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1 Take two countries of your choice and compare their country risk profile? Please find below a table of country risk from the Global Insight web site (www.globalinsight.com):
What is the middle class effect? The middle class effect describes the statistical phenomenon existing in emerging countries showing that middle class population grows faster than the growth of the economy. The middle class effect is due to the skewed nature of the income distribution in emerging countries. It fosters the demand for branded consumer goods. The following chart shows the dramatic evolution and forecast of the middle class population in China and India
2005
300 M 160 M
67 M
0 50000 POORS LOWER MIDDLE CLASS
2015
58 M
100000 UPPER MIDDLE CLASS 150000 MASS AFFLUENTS 200000 GLOBAL AFFLUENTS 250000
RMB
Source: Farrell Diana , Ulrich Gersh and Elizabeth Stepehenson, The Value of Chinas Emerging Middle Class, The McKinsey Quarterly, 2006 Special Edition, Pp. 60-69
2005
2015 2025
1000
Global Above 1000000Rp >21000US$
Source: McKinsey Research Institute: Tracking the Growth of Indian Middle ClassMcKinsey Quarterly 2007 n3
GLOBAL STRATEGIC MANAGEMENT 2d Edition 2007 Philippe Lasserre 3 What determines the quality of demand? The quality of demand describes the nature of the consumer segmentation as well as the customer value curve. A country where the main bulk of the demand for a certain type of product or service would be concentrated in one large segment of low value added products where customers would only be driven by the price, would show a low quality of demand. Low quality demand segments would see low customer loyalty. Quality of demand is essentially driven by purchasing power and the absence or presence of an important educated and sophisticated middle class. The following graph shows the typical segments that exist in a large variety of industry and the quality associated with those.
High End
Elites Cosmopolites
: Differentiated products/ services Functionalities and Performances Less Price sensitive More Loyalty
Large Corporations
Middle Class
Low End
Low End: Standardized Products/ servics Mass Production and distribution Price sensitive
Consumers Segments
Business-to-Business Segments
What are the tools of governments to promote foreign investments? Below is a reproduction of table 6.5 that gives a description of the various incentives used by governments to attract foreign investments.
Financial Incentives
Competitive Incentives
Operational incentives
5.
Can you give examples of a Hub in Africa, an Emerging Giant in Latin America, a resource rich country in Eastern Europe? The book gives the following characteristics of those types of country:
Hubs Population GDP GDP/Cap Infrastructure Skills Labour Costs Risks Natural L L H H H M L Emerging Giants H M L L L L M Resource Rich Developing* M/H L L L L L H
10
The following countries would qualify for being: Hub in Africa: Emerging Giant in Latin America: Resource Rich in Eastern Europe: Dubai Brazil Russia, Ukraine
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