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1. Introduction After the global financial crisis 2008-2009, currently although the international financial system has remained weak, the world economy has had positive signs of recovery. In the early 21st century, despite bearing the first collapsed economy, the world has witnessed a wide range of new trends which promote global economies to become more tightly interconnection by forcing companies, industries and governments to co-operate in ways that could not imagined just a few year ago. Among these trends, the increasing power of emerging markets in the global economy are considered the most impressive through these economies continuing their overwhelm growth and driving the development of the world economy right now and following decades. Roman (2011) claimed that Emerging markets will be not only a source of significant revenue growth for companies but also a source of talent, constant innovation and ground-breaking approaches to business, which they will leverage on a global scale (Roman, 2011). Therefore this case study aims to present and analyze the growing globe power of emerging markets in 21st century, that profoundly influence the whole world economies in general and specially in international business. Beside opportunities come from these markets, some risks existed in them are also highlighted to assess comprehensively this trend. The structure of this essay includes the sections as follow: the first part is the introduction to introduce and justify the topic, continue the second section will provide the overview of emerging markets, then the proofs of increasing globe power of emerging markets will be addressed in section three, after that in section four some potential risks from these markets will remind investors for careful investment planning, finally conclusion and limitation will be addressed in section five. 2. Overview of emerging markets According to Smith (2011), emerging markets are countries have a relatively short period of open market relation and foreign investment but have social or business activity in the process of rapid development and industrialization. These countries have previously had centrally planned and isolated economies since they might posses one-party political and socio-economic systems, or they are developing nations originated from poverty or economic sanctions (Smith, 2011). Up to this point, China and India are two largest emerging markets among more than 40 ones in the world while the largest regional emerging market position belongs to ASEAN-

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China Free Trade Area (Smith, 2011). According to MSCI Barra, emerging markets could be clarified into two main groups (Figure 1): frontier markets and developed emerging markets. Frontier markets include countries which have lower market capitalization and liquidity than developed ones. Figure 1: MSCI Barra - Emerging markets clarify Brazil, Chile, China, Columbia, Czech Republic, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, Morocco, Peru, Philippine, Poland, Russia, South Africa, South Korea, Taiwan, Thailand, Turkey. Argentina, Bahrain, Bangladesh, Bulgaria, Croatia, Estonia, Frontier markets Jordan, Kazakhstan, Kenya, Kuwait, Lebanon, Lithuania, Mauritius, Nigeria, Oman, Pakistan, Qatar, Romania, Serbia, Slovenia, Sri Lanka, Trinidad and Tobago, Tunisia, Ukraine, UAE, Vietnam. Developed emerging markets Source: http://seekingalpha.com In terms of the MSCI All Country World Index, there was a significant increase from 4.5% to 13% in emerging markets between 2003 and 2009, while both the US and all developed countries dealt with the down run from 52.5% to nearly 42% and from 95.5% to 87% respectively (Smith, 2011). Recall from GDP ranking in 1987, only Brazil representing for emerging markets ranked at position of eighth among top 10 nations having highest GDP, however by 2008 China entered the mix at the third spot, and unsurprisingly it is divined that BRIC countries will be in charge in 25% of world GDP by 2030 (Figure 2). According research from Housing Finance Agencies (HFA), in the first quarter of 2011 Emerging Market Hedge Fund capital reached a record new level at over US$ 121 billion compared with the previous record US$ 117 billion set in 2007 (Investoo, 2011). Currently, emerging markets posses two-thirds of the worlds population and contribute over 20 percent of the worlds GDP. Among the emerging markets, Brazil, Russia, India, China (BRIC) are emerging market leaders standing out as undergoing the most far-reaching economic, business and socio-political change in the contemporary world (Emerald, 2011).

