An emerging market economy is a nation's economy that is progressing toward becoming advanced. Emerging markets are not as advanced as developed countries but maintain economies and infrastructures that are more advanced than less or undeveloped countries. They are sometimes called developing economies. A country which is not a developing economy will either classified as developed or undeveloped (also known as a frontier market). Examples of such developing economies include: Brazil, Chile, Turkey, Poland, Russia, Mexico, South Africa, Nigeria etc. Best businesses to invest in, in developing economies and why? Some of the best businesses to invest in in emerging economies are:
Why are emerging economies important for business?
Emerging economies are usually characterized by low income per individual, quick growth and higher than average profit on investments. Emerging economies are important because they drive growth in the world’s economy.
Best businesses to invest in, in developing economies and why?
Some of the best businesses to invest in in emerging economies are:
1. Alternative source of Energy
One major thing lacking in most emerging economies is constant power supply and as a result, citizens rely heavily on alternative sources of electricity. Businesses can make a lot of money by supplying alternative sources of energy such as solar energy and from importation and sales of generators. In Nigeria, for example, almost every home owns a generator.
2. Healthcare
Most developing countries have poor healthcare facilities and infrastructure, and the few available ones are just not enough to cater for the health needs of the huge population. Lots of profit can be made establishing modern healthcare facilities in emerging economies. The average Nigerian has had negative experiences in public hospitals, often due to inadequate facilities, understaffing or a lack of specialized personnel. A business that offers affordable, prompt and specialized healthcare services is sure to thrive in such an economy.
3. Security services
Insecurity is also a common challenge for countries of the world nowadays, especially in developing countries. Many individuals and companies look for ways to protect themselves from security threats so they can sleep with both eyes closed. In Nigeria, for example, where armed robbery is a constant threat, starting a security outfit that specializes in protecting companies and individual assets, using hi-tech systems that are sure to ward off intruders, would be a money-maker.
4. Real Estate
The real estate industry is a hands-down winner in every part of the world and also in developing economies where housing is a major problem that the government is yet to solve. An example is Tolet.ng which connects those who wish to rent or buy properties with agents via an online platform. The prospective buyer’s contact is then sent to the agent so that a physical inspection can take place. Advantages of doing business in an emerging economy Challenges of doing business in an emerging economy Investments in emerging markets come with much greater risk due to:
• First-Mover Advantages
If a company can set up shop in an emerging economy and build early success, it can become the recognized brand in its industry. This is an appealing opportunity, especially for businesses that are not among the elite brands in their home country. E.g. MTN has first mover advantages in the Nigerian telecom industry.
• Access to Capital
Access to new capital is what drives many businesses to take on the risks of doing business in emerging markets. As new economies emerge, untapped capital is up for grabs and building and maintaining a pipeline to those funds helps companies not only expand abroad, but also bring in new resources for domestic growth
Challenges of doing business in an emerging economy
Investments in emerging markets come with much greater risk due to:
• Political Instability:
Political unrest is a big monster haunting emerging economies, as riots and unrest could put the country on lockdown, thereby resulting in losses for businesses and even the economy.
• Access to Capital:
Studies show that firms in developing economies such as Africa's pay more in interest rates for loans than firms in Asia and Eastern Europe. There is generally low access to credit for small businesses and startups, as most banks are hesitant to lend to sectors or businesses they perceive as being too risky.
• Unstable Foreign Exchange Rate:
The rate of the Dollar ($) and price of Oil (per barrel) in the International market affects everything in a developing economy, even the prices of toothpick and roasted yam, as seen in the case of Nigeria.
• Cultural Risks
A major disadvantage of doing business in emerging economies is the challenge in overcoming cultural risks. Cultural views, religious beliefs affect the usage of certain products when new economies emerge. These challenges increase for smaller companies with fewer employees and resources.
• Limited Protection
Developing countries usually have less evolved legal and ethical protections, forcing businesses to risk encounters with criminals, crooked law enforcement agents, dubious individuals and corrupt civil servants. Shady business transactions are common, corrupt violence and even murder can happen in some countries.
Other challenges of doing business is developing economies include: differences in language, culture, and business regulations.
