Asia is the world’s largest and most populous continent. Interestingly the countries which fall under Asia vary in size, environment, historical ties and governance systems. Thus the wealth of these countries differs quite drastically. For example in terms of Gross Domestic Product, GDP ("the market value of all the goods and services produced by labour and property located in a country” (About.com 2009)), Japan has the largest economy on the continent. In fact measured in terms of GDP Japan has the second largest economy in the world (Wikipedia 2009). Yet this is a far cry from other Asian countries such as Pakistan and Bangladesh, where the annual turnover of some large Multinationals exceeds the national GDP. Unfortunately despite the fact that Asia accounts for roughly 60% of the worlds population (wikipedia 2009), it has been overshadowed (in economic terms) by the shear might and power of the western economies, namely America. However in a bizarre twist of fate, sparked by the now infamous credit crunch, which has had a devastating effect on the once robust economies of the West, many are now asking the question, can Asians replace Americans as a driver of global growth? (Economist June 2009).
These Asian countries or economies are often referred to as the ‘Emerging Markets’. This definition is often widely used and loosely defined. The term ‘Emerging Markets’ was first coined by by Antoine W. Van Agtmael of the IFC (International Finance Corporation) of the World Bank in 1981 (Heakal 2009). It is used to describe fast growing economies, which have embarked on economic development and reform programs (Heakal 2009). Thus they are considered to be transitional economies, as they are moving from a closed economy to an open economy, whilst importantly building accountability within the system (Heakal 2009). China and India are examples of two prominent ‘Emerging Market’ Countries. Gone are the days these economies were ignored.
The growing economic strength of these countries, one could go as far as to say may be seen as a threat to current international business. China and India use their generating wealth to actively compete with the West (Ashburton, 2006). For example, the take-over of Corus Steel by the Indian company, Tata made it the largest Indian take-over of a foreign company and the world’s fifth largest steel firm (BBC News, 2006). Another example is of the Indian company Taj Hotels positioning itself as a global player as succeeding Four Seasons Hotels in operating as a New York City landmark.
As many multinationals face domestic market saturation (Fenwick, 2001) they could undoubtedly benefit from accessing these huge markets. The purchasing power of China is greater than that of any other country in Asia, and the second largest in the world (Wikipedia 2009).
However the economies of these ‘Emerging Market’ countries vary considerably from the west in terms of culture and it has been argued that unlike countries in the West, individuals have a tendency to save rather than spend, thus have large current account surpluses. However the statistics tell a rather different story.
‘In China, India and Indonesia spending has increased by annual rates of more than 5% during the global downturn. China’s retail sales have soared by 15% over the past year’ (Economist 2009) .These are phenomenal numbers. This includes government spending thus does overstate the numbers, however according to official household surveys, the percentage increase is in fact more in the region of 9%. This is highly impressive in comparison to the downturn in the west. Sales of cars have increased by a staggering 47%, clothes 22% and sales of electronics have increased by 12%. Ironically while car sales were up in Asia, the American taxpayers had to bail out the once massive Ford.
However its not good news across all of Asia, spending has suffered as a result of...