Do digital technology firms from emerging/developing markets have greater opportunities than firms from developed/advanced markets in the next decade?
Management teams, as well as CEOs from large corporations specifically from Japan, North America, and Europe, have identified that globalization in the contemporary society is a vital challenge. Also, they have acknowledged that it has become relatively tougher to choose which countries are the most efficient to carry out business activities with. Majority corporations have stuck to the strategies that they are traditionally used to employing (Cerutti, Claessens & Puy 2015). Consequently, this emphasizes a standard approach to new markets and at times few local twists. In relation, majority multinational corporations still struggle to develop successful strategies in the ever evolving emerging markets (Chakravorti, Bhalla & Chaturvedi 2017). Despite the fact that much has changed regarding the digital landscape today, there exist several roadblocks on the journey. Some of the discussed noticeable features of the digital landscape include:
- Technology is spreading very fast since it is used on a widespread scale
- The future of work is expected to change due to Digital technologies
- The digital markets are uneven
- Digital players wield outsized market power
- Digital commerce needs to contend with cash
From the Digital mapping Momentum around the World analysis, digital evolution index was analyzed across 60 countries, and the evolution was credited to the general product of an interplay among four key players with 170 indicators across the four key players. Three key questions shaped the research:
- What patterns dictate pre digital evolution across the world, which factors influence the patterns and how precisely do the factors differ across different regions?
- Which countries are considered most competitive in terms of digitalization, which factors are the influencers of competitiveness, specify this as either private or public sectors?
- How do respective countries enhance their nature of digital momentum?
To effectively address the questions above, it is important to measure each country’s digital state and its pace regarding digital evolution. A map of our digital planet effectively put across the main thoughts in the argument (Khanna, Palepu & Sinha 2005). The countries in the chart were categorized into four significant sections: stall out, break out, stand out and watch out. Some of the countries are at the border of what is considered as multiple zones.
Stand out countries
Stand out countries are considered digitally advanced as well as also portray high momentum. Regarding driving innovation, stand out are considered leaders since they build on their advanced advantages in several ways. The challenge, however, is that sustaining consistently high momentum in a series of time may be difficult (Rodrik 2016). Subsequently, this is because innovation led expansion is often a lumpy phenomenon. To remain relevant and to stay on top of its game, such countries maintain their innovation engines in its very best hence refresh new targeted demand.
Stall out countries
On the other hand, stall out countries exhibit a relatively high state of digital advancement while also exhibiting slowed down momentum. In this case, the first five countries according to the DEI 2017 ranking include Sweden, Denmark, Norway, Finland, as well as Switzerland. Also, Stall out countries look up to stand out ones for key lessons in sustaining innovation led growth and other vital variables. In relation, moving past the digital plateaus requires conscious efforts by the named countries to reinvent themselves (Tian 2016). Also, it is important to eliminate impediments to innovation as well as bet on a rising digital technology. In summary, countries that feature in the stall out zone place their scale, network effects, and maturity in growing and reinventing themselves.
Break out countries
Break out countries include Bangladesh, China, Saudi Arabia, Mexico, Colombia, Cameroon, India amongst others. Just as the name, Break out countries simply means countries that are at low scoring levels regarding the current state of digitalization but are in the process of rapidly evolving. Technically, the high momentum of the break out states as well as their significant headroom makes them highly attractive as compared to other groups, particularly to investors (Forsgren & Johanson 2014). The challenge is however that the countries are often held back by a poor institutional quality and relatively weak infrastructure. Tentatively, break out countries should advocate for better institutions to help nurture as well as sustain innovation. Simply put, break out countries can become stand out countries in the future with countries such as Malaysia, Russia, Kenya and China leading the pack.
Watch out countries
On the other hand, watch out countries face numerous challenges with their nature of low state of digitalization and low momentum. It is unfortunate that in some cases, the countries in this category are moving backward in their digitalization pace (Hill 2008). It is important to point out that some of this countries have demonstrated remarkable creativity in the face of low sophistication of consumer demand and severe infrastructural gaps. One of the ways through which such countries can mitigate through their current situation is through improving internet accessibility through closing the mobile internet gap that is technically a primary challenge. Simply put, the gap can be closed by redefining the difference between the available number of mobile phones and the total number of mobile phones which are internet enabled.
Boarder of Stall out and Stand Out
Two of the most significant world’s economies, the United States and Germany fall at the boarder of Stall Out and Stand Out with the quickly rising Japan at the corners of the neighborhood. In relation, it is relatively important for these economies to recognize the risks of plateauing as well as examine the less and high- momentum countries to explore the role of policy interventions. Subsequently, policy intervention is an effective tool in pushing a county into a zone that is considered of heightened competitiveness. As per now, the UK’s digital momentum can be considered much strong as compared to that of its counterparts in the EU.
On the other hand, digitally speaking, the most advantaged areas in the world regarding digitalization is undoubtedly Asia with Malaysia and China as examples. In relation, it is expected in the future to see plenty of entrepreneurial interest and investor in the region. In connection, it is vital that the political institutions are not only supportive but also stable. India on the other side pushes for digitalization an inclusive of a Digital India campaign and also a boost in the digital payments. Simply put, more systemic changes in a broad spectrum should be availed so as to boost digital evolution. Africa also is an important area of study in regards to the case study topic, the two largest economies, that is South African, and Nigeria remains as both break out and watch out zones. However, in terms of digitalization, savvy Kenya has been remarkably impressive regarding momentum by assembling a thriving ecosystem. Also, countries in Latin America can derive key important lessons from faster moving economies like Bolivia and Colombia.
