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Strategy for Selecting an Emerging Market for Investment

Updated on March 8, 2018

Emerging Markets and their Importance:

The markets in large developing economies have emerged as major contributors to international trade. Since three decades, emerging markets of India and Brazil have drastically altered their economic and business environment to attract companies to invest in an emerging market.

Multinational companies are heavily focused on entering emerging markets. Several large corporations have invested millions in emerging markets. As a result, poverty in these countries is decreasing, giving rise to a new middle class with more disposable income. The rise in the middle class with disposable income increases demands for goods and services that make developing economies more suitable for investment.

Developing Strategy for New Market by Tackling Challenges:

When choosing to invest in an emerging market you, as a business owner, must use new strategies to establish and run a successful business in an emerging market. One of the major obstacles is that the markets in developing economies need to be consistently monitored. The products and services, the financial and labor markets need close monitoring for abrupt changes. Another hindrance is cultural and ideological differences between home country and the developing economy.

Investors should also consider the socio-economic and socio-political situation of a developing economy. In the context of the international business environment, a new establishment would need to create a strategy that is different and unique. The strategy should focus on the smooth transition of the business from home country to the emerging economy, as an investment strategy that worked in a developed economy like the USA will not apply to an emerging economy like Brazil or Indonesia.

Investment Strategy for Emerging Markets:

The business’s investment strategy involves using a market strategy that assists your company in establishing a wholly owned subsidiary host country. The policy requires the business to establish every single component of the business from scratch. The investing strategy will include setting up manufacturing units, creating a competent marketing team, selecting suppliers and searching for distribution channels. These countries have cheap labor rates and relatively stable socio-political structure, which makes it the ideal choice for direct investment by multinationals.

For any investment strategy to be successful, the investor needs to negotiate the terms and conditions of the investment with the federal government as well as the local or provincial government. An agreement will be required between the board of directors of the investing company and the government officials will result in a successful investment.

© 2018 Pritesh Jarodiya


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