International Journal of Emerging Markets

Daniel W. Baack; David J. Boggs

2008 International Journal of Emerging Markets

doi: 10.1108/17468800810862605

Purpose – Strategic contingency theory maintains that a successful strategy should fit the features of the environment in which it is implemented, suggesting that different strategies are required in different world markets. In contrast, Porter posited three generic strategies, and asserted that to be effective firms should consistently use only one of the three. This paper aims to address this apparent disagreement by discussing the transfer, by developed‐country multinational companies (MNCs), of a cost‐leadership strategy to emerging markets. Design/methodology/approach – Presenting theoretical arguments, based on deductive reasoning and examples reported in business publications, the authors focus on why firms from developed countries may find a cost‐leadership strategy ineffective in emerging markets. This focus on both emerging markets as a group and on the ease of the transfer of the cost‐leadership strategy fills a gap in the international management literature. Findings – It is argued that implementation of a cost‐leadership strategy by developed‐country MNCs is rarely effective in emerging markets, and that MNCs may benefit from using different strategies in different markets. Originality/value – The paper provides at least a partial explanation as to why developed‐country firms may struggle when they apply a generic competitive strategy across countries. The contribution of this paper is two‐fold. First, it explores the question of emerging market strategies by focusing on developed‐country MNCs that use a cost‐leadership strategy in these markets. Second, the paper contributes an important critique of the claims made by some business strategy theorists that MNCs need to use a single generic strategy globally in order to achieve high performance.

Lalit M. Johri; Phallapa Petison

2008 International Journal of Emerging Markets

doi: 10.1108/17468800810862614

Purpose – To analyse the scope of localization strategies and corresponding benefits of these strategies to subsidiaries of international companies in the automobile industry in Thailand. Design/methodology/approach – The authors have adopted the case research method to investigate localization strategies of subsidiaries of seven companies (Toyota, Hino, Honda, Isuzu, DaimlerChrysler, BMW, and Auto Alliance) as well as 14 of their dealers and suppliers in Thailand. The information was gathered by conducting in‐depth multiple interviews with 120 local and expatriate employees at various levels in the organizations; by referring to annual reports, policy documents and internal reports of these companies; and by observation during plant visits. Findings – Contrary to the belief that international companies implement localization strategies to simply match the local market environment, it was found that these companies implement a wide range of localization strategies to achieve multiple benefits. The paper identifies nine areas of localization: localization of strategic decision making; building and exploiting the local knowledge pool; deployment of local human resources; localization of R&D; localization of products; use of local supplier networks; adaptations to manufacturing processes; local deployment of subsidiary profits; and localization of corporate image. These localization strategies are not just based on the principle of “cost‐based localization” but are based on “value‐based localization.” These strategies work in tandem and create value through a system of multiple benefits, such as managements' ability to comprehend and deal with uncertainty in the operating environment; make informed decisions to respond to challenges in developing efficient local assembly and marketing systems; cost reduction; higher degree of commitments by local employees; product customization and acceptance; and greater brand equity and image as a good corporate citizen. Practical implications – Based on concrete illustrations of seven companies, this study identifies nine distinct areas for planning and implementing localization strategies and their corresponding benefits. The managers of subsidiaries can benefit by focusing their localization efforts in these areas to gain maximum advantage from host country context and then translate these advantages into a competitive international strategy. Originality/value – CEOs of subsidiaries in emerging markets can learn how to build and harness local advantages for global competitiveness by implementing a wide range of localization strategies.

Andreas A. Jobst

2008 International Journal of Emerging Markets

doi: 10.1108/17468800810862623

Purpose – Amid benign monetary policy in mature market countries and high liquidity‐induced demand, lower risk premia have encouraged risk diversification into alternative asset classes outside the scope of conventional investment. The development of derivative markets in emerging economies plays a special role in this context as more institutional money is managed on a global mandate, with more and more capital being dedicated to emerging market equity. This paper aims to focus on these issues. Design/methodology/approach – This paper reviews the recent development of equity derivative markets in emerging Asia and informs a critical debate about market practices and prudential supervision. Goal of the paper is also to outline essential elements and key policy considerations in developing derivative markets. Findings – The supervision of emerging derivative markets depends on the expedient and tractable resolution of challenges arising from consistent risk management, risk mutualization, and prudential standards that guarantee market stability in crisis situations. In particular, further efforts are needed in areas of cash market liquidity, trading infrastructure as well as legal and regulatory frameworks based on a set of coherent principles for capital market development. Originality/value – The paper offers a comprehensive set of principles for the development of equity derivative markets based on the current state of equity derivative trading in emerging Asia. Given current efforts by national regulators in the region to implement comprehensive guidelines on derivatives and revise short selling restrictions, the scope of this paper has topical appeal from the perspective of market participants and regulators.

