Emerging Market Firms Investing in Each Other's Home - Essay Example

? Emerging Market Firms Investing in Each Other's Home Task: Emerging Markets and Developed Economies Investing in Each Other’s Home Introduction Emerging markets have taken shape in giving positive signals of a bright economy in future. Developed economies have also taken advantage of these potentials so as to involve in trade hence foreign direct trade. There are well known countries who have taken center stage in this investment mechanism by inverting in each other’s home through direct foreign investment. China is one example of a developing market that makes its investments in other developed economies and also provides market to the developed economies such as Germany and Britain. Another example of a developing economy that deals in foreign direct trade with other emerging markets is Brazil. Signing of world currency deals with developed countries as well as emerging economies have been witnessed in the recent past. Sauvant (2009) argues China for instance has signed such agreements with various countries such as Argentina, Russia, united Arabs emirates, India and South Africa. This was made with an aim of ensuring financial safety by creating a joint pool risk mitigation mechanism. Foreign direct entry among emerging markets and developed economies Firms within nations with emerging economy; must be protected from foreign firms from developed nations which have competitive advantage as realized in the above mentioned examples. These calls for trade among nations with emerging markets by regulating market entry by other firms. Ken-lchi (2005) emphasizes, for this to change, firms from developed nations must adopt different mechanisms for market penetration. This calls for trade among nations with emerging markets by regulating market entry by other firms. For this to change, firms from developed nations must adopt different mechanisms for market penetration. Lack of such change would see unto it that firms in developing nations develop economically and enhance world-class competence. It is argued that China, for instance, would be a good example in offering alternatives which would have otherwise been sought for from developed nations Rugman (2012) argues, the support for this is the angle of perception of emerging markets as the crucial point o driving the economy owing to the fact that developing countries are growing in number. Scramble for resources creates more pressure hence expectations are made on the first mover longer steps over the emerging heroes. Competition will be realized among emerging markets in regions such as Middle East and Africa through their government. This ability of providing alternatives by developing nation’s blocks developed nations from accessing the markets. Emerging markets have recorded better growth Brazil, china and India are the best examples of emerging markets in the world today. Chinese are known for the increased production as well as large population which provide both affordable labor and market for products. As a matter of facts, developed economies target such emerging markets so as to have a two way mutual benefit among them. Germany has a history of industrial production that majors on steel work. According to Fayolle & Todotoy (2011), this becomes a raw material for the emerging economies in the process of production so that the developed country, in this case Germany exports the product to the emerging economy such as china. India has also recorded an increase in production hence targeted by the developed economies such as Europe in terms of foreign trade. There are challenges that the new economies pose to developed economies in terms of economic strength. This may be evident between Europe and United States as developed economies as well as India, china and Brazil which are the strong emerging economies. Operating at relatively same level of financial ability becomes the driving force. The establishment of enterprises in other countries will follow the emergence of markets for the products which would come from either side. Kathleen (2005) maintains firms that are left to survive the markets are those from similar emerging markets hence protecting each other from exploitation in an attempt to develop. This explains the reasons why most developing nations would prefer to sign business deals with China but not USA and Europe due to the presumed condition that would follow owing to the differences in economic levels. Lack of information for countries which are still developing keep them at bay rather than stretching an arm economy wise. Peng (2008) argues that the resulting case is a notable difference between the developed countries with emerging markets and those that are underdeveloped. Liquidity of commodities is an issue in both cases which makes it appropriate for either side to make considerations on what markets to exploit and in which regions to direct efforts. Taking an example of the motor vehicle industry, Germany controls most well known brands all over the world. As such, they hold the patent right over the brands. Ken-lchi (2005) supports, China being an emerging economy trades in this by producing the same brands under license from Germany. This infers that foreign direct trade takes place between the countries regardless of their economic situations. Still in the motor vehicle industry, china exports most of the manufactured vehicles to other emerging economies such as Africa and India. Three different parties are therefore involved in the trade at international level with benefit reaped from