The Hidden Risks in Emerging Market

Running head: THE HIDDEN RISKS IN EMERGING MARKET
THE HIDDEN RISKS IN EMERGING MARKET
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1THE HIDDEN RISKS IN EMERGING MARKET
The aim of this essay is to discuss the situations of the emerging markets which were
once unnoticed by the international business organizations, have now been explored. After the
globalization a huge change in the economy of the world has been seen which has marked
unconditional growth of the once under developed nations to the economic super powers like
China. Therefore, these emerging economic powers have been changing the understanding of
business now a days. The governments of these emerging countries are attracting the
multinational companies which used to limit their focus on the developed economies only. Now
these companies are entering these emerging markets and transforming themselves to fit in these
markets to gain competitive edge (Yip and Prashantham 2019). However, there are several issues
which can pose as the risks for these companies and may not accept these in doing business in
the local market. In such cases, these companies need to enhance their acceptability though
gaining more knowledge about the expectations of these emerging new markets otherwise they
will not be able to cope up successfully.
This essay will discuss the various types of issues which the companies from other
countries face while entering the emerging market of India and how much they can cope up with
these situations.
In the recent years due to globalisation, the economy of the countries continuously
changing. The developed countries have stagnant economy and not allowing the business to
grow sharply. this is the reason why a huge number of companies are trying to fuel their growth
by investing in the emerging markets around the world. There are lots of benefits for employing
this strategy. The developing countries by and large are promising access to the untapped and
new markets, high level of consumption, rapidly growing population especially the growing
middle class as well as access to the cheap labour and materials (Yadav, Chauhan and Pathak
2015). These markets are gaining more exposure as with every passing year the issues with the
international trade are increasing in the developed countries like America, the UK and other
developed European countries. The reasons are mainly the common currencies, trade agreements
and migration issues.
After globalisation the communication system has been developed hugely and the
cooperation among the countries have enhanced their process of finding new emerging markets.
The possibilities of expansion for the companies have become immense in such markets. Along
with this, the technological advancement has been creating total transformation in the business

2THE HIDDEN RISKS IN EMERGING MARKET
scenario of the world in which the developing countries are also taking same amount of interest.
This is creating positive impact on the global business in one hand and development of economy
of these developing nations on the other.
The emerging countries always help the business to spread in the market by providing
relaxation in the taxes or any other rigid regulations which the companies face while operating in
the existing markets (Dicken 2015). The emerging markets of India, China and other Asian
countries, Brazil, Australia have shown lucrative benefits for the global business corporations
like Starbucks, McDonald’s, Nike, Microsoft, Google and most importantly the manufacturing
industries. These emerging markets have developed buying power of the customers, constantly
rising standard of living, providing inexpensive yet skilled labours and all the other elements for
doing business along with important resources (Thite et al. 2016) . The international companies
which already have experience in entering a market and doing business for a long time in the
developed countries can easily expand in these emerging markets as they have all the techniques
known to face the challenges associated with the political, economic, technological and other
external factors.
It is important to note that the emerging markets along with providing several benefits
can bring significant perils. These problems in case of the emerging markets in India can include
the bureaucratic delays, fluctuating currencies, unanticipated expenses and labour issues when a
company enters this market. These issues are capable to turn a promising new company to lose
their proposition when it is incapable to act effectively or quickly (Dicken 2015). These factors
can intensely disrupt the best plans of the companies while the inter and emerging or advanced
economy. There are in the place of these factors which directly relates to the national
government course of action in the country (Tait et al. 2016). Some uncertain course of action
towards the stabilization of the financial meltdown in the country can affect the business truly.
The practices of elections and other political events, economic crisis and changing societal
attitudes can pose to be the risks for the business in this emerging market.
In order to do a successful venture in the market of India, researching the potential risks
is important. According to the data published by The World Bank, it is the second fastest
growing market in Asia in one hand and one if the most important economy in the eastern
hemisphere. The country has more than 1 billion of population that has made it to have an
exceptionally favourable climate for the foreign business investment. The gross domestic product

3THE HIDDEN RISKS IN EMERGING MARKET
of the country has grown to 7.2% in 2018-2019 FY (Export.gov 2019). Therefore, it can be
suggested that the growth will be sustained of eight to ten percent for next five years.
According to the data published by International Monetary Fund, the outlook projection
of India towards the end of the financial year 2019 will be as followed-
Countr
y
Estimate Projections April 2018
WEO
Projections
Estimate Projections
Years 2016 2017 2018 2019 2018 2019 2017 2018 2019
India 7.1 6.7 7.3 7.5 -0.1 -0.3 7.5 7.4 7.8
Figure 1. outlook projection of India by IMF
(Source: Imf.org 2019)
However, in considering the international trade with this country, the companies must not
only focus on the rewards but the risks also. The main issues which has been deciphered while
working in the Indian market so far, are the underqualified workforce, corruption in the
government and judicial system, lack of awareness of the cultural differences and resentment
from the native nation. These risks can be categorised in five categories which may include,
product risk, market risk, financial risk, team risk and execution risk.
According to the data published by the censusindia.gov.in (2019), the country has more
than 400 million employable people among which almost half percent work in the agriculture
sector in the rural areas (see figure 2). The manufacturing and service industry constitutes the
rest half portion. More than forty percent of these workers in the service sector as well as the
industries, are below twelfth grade reading level. This clearly limits different areas of the
overseas business and proves to be one important risk for these businesses.