Developed and emerging markets firm Essay Example | Topics and Well Written Essays - 1750 words

Developed and emerging markets firm - Essay Example To date, emerging markets have become the greatest global growth driver. This has given rise to a debate concerning why one has to invest in the emerging markets. There are many reasons that can make an investor to consider investing in these regions. This paper explores the reasons for developed and emerging market firms investing in each other’s home regions. The paper also explains why reasons of these kind and entry strategy availability differed for Foreign Direct Investment (FDI) in emerging and developed economies. An investor may invest in an emerging market in order to invest in a region that has displayed some considerable growth currently and in the future. These countries have a future that is foreseeable. Research done by the international monetary fund reported that the emerging economies have a two to three chance of growing faster than the countries that are developed. Such a narrative growth is extremely vital for investors that may fail to be clued on the bul l trends of the prominent Wall Street. In many cases, corporate profits are observed to be growing at a rate that is fast whenever the economic growth of a country or region is high. For example, US companies have increased their profit margin in the last twelve months due to the growing non-US markets. Besides this, some public investors have still considered emerging markets as underweight especially in their portfolios. Additionally, the emerging economies provides increased diversification as they appear to perform differently than the markets that are developed. This is a significant benefit towards an investor. Emerging markets are also considered as markets that have succeeded in decoupling of the long term and biggest West mature economies woes. For example, the Market Stanley index is an emerging market that consist of Brazil, Argentina, Chile, Columbia, Egypt, Israel, Czech Republic, Hungary, Indonesia, India, Korea, Jordan, Mexico, Malaysia, Morocco, Peru, Pakistan, Polan d, Russia, Taiwan, Venezuela, Thailand, South Africa, and Turkey (McAllister, 2006). In comparison to West countries, a number of emerging markets are normally well resourced, have a work force that is young and balance sheets that are strong. For example, India and China together have a population that is approximately three times that of the entire world. In this respect, markets that are emerging do represent about eighty six percent of the population of the world, seventy five percent of the landmass of the world, and about fifty percent of the growth domestic product of the world. In many cases, emerging markets, are displayed in different forms and sizes. In this respect, there are minimal similarities between the structures of finance and the returns drives on investments. For instance, financial systems and a highly developed economy like South Korea and the frontier markets have limited similarities. On the other hand, in emerging markets, the GDP per capita is normally hig her than in the poorer developed countries. For instance, Taiwan and Korea have a per capita of about $22,000, which is a high ratio margin compared to a number of European countries (McAllister, 2006). However, some emerging markets have extremely low ratios like India. India has a GDP of about $ 1500. The countries of the frontier are considered to be extreme. Countries like Qatar and Kuwait states of oil are the wealthiest countries in