Emerging markets are nations with social or business activity in the process of rapid growth and industrialization.

The economies of China and India are considered to be the [1] largest. According to The Economist many people find the term outdated, but no new term has yet to [2] gain much traction. Emerging market hedge fund capital reached a record new level in the first quarter [3] of 2011 of $121 billion. The seven largest emerging and developing economies by either nominal or inflation-adjusted GDP are the BRIC countries (Brazil, Russia, India and China), as well as MIKT(Mexico, Indonesia, South-Korea and Turkey). In the 1970s, "less economically developed countries" (LEDCs) was the common term for markets that were less "developed" (by objective or subjective measures) than the developed countries such as the United States, Western Europe, and Japan. These markets were supposed to provide greater potential for profit, but also more risk from various factors. This term was felt by some to be not positive enough so the emerging market label was born. This term is misleading in that there is no guarantee that a country will move from "less developed" to "more developed"; although that is the general trend in the world, countries can also move from "more developed" to "less developed". Originally brought into fashion in the 1980s by then World Bank economist Antoine van Agtmael, the term is sometimes loosely used as a replacement for emerging economies, but really signifies a business phenomenon that is not fully described by or constrained to geography or economic strength; such countries are considered to be in a transitional phase between developing and developed status. Examples of emerging markets include Indonesia, Iran, some countries of Latin America, some countries in Southeast Asia, South Korea, most countries in Eastern Europe, Russia, some countries in the Middle East, and parts of Africa. Emphasizing the fluid nature of the category, political scientist Ian Bremmer defines an emerging market as "a country where politics matters at least as much as economics [6] to the markets". The research on emerging markets is diffused within management literature. While researchers includingc, George Haley, Vladimir Kvint, Hernando de Soto, Usha Haley, and several professors from Harvard Business School and Yale School of Management have described activity in countries such as India and China, how a market emerges is little understood. In 1999, Dr. Kvint published this definition: "Emerging market country is a society transitioning from a dictatorship to a free-market-oriented-economy, with increasing economic freedom, gradual integration with the Global Marketplace and with other members of the GEM (Global Emerging Market), an expanding middle class, improving standards of living, social stability and tolerance, as well as an [7] [8] increase in cooperation with multilateral institutions" In 2008 Emerging Economy Report, the Center for Knowledge Societies defines Emerging Economies as those "regions of the world that are experiencing rapid informationalization under conditions of limited or partial industrialization." It appears that emerging markets lie at the intersection of non-traditional user behavior, the rise of new user groups and community adoption of products and services, and innovations in product technologies and platforms. More critical scholars have also studied key emerging markets like Mexico and Turkey. Thomas Marois (2012, 2) argues that financial imperatives have become much more significant and has developed the idea of 'emerging finance capitalism' - an era wherein the collective interests of financial capital principally shape the logical options and choices of government and state elites over and above those of labor and [9] popular classes.
[5]

Julien Vercueil recently proposed an pragmatic definition of the "emerging economies", as distinguished from "emerging markets" coined by an approach heavily influenced by financial criteria. According to his definition, an emerging economy displays the following characteristics : 1. Intermediate income : its PPP per capita income is comprised between 10% and 75% of the average EU per capita income. 2. Catching-up growth : during at least the last decade, it has experienced a brisk economic growth that has narrowed the income gap with advanced economies. 3. Institutional transformations and economic opening : during the same period, it has undertaken profound institutional transformations which contributed to integrate it more deeply into the world economy. Hence, emerging economies appears to be a by-product of the current globalization. At the beginning of the 2010s, more than 50 countries, representing 60% of the world's population and [11] 45% of its GDP, matched these criteria. Among them, the BRICS.

[10]

Newly industrialized countries as of 2010. This is an intermediate category between fully developed and developing.

The term "rapidly developing economies" is being used to denote emerging markets such as The United Arab Emirates, Chile andMalaysia that are undergoing rapid growth. In recent years, new terms have emerged to describe the largest developing countries such as BRIC that [12] stands for Brazil, Russia, India, and China, along with BRICET (BRIC + Eastern Europe and Turkey), BRICS (BRIC + South Africa), BRICM (BRIC + Mexico), BRICK(BRIC + South Korea), Next Eleven (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, [13] and Vietnam) and CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa). These countries do not share any common agenda, but some experts believe that they are enjoying an increasing role in the world economy and on political platforms. It is difficult to make an exact list of emerging (or developed) markets; the best guides tend to be investment information sources like ISI Emerging Markets and The Economist or market index makers (such as Morgan Stanley Capital International). These sources are well-informed, but the nature of investment information sources leads to two potential problems. One is an element of historicity; markets may be maintained in an index for continuity, even if the countries have since developed past the [14] emerging market phase. Possible examples of this are South Korea and Taiwan. A second is the simplification inherent in making an index; small countries, or countries with limited market liquidity are often not considered, with their larger neighbours considered an appropriate stand-in.

