MSC Strategy Presentation
mardino97
2TheEmergingGlobalEnvironment.pptxChapter 2 The Emerging Global Environment
The World from 1993 to 2016
| 1993 | 2016 | ||
| East Asia & Pacific | 25% | 30% | |
| North America | 29% | 27% | |
| European Union | 30% | 22% | |
| Latin America & Caribbean | 6% | 7% | |
| Middle East & North Africa | 2% | 4% | |
| Sub-Saharan Africa | 1% | 2% | |
| Russia | 2% | 2% | |
| World GDP (Billion USD, current) | 25 859 | 75 845 |
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The World From 1993 to 2016
| GDP (current billion US$) | GDP per capita (current US$) | Population, total (Million) | Average GDP yearly growth (1993-2016) | ||||||||||
| 1993 | (%) | 2016 | (%) | 1993 | 2016 | 1993 | 2016 | (%) | |||||
| East Asia & Pacific | 6552 | 25% | 22480 | 30% | 3462 | 9788 | 1892 | 2297 | 4.18 | ||||
| North America | 7458 | 29% | 20160 | 27% | 25822 | 56082 | 289 | 359 | 2.50 | ||||
| European Union | 7815 | 30% | 16487 | 22% | 16211 | 17173 | 482 | 511 | 1.74 | ||||
| Latin America & Caribbean | 1565 | 6% | 5300 | 7% | 3332 | 3761 | 470 | 638 | 2.81 | ||||
| Middle East & North Africa | 608 | 2% | 3145 | 4% | 2224 | 2269 | 273 | 437 | 3.82 | ||||
| Sub-Saharan Africa | 300 | 1% | 1513 | 2% | 540 | 512 | 556 | 1033 | 4.21 | ||||
| Russian Federation | 435 | 2% | 1283 | 2% | 2929 | 2663 | 149 | 144 | 1.72 | ||||
| World | 25859 | 100% | 75845 | 100% | 4667 | 4937 | 5541 | 7442 | 2.90 |
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Globalization growth indicators, 2000–2014
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What is an Emerging Country?
No clear definition of what is an “emerging country”.
Often describes countries that exhibit:
High economic growth
China’s GDP in 2020 grew 2.3% despite the pandemic
Increasing development of a middle class
A high degree of infrastructure and educational investment
A progressive shift from agriculture and services
An economy in which market mechanisms play an increasing role
Opening of their market to international trade and investment
Institutional voids
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6
Different Types of Emerging Countries
The BRICS emerging giants – Brazil, Russia, India, China and South Africa
The Transition Economies (Eastern Europe) – transitioning from a centrally planned economy to a market economy
The Emerging Industrial Economies of Latin America, Asia and Africa (e.g., Chile, Mexico, Turkey, Malaysia) – often the wealthiest among other types of emerging countries
GNI per capita over $20,000
The Developing World (e.g., Vietnam, Nigeria, Pakistan) – often the least wealthy among other types of emerging countries & closest to least developed country (LDC) status
GNI per capita around $5,000
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GDP Growth : Emerging Countries vs. the World
(1990-2014) -Base 100 in 1990
Source: Data from World Development Indicators
High Economic Growth
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Increasing Development of a Middle Class
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Forecasted increase in Middle Class Population
in Emerging Regions from 2009 to 2030 (Million)
Central & South America Asia Pacific Sub Saharian Africa Middle Est & N Africa World 132 2703 75 129 3039
| 1990 | 2014 | |
| Brazil | 23% | 15% |
| China | 53% | 7% |
| India | 60% | 49% |
| Russian Federation | 16% | 7% |
| South Africa | 15% | 5% |
| Egypt, Arab Rep. | 39% | 28% |
| Colombia | 20% | 16% |
| Sri Lanka | 41% | 30% |
| Philippines | 37% | 30% |
| Poland | 25% | 11% |
| Czech Republic | 12% | 3% |
| Hungary | 18% | 11% |
| Indonesia | 56% | 34% |
| Mexico | 26% | 13% |
| Turkey | 43% | 14% |
| European Union | 9% | 4% |
| United States | 3% | 2% |
| World | 39% | 20% |
A Progressive Shift from Agriculture to Services
| Agriculture (as % share of GDP) | ||
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Market Mechanisms Play an Increasing Role
Changes to national investment policies, 2002-2016
Source: UNCTAD: World Investment Report 2017: Table III.1, Page 99
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The World in 2050 According to Goldman Sachs
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The World in 2050 According to Goldman Sachs
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Institutional and Business Environments
Governance
Market imperfection
Ease of doing business
Importance of business conglomerates
A significant presence of bottom of the pyramid market segments
Government Effectiveness
Scored from
-2.5 (Weakest)
to 2.5 (Strongest)
Source: Data from World Bank Indicators,2015
Quality of public services
Quality of the civil service & its degree of independence from political pressures
Quality of policy formulation and implementation
The credibility of the governments commitment to such policies
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Regulatory Quality
From -2.5 (Weak)
to 2.5 (Strong)
Ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development
Source: Data from World Bank Indicators,2015
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Rule of Law
From -2.5 (Weak)
to 2.5 (Strong)
Confidence in the rules of society, the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence
Source: Data from World Bank Indicators,2015
Control of Corruption
Reflects perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as "capture" of the state by elites and private interests
From -2.5 (Weak)
to 2.5 (Strong)
Source: Data from World Bank Indicators,2015
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Institutional Voids in Emerging Countries
Access to products markets
Access to labor markets
Access to capital markets
Political and social systems
Bureaucracy
Note: Not all characteristics apply to all emerging countries, and some of those can be found in some OECD countries.
