E m e r g i n g M a r k e t s a n d I he I m p e r a t i v e of G l o b a l i z a t i o n : L e s s o n s f o r Nigeria
Didia, J . U . I ) . ( P h . D ) Department of M a r k e t i n g , i acuity of M a n a g e m e n t S c i e n c e s , Rivers State University of S c i c n c e a n d T e c h n o l o g y , Port I larcourt.
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Abstract Industrial expansion and growth as well as the d e v e l o p m e n t a n d a d v a n c e m e n t of national economies depend on large and viable markets. C o m p a n i e s e s p e c i a l l y multinationals disperse their productive activities globally in order to take a d v a n t a g e o f d i f f e r e n c e s in factor costs. Developing economies and emerging markets require t h e s e f o r b e t t e r o p e r a t i o n a l results. They need to globalize. The literary contention and practical reality in this regard show a classic transformation of hitherto developing/emerging m a r k e t s into i n d u s t r i a l i z e d countries/markets. The conclusion therefore is that globalization is i m p e r a t i v e in c h a n g i n g the status of emerging markets to that of developed markets and advanced e c o n o m i e s . K e y w o r d s : Emerging Market, Imperative, Globalization, L e s s o n s .
Introduction All nations and nationalities seek economic d e v e l o p m e n t a n d e c o n o m i c well-being for their citizens. The state of economic well-being of n a t i o n s t a t e s is a direct product of the entrepreneurial zeal and status of its inhabitants a n d of c o u r s e t h e level of industrial activities. The stage or level of economic development is e q u a l l y d e f i n e d b y t h e s e . M a r k e t e r s often define markets as people with need and economic ability to s a t i s f y t h e n e e d s . T h i s implies that more markets will translate into better operational results. It e q u a l l y m e a n s then that organizations must perforce seek to do business outside and b e y o n d n a t i o n a l g e o g r a p h i c boundaries. In this regard, certain factors arc weighted e.g. factor e n d o w m e n t , s t a g e o f e c o n o m i c development, trade liberalization policies, cntrcprcncurship/private initiate, technological/communication advancement etc. To the extent that these factors a r c p r e s e n t a n d positive, having a global presence and being a global participant b c c o m c s a c o m p e l l i n g o p t i o n b o t h for the recipient and the global actor. This phenomenon and scenario often b e c o m e a catalyst f o r e m e r g i n g m a r k e t s that are hitherto suppliers of component parts and assemblers of p r o d u c t s to b e c o m e global competitors. The advantages of this process arc not limited to this t r a n s f o r m a t i o n but e x t e n d to the ability of these new global competitors to influence trade and d e v e l o p m e n t in t h e e c o n o m i e s of other countries within their spheres of influence. These b e n e f i t s o n l y r e p r e s e n t t h e tip of the ice-berg if we examine the necessity of globalization and its i m p a c t o n e m e r g i n g m a r k e t s and economies. In doing this, we are laying bare the fact that the road to e c o n o m i c w e l l - b e i n g in particular and economic justice in general could not be found in any b e t t e r p l a c e than in the undiluted and openminded adoption of the conccpt of Globalization and its w h o l e s a l e p r a c t i c e . T h e o r e t i c a l p e r s p e c t i v e s of G l o b a l i z a t i o n
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Globalization has become such a concept and term (hat is so pervasive to the extent that care has to he taken in defining it to avoid the pitfall ol being restrictive. It has both implication and application in sociology, engineering, management, economics, marketing, science etc. It is a nascent phenomenon that has made so much in-road and drew so much attention in such a relatively short time because of its relevance in economic advancement and mitigation of human misery. Globalization refers to the process by which the world is said to be transformed into a simple global system (Abercrombie at al, 2000). This phenomenal change in the world economic order is described as a global shift (Dicken, 1992). Sociologists started talking about a global village in the early sixties to describe how the world is shrinking as a result of new technologies in communication. By 1990s, the concept has bcconic a significant issue with dimensions or manifestations in economic, cultural and political spheres. In time, it has acquired a loose and mercurial definition because of its diverse effects on national and human life. It means the shrinking of the world into a global village, the awesome changes brought about or mandated by the revolution in information technology, the collapse of boundaries between different worlds, expanding connectivity of all forms of interaction (Iyayi, 2004). In all, the idea being canvassed is that globalization implies a more connected world. McGrew (1992) opines that globalization is simply the intensification of global interconnectedness... Nowadays, goods, capital, people, knowledge, images, crime, pollutants, drugs, fashions and beliefs are readily now across territorial boundaries though it is equally seen and interpreted as "Americanization" of the world (Iyayi, 2004). This view is however not a consensus. Ihonvbere (2002) sees globalization as the single most dominant phenomenon of the 21st