Emerging Markets: Look Before You Leap

Key questions to define emerging market opportunities

16/07/2013

World

Since the concept was popularized in the 1980s, emerging markets have increasingly attracted attention. Multinational corporations regard emerging markets as a cheap source of manufacturing, an offshore location for technical support, a driver of growth amid stagnation and financial crisis at home, as well as the front line of new competitive pressures.

Yet emerging markets defy facile categorizations. An alternative definition conceives of a market as “emerging” when the specialized intermediaries necessary for the proper functioning of any market are absent or poorly functioning, requiring market participants to work to find new ways to bring buyers and sellers together for some productive exchange.

Put this way, most markets, including those considered developed like the United States, are, to some degree, emerging.

In Issue 17 of IESE Insight management magazine, Harvard Business School’s Tarun Khanna and Krishna Palepu, recently a visiting professor at IESE, discuss emerging markets based on this broad conception.

Synthesizing the lessons of dozens of scholarly and practitioner-oriented papers, 30 cases and their recent book, Winning in Emerging Markets, the authors define the institutional voids that qualify a market as being emerging, and describe the factors that condition their development.

The article lists a series of key questions relating to four areas of emerging market success (product markets, labor markets, capital markets and the macro context) to help readers identify the institutional voids and define the opportunity in the emerging markets that they have set their sights on.

With this richer understanding, managers will be in a much better position to leverage emerging opportunities in all their guises – whether in Asia, Latin America and Africa, the regions that attract the most attention, or in North America and Western Europe, less typical but no less full of business potential.

IESE Insight is a quarterly research-based magazine, published in separate English and Spanish editions. IESE Alumni Association members can enjoy free access to premium articles like this one, using their usual IESE login details. All others can subscribe online.