each end of the economy. China and the US are some of the examples that can be used to demonstrate an emerging and developed economy investing in each others region. Following the financial crisis in the year 2008, there have been changes in the world economic trends. Economic recession hit developed countries implies that developing markets are becoming more competitive and making efforts towards economic development. Singh (2010) argues that this is an indicator of minimized trade between developing and developed economy. Change of market entry strategy by these nations must be evident if at all there has to be improvements. Middle emerging economies continue roaring, restrictions will be realized on credits so as to save money to expand the economy thereby curbing the issue. Deals on finding a leeway into emerging markets may soon be realized only if foreign direct entry strategies are not applied as would be done by emerging economies themselves. Emerging economies exhibited higher development rates as compared to the developed world. This pointed out that emerging economies are the future engine the economic growth worldwide. Developed markets tend to divert into the sector making it a bit tricky for the emerging economies. This ensures leadership in the emerging markets which constitutes a faster economic growth. This look attractive for the existing strong hold economy who takes advantage of the emerging markets in dominating the economy. Market entry strategy for firms from developed nations may be restricted by the condition created by the emerging markets. The other threat that they face is the fast development rate recorded by other countries such as China. According to Sauvant (2009), China has also developed close relations with other developing countries with emerging markets making it win trust of the countries. This calls for need of a market entry plan and strategy other than the direct investments since it has already been made bumpy. Regulations made by countries with emerging economies will not allow firms developed nations to access the markets. Other developing nations will make efforts to ensure that all the required products are availed in a convenient way. It is argued that China, for instance, would be a good example in offering alternatives which would have otherwise been sought for from developed nations (Rugman 2012). This ability of providing alternatives by developing nation’s blocks developed nations from accessing the markets. Market entry strategy An attempt to make entry into foreign emerging markets directly may be doomed to failure due to regulations set by these countries and the mutual agreement that exists among emerging economies. While for emerging economies such as china, market entry strategy for direct investments internationally takes no alternative due to fewer restrictions. Kathleen (2005) supports Developed countries will not have an opportunity to enjoy this advantage which regards the components of a unit product. All other factors of production will be regulated in the name of protecting local firms thereby making it impossible for developed countries to make foreign direct trade. Unlike developed countries, emerging economies will have the advantage of trust on business levels from the emerging economies enabling easier foreign direct investment. The theory of absolute advantage would not be enjoyed as precaution would be taken by the country with emerging markets not to render other producers incompetent. Peng (2008) argues developed countries such as the United States will not have an opportunity to enjoy this advantage which regards the components of a unit product. All other factors of production will be regulated in the name of protecting local firms thereby making it impossible for developed countries to make foreign direct trade. Unlike developed countries, emerging economies will have the advantage of trust on business levels from the emerging economies enabling easier foreign direct investment. Market entry strategy for firms from developed nations may be restricted by the condition created by the emerging markets. The other threat that they face is the fast development rate recorded by other countries such as China. China has also developed close relations with other developing countries with emerging markets making it win trust of the countries. According to Peng (2008), as fortune rises for developing economies, what is indicated is a stronger growth which may only be compromised by well established economies or firms which may interfere with local firms through competitive advantage. after rising that this is the fear of nations with emerging markets, developed nations are compelled to apply other mechanisms of exploiting the markets so as to realize survival of their firms while developing nations make progress along foreign direct entry This calls for need of a market entry plan and strategy other than the direct investments since it has already been made bumpy. Beginning with china as an emerging economy, it recorded a slower growth rate in the year 2012 as compared to the previous two years this is attributed to reduced export to Europe as a result of debt crisis during the euro era as well as destocking of firms due to shrinking demand and falling prices downturn of housing and automobile markets is also a reason behind the decrease. According to Rugman (2012), the ability of providing alternatives by developing nation’s blocks developed nations from accessing the markets. However, a change of strategy by providing extremely high quality to targeted markets may do