QUESTIONS
8-1. What are the emerging markets? Give examples of emerging markets.
(LO 8.1; AACSB: Application of knowledge)
■ Emerging market countries are a subset of developing countries, which are enjoying
rapidly improving living standards and a growing middle class with rising economic
aspirations.
■ Examples
Emerging markets include the “BRIC” countries of Brazil, Russia, India and China, in
8-2. What are new global challengers? What advantages do they typically
possess?
(LO 8.1; AACSB: Application of knowledge)
■ New global challengers are MNEs from emerging market countries.
■ New Global Challengers– top firms from rapidly developing emerging markets that
are fast becoming key global contenders.
■ Emerging market characteristics:
◘ Young populations and a growing middle-class.
◘ Low-cost manufacturing bases, low-cost labor, home-country natural resources
8-3. Do new global challengers pose any threat to firms from advanced
economies? Explain.
(LO 8.4; AACSB: Analytical Thinking)
■ New global challengers are highly capable firms which pose competitive challenges to
traditional MNEs from the advanced economies- Europe, Japan, and North America.
● SUGGESTED SOLUTIONS TO CASE QUESTIONS
8-4. Describe the various advantages that firms such as Tata employ to become
large industrial conglomerates. How can Tata use these same advantages to
succeed in foreign markets?
(LO 8.2; LO 8.4; AACSB: Analytical Thinking)
Describe the various advantages that firms like Tata employ to become large
industrial conglomerates.
■ Emerging Market Global Challengers are Competitors, Partners or Customers
The global challenger may be a competitor, partner or customer, as they are
strategically located in rapidly developing economies. Emerging markets are
■ Ownership and Control: Family Conglomerates and the National Government
Family conglomerates (FC) or Business Houses as they are called in India, dominate
emerging economies, command extensive distribution channels, garner intense market
How can Tata use these same advantages to succeed in foreign markets?
■ New Global Challengers
Global challengers are altering the competitive landscape. The enviable cost structures
■ Tata should leverage: their highly networked FC, which dominates market activity; its
strong connections with national governments; and their competitive advantages
■ The 2009 BCG 100 New Global Challengers Report chronicles the ascent of global
challengers from emerging markets such as Brazil, Russia, India and China, and notes
the quadrupling of such firms on the FT 500 from 15 to 62 in just two short years.
Remarkably, of the 100 global challengers listed in the BCG report, six are Tata
This report is updated for the 2014 BCG Global Challengers:
https://www.bcgperspectives.com/content/articles/globalization_growth_redefining_glob
al_competitive_dynamics/
Accessed December 18, 2015
8-5. What makes emerging markets attractive for international business? Discuss
emerging markets as target markets, as platforms for manufacturing, and as
sourcing destinations.
(LO 8.2; AACSB: Analytical Thinking)
Emerging Markets as Target Markets
■ Growing middle class – emerging markets have become important – represent
substantial demand for electronics and automobiles and health care services.
■ The largest emerging markets have doubled their share of world imports in the last
few years.
■ Emerging markets are excellent targets for manufactured products, technology, and
sophisticated technology:
Emerging Markets as Manufacturing Bases
■ Emerging markets have long served as platforms for manufacturing by global MNEs.
■ Advantages:
◘ Home to low-wage, high-quality labor for manufacturing and assembly
operations.
◘ Large reserves of raw materials and natural resources.
● South Africa is a key source for industrial diamonds.
● Brazil long has been a center for mining bauxite, the main ingredient in
aluminum.
Emerging Markets as Sourcing Destinations
■ Outsourcing– the procurement of selected value-adding activities, including
production of intermediate goods or finished products, from independent, external
suppliers- helps foreign firms become more efficient, concentrate on their core
8-6. What is the relationship between trade barriers, bureaucracy, country risk,
and the emergence of Tata as a major player in world trade? What is the role of
declining government intervention in Tata’s success in India and its ability to
internationalize? What should Tata do to manage country risk in India and other
emerging markets?
(LO 8.3; LO 8.4; LO 8.5; AACSB: Analytical Thinking)
■ The emergence of new global challengers is easier and more compelling due to a
■ For years international expansion was discouraged in India by trade restrictions and
■ Also noteworthy, in the wake of collapsing stock markets and global financial crisis,
the new global challengers are paradoxically better off. First, the embedded competitive
In terms of its domestic operations, what should Tata do to manage country risk
in India?
■ Typically the risks of doing business in emerging markets are associated with bureaucracy,
red tape, and lack of transparency.
Country risk (also known as political risk) includes the following:
■ Economic freedom differs among nations- Hong Kong, Singapore and Ireland are
known as having the highest levels of economic freedom, see: http://www.heritage.org.
■ Government intervention may restrict market access and impose bureaucratic
procedures hindering business transactions. Governments and state-owned enterprises
■ Risks are omnipresent. In practicing due diligence, managers must understand their
implications, anticipate them, and take proactive action to reduce adverse effects.
