore, and Vietnam), and the Chinese Economic Area (China, Hong Kong, and Taiwan).
5. J.A. Quelch and L.R. Klein, “The Internet and International Marketing,” Sloan Management Review, volume 37, Spring 1996, pp. 60–75.
6. R. Batra, “Marketing Issues and Challenges in Transitional Economies” (Ann Arbor, Michigan: University of Michigan Business School, William Davidson Institute, working paper 12, October 1996); and D. Johnson and E. Kaynak, Marketing in the Third World (Binghamton, New York: Haworth Press, 1996).
7. J.E. Garten, “Troubles Ahead in Emerging Markets,” Harvard Business Review, volume 75, May–June 1997, pp. 38–50.
8. C. Nakata and K. Sivakumar, “Factors in Emerging Markets and Their Impact on First Mover Advantages” (Cambridge, Massachusetts: Marketing Science Institute, working paper 95–110, 1995), p. 31.
9. A. Shama, “Transforming the Consumer in Russia and Eastern Europe,” International Marketing Review, volume 9, number 2, 1992, pp. 43–59.
10. W.J. Keegan, Global Marketing Management (Englewood Cliffs, New Jersey: Prentice Hall, 1995); and C.A. Bartlett and S. Ghoshal, Managing Across Borders (Boston: Harvard Business School Press, 1989).
11. J.A. Quelch and N. Laidler, “Mary Kay Cosmetics: Asian Market Entry” (Boston: Harvard Business School, case study, 594–023, 1995); and M.A. Rennie, “Born Global,” McKinsey Quarterly, volume 4, 1993, pp. 45–52.
12. J. Johanson and J.E. Vahlne, “The Internationalization Process of the Firm,” Journal of International Business Studies, volume 8, Spring–Summer 1977, pp. 11–14; S.P. Douglas and S.C. Craig, “Evolution of Global Marketing Strategy,” Columbia Journal of World Business, volume 24, Fall 1989, pp. 47–59; H.G. Barkema, J.H.J. Bell, and J.M. Pennings, “Foreign Entry, Cultural Barriers, and Learning,” Strategic Management Journal, volume17, February 1996, pp. 151–166.
13. Purchasing power parity (PPP) data are widely available, for example, in World Bank GDP reports.
14. We acknowledge an anonymous reviewer for emphasizing the availability of consumer credit in assessing potential demand.
15. M.R. Czinkota, I.A. Ronkainen, and J.J. Tarrant, The Global Marketing Imperative (Chicago: NTC, 1995), p. 124.
16. J.P. Jeannet and H.D. Hennessey, Global Marketing Strategies (Boston: Houghton Mifflin, 1995), p. 353; and P. Kotler, Marketing Management (Upper Saddle River, New Jersey: Prentice-Hall, 1997), p. 350.
17. J.A. Quelch and N. Laidler, “Gallo Rice” (Boston: Harvard Business School, case study, 593–018, 1993).
18. See “Blazing Away at Foreign Brands,” Business Week, 12 May 1997, p. 58.
19. Ad Age International, March 1997, p. 136.
20. W. Vanhonacker, “Entering China: An Unconventional Approach,” Harvard Business Review, volume 75, March–April 1997, pp. 130–140; and “Going it Alone,” The Economist, 19 April 1997, pp. 64–65.
i. M.R. Czinkota and I.A. Ronkainen, “International Business and Trade in the Next Decade: Report from a Delphi Study” (Washington, D.C.: Georgetown University, working paper 1777-25-297, 1997).