Emerging markets vs. advanced markets in the next decade
This section will in an in-depth analysis examine what is different about emerging markets from the developed markets and how exactly the concepts influences the general outlook of the global economy (Hull & McGroarty 2014). Here is a breakdown of some concepts and the relevancy that each has on theoretical and practice implications.
Emerging markets have a vital role to play in the broad global economy and hence is a form of natural development in the dynamics of international trade. Since different countries have different types of resources wealth can be generated by countries with a specialty in businesses in which they have an added advantage. Consequently, relevant examples include Indian Mutiny and Boxer Rebellion in China. Several factors make emerging markets the best option. Issues such as diversity and fragmentation is a relevant example in this case (Reinhart & Rogoff 2014). Technically, there may be differences in consumer needs as well as solutions in developed markets and these said differences pale as compared to customer resources and behaviors in emerging markets such as Mombasa and Mumbai. Subsequently, understanding the highlighted multifaceted differences and their impending implications via the use of a multidisciplinary approach. Just as defined in the subsequent paragraphs, managing within and across Emerging Markets comes along with both challenges and opportunities, but it is true to say that developing markets are the new kids on the block to be watched out for by developed markets (Morschett, Schramm-Klein & Zentes 2015).
Different terms have developed in attempts to define the largest developing countries like Russia Brazil, India, and China, commonly denoted as BRIC. Also, there exist BRICET (Bric+ Eastern Europe and Turkey), BRICS (BRIC + South Africa) and CIVETS (Columbia, Indonesia, Vietnam, Egypt, Turkey and South Africa). Although the mentioned countries may not share in any common agenda, it is quite noticeable that they do benefit from an increasing role in the world’s economy as well as on other major platforms like political platforms (Blitz, Pang & Van Vliet 2013). The best guides on analyzing emerging or developed markets can be obtained from sources like EMIS which stands for Euro-money Institutional Investor Company as well as the Market index makers such as Morgan Stanley Capital International. In relation, it is important for investors in the future not to only think of the traditional classifications of “G10” OR “G7” as compared to the emerging markets (Meyer & Peng 2016). On the contrary, people should examine the world as countries that are fiscally responsible distinguished from the countries that are not. In relation, whether the country is Europe or South Africa, the weighing scale is the same. Regarding Global Growth Generators, the countries, in this case, showcase the most promising growth prospects in the years 2010-2050. The countries in this category include Egypt, Indonesia, Iraq, Mongolia and other previously listed emerging countries. However, there have been several counter arguments about the reclassification of these countries amongst others. Additionally, digital investors should acknowledge that public policy plays a vital role in the success of a digital economy (Eichengreen 2015).
Countries like those in the EU have high performing digital sectors and hence has strong government involvement regarding shaping the digital economies. The same applies to high momentum countries like New Zealand, the UAE, and Singapore and also Break Out countries like Saudi Arabia, Malaysia, and China. The second vital factor to be considered by investors is countries that focus more on specifics, that is, identifying and amplifying the country’s digital momentum different drivers. Different drivers are responsible for diverse digital momentum, digital evolution, and economic advancement (Karolyi 2015). In relation, this has various implications for what developing and advanced economies out to prioritize. For the least digitally advanced countries, they should focus on reasonably allocating limited resources. Also, country size is a crucial factor; small countries have an added advantage since they have strong institutions hence create a demonstration effect for the world. In this case, both the traditional trading hubs and emerging digital hubs can be vital in creating smart and digitally enabled ecosystems (Verbeke 2013).
The concept of the digital market’s uneven nature is also a crucial concept when examining the study topic (Cubeddu et al. 2014). In this case the level of economic development, politics and also regulations play a central role in the shaping of the industry of digitalization as well as the concept of market attractiveness. China, despite the fact that it has the largest internet user population at 721 million, still has a parallel digital market. This is because majority of its central players have no particular presence there. India on the other hand, with an internet user population of 462 million users has a digital economy with arguably one of the paramount market potentials. However, its operation also takes part in several languages as well as multiple infrastructure challenges (Enderwick 2013). Subsequently, this is despite the fact that the government has taken all-encompassing actions affecting the digital market. Also, the EU has a base of 412 million internet users but is obligated with a market that is fragmented. In relation, there is an ongoing process aiming at creating a digital single market platform. Across the world, digital access is still farfetched (Claessens & Yurtoglu 2013).
As a summary, the digital economy of the world is at a balance where the risk and the opportunity are presented at a cross roads. Much has changed in the journey towards digitalization, and in relation, there are several speed bumps experienced along the path (Marquis & Raynard 2015). Subsequently, this can be credited to the digital momentum showcased across the globe and the systemic nature of the forces that dictate the course of the digital evolution. Subsequently, it is justified to argue that the Stand out as well as Break out countries are at an advantage from the combination of the strong rates of digitalization as well as the immersion of governments in enabling more comprehensive digitalized economies.
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