Ppp adjustment provides a more realistic indicator of

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rates, rather than the market exchange rates. PPP adjustment provides a more realistic indicator of purchasing power of consumers in emerging and developing economies. PPP adjusted per capita GDP represents the amount of products that consumers can buy in a given country, using their own currency and consistent with their own standard of living . International Business: The New Realities 10-16
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Magnitude of Middle-Class Population for a Sample of Emerging Markets
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Key Criteria for Assessing the Attractiveness of Emerging Markets and Developing Economies Market Size : the country’s population, especially those living in urban areas. Market Growth Rate : the country’s real GDP growth rate. Market Consumption Capacity : income of the middle class Commercial Infrastructure : density of telephone lines, number of personal computers, density of paved roads, population per retail outlet, and other such characteristics. Economic Freedom : the degree to which government intervenes in business activities. Country Risk: degree of political risk. International Business: The New Realities 10-18
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Challenges of Doing Business in Emerging Markets Political stability – corruption, weak legal systems, and unreliable government authorities increase business risks and costs, and hinder forecasting. Weak intellectual property protection – discourages producing or selling goods that entail valuable assets. Bureaucracy, red tape, and lack of transparency -- burdensome rules, excessive requirements for licenses, approvals, and paperwork; not accountable legal and political systems. E.g., it may take years, or many bribes, to obtain permissions to do business. China, India, and Russia are particularly problematic. International Business: The New Realities 10-19
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Challenges in Emerging Markets (cont’d) Poor physical infrastructure – Basic infrastructure – such as – high -quality roads, drainage systems, sewers, and electrical utilities – are often sorely lacking in emerging markets. Partner availability and qualifications – given emerging market challenges, foreign firms may seek local partners, who provide access to markets, supplier and distributor networks, and key government contacts. But qualified partners are often hard to find, or require much assistance to upgrade their abilities. International Business: The New Realities 10-20
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Challenges in Emerging Markets (cont’d) Dominance of family conglomerates economies are often dominated by privately-owned local companies that are highly diversified, and control supplies and employment. Common in South Korea ( chaebols ), India ( business houses ), Latin America ( grupos ), and Turkey ( holding companies ).
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