International Business Expanding Business in Emerging Market

The great economist David Ricardo stated that optimal resource allocation and maximum surplus can be generated by a country, with the essence of international trade (DHL, 2013). Foreign trade is highly beneficial if it is executed according to the norms of competitive advantage. Under the regime of this theory, a nation should only produce those goods and services, over which it possesses cost advantages in production (DHL, 2013). Increased revenue and profitability can be experienced by a company through foreign trade. In the contemporary world, companies are exposed to severe threats of market rivalry across both domestic and foreign economies (Solomon, et al., 2006). In order to improve core competencies in business, firms try to exploit their productive resources in the foreign market after saturation of their native market demand (McEachern, 2012).
The rationale for Expanding Business in Emerging Markets
The emerging market economy experiences middle to low per capita income level. Such nations include almost 80% of the global population and sum up together to form 20% of the world’s economies (Srivastava and Rego, 2011). Culture and markets of these economies are demanding in nature. Such countries experience high rates of emigration, growing young population, increasing domestic and per capita income thresholds (Lian and Ma, 2011). Figure 1 in the Appendix shows that the extent of internationalization practiced in some selected countries. The figure shows that countries such as Russia, Brazil, and China experience the highest rate of business internationalization, compared to some developed economies such as Germany, Canada, U.S. and U.K. Furthermore, Figure 2 in the Appendix shows that the BRICM nations (Brazil, Russia, India, China, and Mexico) are superior to the G7 countries (Canada, Germany, Italy, Japan, U.K., and the U.S.), both in terms of innovation and efficiency (Lian and Ma, 2011). At present, the most prominent emerging countries are the BRICM nations. The political authorities of these countries adopt liberal policies for encouraging foreign investments in their economies. Increased foreign participation augments the employability, per capita income and living standards of these economies (Drauz, 2013). On the other hand, foreign companies are able to operate in such booming economies, at relatively lower costs (Lian and Ma, 2011). Even so, these firms enjoy the benefits of the growing market demand created by the middle-income consumers from these economies. Emerging countries are rich in terms of factor services and are considered to be innovation hubs in the current epoch (Lian and Ma, 2011).