Why the Market Leaders of Western Origin have to be Afraid of Newcomers from Emerging Economies - Essay Example

?Why the market leaders of western origin have to be afraid of "newcomers" from emerging economies? Western countries are facing huge problems as result of the recent global financial crisis. At the same time emerging economies such as India, Brazil, China, Russia Korea etc are escaped from the recession problems up to certain extent. America and European countries are still struggling to overcome the challenges caused by recent recession. Many of the prominent companies in America such as Lehman Brothers and Bank of America collapsed many other companies are on the verge of destruction. The case is not much different in Europe also. Many of the European companies were acquired by the business organizations from the emerging world. Earlier global wealth was concentrated in the less populated western world. However, as a result of globalization, global wealth is now shifting towards the densely populated Asian region. In other words, Asian region and some other parts of the world are progressing rapidly whereas Western countries are exhausting. According to the views of many scholars, India and China would be the superpowers which control global matters in near future itself. In American medias, the discussion has already started about who is going to dominate the world - India or China- in the coming years. Market leaders of the western world are worried about the new situations developing. It should be noted that Chinese products are dominating global market at present because of the cheaper prices. On the other hand products from the developed world are struggling to compete with the products from the emerging world, especially from China. In short, industries in the western world are watching the new situations in the market with lot of worries. This paper analyses the extent to which the market leaders of western origin have to be afraid of "newcomers" from emerging economies. Indian automobile manufacturer TATA has recently acquired prestigious British Automaker Jaguar and Land Rover. It is now official, Tata Motors owns both the Jaguar and Land Rover brands. Ford has handed over the rights to both brands in a ceremony held at Jaguar Land Rover headquarters in Gaydon, UK. Tata Motors has eventually paid USD 2.3 billion in cash while Ford has contributed USD 600 million to the Jaguar Land Rover pension plans, leaving Ford with USD 1.7 billion. Ford and Tata have agreed on long term cooperation plans in regards to the supply of engines, stampings and other components to Jaguar Land Rover (Official handing over ceremony held). It should be noted that India was once the colony of Britain. A couple of decades before, it was unimaginable for the British people to think about a scenario in which an Indian company acquiring a British company. TATA group did exactly that. Instead of one, they acquired two British companies in a deal. TATA is the prestigious automaker in India whereas Land Rover and jaguar are iconic symbols for the British. Many of the British firms started to think that if an Indian firm is able to buy Jaguar and Land Rover like British firms, their survival could be in jeopardy. India in the past and India at present are entirely different. India struggled to develop properly in the past because of the growing population. China also faced similar situations in the past. However, these countries succeeded in converting their big curse (growing population) in to big blessing in the recent past. Currently these countries are the supplier of manpower to the Western countries like America, Britain, Germany, Australia etc which are struggling to find enough manpower for executing essential works in their countries. America companies are currently outsourcing jobs worth billions of dollars to India like merging countries. President Obama is trying hard to stop the capital outflow from American soil to emerging world. America has already realized the dangers associated with the outsourcing of American jobs. It should be noted that American companies are saving billions of dollars yearly as a result of outsourcing. However, outsourcing reduces internal job creation and many of the locals in America are currently struggling to find suitable jobs. More than 3 million manufacturing jobs have disappeared since 1998, and the Economic Policy Institute estimates 59 percent—or 1.78 million—of these jobs have been lost due to the explosion in the U.S. manufacturing trade deficit over the period. Goldman Sachs estimates 400,000–600,000 professional services and information sector jobs moved overseas in the past few years, accounting for about half of the total net job loss in the sector over the period (How Many Jobs Have We Lost?). The above statistics are not much comfortable to American government and American organizations. In emerging markets, the labour is extremely cheaper compared to the western world. It is difficult for the western organizations to produce goods internally using the expensive internal labour force and compete with external organizations from emerging world which are producing goods using cheap labour. In other words, the products from western world cannot