century and notes that it has become a much abused word. Kay (2003) defines globalization as the trans-boundary movement of capital, people, goods, information and culture. While some of these definitions portray globalization in its true colour, others exhibit the ideology and relative position of the analysts. For instance Khor (2000) maintains that by its nature, globalization is most likely to exacerbate global inequalities, jeopardize investment, destroy the welfare basis of society and commoditive human relations. Asobie (2001) has identified northern perspectives to the issue of globalization. He points out that the northern view presents globalization as the process of both vertical and horizontal integration involving an increase in the volume of economic activities... In this regard, the primary mechanisms of globalization include open policies with respect to international capital flow or international market integration and international spread of knowledge. In the same vein, Hills (2002) maintains that, a fundamental shift is occurring in the world economy. We are moving progressively further away from a world in which national economies were relatively isolated from each other, cross-boarder trade and investment, distance in time zone, languages and national difference in government reputation, culture, and business system and a world in which national economies are merging into an interdependent global economic system. Globalization is possible because of changes in Global economy notably the growth of multinational companies, the expansion of international trade, international division of labour; rapid technological change, privatization, deregulation, and falling barriers to cross-boarder investment (Hill, 1998). Add to these, advancement in Transportation and Telecommunication. These have led to the Globalization of markets and products. Thus in many industries, it is no longer meaningful to talk about the German market, the American market, or the Japanese market; there is only the Global market (Levitt, 1983). This equally applies to production. Individual companies are dispersing parts of their production process to various locations around the Globe to take advantage of national differences in the cost
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and quality of production factors (e.g. land, energy, labour, capital^. Thus it is no longer meaningful to talk about American products, Cicrman products or Japanese products (Hill, 1998). The classic example by Reich (1991) elucidates this point better. Reich, Secretary of Labour under U.S. President Bill Clinton, had pointed out that based on a comparism of national differences in production costs, GM had dispersed many of the Le Mans production activities to other countries. Consequently, of the $20,000.00 paid to GM for a Le Mans, Reich notes that: $6000 went to South Korea where Le Mans was assembled; S3500 went to Japan for advanced component (engines, transaxles, and electronics); SI500 went to Germany, where the Le Mans was designed; S800 went to Taiwan, Singapore, and Japan for small components; About SI 00 went to Ireland for data processing services; The remaining S7600 went to G M and to the lawyers, bankers, and insurance agents that GM uses in the United states. Thus, the Le Mans is not an American product or the product of any of the other countries, but in fact, a global product. This classic example typifies both the essence and meaning of Globalization whose mainstay, as indicated earlier is attributed to two factors viz: The decline in barriers to the free flow of goods, services, and capital that has occurred since the end of World War II and The dramatic developments in communication, information, and transportation technologies in the same period. Cultural Globalization results from the rise of mass tourism, increased migration, of people between societies, the commercialization of cultural products and the globalization of an ideology of consumerism, which has the effect of replacing or supplementing more localized cultures. The marketing activities of multi-national companies and the development of mass media of communication (which are mainly owned by MNCs) contribute to globalization (Abercrombie et al, 2000). Political Globalization has seen the rise of international agencies including the World Bank, the International Monetary Fund and the World Trade Organization (WTO), which regulate the global economy and therefore set limits on the freedom of nation states. Global financial markets and MNCs also reduce the capability of National governments to control activities within the boarders of the state. The concept of globalization has acquired a consuming passion in theory and in practice. Those that are still in subtle resistance because of differences in culture, technology or economic development, are accommodated by globalization, a process of Globalizing the local and localizing the Global. Some Benefits of Globalization Globalization has posted so many attractions despite the myriad of criticisms. Some of the major benefits are: Falling barriers to international trade and investment are the twin engines that are driving the global economy toward ever-greater prosperity; Increased international trade and cross boarder investment will result in lower prices across the board for goods and services; Globalization stimulates economic growth, raises the incomes of consumers, and helps to create jobs in all countries that choose to participate in the global trading system (Hill, 1998). These are the tripods and developmental levers required by emerging markets to attain the status of Newly Industrialized Countries (NICs). The Concept of Emerging Markets Nations seek development, especially economic development that will change forever, their economic wellbeing and make life more abundant for the generality of their populace, on one hand. On the other hand several countries and nations cling to anachronistic tendencies and policies that negate the very essence of economic development by closing their borders and
