EXPERT Insight

Emerging Markets: Look Before You Leap Premium

Spotting Market Voids

Khanna, Tarun; Palepu, Krishna

Date: Second Quarter 2013

Tags: emerging markets, BRIC, institutional voids, credibility enhancers, informational analyzers

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Think "emerging markets," and most people think BRICs. The problem with this approach is that it is too simplistic and tends to treat emerging markets as one homogeneous whole, when the exact opposite is true. Instead of asking, "What's my emerging market strategy for Brazil, Russia, India or China?" companies should ask themselves, "In which ways is this particular market emerging?" Viewed this way, the answer may surprise them. The authors synthesize a decade of their research to clear up the confusion that abounds as to whether a market is or isn't emerging. They first explain which institutional mechanisms need to be in place for the healthy functioning of any market, so managers will be able to recognize when these vital mechanisms are absent or deficient. Asking a series of key questions will help managers spot voids, making them better equipped not only to tackle the challenges but to leverage emerging opportunities in all their guises -- whether in the countries that attract the most attention, or in the United States and Western Europe, which may still be "emerging" in some ways.

Tools and Frameworks:
> Lists a series of key questions relating to four areas of emerging market success (product markets, labor markets, capital markets and the macro context) to identify the institutional voids and define the opportunity in the emerging markets that you have set your sights on.

Examples Cited:
Chile, Shanghai Stock Exchange, subprime market, PayPal, Microsoft, GM, Shanghai Jiao Tong University, Bharti Airtel

Research Basis:
Synthesizes the lessons of dozens of scholarly and practitioner-oriented papers, 30 cases and the authors' recent book, Winning in Emerging Markets (HBR Press).

About the Authors:
Tarun Khanna is the Jorge Paulo Lemann Professor at Harvard Business School and Director of the South Asia Institute at Harvard University.

Krishna Palepu is the Ross Graham Walker Professor of Business Administration at Harvard Business School and Senior Adviser for Global Strategy to the President at Harvard University.


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