compete with the products from the emerging world because of the higher prices of the products from the western world. So, western countries are trying to exploit the cheap labour force in emerging market with the help of business strategies such as outsourcing and offshoring. In both the cases, the ultimate beneficiaries would be the emerging world since they are able to get huge amounts of foreign money in the form of outsourcing and offshoring. Gupta (2006) has mentioned that world Energy Requirements to increase by approximately 60% between 2004 and 2030 and two-thirds of this increase might be from the developing world and China may account for 21% of total increase (Gupta, p.7-8). (see appendix 2 for more details) Energy requirements increase when industrial developments happen and the living standard of the public increases. From the above statistics, it is clearly evident that developing world is going to face more energy demand than the western world in future. In other words, industries in emerging world are going to develop more rapidly than the industries in the western world. China’s GDP was dollar 4.5 trillion in 2000, second only to US whereas the GDP per capita was $ 3600 in 2000. The trading power of China was in the 32nd place in 1978, 15 th in 1989, and 6 th in 2001. China was the world’s fifth largest exporter and 6 th largest importer in 2002. FDI in 2002 was around $ 50 billion (Gao). Jintao (2005) has mentioned that by 2020, China's GDP might be approximately $4 trillion with a per capita level of around $3,000 (Jintao).The above statistics clearly suggests that China is growing much rapidly than any other country in the world. India, Korea, Brazil, etc are some other emerging economies which follow the same path of China. GDP growth in East Asia is much higher than the GDP growth in other parts of the world including the western world (see appendix 1 for more details). Moreover the growth prospects of China, Vietnam and India are the largest in the world as per the statistics available in 2006. (see appendix 3 for more details). At the same time, it should be noted that the same figures with respect to the western world are not much encouraging. Industries are currently shifting their focus from Western world to the Asian region because of the huge opportunities there. It should be noted that the living standards and per capita income of the people in Asian region has increased a lot at present. Expensive cars such as Benz, BMW, Toyota, Honda are selling rapidly in emerging world at present which clearly underlines the developments happening in the emerging world. At the same time, organizations in western world are struggling to find enough space for expansion in their soil. These organizations already attained saturation in the western world and they are looking for opportunities in the emerging world. For example, Starbucks is the famous coffee brand in America and in other western countries. Starbucks have tea shops in every corner of America. They can no more think about America when they consider their expansion strategies. Korea is another Asian country which emerging rapidly. It should be noted that Korean firms are raising stiff challenges to many of the western firms. For example, Apple’s iPhone was a hot attraction when it was introduced in the market. At present Samsung’s Galaxy S2 has pushed iPhone yards behind in global market. It should be noted that Apple is currently the most valuable technology company in the world and they are the second largest company in the world as far as market capitalization is concerned. However, Apple is currently struggling to counter the threats from Samsung at least in the cellphone market. Pushing Apple behind is not an easy task when we consider the capabilities of Apple Company. Another dominant American Microsoft is also struggling to keep their supremacy in the market. Even though they were able to maintain their supremacy in the operating system market, they are struggling to penetrate into other markets because of the stiff competition from the companies from the emerging markets. To conclude, emerging economies, especially some Asian countries are raising stiff challenges to Western world. Organizations in the emerging economies are capable of acquiring organizations form the western world at present. On the other hand, western organizations are struggling to escape from the injuries caused by the recent recession. Organizations in emerging economies are using this opportunity very well to buy sick units from the western world. In short, western organizations are currently facing stiff challenges from the organizations of the emerging world. Works Cited Gupta Sidhartha. “Global Energy Trends: Changing Energy Requirements of the Developing World”. 2006. Web. 05 December 2011 Gao,Tao "Globalization and China: Impacts on the Economy and People's Quality of Life" Web. 05 December 2011. “How Many Jobs Have We Lost?”. Web. 05 December 2011. Jintao, Hun. ''Why China Loves Globalization." The Globalist. Jun. 7, 2005. Web. 05 December 2011. “Official Handing Over Ceremony Held”. Web. 05 December 2011. Appendix 1 Average Annual GDP Growth (Gupta, 2006, p.4) Appendix 2 (Gupta, 2006, p.10) Appendix 3 (Gupta, 2006, p.5) Read More