Which are the next areas in the world likely to experience the massive growth recorded by China, India and others in recent years?
Large economies such as Indonesia and others in southeast Asia have been called the “New Tiger” economies for their potential. With 50 per cent of the world’s population in Asia — and the strong manufacturing links in the region, this may well be the Asian century, led (not surprisingly) by China and India.
What are the conditions necessary for such growth?
A large population helps, but having strong regional trade links can offer a large enough market to enable even smaller countries to grow substantially. More important are stable institutions committed to liberalisation and reform. Promoting entrepreneurship to get that all-important driver of enterprise is also very important. This can take various forms, ranging from incentivising firms to collaborating with foreign firms as well as creating the market conditions to allow new start-ups.
What are the business lessons from the growth of the BRIC countries?
Spotting the new markets to jump ahead of opportunities is the most important business lesson. Although these economies have been integrated into the world economy since the early 1990s, their transformation and growing middle class were not much noted until the 2000s. Consider China, whose “open door” policy began in 1992; India, which turned outward after its 1991 balance-of-payments crisis; and Eastern Europe and the former Soviet Union, whose array of emerging countries have converted the fall of communism into the adoption of capitalism. All of these have received much more attention but only since 2000.
By then, early movers were already in those markets, beating the competition and gaining consumer loyalty. Some of the biggest players in those markets were the early multinational corporations operating at the start of market liberalisation — consumer-goods markets were developing in China in the late 1980s and early 1990s; deregulation and the opening of markets in India took place at around that time as well; banking and capital market liberalisation in Eastern Europe began also a full decade before the 2000s.
What are the implications for Western multinationals?
Keep attuned to differential economic growth patterns around the world, paying particular attention to policy initiatives that are liberalising markets. By focusing on those economies with stable institutional systems and a track record of delivering growth, the next big opportunity can be anticipated and capitalised on. The fastest growing markets in the world in the 21st century will be emerging economies; it’s time to build a strategy to get ahead of the tide.
Linda Yueh (firstname.lastname@example.org) is a visiting Assistant Professor of Economics at London Business School.