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being negative to foreign investments. Thus, China, South Korea, Poland, Argentina, Brazil, Mexico and India are some of the countries undergoing impressive changes in their economies and emerging as vast markets (Cateora, 2005). It has been noted that in these countries there is an ever-expanding and hanging demand for goods and services. As countries prosper and their people are exposed to new ideas and behaviour patterns via global communications network, old stereotypes, traditions, and habits are cast aside or tempered and new patterns of consumer behaviour emerge, leading to the concept of emerging markets. To be considered a global emerging market, the state of economic development of a country is taken into consideration. This is because the state of economic growth within a country affects the attitude towards foreign business activity, the demand for goods/the distribution system found within the country, and the entire marketing process. Hitherto, the best known model for classifying countries by stage of economic development is the five-stage model presented by Rostow (1991). These stages arc summarily listed as: The traditional societies, the precondition for take-off, the take-off, the drive to maturity and the age of high mass consumption. What defines each stage are: Cost of labour, the technical capability of the buyers, the scale of operations, interest rates and the level of product sophistication. Growth is then defined as the movement from one stage to the other and countries in the first three stages are considered to be economically underdeveloped. However, the United Nations uses More Developed Countries (MDCs), Less Developed Countries (LDCs) and Least Developed Countries (LLDCs) to classify the stage of economic development, industrial wise. * Others that do not fit into MDC or LDC but are experiencing rapid economic expansion and industrialization are referred to as Newly Industrialized Countries (NICs), such as Chile, Brazil, Mexico, South Korea, Singapore, and Taiwan. These countries have become formidable exporters of many products including steel, automobiles, machine tools, clothing, and electronics as well as vast markets for imported goods. Brazil's case is remarkably legendry, exporting everything from alcohol to carbon steel; orange juice, poultry, soya beans and weapons (Brazil is World's 6th largest weapons exporter). The progress of South Korea, Taiwan, Hong Kong and Singapore, known as the Four Tigers of Southeast Asia, is equally remarkable. These countries managed to dramatically improve their living standards by deregulating their domestic economies and opening up to global markets. Thus typifying the case of Third World to 1st or industrial nations. The question often asked is why have some countries grown so rapidly and successfully while others with similar or more plentiful resources languish or have modest growth? The answer among others, lies in their outward oriented market-based economic policy coupled with emphasis on education and health care. The factors that helped them out arc identified to include: Political stability in policies affecting their development; Economic and legal reforms: poorly defined and/or weakly enforced contract and property rights are features of the poorest countries; Entrepreneurship: In all, free enterprise and the hands of the self-employed was the seed of the new economic growth; Planning: A central plan with observable and measurable development goals linked to specific policies. Outward orientation production for the domestic market and export markets with increases in efficiencies and continued differentiation of exports from competition was the focus; Factors of production: If deficient in the factors of production - land (raw materials), labour, capital, management, and technology - an environment existed where these factors could easily come from outside the country and be directed to development only; Industries targeted for growth: Strategically directed industrial and international trade policies
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were crcated to identify those sectors where opportunities existed (Sadrudin ct ul% 2002)key industries were encouraged to achieve better positions in world markets by directing resources into promising target sectors; Privatization of state-owned enterprises (SOEs) that placed a drain on national budgets: Privatization released immediate capital to invest in strategic areas and gave relief to the continuing drain on future national resources. Often when industries are privatized, the new investors modernize, thus creating new economic growth (Cateora ct al, 2005). At the final analysis however, large accessible markets with low tariffs seem to be the major catalyst. It appears then that there is a nexus between emerging markets and globalization that could facilitate or precipitate the consummation of an industrialized status and economic well-being