In an Opalesque.TV video, hedge fund manager Jonathan Binder discusses the current and future relevance of the term "emerging markets" in the financial world. Binder says that in the future investors will not necessarily think of the traditional classifications of "G10" (or G7) versus "emerging markets". Instead, people should look at the world as countries that are fiscally responsible and countries that are not. Whether that country is in Europe or in South America should make no difference, making the traditional "blocs" of categorization irrelevant. The Big Emerging Market (BEM) economies are (alphabetically ordered): Brazil, China, Egypt, India, Indonesia, Mexico, Philippines, Poland, Russia, South Africa, South [14] [15] Korea and Turkey. Newly industrialized countries are emerging markets whose economies have not yet reached first world status but have, in a macroeconomic sense, outpaced their developing counterparts. Individual investors can invest in emerging markets by buying into emerging markets or global funds. If they want to pick single stocks or make their own bets they can do it either through ADRs (American depositor Receipts - stocks of foreign companies that trade on US stock exchanges) or through exchange traded funds (exchange traded funds or ETFs hold basket of stocks). The exchange traded funds can be focused on a particular country (e.g., China, India) or region (e.g., Asia-Pacific, Latin America).

Definition of 'Emerging Market Economy'

A nation's economy that is progressing toward becoming advanced, as shown by some liquidity in local debt and equity markets and the existence of some form of market exchange and regulatory body. Emerging markets generally do not have the level of market efficiency and strict standards in accounting and securities regulation to be on par with advanced economies (such as the United States, Europe and Japan), but emerging markets will typically have a physical financial infrastructure including banks, a stock exchange and a unified currency.

Investopedia explains 'Emerging Market Economy'

Emerging markets are sought by investors for the prospect of high returns, as they often experience faster economic growth as

measured by GDP. Investments in emerging markets come with much greater risk due to political instability, domestic infrastructure problems, currency volatility and limited equity opportunities (many large companies may still be "state-run" or private). Also, local stock exchanges may not offer liquid markets for outside investors.

As economic globalization has brought down trade and investment barriers and has connected far-flung countries in integrated global supply chainsand emerging markets seem to be converging with the worlds rich industrial countriesdistinguishing these economies from developed markets may seem to matter less than before. We disagree. One fundamental premise of this book is that businesses still need to distinguish emerging marketscollectively from developed markets and individually from each other. But what, really, is an emerging market? The term emerging markets was coined by economists at the International Finance Corporation (IFC) in 1981, when the group was promoting the first mutual fund investments in developing countries. Since then, references to emergingmarkets have become ubiquitous in the media, foreign policy and tradedebates, investment fund prospectuses and multinationals annualreports, but definitions of the term vary widely. The term is often reduced to the unhelpful tautology that emerging markets are emerging because they have not emerged. To understand emerging markets, we need to consider carefully the ways in which they are emerging and the extent to which they are genuine markets. If you ask a conference room full of business executives how they would distinguish emerging markets from developed economies, variants of three stories will likely arise. Emerging markets such as Brazil, China, India and Russia, some will certainly say, are emerging by virtue of their recent fast economic growth. The opening of these large economies to global capital, technology, and talent over the past two decades has fundamentally changed their economic and business environments. As a result, the GDP growth rates of these countries have dramatically outpaced those of more developed economies, lifting millions out of poverty and creating new middle classesand vast new markets for consumer products and services. Large, low-cost and increasingly educated labor pools, meanwhile, give these markets tremendous competitive

advantage in production, and information technology is enabling companies to exploit labor in these markets in unique ways. Other executives will focus on emerging markets as emerging competitors. On the macro level, a landmark Goldman Sachs report published in 2003 forecast that the economies of Brazil, China, India and Russia could grow to be collectively larger than the G-6 economies (United States, Japan, United Kingdom, Germany, France and Italy) in U.S. dollar terms before the middle of the twenty-first century. Commentator Fareed Zakaria sees this rise of the rest as a transformative, tectonic shift in the distribution of global power. Companies based in these economies, meanwhile, are already challenging multinationals based in the developed worldand not only in their home emerging markets. ChinabasedLenovo s purchase of IBM s personal computer business in 2004 and the acquisition of Jaguar and Land Rover by Indias Tata Motors in 2008 are only two examples of the increasing global mergers and acquisitions activity by emerging market-based firms. Some observers see the financial crisis of 2008 2009 as an inflection point, accelerating the emergence of these markets as dominant players in the global economy. A deeper discussion might elicit a list of the persistent headaches of doing business in emerging markets. These markets, the executives might say, are prone to financial crises. Intellectual property rights are insecure. Navigating government bureaucracies can be thorny. Product quality is unreliable. Local talent is insufficient to staff operations. Reliably assessing customer credit is difficult. Overcoming impediments to distribution can be frustrating. Sorting through investment opportunities or performing due diligence on potential partners is often a guessing game. Others might throw up their hands and say that corruption is so endemic in emerging markets that the risks simply outweigh the potential rewards. Based on many of these signs of emergence, some might say, emerging markets are not distinctly different from other markets; rather, they are simply starting from a lower base and rapidly catching up. Indicators such as the growing numbers of emerging market-based companies listed on the New

