IJM

Marketing Strategy Adaptation on the Anvil of Market and Institutional Variations: MNCs and Emerging Economies *Navneet Sharma **Gordhan K. Saini “Emerging Economies” (EEs hereafter), are known to be the biggest boost to the global economy after industrial revolution; while they have relatively low levels of per capita incomes, they are moving from a lower to a higher stage of economic development (see Nakata and Sivakumar, 1995, The Economist 2006). An emerging economy is generally viewed as one that often has low per capita income but also has a rapid pace of economic development, government policies favoring economic liberalization, and a usually free market economy (see Hoskisson, Eden, Lau & Wright, 2000 for a good account).

Comprising a part of the world economy having over 6 billion people and 200 nations, EEs present, potentially some of the most important growth opportunities for companies (Hooke, 2001). Many scholars and institutions have defined and identified EEs suiting their own objectives. The Economist, World Bank/IFC, Goldman Sachs, Morgan Stanley to name a few. Some agencies tend to prefer emerging market over economy. In fact the definitional issues are yet to be resolved with regard to EEs. We will use both terms interchangeably. Twenty four countries were identified as "Emerging Markets" by The Economist (Market Potential Study of Emerging Markets 2005). The Emerging Economies comprise more than 80 percent of the world's population, account for a large share of world output and have a very high growth rate which means enormous market potential (for a more comprehensive statistical coverage see The Economist, 2006). They can be distinguished by the recent progress they have made in economic liberalization and trade opening. This is reflected by their increasing need for capital equipment, machinery, power transmission equipment, transportation equipment and high-technology products.

These emerging economies comprise countries with a rapid pace of development and government policies that favor economic liberalization. Out of the 64 emerging economies identified by Hoskisson et al. (2000), 51 are rapidly growing developing countries and 13 are in transition from centrally planned economies (often called 'transition economies'). The changing landscape may be gauged by the fact that the list of the world's ten largest economies may look quite different in 2050. The largest economies in the world (by GDP) may no longer be the richest (by income per capita), making strategic choices for firms more complex (Dreaming With BRICs: The Path to 2050, 2003).

As today's advanced economies become a shrinking part of the world economy, the accompanying shifts in spending could provide significant opportunities for global companies. Being invested in and involved in the right markets sparticularly the right emerging markets may become an increasingly important strategic choice. The interest comes from Multi National Companies (MNCs), western as well as eastern MNCs, who see the growth and leadership potential in these emerging markets and have hastened to expand their operations in them. Others are interested in these newly-opened emerging markets, because of the potential threat they represent to local corporations, as new MNC competitors flood in and take away market demand from these local corporations. The interest of MNCs in emerging markets is easy to understand, due to attractiveness of these new markets. For example, the household penetration of durables in most of these countries is growing rapidly from very low base, and households are rapidly moving up their shopping lists of motorized two-wheelers, TVs, VCRs, air coolers, washing machines and clothes dryers, electric ranges, air-conditioners and cars. These increase in demand are fueled by rising incomes, increased availability of credit, the “demonstration effects” of expanding television reach, and an increased demand for convenience from two-earner households (Jain 1993, p.140).

Emerging markets have attracted considerable attention and are likely to become an increasingly important political and economic force. They represent an enormous opportunity for entrepreneurs, multinationals, and *Navneet Sharma, Economist, Economic Laws Practice, New Delhi, Email - ns74@rediffmail.com **Gordhan Kumar Saini, Academic Associate(Marketing Area), Indian Institute of Management, Vastrapur, Ahmedabad, Email - gksaini@iimahd.ernet.in Indian Journal of Marketing • June, 2008 3