8-7. Given growth rates and other characteristics of emerging markets, what
markets should Tata Motors target for sales of Nano cars? What country-level
factors should the firm consider as it evaluates the potential of various emerging
markets?
(LO 8.3; AACSB: Analytical Thinking)
■ Students might employ a process similar the table in Exhibit 8.10, Median Household
Income for a Sample of Emerging Markets, 2015. [Sources: Based on Euromonitor
International January 2015 (www.euromonitor.com) and International Monetary Fund,
■ An EXCELLENT tool for assessing emerging market potential is the Market Potential
Index for Emerging Markets, (MPI) which integrates eight dimensions used to assess
the overall MPI. Eight dimensions are selected to represent the market potential of a
■ These rankings may be used to prioritize emerging markets for international
expansion. For example, attractive export markets would include Singapore, China, and
■ Finally, ask your students to think about any additional indicators and/or countries that
should be included in the MPI framework. When prompted to justify their
Jaguar and Land Rover- Emerging Markets Provide Key Growth Opportunities
Traditionally, Jaguar and Land Rover have reaped the majority of their sales from the
U.S., the UK and Western Europe. Faced with maturing markets, Tata Motors needs to
8-8. As it prepares to expand abroad, how can Tata Motors improve its corporate
social responsibility toward future customers in emerging markets? What can
the firm do to minimize the impact of its operations on the natural environment in
Asia and elsewhere?
(LO 8.6; AACSB: Reflective thinking)
■ Tata Motor’s Corporate Citizenship Initiatives
When Jamsetji Tata’s envisioned an industrialized India in 1868, to the opening of the
Indian Institute of Science, when his vision became a reality, to the 2008 joint venture
■ Tata Steel spends millions every year on education, health, and agricultural
■ In 2008 Tata Motors acquired a 50% stake in Miljo Grenland/Innovasjon, a Norwegian
■ Tata BP Solar Ltd., a joint venture with British Petroleum, supplies buildings with
■ Transitioning from a shareholder to a stakeholder perspective would heighten the
■ Limiting Carbon Emissions through Alternative Energy Sources
Consistent with its strategy of global partnerships and the production of sustainable and
affordable vehicles, Tata Motors in 2008 acquired a 50.3% stake in Miljo
What can Tata Motors do to minimize the impact of its operations on the natural
environment in Asia and elsewhere?
■ Thomas Friedman writes of the innovative platform India has become. For example,
with leap-frog-technology, cell phones are now affordable to Indians who make less
■ Environmental Sustainability
Tata Motors might address climate change by preparing for the transition to a
V. END OF CHAPTER QUESTIONS
● TEST YOUR COMPREHENSION
8-9. What are advanced economies, developing economies, and emerging
markets? What are the major distinctions among these three country groups?
Visit MyManagementLab for suggested answers.
(LO 8.1; AACSB: Application of knowledge)
8-10. Explain why firms want to do business in emerging markets. What makes
these markets attractive?
Visit MyManagementLab for suggested answers.
(LO 8.2; AACSB: Application of knowledge)
8-11. Describe the various risks and challenges encountered in emerging
markets.
(LO 8.4; AACSB: Application of knowledge)
■ Risks and challenges of doing business in emerging markets:
◘ Political instability, inadequate legal and institutional frameworks, lack of
transparency, and inadequate intellectual property protection are among the factors that
add to the cost of doing business.
8-12. What is a family conglomerate (FC)? How do FCs differ from publicly owned
companies? What role do FCs play in emerging markets?
(LO 8.4; AACSB: Analytical Thinking)
■ Family conglomerate (FC) is a large, privately-owned company that is highly
diversified, and control economic activity and employment in emerging markets.
■ Examples–
◘ South Korea, where they are called chaebols – the top 30 FCs account for
nearly half the assets and industry revenues in the Korean economy. Samsung, the
most famous Korean FC, has annual revenues of $140 billion.
■The origin and growth of FCs are partly attributable to governments, which protects
FCs by providing subsidies, loans, tax incentives, and market entry barriers to
■ FCs provide huge tax revenues and facilitate national economic development.
■ FC dominance in emerging markets suggests that they will be formidable competitors
8-13. Describe the process for selling to foreign governments and state
enterprises.
(LO 8.5; AACSB: Application of knowledge)
■ Governments are often major buyers in emerging markets.
■ Governments and state enterprises are targets for sale of infrastructure-related
■ Selling to government agencies involves preparing tenders in response to call for
projects. Firms from advanced economies follow various approaches to skillfully
■ Privatization provides opportunities for foreign firms to enter emerging markets by
8-14. Doing business in emerging markets involves strategies that are often
distinct from those of other international venues. What types of business
approaches can firms use when doing business in emerging markets?
(LO 8.5; AACSB: Analytical Thinking)
■ Firms aspiring to do business in emerging markets need to adapt strategies and
■ Emerging markets are ripe as export destinations, direct investment targets, and
■ Some firms succeed in these markets by partnering with family conglomerates.
■ Governments are often major buyers in emerging markets. Selling to government