The Emergence of Markets and Competition

Perhaps the most critical aspect of globalisation has been the emergence of new markets and the rise of new competitors, bringing in a wide spectrum of modalities of competition (Baumol et al., 1982; Dunning, 1993; Levitt, 1983; Porter 1986, 1990). The decades of the 1970s and the 1980s have witnessed intense competition for the American market by firms from Europe, Japan, Asia and many Third World countries (Caves & Mehta, 1986; Heenan, 1979; Lawrence, 1996; Lall, 1983; Wells, 1983). As the markets of developed countries have matured, American and European firms have been forced to look beyond their borders for opportunities to pursue their financial and strategic goals (Dunning, 1997). Increasingly, this movement has crossed the frontiers of emerging markets. Even where corporate objectives have not involved local market objectives (e.g. scarce resources, unique technology), foreign firms have begun to face intense pressure from emerging local as well as other foreign competitors. This paper deals with those countries which are collectively known as emerging markets. Furthermore, it focuses on the issue of emerging competition from and within these emerging markets. Simply put, since historically these markets were not open to foreign firms irrespective of market entry strategy, the issue of emergence per se becomes critical from the perspective of strategic analysis (as and when they occur). Given the prior state of autarky of such economies, the effect of these developing country firms at that point was minimal, if any. Here again the need to understand the issue of emergence is strategically vital. Thus of particular interest to the paper is the concept of emergence itself which is discussed in detail. Emerging market countries, and the relevant criteria, are also identified using the work of several organisations. The paper examines the lure of emerging markets from the foreign portfolio equity investment (FPEI) and the foreign direct investment (FDI) perspective. The paper also addresses the linkage between economic evolution and market evolution. Finally, the paper after reviewing a few issues relating to competition, identifies a few examples of the strategies that indigenous competitors utilise to combat the powerful multinationals attempting to build market position given the post liberalisation accessibility of the developing countries.