What is an Emerging Market?

The term emerging markets is commonly used to describe business and market activity in industrializing or emerging regions of the world. The term is sometimes loosely used as a replacement for emerging economies, but really signifies a business phenomenon in countries that are in a transitional phase between developing and developed status that are expected to experience exceptional growth. World Bank economic benchmarks define emerging markets as countries that have a gross national income (GNI) of $10,725 or less per capita. Examples of emerging markets include Brazil, China, India, Mexico, much of Southeast Asia, Turkey, many countries in Eastern Europe, as well as parts of Africa and Latin America. More often than not, emerging markets are found in countries where the political situation matters at least as much as economics to the marketplace.

Emerging markets are commonly categorized in three sub-groups according to market size – population, and economic attractiveness or purchasing power.

• Strategic Opportunity Markets are the largest and most economically attractive for a multinational corporation that is looking to grow its customer base. These markets have a population over 40 million, and strong real GDP growth. These markets also have a GNI per capita over $2000 per year in purchasing power parity (PPP).

• Niche Opportunity Markets are countries with a population under 40 million that have average incomes over $2000 in PPP terms and strong real GDP growth. These markets provide multinational companies with opportunities to grow their markets on a smaller scale, or they may be “gateways” to larger nearby markets.

• Long-term Opportunity Markets are the least attractive markets to a multinational corporation. These markets exhibit a low standard of living with a GNI per capita under $2,000 per year in PPP terms. In these countries, persistent poverty, corruption, and political instability periodically hamper economic growth. A common feature of many developing country markets is the absence of a vibrant domestic private sector, including small – and medium-sized enterprises. These countries may be viable markets in the long term with consistent political and economic reform. However, there remain numerous and immediate opportunities for companies to gain significant value through meeting some of civil society’s needs while trading in the unique resources available.

Over 141 countries - representing 84% of the world’s population - meet these criteria. To put this buying power in perspective - by 2015 the combined GDP of emerging-market nations will surpass that of the top 20 developed economies.