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Structure of the Book

Since the crisis of 2008, internationalizing to emerging markets has become a priority for U.S., European, and Japanese companies. Nonetheless, most of them continue to operate with a “developed world” mentality—they first address developed markets and then adapt strategies and products to suit emerging markets. This often leads them to underestimate the difficulties and risks of managing a business in contexts that are fundamentally different from those of developed economies. Succeeding in emerging markets entails accepting that they are different, and that a retooling of business models, products, and strategies in ways that can best exploit these differences is needed. This book provides a step-by-step guide to business and strategy in emerging markets. It is structured in three parts: The first part sets the stage for our analysis. It discusses the main features of emerging markets that companies and managers should examine to improve their chance of being successful in these economies, framing them in a theoretical and historical context. The second part provides a set of analytical tools to support the development of emerging-market strategies. The final part of the book examines the empirical and theoretical implications of the rise of emerging-market multinational companies, explaining their main features and their internationalization. Some of our chapters, such as Chapters 2, 3, and 9, are more theoretical. Others, such as Chapters 4, 5, 6, and 7, are more practical and strategic in nature. We believe that the combination of empirical, theoretical, and strategic insights of the book make it interesting and hopefully useful for different types of readers and for different types of purposes. We structured it in a flexible manner, so that readers can choose whether to read the whole content in a sequential way, read the chapters in a different sequence, or pick and choose the topics they wish to spend time focusing on.

In Chapter 1, “What Are Emerging Markets?,” we “open the black box” of emerging markets and their most important characteristics and the different ways in which they have been defined. We explain the dimensions in which emerging markets differ from developed economies and point out their relevance for business. In particular, we examine the obstacles that make operating a business in emerging markets more difficult and often more costly. The chapter introduces the topic in a structured way for students, managers, and entrepreneurs who are not familiar with the complex and highly diverse world of emerging markets.

Chapter 2, “Markets and Institutions,” provides a theoretical background for the book, examining some key concepts related to the generation of wealth in different economies. It traces the evolution of markets and institutions through ancient history, demonstrating how these differ across societal and cultural contexts. It is an important corollary for readers who lack an economics or political science background and are interested in finding out more about markets, trade, and economic growth.

Debates over the causes and implications of the rise of emerging markets normally overlook the earlier history of multinationals, predominantly from European and other industrialized countries, which invested in developing and underdeveloped territories, mostly in the southern hemisphere. Chapter 3, “A Historical Perspective,” addresses this neglect, looking at two distinctive periods of the global economy: 1850–1914 and 1948–1980. The chapter is aimed at students and practitioners interested in acquiring a historical perspective of internationalization toward emerging markets and the challenges it poses for business.

In the second part of the book, we develop our conceptual model, which is structured in four steps: the identification of the “Determinants of Attractiveness,” the analysis of Four Dimensions, the examination of risk and development of risk-management strategies, and, finally, the structuring of strategies to target different segments of emerging-market clients. In Chapter 4, “The Determinants of Attractiveness and the Four Dimensions,” we discuss the first two steps of the model. First, we explain how to use the Determinants of Attractiveness as part of a structured effort to identify the reasons why it may be attractive to do business in a given market. Next, we explain how to examine the context where a business may operate by looking at the Four Dimensions: geography, population, business environment, and economic performance. We provide a set of analytical tools to help readers go through the steps of the model, collecting information and putting together its different aspects.

In Chapter 5, “Managing Risk,” we discuss the risks of operating in emerging markets and ways in which they can be managed. We explain the different aspects and effects of risk, and provide a tool to examine risk that focuses on two dimensions—the extent to which risk can be predicted, and the extent to which it is general or specific to the business we intend to operate. We explain how this information can be combined with the analysis of the Four Dimensions to develop the background information needed to formulate successful emerging markets strategies.

The next two chapters are aimed at students, scholars, and practitioners interested in businesses that sell to clients based in emerging markets. Chapter 6, “Targeting Emerging Market Clients I: The Rich and the Middle Classes,” discusses strategies to target rich, upper-middle class, and new middle class consumers. It illustrates how these groups of consumers differ from each other and the extent to which targeting them entails emulating strategies experimented in developed economies. Chapter 7, “Targeting Emerging Market Clients II: Strategies for the Base of the Pyramid,” examines consumers at the “base of the pyramid,” which make up the majority of the populations of emerging economies, discussing different strategies to target these consumers in ways that generate profits but also contribute to improving their livelihoods.

The third part of the book discusses how emerging markets are changing the theory and practice of international management. Chapter 8, “Multinationals Based in Emerging Markets: Features and Strategies,” looks at how companies based in emerging markets differ from firms based in developed economies and how they have conquered leading positions in many industries. Chapter 9, “The Internationalization of Emerging Market MNEs: A Critical Examination of International Business Theories,” discusses how international business theory can explain the global expansion of multinational enterprises based in emerging markets, anchoring the information presented in Chapter 8 in a structured theoretical framework. The Appendix gives a brief account of the definitions that have been used through history to categorize economies according to their various features.

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