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Study notes

Emerging Economies

  • Levels: A Level, IB, BTEC Level 3
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

An emerging economy is one in which the country is becoming a developed nation often driven by relatively high economic growth and a rapid expansion of trade and investment flows.

Although there is not unanimous agreement on what precisely defines an emerging economy, in 2018 the following countries were classed by the IMF as emerging: Brazil, Chile, China, Colombia, Hungary, Indonesia, India, Malaysia, Mexico, Peru, Philippines, Poland, Russia, South Africa, Thailand and Turkey.

Emerging economies as an opportunity for business

Emerging economies can be seen as a potential opportunity for some business. For example:

  • They tend to enjoy relatively high rates of economic growth compared with more mature developed economies like the UK, US, Japan and Europe.
  • Many emerging economies have seen the rapid growth of a "middle class" with rising disposable incomes that might simulate demand for the products of businesses located in developed economies.
  • Emerging economies may be a suitable location for international operations - either as a location for production and/or to sell into the domestic market

Emerging economies as a threat for business

Fast-growing economies such as China, Indonesia, India etc may also pose threats to businesses based in developed economies like the UK:

  • Many domestic businesses based in emerging economies are now actively pursuing expansion into developed economies. For example, Chinese businesses such as Lenovo, Huawei, Alibaba and Xiaomi are now world-leaders in their target markets.
  • Doing business in emerging economies is not straightforward. An increased risk of intellectual property theft, restrictions on the methods of doing business and competitive challenges from established domestic businesses are threats that need to be overcome

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