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Figure 2: Top ten largest GDP countries in three different periods

Source: http://seekingalpha.com

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Figure 3: BRIC countries Four emerging market leaders

Source: International Monetary Fund, World Bank, CIA World Factbook. All data are from 2009. Economic size is measured in purchasing power parity terms,which takes differences in exchange rates into account when quantifying GDP. HSBC forecasts for Brazil and Russia are as at April 2010; forecasts for China and India are as at May 2010, cited from http://www.hsbc.ca

3.

The increasing global power of emerging markets in the 21st century According to Godhwani (2011), in a globalized era especially with the US and EU

crisis, developed economies have a hard time to deal with their own issues so that they can not take responsibility to drive the global economic growth (Godhwani, 2011). Indeed, due to the burgeoning burden of several peripheral Eurozon economies sovereign debt, the EU is led to the state of perpetual quandary (Ghaush, 2011). Although the crisis is now confined to Portugal, Ireland, Greece, it still contains a jeopardy leading to a bigger crisis if the contagion spreads to countries like Italy and Spain, which contribute 16.9% and 11.6% (IMF, 2010),

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respectively to the global GDP (Ghosh, 2011). The situation is also not encouraging for the US when this country is frantically to grapple with its own debt, housing and growth related issues, any unintended outcome could lead the world economy to the brink. Moreover, some other developed nations are fighting with serious issues such as fragile growth, rising unemployment levels, crippling government debt and waning consumption. Against this backdrop, emerging markets more clearly reflect the significant role to drive global growth. It is estimated that over the next few years 70% of world growth will be generated by emerging markets, with China and India accounting for 40% of that growth (Godhwani, 2011). The overwhelmed growth of these economies spreading many decades has been supported by younger economies, faster speed of urbanization and industrialization, and enhancing disposable incomes boosting domestic consumption and reducing dependency on exports to developed economies. Taking experiences from developed markets, these emerging markets run their economies more sustainable and healthier with their lower government debt (Ghaush, 2011). Therefore the International Monetary Fund evaluates the increasing purchasing power parity of emerging markets is more impressive than these of the developed ones, and forecasts that as early as 2014 the total GDP of the developed economies could be overtaken by emerging ones (Ernst&Young, 2011). In terms of international trade, the emerging markets have already attracted approximately 50% of foreign direct investment international inflows and have been in charge of 25% of FDI outflows (ibid). Currently, BRIC countries, Africa, the Middle East are the most fascinating areas for FDI as well as ASIAN markets are exhausting these especial interests. The forecasts propose that investors will keep investing in emerging markets for some time to come, and one again BRICs are expected to be in charge for nearly 25% of all global GDP growth, thus it is a reasonable premise for investors seeking growth beyond them (ibid). Also, the more significantly the emerging economies contribute to the global economy, the more heavily these economies global influences enhance. Admittedly, the BRICs' growing economic strength is leading to greater power to influence world economic policy (Ernst&Young, 2011). For instance, since October 2010 China has become a the IMF's third-biggest member after gaining a landmark agreement that approval 6 percent of voting shares in the IMF to dynamic emerging markets, it performed the greater voice from emerging markets (ibid).

Figure 4: MSCI Emerging Markets Total Return from 1990 to 2010

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Source: TD Newcrest and Bloomberg cited from http://www.hsbc.ca In the international competitive perspective, emerging markets will become a new battlefield and emerging market leaders will become tumultuous forces. Actually, trading partners in general and resource-rich nations in particular are being influenced deeply by the BRIC countries and being exhausted into their economic orbit. In 2009, emerging-toemerging trade reached 2.9 trillion USD which contributes to create a second tier of emerging market leaders among emerging markets (Ernst&Young, 2011). According to
Godhwani (2011) emerging market will be the largest consumption market in the next period

by creating more than 445 million middle class consumers over the next five years, further more by 2030 global middle classes purchasing power is estimated to 56 trillion USD with 80% of this demand will originate from Asia (Godhwani, 2011). Ghaush stated that in India, consumption is now a key driver for their economy and the middle class of this country over the next decade will be larger than the Europe and US combined (Ghaush, 2011).