of nations. Emerging Markets and Globalization In the light of what we know about globalization, it appears to hold the key to industrialization despite some critical appraisal of the concept. For instance, Toyo (2000) had asserted that anyone who thinks that globalization is not an imperialist policy simply because there is no evidence to proclaim globalization and impose it on all countries has a child's ignorance of the affairs of men. This kind of outburst simply begs the question. Our inability to harness our enormous human and natural resources for development cannot be perpetually blamed on imperialism. Because of this kind of mindset we do not see any benefit in whatever emanates from the advanced West. Globalization is hinged on: Entrepreneurial Spirit, Privatization, Outward Market Orientation, Cross Boarder Investment, "Dc-barrification" and A d v a n c e d t r a n s p o r t a t i o n and telecommunication facilities. Of all these, what provided the momentum for the operationalization of globalization are first, the decline in barriers to free flow of goods, services, and capital that has occurred since the end of World War II and the second is, the dramatic developments in communication, information, and transportation (Hill, 2002). Emerging markets, which we have described in this write-up, obviously need these to advance from one stage of economic growth to another. They need to be outward oriented in operation and open their doors to foreign direct investment. Protectionism has failed woefully. In addition to falling trade barriers, many countries have also been progressively removing restrictions on capital inflows and outflows. For instance in 1991 alone 34 countries, rich and poor, made 83 changes to their laws governing foreign direct investment. All but two of those changes made the laws less restrictive, thereby encouraging both outward investment by domestic firms and inward investment by foreign firms ("Another World", The Economist, September 19, 1992). These countries are not imperialists. The advancement of innovations in transportation, communication and information technologies upon which globalization thrives have the capacity of enabling emerging market to industrialize. The benefit and imperative of global communication to emerging markets cannot be overemphasized. The development of satellite, optical fiber, and wireless technology, and now the internet and World Wide Web arc of unquantifiable import towards the march of emerging markets to industrialization. Not left out is progress made in transportation. The discovery of commercial jets and super freighters and the introduction of containerization have benefited emerging markets in their outward and inward bound flows than the so called imperialists. Because of the immense necessity and importance of globalization to emerging markets, some of which have turned to Newly industrialized countries (NICs), the dominance of United States as the World industrial power has continued to wane. Japan, South Korea and Taiwan's world manufacturing output has continued to rise as shown on Table 1.
(Didia. J.U.D.)
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Considering the rapid economic transformation being experienced by countries like China, Thailand, and Indonesia, further relative decline in the share of world output and world export by U.S. is forecasted. It should be noted however that this does not indicate any absolute decline of the U.S. economy but a growing industrialization of the world economy due to globalization. Table I: Major Beneficiaries of Globalization S h a r e of world
S h a r e of
S h a r e of
output
world output
world exports
1963
1993
1993
40.3%
15.6%
11.8%
Japan
5.5%
15.9%
9.5%
Germany (West) 1963
9.7%
7.8%
12.0%
Francc
6.3%
5.7%
6.5%
Great Britain
6.5%
3.9%
5.3%
Italy
3.4%
5.3%
5.0%
Canada ,
3.0%
2.1%
3.7%
Country
United States
Source: World Bank, World Development Report, 1994. If these trend continue, the World Bank forecasts that by 2020, the Chinese economy could be 4 0 % larger than that of the United States, while the economy of India will be bigger than that of Germany. It is equally noted that, today's developing nations may account for over 60% of world economic activity by 2020, while today's rich nations, which currently account for over 55% of world economic activity may account for only 38% by 2020 ("War of the Worlds" The Economist, October 1,1994). An interesting development about globalization occurred in Europe. The United States was the only Global participant in 1960s and the dominance of U.S. firms in Europe received critical review bordering on economic threat to Europe (Serven-Schreiber, 1968). However as barriers to the free flow of goods, services, and capital fell, and as other countries increased their shares of world output, non-US firms increasingly began to invest across national borders (Hill, 2002). Thus by 1970s and 80s European and Japanese firms began to disperse productive activities to optimal locations and to build a direct presence in major foreign markets. In the next few years, this global efforts yielded immense and immeasurable returns and saw the economic transformation of these economies and countries. As barriers to free trade fall and doors open for foreign direct investment, the impact of globalization and its imperative in transforming emerging markets become more evident. The countries that were the greatest recipient of FDI about two decades ago or more are today, the global economic players as indicated on Table 2.
