Challenges of Conducting Business in an Emerging Market
Emerging markets, also known as emerging economies, are markets that were once developing economies. They have some features of a developed market but do not meet entirely meet the standards. Some of these emerging markets are Poland, Turkey, and Indonesia. These emerging economies have potential; however, they have significant challenges. This essay will look at the various problems faced by conducting business in these markets. Emerging economies have challenges that make them riskier for business.
The first challenge is political instability. Alam, Uddin, & Yazdifar (2019) note that there has been political unrest in economies like China and Turkey in recent years. Political instability leads to a not conducive business environment. Family businesses, well known as conglomerates, often control emerging markets. They are local firms that are dominant and diversified, especially in South Korea and Turkey, where one can find holding companies. New entrants into their markets are a threat to their control base of market and supplies. Therefore, the conglomerates will resist any other business operations. Thirdly, there are excessive, extreme regulations, and bureaucracy regulations in governments, large corporations. For instance, in India, it will take years to get business licenses (Krammer, 2019). Lastly, these economies do not have robust intellectual property systems for protection. This denies them an incentive to create and produce content and unlawful copying. Businesses are discouraged from producing their products profitably.
In conclusion, emerging markets were once developing economies. They pose challenges to a new business that would want to venture into their markets. Dominance from conglomerates, weak systems that do not pay for intellectual property protection, excessive regulations, and political instability are challenges that businesses face in emerging markets. It is, therefore, essential for governments to put conducive and business-friendly measures to promote other companies in the emerging markets.
References
Alam, A., Uddin, M., & Yazdifar, H. (2019). Institutional determinants of R&D investment: Evidence from emerging markets. Technological Forecasting and Social Change, 138, 34-44.
Krammer, S. M. (2019). Greasing the wheels of change: Bribery, institutions, and new product introductions in emerging markets. Journal of Management, 45(5), 1889-1926.