Globalisation & emerging markets
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Transcript of Globalisation & emerging markets
Agenda
• Globalisation
• Evolution of Globalisation
• Global Economic Status
• Emerging Markets
Globalisation
Globalisation
• At political and economic level, globalization is the process of denationalization of markets, politics and legal systems, i.e. the rise of Global Economy.
• At business level, Globalisation is when companies decide to take part in global economy and establish themselves in foreign markets, by most cost effective way of production and selling in a profitable manner in a world without barriers.
Evolution of Globalisation
Evolution of Globalisation
Globalisation Challenge
• Creating a strategy to address the entire spectrum of product, process, and resource challenges faced by the organizations as they introduce their products or services into global markets.
• Review the domestic strategy to retain and improve the competitive position
Globalisation Strategic Challenges
1. Look at the world as one market.2. Make Global-minded decisions on strategic issues
such as technology, product and capital resources.3. Make Local-minded market decisions in packaging,
advertising, distribution and management. 4. Give local management freedom for marketing and
human resources.5. Develop multi-cultural skills across the organisation.6. Establish co-operative business dealings with supply
chain partners.
Global Strategy Alternatives
• Exporting – direct and indirect• Counter Trade• Turnkey projects• Licensing• Franchising• Joint Ventures• Direct Foreign Investment
The New Competitive Strategy of Global Alliances and Manufacturing Outsourcing
• Larger firms acquiring small competitors to form a global operating network that delivers:
• Economies of scale• Outsourcing manufacturing process• Global distribution• Technology pooling including managerial talent• Global sourcing
• Flex, not fixed, manufacturing• Outsourcing to free-lance manufacturing companies• Joint ventures to utilise excess idle capacity• Co-marketing
Geo-political and Geo-economic Strategy
• Global trade integration: a process in which nations economically and politically interdependent reciprocate on trade policy.• Regional FTAs pull nations together to economically and politically to form a “virtual” nation. • Weak manufacturers are exposed and become prey for takeovers and mergers. • Global Rationalisation• Invention and Innovation – foundations for global growth
Global Industry Structure
• High tech nations – Japan, USA, Western Europe – must excel at invention, innovation and marketing• Low tech (labour intensive) nations – China, India, Indonesia, Mexico – offer a large affordable labour supply, strong work ethic and raising consumerism • Economies of scale manufacturing (capital intensive) – Germany, Korea, Japan – Large size corporations• Outsourced (flex) manufacturing – USA, Western Europe – Lead the world in FDI
Examples of recent International Mergers and Joint Ventures
• LaFarge (French building materials & cement supplier) bought Blue Circle Industries (UK’s largest cement firm) to form the world’s largest cement company • Time Warner (USA) bought EMI (Britain) to become the world’s record company • Toyota + GM JV to produce GM’s Onstar in-car communications system
Examples of recent International Mergers and Joint Ventures
• Glaxo Wellcome bought SmithKline Beecham (USA co. that now form the world’s largest drug company) • Pfizer bought Warner-Lambert and American Home Products (all USA) to form the world’s second largest drug company• Sears (USA) + Carrefour (France) JV to form the GlobalNetXchange, an internet system to link retailers and suppliers
Global Economic Data
Global Economic Activity – 2005
Country GDP$billion
US 12410China 8182Japan 3914India 3699Germany 2454UK 1869France 1822Italy 1651Brazil 1568Russia 1539Mexico 1068
GDP adjusted for PPP
Global Economic Activity – 2005
Country GDP Agriculture Industry Service$billion % % %
US 12410 1.0 20.7 78.3China 8182 14.4 53.1 32.5Japan 3914 1.3 25.3 73.4India 3699 20.6 28.1 51.4Germany 2454 1.1 28.6 70.3UK 1869 1.1 26.0 72.9France 1822 2.5 21.4 76.1Italy 1651 2.1 28.8 69.1Brazil 1568 10.0 39.4 50.6Russia 1539 5.0 65.0 60.0Mexico 1068 4.0 26.5 69.5
GDP adjusted for PPP
Global Economic Activity – 2005
Country GDP POP$billion Million
US 12410 298China 8182 1314Japan 3914 127India 3699 1095Germany 2454 82UK 1869 61France 1822 61Italy 1651 58Brazil 1568 188Russia 1539 143Mexico 1068 107
GDP adjusted for PPP
Global Economic Activity – 2005
Country GDP POP GDP per$billion Million capita $
