Emerging markets describes countries with social or business activities are in the process of rapid growth and industrialization. They are in the phase of moving from a closed economy to an open market economy. The economies of China and India are considered to be the largest (Wikipedia 2012).
An emerging market is always endeavoring to build an economic reform program to develop a stronger and more firmed economic performance and efficient capital market. One of the major characteristics in an emerging market is lack of infrastructure facilities. In some areas, there may not be electricity or water, narrow highways, limited transportation and difficulties in telecommunication are some of the key issues.
The poor infrastructure system creates opportunities for businesses that can fill the gaps with water purification systems, generators, mobile telecommunication and other products. Nevertheless, the products and services you sell have to be adapted to local cultures and traditions. How would you sell beef in a market like India where you find sacred cows? Customers can have a major impact over the growth of products and the business.
Incomes and cash flows in emerging markets are much lower particularly, in rural and poor segments. Hence, customers do not buy in large quantities. In India, with 342 people per square kilometer, is more than 11 times as populated in U.S. The companies operate in an environment like this should change their products by reducing the package size, price etc.
Also in emerging markets have poor distribution systems. In India, products go to customer’s hand often through small shops. A market of 600 million is locked in villages in India with weak connections to the outside world. Some villages do not have retail outlets at all. The companies in emerging markets can turn this in to a fortune by building distribution channels or developing existing systems in align with developed countries.
A stable local currency in an economy can build the confidence in foreign investors. The local businesses can also consider sending their capital abroad. On the other hand the emerging economies are most likely receiving aid and guidance from large donor countries and world organizations such as the World Bank and International Monetary Fund. There is a risk also in foreign investments due to the markets are in transition and hence not stable. Thus the investments are higher than the investments in developed markets. During the 1997 Asian crisis, investments flows into these countries actually began to reverse themselves (Banga and Mahajan 2005).
Unlike developed countries, emerging markets suffer from weak institutions in most of the areas. Hence, the companies operate in emerging markets must take responsibility for a wide range of functions and once investing in a new market in order to do business effectively. Some of the large diversified corporations in emerging markets such as Indonesia and India have failed their investments in advanced economies (Khanna and Palepu 1997). Highly diversified business groups can be particularly well suited and better equipped to conduct business in other emerging markets.
2.0 Companies and Investment Climate in “Chindia” Chindia is a portmanteau word that refers to China and India together in general. Both countries are considered as emerging economies and have been named as countries with the highest potential for growth (Wikipedia 2012).
The Chinese economy is started to boom in 1978, with the transformation happened from centrally planned economy to open economy. In the last 30 years, the growth rate of Chinese economy averaging at 8 percent per annum. According to IMF WEO (2011) figures, China has the biggest economy after United States. In 1980, it was ranked 16th (Economy Watch 2010).
The Chinese market consists of several Fortune Global 500 companies. Some of the largest revenues making firms are headquartered in Beijing such as Sinopec, China National Petroleum, State Grid Corporation, Industrial and Commercial Bank of China, China Mobile Limited and China Life Insurance etc. (Wikipedia 2012).
Figure 01 – China’s GDP growth rate
Source: The Economist online 2012
The Indian Economy is on its growth trajectory, since the time it was liberalized. Historically, for the last 20 years the Gross Domestic Product rate averaged about 6.5 percent. It was recorded all time high of 10.1 percent in 2010.
The transition in the economy has created a positive impact on various sectors. Due to the favorable emerging market conditions, more local and foreign companies are being set up and the customer base is also increasing. India is the second largest FDI destination, after China for the period of 2010-12. Foreign investment has become a significant source of funds inflow in the country mainly on telecommunications, services, information technology, construction and real estate industry.
Some industries are competitive in the Indian economy. Large numbers of businesses are selling the same kind of products. Alternatively, the markets have very poor competition. The returns on investments in the India market have been substantially moderate from all the listed stocks. Public Private Partnership has become one of the new trends in the marketplace. The public enterprises like Indian Oil Corporation, Oil and Natural Gas Corporation, Bharat Heavy Electricals, NTPC, Steel Authority of India etc. are creating opportunities for the private sector. At the same time, private businesses such as Reliance Industries Limited, Infosys, Tata, Birla Corporation, Jet Airways, Ranbaxy, Biocon, Bajaj Auto, ICICI Bank have been performing well in all the financial years.
The automobile market in India is the second fastest developing market in the world. The automobile industry has been able to achieve a sustainable growth during the past years. India is one of the favorite destinations for car makers due to strong economic development, high disposable income, favorable demographics, opportunity for new investments, rise in GDP rate, the growing per capita income, massive population and high ownership capacity etc. There is a massive demand for small cars in India and they are low-priced.
The liberalization policies are being set up favorable for businesses in the car market. The recent trend which is the new generation get to work more in the software industry has led to the rise of the income level and the change in lifestyle. It has further created a demand for different varieties of cars. Moreover, there are many financing companies providing easy car loans at reasonable interest rates and affordable installments.
Today the car Market in India is crowded with various types of car models like small cars, luxury cars and sport cars. Some of the leading companies in the automobile industry are Tata Motors, Maruti Suzuki India, Hyundai Motor India, Mahindra
Market overview for elevator products and services
Aggregate global demand for elevator / escalator products and services is projected to increase 5.6% per year through 2009 to more than $20 billion. Fueling gains will be economic recovery and expansion in the mature markets of the developed world, coupled with ongoing industrialization among the less advanced countries of Asia.
The world elevator market rose at a relatively healthy pace throughout most of the 1990s in a generally sanguine global macroeconomic climate. Basically strong economic growth in developing countries was briefly interrupted in 1997-1998 by a financial crisis engulfing many East Asian and Latin Americans nations, as well as Russia. Fallout form the crisis continued to adversely impact the elevator market into 1999 and 2000, as trends in the elevator market tend to lag developments in the macro economy by a few years. Subsequently, as the emerging market began to recover, growth in Western Eur0pe and North America was depressed in the wake of the global economic slowdown precipitated in the US, although by 2004 a recovery was apparent in most markets.
In the developed world, gains will reflect an expected recovery in office construction, as vacancy rates come down in major global financial centers such as Tokyo and London. Over the long term, development of the residential sector, especially in the largely untapped US market where single-family homes predominate, will also create opportunities, supported by again populations and regulations such as the Americans with Disabilities Act. In Europe, adoption of new EU-wide safety regulations for existing lifts will bolster the modernization/upgrade service segment.
The fastest growth is anticipated in the world’s developing regions – Asia, Latin America, Eastern Europe, Africa and the Middle East. In developing countries, market expansion will reflect increased urbanization, as virtually all structures in large third-world cities require elevators. Aftermarket services are also not well established, even in more developed countries such as South Korea and hence offer a sizable potential market which major global suppliers such as OTIS are actively working to develop.
China, which has already emerged as the largest global elevator market in unit terms, will continue to log explosive gains, with the genesis of a lucrative service aftermarket bolstering the robust OEM business. Almost half of the increase in passenger and freight elevator unit sales will be attributable to China, where per capita elevator use remains less than 10% of that typical of Western Europe.
TABLE III – 1 WORLD ELEVATOR MARKET BY REGION (billion dollars) Item 1994 1999 2004 2009 2014 World Urban Population (mil persons)
Bldg. Construct Expend (bil 2000$)
$ elevator/urban capita
$ elevators/000$ construct
World Elevator Market 24.9 30.0 38.5 50.5 66.2 North America :