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Q1. What are the effects of Global Competition on the industries in India?

June 30, 2013 By: Meliza Category: 1st SEM

Answer:  The effects of Global Competition on the industries in India are follows as,

As the greatest hope for growth in the global economy for the past two years, the emerging markets have become the darlings of the financial press and a favorite talking point of C-suite executives worldwide. Once attractive only for their natural resources or as a source of cheap labor and low-cost manufacturing, emerging markets are now seen as promising markets in their own right. 

Rapid population growth, sustained economic development and a growing middle class are making many companies look at emerging markets in a whole new way.As the emerging markets rise, so do their companies. Many companies that had previously posed no competitive threat to multinational corporations now do so. These emerging market leaders represent a major shift in the global competitive landscape – a trend that will only strengthen as they grow in size, establish dominance and seek new opportunities beyond their traditional domestic and near-shore markets. In particular, we see the following trends ahead:

Leading emerging markets will continue to drive global growth: Estimates show that 70% of world growth over the next few years will come from emerging markets, with China and India accounting for 40% of that growth.

Adjusted for variations in purchasing power parity, the ascent of emerging markets is even more impressive: the International Monetary Fund (IMF) forecasts that the total GDP of emerging markets could overtake that of the developed economies as early as 2014.The forecasts suggest that investors will continue to invest in emerging markets for some time to come. The emerging markets already attract almost 50% of foreign direct investment (FDI) global inflows and account for 25% of FDI outflows. The brightest spots for FDI continue to be Africa, the Middle East, and Brazil, Russia, India and China (the BRICs), with Asian markets of particular interest at the moment. By 2020, the BRICs are expected to account for nearly 50% of all global GDP growth. Securing a strong base in these countries will be critical for investors seeking growth beyond them.

Emerging market leaders will become a disruptive force in the global competitive landscape:  As emerging market countries gain in stature, new companies are taking center stage. The rise of these emerging market leaders will constitute one of the fastest-growing global trends of this decade. These emerging market companies will continue to be critical competitors in their home markets while increasingly making outbound investments into other emerging and developed economies. Working to serve customers of limited means, the emerging market leaders often produce innovative designs that reduce manufacturing costs and sometimes disrupt entire industries. A case in point: India’s Tata Motors’ US$2,900 Nano, priced at less than half the cost of any other car on the market worldwide. A version is set to go on sale in Europe this year. Many emerging market leaders have grown up in markets with “institutional voids,” where support systems such as retail distribution channels, reliable transportation and telecommunications systems and adequate water supply simply don’t exist. As a result, these companies possess a more innovative, entrepreneurial culture and have developed greater flexibility to meet the demands of their local and “bottom-of-the-pyramid” customers.

Rising population and prosperity drive new consumer growth and urbanization: Between now and 2050, the world’s population is expected to grow by 2.3 billion people, eventually reaching 9.1 billion. The combined purchasing power of the global middle classes is estimated to more than double by 2030 to US$56 trillion. Over 80% of this demand will come from Asia.

Most of the world’s new middle class will live in the emerging world, and almost all will live in cities, often in smaller cities not yet built. This surge of urbanization will stimulate business but put huge strains on infrastructure.

Physical infrastructure, such as water supply, sanitation and electricity systems, and soft infrastructure, such as recruitment agencies and intermediaries to deal with customer credit checks, will need to be built or upgraded to cope with the growing urban middle class.

Addressing such concerns in Asia alone will require an estimated US$7.5 trillion in investments by 2020. Meeting these needs will likely entail public-private partnerships, new approaches to equity funding and the development of capital markets.

Emerging markets will become the new battleground:

The BRICs are having a major impact on their regional trading partners and more distant, resource-rich countries, an increasing number of which are being pulled into their economic orbit.

In 2009, emerging-to-emerging (E2E) trade reached US$2.9 trillion. This massive flow of investment among emerging markets is well on its way to creating a second tier of emerging market leaders. As pressure for resources increases, we expect a battle for first-mover advantage among emerging heroes, global players and emerging market governments in regions such as the Middle East and Africa.

 

 

Global influence grows

Inevitably, the BRICs’ growing economic strength is leading to greater power to influence world economic policy. In October 2010, for example, emerging economies gained a greater voice under a landmark agreement that gave 6% of voting shares in the IMF to dynamic emerging countries such as China. Under the agreement, China will become the IMF’s third-biggest member.

Emerging and developed markets’ share of global GDP Of course, it would be a mistake to see economic growth in the emerging markets as a winner-take-all contest, with developed countries on the losing side. Billions of new middle-class consumers in the emerging markets represent new markets for developed-world exports and companies based in developed countries. Emerging market corporations are another big new market: business-to-business sales to China and India, for example, are a key factor in Germany’s strong export economy.

Q2. How is ‘Economies of Scope different from Economies of Scale? 10 marks (300-400) words

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