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Tabic 2: Emerging Global Economic Players Country
1 9 8 8 - 1 9 9 2 ($ billion)
China Singapore Mexico Malaysia Argentina
25.6 21.7 18.4 13.2
Thailand Hong Kong Brazil Taiwan Indonesia
9.5 7.9 7.6 6.0 5.6
10.6
Source: United Nations Data: The Economist Oct. 1, 1994 p. 23. This table 2 clearly shows the workings of the outAvard oriented e c o n o m y and the power of globalization. We should certainly rejoice over globalization instead o f maligning the concept and resorting to name calling that does not c o n d u c e to a n y t h i n g m e a n i n g f u l . As we speak, serious minded countries are democratizing. Before n o w r e m a r k a b l e d e m o c r a t i c revolutions swept the world. Country after country throughout Eastern E u r o p e and eventually the Soviet Union itself, communist governments collapsed. Many of these c o m m u n i s t nations n o w share a commitment to democratic policies and free market economies. T h i s approach has the tendency of broadening international business opportunities. China typifies the case of Asia. China suppressed its prodemocracy movement in the bloody Tiananmen S q u a r e M a s s a c r e of 1989. Despite this, China seems to be moving progressively toward ever greater market r e f o r m . T h e Southern Chinese province of Guangdong, where these r e f o r m s h a v e been pushed the furthest, now has the fastest growing economy in the world (Engardio et al, 1992). Latin A m e r i c a is no different. The democracy and free market reforms arc taking root after d e c a d e s of militarization and "closeddoors" economies. Now all these arc changing throughout most of Latin America, debt and inflation are down, governments are selling state o w n e d enterprises to private investors, foreign investment is welcome, and the region's e c o n o m y is g r o w i n g rapidly. In the Middle East, Dubai's openness has m a d e it the e n v y of the region, besides huge success in commerce and economy generally, Dubai is d e t e r m i n e d to be the world financial capital what with its opening of the world tallest building (828 m e t e r s tall) in 2009. Country after country, region after region are opening their e c o n o m i e s . S o m e arc harnessing their natural resources to post their names on global map e.g. Chile. T h e only continent that s e e m s to lag behind is Africa. We continue to see and read negative m e a n i n g to every m o v e of the west to improve our lot. We stubbornly refuse to democratize, wallow in corruption, not accountable, no good education, no good healthcare, no power, no roads, no water, and yet w e see globalization as imperialistic tool. If it is not slave trade today, it is colonization t o m o r r o w . If it is not globalization today only God knows the reason we will give tomorrow for our w o e f u l state of economic affairs. Nigeria typifies the countries on the flip side where a n t i d e m o c r a t i c forces still hold sway and where: few people sit down and unconstitutionally share e x c e s s c r u d e revenue; somebody who did not win election could govern up to three years b e f o r e j u s t i c e is rendered, if at all; a president could be incapacitated and out of the country for m o r e than o n e m o n t h without any constitutional transfer
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of power to anybody; ctc. These are no imperialistic tools. We indeed have to wake up and realize that there is no excuse for failure. Globalization is seen as not only being imperative to the economic emancipation of emerging markets but a sin qua non for the growth and expansion of world economy. Conclusion Globalization has in recent times acquired a pervasive influence cutting across every area of human life; ecpnomics, culture, and politics. In its simplest definition, it is a concept that sees and attempts to make the world a Global village. Globalization is hinged on competitiveness, open markets, democracy, entrepreneurship, advanced transport and telecommunication facilities and inflow of foreign direct investment. Several countries and regions have transformed their economies and the well-being of their people through globalization. Ironically, some egg heads of African decent still sec it as imperialism. However, we arc compelled by the avalanche and magnitude of literary contentions and practical realities on ground to conclude that Globalization is not only necessary but a must not only to emerging markets but for the achievement of a global economic order that will increase the living standard and well-being of humanity, especially for countries such as Nigeria.
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