The Rise of BRIC Economies

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Description:

BRIC or BRICs is an acronym that refers to the fast growing developing economies of Brazil, Russia, India, and China. The acronym was first coined and prominently used by Goldman Sachs in 2001. Goldman Sachs argued that, since they are developing rapidly, by 2050 the combined economies of the BRICs could eclipse the combined economies of the current richest countries of the world. Goldman Sachs did not argue that the BRICs would organize themselves into an economic bloc, or a formal trading association, like the European Union has done. However, there are strong indications that the "four BRIC countries have been seeking to form a "political club" or "alliance", and thereby converting "their growing economic power into greater geopolitical clout".

These countries encompass over twenty-five percent of the world's land coverage, forty percent of the world's population and hold a combined GDP (PPP) of 15.435 trillion dollars. On almost every scale, they would be the largest entity on the global stage. These four countries are among the biggest and fastest growing Emerging Markets. Goldman Sachs predicts China and India, respectively, to be the dominant global suppliers of manufactured goods and services while Brazil and Russia would become similarly dominant as suppliers of raw materials. Cooperation is thus hypothesized to be a logical next step among the BRICs because Brazil and Russia together form the logical commodity suppliers to India and China.

Thus, the BRICs have the potential to form a powerful economic bloc. According to the study, India has the potential to grow the fastest among the four BRIC countries over the next 30 to 50 years. A major reason for this is that the decline in working age population will happen later for India and Brazil than for Russia and China.


Enablers:

1. sound macroeconomic policies

2. reasonably open trade and domestic policies

3. relatively stable political systems

4. political transitions that don't disrupt the growth process.


Consequences:

1. New market potential. This phenomenon, too, will affect world markets as multinational corporations will attempt to take advantage of the enormous potential markets in the BRICs by producing, for example, far cheaper automobiles and other manufactured goods affordable to the consumers within the BRICs in lieu of the luxury models that currently bring the most income to automobile manufactures. India and China have already started making their presence felt in the service and manufacturing sector respectively in the global arena. Developed economies of the world have already taken a serious note of the fact.

2. Shifts in global power. The United Nations is outdated and unrepresentative; the leadership of the World Bank and the International Monetary Fund is too ‘Western’; and the G-7 or whatever does not contain some important players. The world is in transition and the United States is going to have to be an integral partner in the transition. In the past seven and one-half years, in too many areas, the United States has taken the position that if it didn’t like what was going on, it just removed itself from the picture.

3. Rapid penetration of consumer products. The area that people get most excited about is the stage of very rapid penetration in consumer products. According to experts, the sweet spot is found around $3,000 to $10,000 per-capita income levels. Probably the first economy to hit those levels -- and fairly soon -- is Russia. China will take a little bit longer, with the sweetest period beginning probably in about a decade.

4. Increasing transportation, due to increasing number of exports and imports of goods

5. Marketing and branding challenge. One of the biggest challenges for marketers and their agencies is the sheer scale of the BRIC countries and the difficulty in reaching far-flung consumers with different cultures, languages and traditions. The marketing infrastructure in countries like China, India and Russia is still under development, and Western aspects of doing business that are taken for granted elsewhere—such as national retailers—are still in the making.

6. Growing importance of human resource. The biggest investment—and challenge—for any company doing business in BRIC countries lies in people. Training local staff has become an imperative and retaining them is difficult, and often expensive, as the limited pool of homegrown talent regularly trades up for bigger paychecks and titles.


Web Resources:

1. http://en.wikipedia.org/wiki/BRIC

2. http://www.businessweek.com/magazine/content/03_43/b3855187_mz035.htm

3. http://www.ft.com/cms/s/0/0dcb6f1c-8906-11dd-a179-0000779fd18c.html?nclick_check=1

4. http://www.internationalbusinessreport.com/files/ibr_2008_emerging_markets_report_final.pdf

5. http://www2.goldmansachs.com/ideas/brics/book/BRIC-Full.pdf

6. http://seekingalpha.com/article/77727-bric-is-for-real

7. http://www.adweek.com/aw/content_display/esearch/e3iade5585233ac6180ab16de8dc9af383b