As discussed in Khanna and Palepu (1997)
Lack or low levels of socio-economic and market data
Difficulties in accessing suppliers
Weak logistical infrastructure
Poor product-related environmental and safety regulations
Unsophisticated consumer credit and payment mechanisms
Poor consumer protection
Access to Products Markets
Note: Not all characteristics apply to all emerging countries, and some of those can be found in some OECD countries.
As discussed in Khanna and Palepu (1997).
.
Access to Labor Markets
Weak educational system, though improving
Poor mobility of personnel
Ethnically & politically biased performance and compensation of employees
Difficulties in transparency of hiring and firing employees
Not all characteristics apply to all emerging countries, and some of those can be found in some OECD countries.
As discussed in Khanna and Palepu (1997).
Low liquidity of equity (e.g., stock) markets
Lack of transparency on financial performance of corporations
Predominance of government banking sector
Poor protection for minority shareholders
High predominance of diversified conglomerates
Politically motivated allocation of licenses
Unclear bankruptcy process
Access to Capital Markets
Not all characteristics apply to all emerging countries, and some of those can be found in some OECD countries.
As discussed in Khanna and Palepu (1997).
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Political and Social Systems
Uncertain stability of political cohesiveness
Strong interference in regulating business
Uncertain protection of property rights
Lack of independence of judiciary system
Ethnic, religious, family, linguistic tensions
Control of media
Corruption
Not all characteristics apply to all emerging countries, and some of those can be found in some OECD countries.
As discussed in Khanna and Palepu (1997).
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Bureaucratic Constraints
Investments and preferential treatment for national companies
Bureaucratic constraints on foreign business concerning the opening of businesses, acquisition of property, transfer of dividends, local borrowing, imports and exports, labor and currency
Not all characteristics apply to all emerging countries, and some of those can be found in some OECD countries.
As discussed in Khanna and Palepu (1997).
Ease of Doing Business Indicators 2018
From low ranking score (Easy) to high (Less Easy)
Source: Data from World Bank, http://www.doingbusiness.org/rankings
Nigeria * Côte d'Ivoire Egypt, Arab Rep. Sri Lanka Philippines Colombia Indonesia * Turkey Chile Mexico * Malaysia India * Brazil * South Africa China * Russian Federation * Hungary Czech Republic Poland Japan * France Germany United Kingdom United States * 145 139 128 111 112 59 72 60 55 49 24 100 125 82 78 35 48 30 27 34 31 20 7 6
Significant Presence of Bottom of the Pyramid Markets
Bottom of the Pyramid
Middle Class
High
Class
Below 3,000 ppp $/capita
From 3,000 to 20,000
ppp $/capita
Above 20,000 ppp $/capita
486
95%
2858
83%
63%
70%
254
360
Significant Presence of Bottom of the Pyramid Markets
Source: Data from The Next Four Billion, IFC and the World Institute, 2007
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Multinational Corporations from:
China
India
Multinationals companies are defined as companies with sales above 1 billion US$ (as of 2004) at least 10% of which is international
Source: Data from Boston Consulting Group report The New Global Challengers (2006)
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Millions US $
Source: Data from UNCTAD “World Investment Report, 2006
Cross-Border Merger and Acquisitions:
Cumulative Acquisitions by the BRICS
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In most emerging countries the industrial, financial and trading
sectors are controlled by three groups of players:
Government-owned enterprises
The multinationals
The domestic “business groups” (e.g., the Tata group in India)
The domestic business groups exhibit typical characteristics:
Highly diversified
Personally controlled
Most often controlled by families or ethnic groups
Business Groups in Emerging Countries
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Consequences of Business Groups
Since the early 2000s, a large number of Asian Entrepreneurial Conglomerates
have announced a series of moves under the generic name of :
RESTRUCTURING
COST CUTTING: (wage cuts, bonus freezes, headcount reductions)
DEBT RESTRUCTURING:( See 200% D/E ratio imposed in Korea)
PORTFOLIO REDEFINITION: (Definition of Core Business,
concentration of similar activities in the same group, intergroup mergers)
DIVESTMENT OF NON-CORE ACTIVITIES: (spinning off, or selling off)
REORGANIZATION: (flatter structures, decentralization of decision-making)
“ We’ve expanded too much. Now we need to focus only on businesses in
which we have a strong potential. It is impossible for us to maintain 100
different businesses under the current situation” - Samsung
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