The emerging market hype – putting market size and growth in BRIC countries into perspective

Abstract

Purpose

There is a stream of literature highlighting the enormous growth potential of emerging markets. This literature forms the basis for strategic investment decisions made by multinational corporations (MNCs). Seeking to question the findings of this literature, this paper aims to undertake a comparison of the BRIC countries with that of Germany as a representative mature market to put into perspective the short to medium‐term market potential of BRIC markets.

Design/methodology/approach

An analysis of the geographical investment priorities of 25 DAX multinationals operating in the real economy and a statistical comparison of market size and growth between BRIC countries and Germany are undertaken.

Findings

While the majority of the DAX companies examined focused their strategic investment priorities on emerging markets, the short‐ to mid‐term revenue potential of the BRIC countries – currently the most important emerging markets – are expected to be lower in absolute terms than those for mature markets such as Germany. This holds true on several levels of granularity, such as GPD per capita, size and growth of high‐income market segments.

Research limitations/implications

The considerable “hype” surrounding focusing investment on emerging markets needs closer scrutiny. Further research is required to subject the reasons behind the strategic investments of MNCs in BRIC countries to more detailed analysis. This encompasses, for example, a closer consideration of the extent to which messages from the company reports might not reflect true strategic priorities but rather represent a means of public relations or tactical ploys. Next, the impact of real long‐term expectations and potential bandwagon effects require further study. Finally, a comprehensive theoretical model placing emerging market growth into a broader perspective has yet to be developed.

Practical implications

Decision makers in business, government and NGOs should not be misled by the “hype” surrounding emerging markets. In many industries, BRIC countries do and will provide smaller markets when compared to mature markets like Germany.

Originality/value

Direct comparison of market growth in the BRIC countries and that in Germany reveals greater short‐ to medium‐term absolute growth potential in Germany, a fact often ignored by current literature on international growth strategies and not reflected in the growth priorities published by German DAX companies.

Citation

Heinz, D.B. and Tomenendal, M. (2012), "The emerging market hype – putting market size and growth in BRIC countries into perspective", Critical Perspectives on International Business, Vol. 8 No. 3, pp. 241-258. https://doi.org/10.1108/17422041211254969