Editorial

Citation

(2008), "Editorial", International Journal of Emerging Markets, Vol. 3 No. 2. https://doi.org/10.1108/ijoem.2008.30103baa.001

Editorial

Article Type: Editorial From: International Journal of Emerging Markets, Volume 3, Issue 2.

Welcome to Vol. 3, Issue 2 of IJoEM! This issue of IJoEM presents probably our broadest range of papers in terms of discipline and geographical scope. Before I get to a summary of the papers, I would like to take this opportunity to emphasize to our readership about important changes in the editorial policy of the journal.

Since the journal's launch, we have received a large number of papers in the area of finance and economics. There is no doubt that finance and economics dominate in the emerging market literature with good reason. Yet it is important to emphasize that emerging markets are also important research tableau for other disciplines too. My Associate Editors and I would like to strongly encourage submissions from other disciplines in addition to economics and finance.

You may well get to meet us at conferences in the coming year and of course we welcome you to contact us at any time by e-mail with any questions and queries about the journal and the suitability of your manuscripts for IJoEM.

So, to the papers in this issue: our first paper co-authored by Daniel Baack and David Boggs who present a conceptual discussion on the importance, effectiveness and weaknesses of developed country multinational companies (MNCs) of using a cost-leadership model in emerging markets. They contrast the strategic contingency theory literature with the generic strategies approach pioneered by Michael Porter. The paper provides at least a partial explanation as to why developed-country firms may struggle when they apply a generic competitive strategy across countries.

Baack and Boggs highlight the importance for MNCs in developed economies that use a cost-leadership strategy to consider the ease with which their strategy will transfer to emerging markets. MNC managers may wish to pause and consider the source of their cost advantage. In what ways are they more efficient than their competitors? If it is through economies of production or distribution, how easily will they be able to access the resources and infrastructure needed to transfer these economies? If their advantage is through proprietary knowledge, how vulnerable are they to this knowledge being stolen? Are the rewards worth the potential losses? Ultimately, the authors suggest that managers may wish to consider the costs and benefits of using a differentiation, focus, or other strategy type in emerging markets. There are costs associated with switching strategic approach, and there are obviously risks associated with this change, but it is possible that the risks and barriers to a cost-leadership strategy will influence MNCs from developed economies to consider alternative strategies.

It is interesting to note that in practice MNCs in India, China and other leading emerging markets are moving towards more nuanced strategies rather than a cost-leadership approach especially with an increased emphasis on local branding and product development. This anecdotal evidence supports Baack and Boggs' conceptual claims.

Related to the strategy issues raised in our first paper, Johri and Petison examine the localizations strategies of automotive assemblers in Thailand. The paper adopted a case research method to investigate localization strategies of subsidiaries of seven companies (Toyota, Hino, Honda, Isuzu, DaimlerChrysler, BMW, and Auto Alliance) as well as 14 of their dealers and suppliers in Thailand. Data were collected by conducting in-depth multiple interviews with 120 local and expatriate employees at various levels in the organizations; by referring to annual reports, policy documents and internal reports of these companies; and by observation during plant visits. To date this is the first study of automotive MNCs in Thailand.

Providing clear empirical support for Baack and Boggs' conceptual arguments, Johri and Petison find localization strategies are not just based on the principle of “cost-based localization” but are based on “value-based localization.” These strategies work in tandem and create value through a system of multiple benefits, such as managements' ability to comprehend and deal with uncertainty in the operating environment; make informed decisions to respond to challenges in developing efficient local assembly and marketing systems; cost reduction; higher degree of commitments by local employees; product customization and acceptance; and greater brand equity and image as a good corporate citizen. Further, the authors found that after harnessing local advantages, these companies exploit these advantages to achieve success in the host market as well as to weave together highly competitive international expansion strategies.

