Lecture notes
Lecture 18
- Institution
- Royal Holloway University Of London
EMERGING OR ‘NEW WORLD’ REGIONAL STRATEGIES
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06/12/2019LECTURE 18: EMERGING OR ‘NEW WORLD’ REGIONAL
STRATEGIES
TODAY’S TOPICS TODAY’S LEARNING OUTCOMES
• Growing importance By the end of this session you will be able to:
• Inbound FDI • Examine opportunities and threats in
• Challenges to doing business in China and from emerging economies
• Comparative advantage • Understand the nature of new
• Outbound FDI multinationals from emerging
• Motivations and difficulties for Chinese MNEs economies
EMERGING ECONOMIES
Emerging economies (EEs) are marked by their rapid economic growth and changing involvement in the
global economy
BRICS
Populous
Underdeveloped
• EE come from countries which were previously part of an empire
• GDP Growth the biggest economy (US) has the lowest growth rate (2.1%)
• The number of under 30 years old in a country is important as when older people retire,
new generations needs to take replace them
Video about the Emerging Economies, The Economist https://www.youtube.com/watch?
v=iyCPqyHRqbo
• A lot of EE are closely located to Triad economies
HIGHEST EMERGING ECONOMY GROWTH GDP (2017)?
China
A. Philippines Answer is A, the Philippines has the
B. Kenya highest GDP after Chia.
C. Thailand
PLUS ONE STRATEGY China + another country
, GROWING IMPORTANCE
There are two types of international expansion that are important in relation to emerging economies:
• Internationalization of firms from the Triad (advanced economies)
• Internationalization of firms from outside the Triad (emerging economies)
th
69 Fortune 500
Petronas (company) is an example of a MNE which moves out of its ‘home’ country
MNES IN TRIAD AND EMERGING MARKETS
Triad regions:
• Expensive for labour and infrastructure
• Strong incentives for offshoring to emerging markets
Non-Triad regions:
• main attraction of Triad markets are large, mature markets, assets, resources and capabilities
2009: Average Chinese household income $10,220 vs. $84,300 in the United States (the median US income
is $47,300)
Producing a product in the Triad is expensive, so MNEs situated in the Triad produce their
products in other countries
EMERGING MARKETS FDI
Beware: ‘Emerging economy’ is a broad concept
Asia–Pacific and the Middle East: 23 percent of global FDI flows, the most of any non-Triad region
Latin America: 8.5 percent of global FDI in 2006, a difficult decade
Africa: has low levels of inward FDI due to political instability, weak infrastructure and macroeconomic
fragility
Emerging economies are diverse: extraction, production, language and law
• EE are diverse
• Money flows (outside the Triad region) mostly in Asia and the middle East
What event in December has the potential is disrupt emerging economies?
A. Santa
B. Oil price volatility Answer is D
C. Euro quantitative easing
D. Fed rate decision
CHINA IN THE GLOBAL ECONOMY
China owns $1.1 trillion US debt I Exports cheap products I Emerging economy resources
• weak during WW2
• Now it is essential to the Worlds’ economy
• China’s debt could be sold easily, but it will create huge problems in the US economy (this
debt could be considered as an economical weapon)
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