Nana Owusu‐Frimpong

2008 International Journal of Emerging Markets

doi: 10.1108/17468800810862632

Purpose – To ascertain customers' usage level and perceptions of the image of rural community banks (RCBs) in Ghana. This research examines whether women and men differ in their levels of satisfaction and expectation about the banks' services. It also assesses the contribution of RCBs towards infrastructural development in the rural areas. Design/methodology/approach – Both desk and primary research methods were employed. Face‐to‐face interviews took place in 15 bank branches in the eastern region of Ghana. Over 170 respondents consisting of 105 males and 65 females co‐operated for this study. Analyses are presented in a statistical format using mean score and t ‐test. Findings – RCBs are perceived as fairly active in rural infrastructural development, and have collaborated with NGOs to help identify, mobilise and educate rural groups in the usage and benefits of banking services. Men and women are gradually cultivating the banking culture. Both genders perceive the quality of financial advice, provision of information and service delivery as areas that need significant improvement. There are no significant differences between both genders in their perceptions and expectation of the banks services. Research limitations/implications – The sample size was limited to only one part of Ghana and may not be entirely representative. Practical implications – This study provides a meaningful insight into consumer behaviour in rural banking sector and useful platform for future studies in marketing of financial services in a developing country context. Originality/value – The study is unique in that it looks at a rural banking service provision in a sub‐Sahara African country, a setting that markedly differs from the traditional high street banks sectors in the developed world. The results will enable financial service providers to consider the changing needs and wants of RCBs customers.

Obiyathulla Ismath Bacha

2008 International Journal of Emerging Markets

doi: 10.1108/17468800810862641

Purpose – This paper aims to examine the feasibility of a Common Currency Area (CCA) among ten MENA (Middle East and North Africa) Countries. The ten sample countries constitute the six GCC Countries and the four Agadir nations. Design/methodology/approach – Macroeconomic data for the 34‐year‐period 1970‐2003 is used. Feasibility is examined by analyzing the symmetry of response of countries within each group to a common external shock. The impulse response functions (IRF) from a Vector Autoregression Model is used. The strength of linkages within each economic bloc was examined using Pearson pairwise correlation and variance decomposition. Findings – Among GCC countries, the results show the existence of strong linkages among the monetary variables, signifying strong monetary sector integration. Such integration however is lacking where the real sector is concerned. Despite the symmetry seen in the impulse response functions, variance decomposition showed the absence of any meaningful influence of countries on each other within the bloc. Amongst the Agadir nations, the results show no correlation in real output growth, some correlation among monetary variables but no symmetry whatsoever in response to external shocks. The variance decomposition too did not show mutual influence intra group. Practical implications – The lack of real sector integration will present a challenge to GCC's desired goal of a CCA by 2010. The Agadir nations appear to be simply a loosely knit economic grouping with little integration of any kind. Thus, hopes of a CCA among Agadir nations is far too premature. Originality/value – The paper concludes that the GCC is, at present, a quasi‐monetary bloc with little real sector integration.

Rakesh Belwal; Meseret Chala

2008 International Journal of Emerging Markets

doi: 10.1108/17468800810862650

Purpose – This paper aims to conduct a case study on the recent rise of floriculture industry in Ethiopia which has taken aback the stakeholders in the global flower industry. Further to understand this success, an attempt has been made to conduct an environmental appraisal of the floriculture industry in Ethiopia amid explicit promotional efforts of the incumbent government towards boosting floriculture exports. Particularly, the study intends to reveal the catalysts and barriers prevalent in the industry that concerns the growth. Design/methodology/approach – The first stage of research involves a general assessment of global and Ethiopian floriculture industry using desk research. The second stage includes analysis of primary data secured through interview of managers at eight functional floriculture farms located around Addis Ababa. The study utilizes qualitative analysis of data acquired using judgmental‐cum‐convenience sampling and semi‐structured interviews with concerned officials. Findings – The success of Ethiopia in the cut flower exports from Africa has been remarkable. Ethiopia enjoys certain advantages that create ample opportunities for being one among the principal producers and exporters of flower in the world. As a whole, the finding reveals that foreign investments, government support and the formation of the Horticulture Producers and Exporters Association are the major catalysts in the sector. However, the opportunities are not without threats. Infrastructural bottlenecks appended by shortage of agricultural inputs, narrow product range, and lack of adherence to international codes of practices are major among the perceived barriers. As a whole, there is a growing trend in the development of the floricultural industry in Ethiopia. With the attention given by the government to this sector coupled with the advantages that Ethiopia has, the country has been able to attract both domestic and foreign investors. Ethiopia's performance in floriculture acts as an eye opener for other African countries. Originality/value – The study is of benefit to the floriculture industry as well as the investors and policy makers intending to support establishing floriculture industries in countries such as Ethiopia.