CHAPTER 9

EMERGING MARKETS
DOING BUSINESS WITH TRANSITION ECONOMIES
The major market economies emerging out of formerly centrally planned economies are Russia and the now independent states of the former Soviet Union,east Germany(now unified with West Germany),and the eastern and central European nations(Albania,Bulgaria,the Czech and Slovak Republics,Hungary,Poland,and Romania).For information regarding the population and GDP of the transition economies,consult this chapter’s map.Shown also are the population levels and migration flows of countries around the world.It is evident that insufficien economic opportunity result in migration from depeloping nations into industrialized ones.Successfull economic transition is a key tool to reduce such migration .If people have a reasonable chance for economic prosperity at home they are less likely to leave.

ADJUSTING TO GLOBAL CHANGE
Both institutions and individuals tend to display some resistance to change .The resistance grows as the speed of change increases.It does not necessarily indicate a preference for the earlier conditions but rather a concern about the effects of adjustment and a fear of the unknown.Major shifts have occurred both politically and economically in central Europe and the former Soviet Union ,accompanied by substantial dislocations.There fore,resistance should be expected .Deeply entrenched interest and tradidions are not easily supplanted by the tender and shallow root of market-oriented thinking.The understanding of links and interactions cannot be expected to grow overnight.

STATE ENTERPRISES AND PRIVATIZATION
One other area where the international business executive must deal with a period of transition is that of state –owned enterprises.These firms represent a formidable pool of international suppliers,customers,and competitors.Many of them are located in emerging market economies and are currently being converted into privately owned enterprises.This transition also presents new opportunities.

THE ROLE OF THE MULTINATIONAL FIRM
All problems aside ,the market potential of transition and emerging economies is enormous.It is this promise that is paramount to understanding the developing role of multinational firms in transition economies.They enter because they see substantial profit potential.This potential,however,may not be attained quickly,and firms must time their and activity to pace themselves for the long race.
As multinational firms gain experience and experience and knowledge of the local markets,they may then increase the size of their capital investments,for example in the form of acquisitions or Greenfield investments.The local market is then used as an export base to neighboring and other transition and emerging economies,taking adventage of long –standing links across countries for trade and commerce.At this point ,the domestic market is not the focus of the firms activity.With few exceptions,the profit potential is seen as cost-based access to other axternal markets.
Multinational corporations are very often the only ones that can realistically make a difference in solving some of the problems in developing markets,as shown in focus on Enterpreneurship.Developing new technologies or products is a resource-intensive task and requires knowledge transfer from one market another.Without multinationals as catalysts,nongovernmental organizations,local governments,and communities will continue to flounder in their attempts to bring development to the poorest nations in the world.