for developing nations rather than using foreign direct entry procedure. China as an emerging economy took a measure. Rising oil and food prices together with non performing bank loans have also been an issue for china as an emerging economy in terms of inflation hence limiting possibilities of relaxing monetary policies father. China still has room for maneuvering with microeconomic policy so as to stimulat4e the economy. As a result of decrease in demand for commodities, prices also go down. In emerging economies, it has been found out that the public debt ratio is about 30% while for developed economies such as the united states is about 100%. According to Singh (2010), Fiscal policy can still be expanded in china so as to stimulate the economy. China has a big population giving it an advantage in terms of markets a result; it is capable of adjusting its income distribution which means that the potential to be tapped in emerging economies are great. There has ben a recorded increase in cross border trade among emerging economies thereby bringing increased growth rate within the emerging economies which may result into future impendence to economic development. Emerging markets and its leaders sought to create second tiers with a massive flow of investment realizations. Scramble for resources creates more pressure hence expectations are made on the first mover longer steps over the emerging heroes. Competition will be realized among emerging markets in regions such as Middle East and Africa through their government. The United States preferred china’s as an investment target as china also makes exports to the US. Kathleen (2005) maintains any slowdown in the Chinese economy may lead to a hurting between the bilateral trades among the two countries. China and the US invest in each others home due to the economic differences and concordance of requirements on either side. China has been on the stable end lately as the US faces an economic crisis, this created a need for more mutual trade between the two countries. Foreign direct entry in the markets became abit6 different as compared to market entry in other emerging economies. According to Singh (2010), China has limited foreign direct investment to the US due to the limited western deal making or due to the reason that America may be having a xenophobic feeling about Chinese investments in the country. Both private and stat4e owned companies enter the markets from china to the US. However, pressure by the US government has lead to the fail of some deals with china resulting from worried law markers. Conclusion Emerging markets such as China, India and Brazil trade among themselves as developed economies find alternative ways of entering the markets. Countries with emerging markets tend to have trade among themselves due to various reasons. This may include taking control of the economy and having a mutual beneficial scenario among them. As a result, regions with no emerging markets are locked out with records of low economic growth rates. Most investors would prefer to make multinational deals with nations that have potential of emerging markets. Operating at relatively same level of financial ability becomes the driving force. The establishment of enterprises in other countries will follow the emergence of markets for the products which would come from either side. Maintaining circulation of finances among countries with emerging markets becomes more beneficial to the countries than these locked out from the game. These emerging markets come about as a result of increase in population and advent of technology, an attempt to pull up the economy by developing nations call for resources. Developed economies such as the United Kingdom, Germany, and United States find alternative market entry strategy so that they also benefit from the emerging economies despite recorded restrictions, pressure from emerging economies and challenges such as economic recession. All these may be witnessed in the accounts of trade between china and Germany, Brazil and the US, as emerging markets and developed economies involving themselves in trade as well as emerging markets trading among themselves as exhibited between china and African countries. These countries aim at dominating the economy by involving in foreign market trade through direct entry into the markets and finding alternative entry methods where there is regulation. There are factors which come to play such as fears of the emerging markets, economic crisis as well as quest to dominate the economy. Both the developed economy such as the west and developing economies involve themselves in foreign trade through various ways as discussed in the sections above. Lack of direct entry mechanisms leads to alternative entry methods as evident in the motor vehicle industry between china and Germany among other discussed examples. References Fayolle, A & Todotoy, K 2011, European Entrepreneurship in the Globalizing Economy, Edward Elgar Publishing, Kimberley. Kathleen, S 2005, Investing Online For Dummies, John Wiley & Sons, New Jersey. Ken-lchi, A 2005, Japanese Multinationals in Europe: A Comparison of the Automobile and Pharmaceutical Industries. Edward Elgar Publishing, Kimberley. Peng, M 2008, Global Business, Cengage Learning, London. Rugman, A 2012, Multinational Enterprises from Emerging Markets, Bloomington, IN Indiana. Sauvant, K 2009, Investing in the United States: Is the US Ready for FDI from China, Edward Elgar Publishing, and Kimberley. Singh, S, 2010, Business Practices and Growth in Emerging Markets, World Scientific, Singapore. Read More