Companies can often achieve success much faster in smaller markets, finds study
China is no longer the undisputed favourite emerging market for companies seeking new opportunities abroad, other countries are growing increasingly attractive as well, finds a new survey.
Only 48% of companies intend to focus their efforts primarily on China in the future. 45% will focus on India in the future, 25% on Central and Eastern Europe, and 24% on Southeast Asia (excluding China) and Russia.
This view is based on findings of the recent international study “Promise or peril – the lure of the emerging markets” produced by Atradius
However, sixty per cent of surveyed company representatives continue to give top priority to China over the last three years.
“Some companies have realised that multinationals can achieve success much faster in smaller markets such as Thailand, Vietnam or parts of South and Central America,” said Dr. Peter Ingenlath, Atradius chief risk officer and vice chairman.
“Some companies have realised that multinationals can achieve success much faster in smaller markets.
Dr. Peter Ingenlath, Atradius chief risk officer and vice chairman
“The study findings show that an investor’s choice of country is often driven more by emotion than by sound risk management,” according to Ingenlath.
On the one hand 72% of respondents believe their companies will be able to profit from growing opportunities in emerging markets in the next three years. Only 30% believe that the risks will lessen over the same period.
92% of respondents identified macroeconomic factors and 91% political instability or opaque rules and excessive bureaucracy as significant or very significant obstacles to success in emerging markets.
Despite all these risks surveyed companies displayed a great deal of optimism, as many as 55% of the companies expect 16% sales growth over the next three years.
The trend towards investing in emerging markets remains unchanged. Total capital flows into emerging markets were higher in 2007 than ever before, according to figures from the Institute of International Finance (IIF), at US $782 bn. Of this, US $255 bn came in the form of foreign direct investment (FDI)—an increase of more than 50% compared to 2006.