US 12410 298 41644China 8182 1314 6227Japan 3914 127 30784India 3699 1095 3378Germany 2454 82 29782UK 1869 61 30639France 1822 61 29869Italy 1651 58 28466Brazil 1568 188 8340Russia 1539 143 10762Mexico 1068 107 9981
GDP adjusted for PPP
Global Economic Activity – 2005
Country GDP POP GDP per Export %Exp$billion Million capita $ $billion to GDP
US 12410 298 41644 928 7.48China 8182 1314 6227 752 9.19Japan 3914 127 30784 551 14.08India 3699 1095 3378 100 2.70Germany 2454 82 29782 1016 41.40UK 1869 61 30639 694 37.13France 1822 61 29869 443 24.31Italy 1651 58 28466 372 22.53Brazil 1568 188 8340 115 7.33Russia 1539 143 10762 245 15.92Mexico 1068 107 9981 214 20.04
GDP adjusted for PPP
World Trade Merchandise - 2004
$billions
Exports Imports
Value Value
World 8907 9250
North America 1324 2013
Latin America 276 237
Western Europe 4031 4140
C./E. Europe/Baltic States/C IS 449 268
Africa 232 212
Middle East 390 252
Asia 2388 2224
Merchandise Trade 2004Country Export $ billion Import $ billion
United States 819 1536
UK 347 464
Germany 912 717
France 449 466
Japan 566 455
Italy 349 351
China 593 561
India 76 97
Russia 184 96
Mexico 189 206
Brazil 97 66
World Trade Services - 2004
$billions
Exports Imports
Value Value
World 2125 2095
North America 379 335
Latin America 56 58
Europe 1126 1025
Africa 48 55
Middle East 36 41
Asia 450 512
Ref: WTO
Services Trade 2004Country Export $ billion Import $ billion
United States 318 260
UK 172 136
Germany 134 193
France 110 96
Japan 95 134
Italy 82 81
China 62 72
India 40 41
Russia 20 33
Mexico 14 19
Brazil 12 16
Regional Trade - 2005
Region Trade in $billions
Populationmillions
Trade per capita in $
APEC 2200 2500 840
EU 1600 600 2667
NAFTA 700 450 1520
ASEAN 120 290 385
SAARC 5 1380 3.50
India – 04-05 Merchandise$billions
Category World India %Agricultural 783 8.00 1.02Mining 1281 11.00 0.86Iron & steel 266 1.62 0.61Chemicals 976 8.65 0.89Engineering 3474 10.28 0.30Textiles 195 10.64 5.46Others 1932 25.81 1.34Total 8907 76.00 0.85
India – Trade 04-05 by Region
$billionsRegion Exports Imports Trade
Americas 16.18 8.95 25.13Europe & Russia 20.14 56.51 76.65Asia& Oceania 37.57 37.90 75.47Africa 5.36 3.67 9.03Total 79.25 107.10 186.35
India – Trade 04-05 MerchandiseCategory Exports Imports
Agri/Commodities 6.65 8.00Mining 11.00 36.30Iron & steel 3.63 2.60Chemicals 12.68 8.50Engineering 14.59 23.60Textiles 12.02 1.00Gems & Jewellery 13.70 9.42Others 5.03 17.65Total 79.25 107.07
Emerging Markets
Emerging Markets Growth Factors
Political Stability
Economic, Political, and Legal Reforms
Entrepreneurship
Central Planning with Outward Orientation
Factors of Production
Industries Targeted for Growth
Financial Incentives
Privatized State-Owned Enterprises
Large, Accessible Markets
Low Tariffs
Common Traits of Emerging Markets
Are physically large.
Have significant populations.
Represent considerable markets for a wide range of products.
Have strong rates or the potential for significant growth.
Have undertaken significant programs or economic reform.
Are of major political importance within their regions.
Are "Regional Economic Drivers".
Will engender further expansion in neighboring markets as they grow.
CHINA
CHINA
China Oldest continuous civilization Chinese society is founded on Confucianism
ideology: Honesty Reciprocal honesty Trust in others
Between the two world wars and China came under the influence of Japan
After WW II, followed socialistic & communist principles
After 1980, opened up the barrier and encouraged globalisaton
Religion in China
India & China
Competing giants India China
Population in billion 1.09 1.31
Population growth rate 1.38% 0.59%
GDP growth rate 1993-2004
8.4% 8.4%
FDI $ billion 4.3 53.5
Foreign exchange reserve $b
160 795
Fixed & mobile phones /1000
150 645
India & China
India ChinaLiberalisation began 1990 1980Per capita GDP $ PPP 1991 2005
10903400
11386300
Trade $ billion 2004 190 1383Trade relative to GDP 3.78% 11.95%Hiring & Firing:Difficulty of Hiring IndexDifficulty of Firing IndexFiring costs (weeks of wages)
339079
114090
FDI Attractiveness
Description India China
Educated workforce 78% 22%
Rule of law 73% 27%
Cultural barriers 66% 34%
Economic reform 40% 60%
Political & social stability 41% 59%
Production & labour costs 35% 65%
Market size 6% 94%
China’s Reform Agenda
Restructure state enterprises. SOEs account for about two-fifths of the industrial output but soak up four-fifths of investment.
Sell state assets. Sell off all but 1,000 of China’s 305,000 state enterprises and allow some to go bankrupt.
Build social services. Create housing, pension programs, and other services to relieve burdens on SOEs and to care for millions who may lose jobs.
Slash tariffs. Reduce average tariffs to 17 percent in 1997 and to 15 percent by 2000 as part of China’s bid to join the World Trade Organization.