York Stock Exchange or the growing ranks of billionaires from emerging markets listed annually by Forbes illustrate this trend. Behind those indicators, however, is a more complicated story of why firms based in these economies have sought out overseas listings and how those moguls have amassed fortunes in developing countries that are, by many standards, still quite poor. All these criteriathe indicators of opportunity and the causes for complaint are important features of many emerging markets, but they do not delineate the underlying characteristics that predispose an economy to be emerging, nor are they particularly helpful for businesses that seek to address the consequences of emerging market conditions. We see these features of emerging markets as symptoms of underlying market structures that share common, important, and persistent differences from those in developed economies. A fundamental premise of our work is that emerging markets reflect those transactional arenas where buyers and sellers are not easily or efficiently able to come together. Ideally, every economy would provide a range of institutions to facilitate the functioning of markets, but developing countries fall short in a number of ways. These institutional voidsmake a market emerging and are a prime source of the higher transaction costs and operating challenges in these markets. By relying on outcome criteria to assess markets, managers often overlook the ways in which emerging markets operate differently than do developed economies. Ranking the worlds economies by per capita gross domestic product would suggest that the United Arab Emirates, for example, is among the worlds most developed economies, but it is an emerging market nonetheless because of its market structure. Intuitively, managers know that operating a business in an emerging market is different from doing so in a developed economy. It is tempting to chalk up these differences simply to country context. Indeed, market structures are the products of idiosyncratic historical, political, legal, economic and cultural forces within any country.

By developing a granular understanding of the underlying market structure of emerging economiesand not only cataloging symptoms to be incorporated in an overall risk assessmentcompanies can tailor their strategies and execution in emerging markets to avoid mistakes and outcompete rivals. Tarun Khanna is Jorge Paulo Lemann professor at Harvard Business School. Krishna G. Palepu is senior associate dean for International Development at Harvard Business School. Excerpted with permission from Harvard Business Press. From Winning in Emerging Markets: A Road Map for Strategy and Execution, by Tarun Khanna and Krishna G. Palepu. Copyright 2010 Tarun Khanna and Krishna G. Palepu. All rights reserved.

Reinventing marketing: Behavioural economics will shake marketing to the core

Alan Mitchell, Marketing, Wednesday, 12 May 2010, 12:00am, Be the first to comment

LONDON - Approaches based on rationality and emotional added value have been so thoroughly discredited that marketers now need to revise their notions about how branding works, writes Alan Mitchell.

Have you got a theory of how branding works, and why? Before reading on, please set aside just one minute to write down 15 or so words which sum up your theory. Date it and put it safely in a drawer. Now read on. I suggest you do this because long-held assumptions about how and why brands work face some fundamental challenges - challenges that could radically change how you manage and measure your brand. Let's start with two warring world views of branding that, together, pretty much define our status quo. The first is an echo of 20th-century economists' belief that we are all 'rational' decision-makers, carefully weighing all available options and then choosing the one that maximises our utility. This led marketers to use rational, functional product claims ('washes whiter'), highlight unique selling points, and treat brands as basically a sort of rational legal contract. The brand makes a promise, the consumer buys it, the brand keeps it, so the consumer is satisfied and buys again. The second great theory of branding grew from marketers' realisation that very few consumers behave in the ways predicted by economists. So marketers replaced (or added) emotions to 'rationality'. Products are made in factories, but brands are made in peoples' heads, we were told, so marketing switched its