Figure 5: Emerging markets geographic

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Source: http://www.hsbc.ca Moreover, due to the scarcity of resources and limited means, in order to reduce manufacturing costs some emerging market leaders often produce innovative concepts that sometimes disrupt entire industries. For example, the concept USD 2,900 Nano automobile of Indian Tata Motor company priced at less than half the cost of any same products on the world market, because this company has based on disruptive innovation theory of Christensen to employ relatively simple and low cost technological manufacturing to provide cheaper, simple, and more comfortable services and products (Tsara&Jackson, 2010). 4. The potential risks existing in major emerging markets Although emerging markets play more important role in the global economy and international business, these countries still reveal much inadequate for investors when considering investing in these regions. The first problem might come from political risks, involving to unstable politics, irregularly applied laws, xenophobic nationalism and violent regime change. These risks are quite popular in emerging countries such as China, Russia, and Thailand , etc, even though these threats still happen in developed markets, thanks to constitutional processes and the rule of law these problems are not endemic in these countries (J.P. Morgan Asset Management, 2011). Similar to politics, the corporate governance issues can heighten and become permeating risks in emerging economies. For example, the travails of the large, partially privatized energy sector in Russia testify to the pitfalls of investing or even trying to do business in financially immature markets that lack traditions of independent jurisprudence and shareholder rights (ibid). Moreover, admittedly emerging markets have not attracted intensely foreign long term investors while the biggest institutional investors from the emerging countries like the sovereign wealth funds prefer to spend their money in
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the developed economies. The reason is the lacking dedicated base, many emerging market leaders have run their own economies in the inadequate facilities and infrastructures with "institutional voids" where fundamental support systems such as adequate water supply, retail distribution channel, and efficient transportation and telecommunications systems simply do not meet investors demand (J.P. Morgan Asset Management, 2011). Therefore some foreign investors just have developed greater flexibility to meet the demands of local residents and "bottom-of-the-pyramid" customers in short term, and the final threat from emerging market is financial risks involved to currency manipulation, inflation and currency debasement with China as a typical example. Some major emerging markets lose the control of their sheer volume of foreign exchange reserves as well as their increasing fiscal and monetary complications performing their chronic currency instability. These markets still bear far more vulnerable to global exchange imbalances beyond their control than do the reserve currencies (ibid). It could be seen that despite bringing many positive elements to drive the global economy and opportunities for international business right now and in the next decades, emerging markets still contain heightened and in some cases unique risks. 5. Conclusion To sum up, emerging markets are set to enhance their positions in the global economy. While hight debts and sluggish growth are pulling back the advance economies in contrast emerging markets run theirs economies with extraordinary growth. These markets have played a role as the world's economic growth engine to drive the global economy and their spectacular developments are bringing the far-reaching effects for themselves and for international business. According analysis, one of the fastest global trends of this decade are an increase of these market leaders, who are considered as a disruptive force in the international competitive perspective, and increasingly gain tremendous voice in economic policy. Emerging markets are not only the worlds giant factory but also will be the largest consumption market in the next few years due to their rising population and prosperity. These markets will serve as new battleground where these emerging market enterprises continue to be respected rivals in their home markets meanwhile increasingly making oversea investments to other emerging and even advanced countries. However, together with growing opportunities, these followed implications of overwhelm growth and other potential risks such as xenophobic nationalism and violent regime change, the lacking dedicated base, hyperinflation and global exchange imbalances .etc exist popularly in vast major emerging nations, and threat critically to foreign investors. Nevertheless, according to economists,
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through actively observing and constantly evaluating those risks, international investors can take prudent advantage of the next massive surge in global economic growth ((J.P. Morgan Asset Management, 2011)). Due to some limitations involved to time, finance and research scope, this essay just focuses on the power and risk of emerging markets in the recent period by using secondary data from other previous researches and articles to illustrate for the role of their markets in the global economy. It is recommended that future research such as analysing precisely update figures should be conducted and should be broaden to enrich this trend illustration.

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Bibliography
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