RUSSIA
Russia
Russia Russia represents a complex and mysterious
environment During 17th & 18th century Czars encouraged
Western European influence including orthodox religion and culture, but resisted market forces and modernisation
After Bolshevik Revolution and WW I, in 1917, Czars lost control and power rested with Communist party
Lenin strengthened economy by concentrating on oil, steel and textile industries
RUSSIA - Rebuilding of a Super Power
• High price recovery for Russian oil, gas and commodities• Import substitution efforts after 1998 devaluation• Market oriented restructuring• Decline in real wages resulting in cost reduction• Sound fiscal and monetary policies• 1999-2002 GDP growth rate was 6.4, 10, 5 and 4.3 %• Ruble has remained stable since 2001 (29.2-31.45/$)• Real disposable income has risen by 9% every year since 1999
RUSSIA - Rebuilding of a Super Power
• High price recovery for Russian oil, gas and commodities• Import substitution efforts after 1998 devaluation• Market oriented restructuring• Decline in real wages resulting in cost reduction• Sound fiscal and monetary policies• 1999-2002 GDP growth rate was 6.4, 10, 5 and 4.3 %• Ruble has remained stable since 2001 (29.2-31.45/$)• Real disposable income has risen by 9% every year since 1999
BRAZIL
Brazil Discovered by Portuguese in 1500 and remained
in their possession till 1822 when it became an independent monarchy
Brazil has been a Republic since 1889 Brazil is distinct in Latin America, in that it draws
from Portuguese heritage unlike the other Spanish speaking countries
Industrially, it is well advanced Leading producers of coffee, rubber, oranges and
lumber Its ethanol for automobiles has reduced the
dependence on oil
BRAZIL - Economic Progression
• The average tariff has come down from 32% in 1990 to 14%• No quantitative restrictions to imports• Exports has touched $59 billion with trade surplus of $4 billion. 50% Trade with US and EU• GDP contributions - Industry 20%, Agriculture 20% and Services 60%• FDI has grown from $6 billion in 1995 to $30 billion• FDI directed to massive privatisation of state owned enterprises
Useful Data
United States 6,407 228 42,298 3,892,200
Brazil 1,725 29 2,450 387,500
Japan 1,177 24 22,694 1,017,273
Colombia 110 3 4,154 50,430
Germany 232 46 4,145 558,100
Kenya 64 3 110 4,342
Mexico 349 17 3,679 209,200
Spain 666 15 2,959 247,300
India 3,851 63 1,839 556,800
South Africa 362 21 1,597 215,900
China 1,810 71.9 4,927 2,190,000
Highways* Railways Trucks Electricity(km) (km) and Buses Production
Country (000) (000) in Use (000) (million kwh)
*Includes unpaved and paved.
Infrastructure of Selected Countries
Living Standards in Selected CountriesPercent of Households
Households Persons per Piped Flush Electric(000) Household Water Toilers Lighting
Brazil 38,434 4.05 73% 76% 69%Chile 3,216 4.35 70% 59% 88%China 357,064 3.40 90% NA NAColombia 8,482 4.14 76% 64% 87%Ecuador 2,626 4.36 52% 33% 62%Hong Kong 1,797 3.44 98% 80% 93%India 185,048 5.00 10% 5% 16%Indonesia 43,065 4.50 12% 15% 30%Japan 40,548 3.09 93% 65% 98%Peru 5,057 4.65 49% 43% 48%Philippines 12,750 5.37 NA NA NASingapore 815 3.67 48% 42% 37%South Africa 13,300 3.37 96% 35% 90%United States 100,308 2.62 99% 99% 99%
Consumption Patterns in Selected Countries (percent of household expenditures)
U.S. Germany Singapore Mexico Poland Iran Kenya Thailand India
Food 10% 12% 19% 35% 29% 37% 38% 30% 52%
Clothing 6% 7% 8% 10% 9% 9% 7% 16%11%
Gross rent 18% 18% 11% 8% 6% 23% 12% 7%10%
Medical care 14% 13% 7% 5% 6% 6% 3% 5%3%
Education 8% 6% 12% 5% 7% 5% 10% 5%4%
Transport/communications 14% 13% 13% 12% 8% 6% 8% 13%
7%
Appliances/other durables 30% 31% 30% 25% 35% 14% 22% 24%
13%
Emerging Market Companies
Country Company Industry
Brazil EmbraerCVRDSadiaPetrobras
AerospaceMiningFood & beveragesOil & Gas
China Techtronics IndustriesHuawei & ZTEHaier & HisenseLenovoCNOOCChina MobileShanghai Bao Steell
Power ToolsTelecom ServicesElectronic AppliancesComputersOil & GasTelecom ServiceSteel
Emerging Market Companies
Country Company Industry
South Africa
SabMiller Beer
Egypt Orascom Telecom Services
Mexico America MovilCemex
Telecom ServicesCement
Russia GazpromVistSeverstalMMC Norilsk Nickel
Oil & GasComputersSteelNon-ferrous metals