attention from USPs (dismissed as mere table stakes) to lodging emotional associations in consumers' heads. Phrases like 'aspirational imagery' and 'emotional engagement' tripped off everyone's tongues as marketers embraced brands as sources of emotional 'added value'. Clean clothes for your kids meant that you had the emotional satisfaction of knowing you were a good mother. How much better is that than just having clean clothes? Trouble is, much of what followed was hocus-pocus and it left marketing with two thumping headaches. Building brands by lodging messages in peoples' heads is both expensive and risky. Often, it doesn't work as intended - thus today's obsessive quest to demonstrate marketing accountability. At the same time, it also had the unfortunate side-effect of progressively eroding consumer trust - a legacy we are wrestling with to this day. So what's new? Behavioural economics (BE), that's what. By now, every self-respecting marketer will have drunk at least a little from this fountain, so let's focus on just one of the ways it is setting the cat among the pigeons: measurement. In the good old days of rational USPs, sales and market share were the critical indicators of success because they told us whether consumers were choosing our product or not. In the good old days of brands as emotional added value, attention switched to calibrating how much value the brand was adding. The tried-and-tested way of doing this was to take the price/market share of a generic commodity (often artificial and invented) and compare this with the market share and price charged by the brand. Out pops the value added by 'branding'. Oh dear. Why 'oh dear'? Because BE suggests that many people may buy brands for reasons that have little or nothing to do with the brand strategies adopted by marketers - emotional or rational. So, your brand measurements may not be measuring what you think they are measuring and when you 'do' branding you may not be doing what you think you are doing. Let's look at just a few BE findings that open up this can of worms. The power of familiarity For deep, instinctive reasons, human beings are fearful and suspicious of things that aren't familiar to them. So, when comparing an unfamiliar item with a familiar one, they almost always prefer the latter. Far from breeding contempt, familiarity fosters fondness. However, much of this liking has nothing to do with the lovingly crafted content of the branding or advertising that created the familiarity. Instead, it has got everything to do with the simple fact that it is familiar.

Status quo bias In Austria 99% of citizens are organ donors. In neighbouring Germany only 12% are. Why is this? Are Austrian donor marketers eight times more persuasive in their marketing than their German counterparts? Not at all. The numbers tell us nothing about 'effective persuasion' and everything about default options. Austrians have to opt out of being a donor; Germans have to opt in. If, as a brand, you somehow end up as a default option, you've got it made. What the actual option is - and what the competing options are may have almost zero bearing on the matter. Just make yourself the default. Likewise, if the status quo is that 'in this household we always buy Brand X', once created, it can be very difficult to shift. This is not because people really love the brand, but simply because they don't like change. If the status quo were different, they would be equally loyal to that, so it's got nothing to do with 'brand loyalty' and everything to do with 'loyalty' to the status quo. That's fabulous if you happen to be the incumbent, but disastrous if you are not. This is why, despite all their breast-beating, marketers endlessly play the promotions game they profess to hate: because disrupting the status quo is a must, and once you are the status quo someone is desperately trying to disrupt you. The power of heuristics In the real world, 'rational' decision-making (where you stop to gather, consider and weigh all the options before making a decision) is actually supremely irrational, because by the time you have done this you would be a predator's lunch. Instead, we instinctively seek quick-and-dirty decision-making short-cuts, or heuristics, and routinely rely on dozens of them. Some are deeply instinctive, others are learned. 'Do what other people are doing' is a pretty sensible strategy for reducing risk when you want to act fast on the basis of limited information. It also brings the added emotional benefit of a sense of belonging. The same instinct transfers very easily to brand buying, which means that if your brand is popular, it may have little to do with its unique qualities, positioning or whatever, and lots to do with the simple fact that it is popular. Ditto, if your brand is unpopular, nothing in particular may be making it unpopular other than its unpopularity. Other heuristics are learned. Price as a signal of quality is a good example. 'Buy the leading brand' is another. This is a dominant shopping heuristic for some people partly because of the effects of popularity described above, but it is also partly because status, as 'the leading brand', imparts signals of quality, reliability and value.

What people are choosing is not the particular rational or emotional benefits that are provided by that brand, but the signal that it is the leading brand. (This is why maximising 'share of voice' often works so powerfully as an advertising strategy.) In each one of these cases, the effects of 'branding' may be attributable wholly or in part, not to the quality of the product per se or the power or persuasive content of its marketing, but to the strange ways in which human beings make decisions. There's a sting in the tail here: these effects may be 'wholly' or 'partly' attributable to BE. However, right now, we don't know when or whether it is 'wholly' or 'partly' and if so, by how much. In fact, there is a huge amount we don't know. We do not have a single, comprehensive list of all known BE effects or an agreed way of categorising them. There are no measures of how big an impact they have in different contexts (most effects so far have been studied in very artificial laboratory environments). Similarly, we have no understanding of any pecking order of effects, or how different effects work together (or cancel each other out) when in combination with each other, or with the elements of truth in rational and emotional approaches to branding. However, over time we can expect that the mists will slowly clear. So keep hold of that piece of paper and look at it from time to time. It may become a useful guide to what you are learning during the rollercoaster times to come.