The Impact of Emerging Economies on Global Business Trends

An emerging market economy is a developing country’s economy getting more involved in global markets as it grows. Emerging market economies have some, but not all, of the features of developed markets. Strong economic development, high per capita income, liquid equities and debt markets, accessibility to foreign investors, and a dependable regulatory structure are all characteristics of developed markets. As an emerging market economy grows, it often integrates more fully into the global economy. That means improved liquidity in domestic debt and equity markets, increased trade volume, and increased foreign direct investment. But what are the most important emerging markets around the world?

Three emerging economies

Here are three examples of emerging economies and the factors driving their growth.

Brazil

Brazil’s economy developed significantly relative to the rest of the world in the early 2010s, at a rate of 7.5%. Nevertheless, due to political unrest and trade sanctions, growth slowed and turned negative in 2016 (-3.5%). Brazil also had significant advances in income levels and poverty reduction from 2003 to 2014. Still, progress slowed after 2015 due to decreasing economic activity, which was reflected in the forex markets. In addition, political uncertainty and reduced government spending have significantly impacted the Brazilian economy. Yet, the country’s future appears to be bright. The domestic economy expanded by 0.6% in 2019 and is predicted to maintain growth through infrastructural improvements, foreign investments, and reliance on agricultural commodities such as soybeans and coffee.

India

Because of global trends and essential investments in technology and energy, India is on track to become the world’s third-largest economy by 2027, surpassing Japan and Germany, and to have the world’s third-largest stock market by 2030. India already has the world’s fastest-growing economy, with an average GDP growth rate of 5.5% over the last decade. Three megatrends—global outsourcing, digitalisation, and energy transition—are now laying the groundwork for unprecedented economic expansion in the country of over 1 billion people.

China

China’s economy is expected to improve this year as mobility and activity increase, boosting the global economy. According to the most recent predictions, the economy will grow by 5.2% this year, up from 3% last year. This is fantastic news for China and the rest of the globe, as the Chinese economy is now forecast to provide one-third of global growth this year. However, China still has enormous economic concerns. The real estate downturn continues to be a severe impediment. Longer-term growth obstacles include a declining population and slower productivity growth.

How does this impact global business?

The international economy promotes greater dissemination of goods across continents. As a result, many small firms devote time and money to capitalising on commercial prospects in rising areas worldwide. An emerging market is an economy that has yet to reach the same degree of development as the developed world. On the other hand, people in emerging markets still have enough labour and a need for the commodities you sell, resulting in significant advantages for enterprises that build outposts in these countries. These advantages include the following:

Expanding international trade

Regarding international trade, emerging markets provide numerous advantages. In Latin America, for example, Brazil, Mexico, Chile, and Argentina have accounted for more than 70% of total exports and imports to foreign markets over the last 15 years. But, if you want to benefit from international trade, you must first discover each rising market’s primary trading alliances and top exports.

Portfolio diversification

Portfolio diversification is another significant advantage for foreign investors since economic downturns in one country or region can be countered by growth in a developing market. As a result, investing in developing market stocks will likely provide more growth and higher returns than investing in more developed markets.

Enhanced social profile

Operating a multinational firm that effectively navigates different markets doesn’t just build consumer trust. It’s also an unmistakable proof of concept that will impress investors and prospective business partners alike.

Bottom line 

To survive in a changing economy and maintain long-term competitiveness, multinational corporations must consider entering and extending their operations in developing countries to harness the growing middle-class consumer market. In order to thrive, businesses must understand local requirements, use local know-how and resources, and employ new, highly adaptable business models to provide a locally tailored and appealing value proposition. Following that, businesses might then consider exporting their products to other markets in developed and emerging countries.