Our third paper comes from Andy Jobst. As a public policy practitioner at the IMF, Jobst's emphasis in his paper is on the emergence of new forms of financial markets that have strong links to emerging markets, e.g. equity derivative markets. The development of derivative markets in emerging economies plays a special role in this context as more institutional money from developed countries is managed on a global mandate, with more and more capital being dedicated to emerging market equity. This paper highlights the recent development of equity derivative markets in emerging Asia and contributes to a broader debate about market practices and prudential supervision given the high-risk nature of equity investment in emerging Asia. The main aim of Jobst's contribution is to examine key elements and salient policy considerations in developing derivative markets in emerging markets. Unsurprisingly, Jobst highlights the ongoing need for prudential supervision and institution building in these emerging markets. The paper's principle contribution lies in developing comprehensive set of principles for the development of equity derivative markets based on the current state of equity derivative trading in emerging Asia. Given current efforts by national regulators in the region to implement comprehensive guidelines on derivatives and revise short selling restrictions, the scope of this paper has topical appeal from the perspective of market participants and regulators alike.

From Asian equity markets to rural West Africa for our fourth paper: Nana Owusu-Frimpong tackles the perceptions of consumers of the Rural Community Banks (RCB) in Ghana. Based on a survey of face-to-face interviews of customers (more than 150), this paper examines whether gender plays a role in the reported levels of satisfaction and expectation about the banks services. It also assesses the contribution of RCBs towards infrastructural development in the rural areas. RCBs are perceived as fairly active in rural infrastructural development, and have collaborated with NGOs to help identify, mobilise and educate rural groups in the usage and benefits of banking services. Men and women are gradually cultivating the banking culture. Both genders perceive the quality of financial advice, provision of information and service delivery as areas that need significant improvement. Owusu-Frimpong finds that are no significant differences between genders in their perceptions and expectation of the banks services. The paper is valuable for two main reasons. Firstly, it continues a debate about rural finance started and pioneered by the success of Grameen bank in Bangladesh and second, it stands in stark contrast to much research on banking services that has tended to focus on developed countries.

Moving from a microfinance banking issue in Africa, Obiyathulla Bacha undertakes an empirical assessment of the feasibility of a currency union for the Middle East/North Africa (MENA) region. The paper uses a traditional vector auto regression model (VAR) using data Macroeconomic data for the 34-year period 1970 to 2003. Feasibility is examined by analyzing the symmetry of response of countries within each group to a common external shock. The strength of linkages, a key test of suitability, within each economic bloc was examined using Pearson pair-wise correlation and variance decomposition methods. Bacha finds that while monetary linkages are strong among the Gulf Cooperation Council (GCC) group of countries (six of the ten examined in the study), there is little linkage in the real economy. Moreover, there is little or no linkage between the GCC-6 and the remaining four countries in North Africa. The lack of real sector integration will present a challenge to GCC's desired goal of monetary union by 2010. The North African nations appear to be simply a loosely knit economic grouping with little integration of any kind. Thus, Bacha concludes that hopes for a monetary union among North African nations is far too premature.

As with studies focusing on purely economic tests of suitability, Bacha's paper illustrates the weaknesses of economic arguments for common currencies. It is worth supplementing this with the importance of political motives behind economic integration. The world's most successful economic union to date, the European Union, has been driven by political unity aims as much as economic goals. A lack of common political will among GCC countries may also hinder deeper economic integration too.

Our last paper of this issue is a unique contribution to the emerging market literature: a case study of the floriculture industry in Ethiopia by Rakesh Belwal and Meseret Chala. The case study recounts the recent rise of floriculture industry in Ethiopia that has taken aback the stakeholders in the global flower industry. Further, to understand this success, the case study conducts an environmental appraisal of floriculture industry in Ethiopia amid explicit promotional efforts of the incumbent government towards boosting floriculture exports. Particularly, the study reveals the catalysts and barriers prevalent in the industry that concerns the growth. The study includes analysis of primary data secured through interview of managers at eight functional floriculture farms located around Addis Ababa, Ethiopia's capital city.

The success of Ethiopia in the cut flower exports from Africa has been remarkable. Ethiopia enjoys certain advantages that create ample opportunities for being one among the principal producers and exporters of flower in the world. As a whole, the case study reveals that foreign investments, government support and the formation of the horticulture producers and exporters association are the major catalysts in the sector. However, the opportunities are not without threats. Infrastructural bottlenecks appended by shortage of agricultural inputs, narrow product range, and lack of adherence to international standards in the industry are major among the perceived barriers. As a whole, there is a growing trend in the development of the floricultural industry in Ethiopia. With the attention given by the government to this sector coupled with advantages that Ethiopia has, the country has been able to attract both domestic and foreign investors. Ethiopia's performance in floriculture acts as an eye opener for other African countries.

Enjoy!