Emerging markets essay

Despite the risks associated with doing business in India there are some factors that favor doing of business in India. These factors include the, social, economic, legal, environmental and political factors. In this regard, India will remain to be a strong emerging market because the returns of investing in India outweighs the risks. I chose this topic because the emerging markets although they have high economic growth, investment opportunities and diversified economy and resources that offer high returns for the investors they hidden risks that are in one way or the other a challenge to the investors. In this regard, India just like other emerging markets has various risks that should worry any investor before investing his capital in India. One of the determinants is the factor conditions.

India is not an exception because it has factor conditions that favor investors. These factors are usually favorable conditions that are advantageous and which are suitable for companies. For example, the lack of advanced technology is considered to be a beneficial factor because a company that invests most in technology will strengthen its competitiveness in the long run. Also, there are demand conditions that make the local market to be more demanding hence the local industries will likely to work hard to improve the Indian Market when compared to the foreign companies because the demand for the local products is very high. Although India just like other emerging market has various risks that may affect the performance of businesses, some factors make these risks minimal.

One of these factors is political factors. The political system of India is, and various political parties are involved in active politics. The political parties have different ideologies concerning India, and this makes the democratic system of India very strong because of the political parties interested in making the lives of the people of India better. In this regard, the political factors in one way or the other favor investors because the political system does not pose a threat to the investors. Also, the creation of FIBP as well as liberalization of the overall foreign capital has introduced a lot of improvement in the area of the economic environment. The economic factors have not only improved the growth of the businesses but the entire economy because the country is experienced adjusted GDP.

The economic factors of India have enabled various companies to thrive. Example of these businesses includes the Mercedes Benz, Honda, Ford, Toyota, Hyundai, BMW, and General Motors. Another economic factor that makes India the right place for doing business the availability of various natural resources. For example, India has introduced smartphones that have the latest specifications, and this makes Indian companies globally competitive because they can control a certain level of the Indian market. Moreover, they introduced the 3G as well as 4G networks to the phone users. Other key innovations include the introduction of the MP3 player’s definition TVs and online gambling. It is evident that the new technology has generally reduced cost, more, and improvement of the quality of the products (Sinha 2012).

The environmental factors are in one way or the other associated with some of the risks of doing business in India. In this regard, the Indian government is very much concerned about the way of operating businesses (Poynter 2013). However, these factors cannot be said to be a hundred percent perfect because they are associated with some of the risks that affect the way of doing business in India. Risks of Doing Business in India India just like other emerging markets has various risks that in one way or the other affect the idea of doing business. These risks can be classified into political, economic, legal threats, political risks, and business risks. The first group of risks is the business risks which in most cases affect companies that are not well prepared before entering the market because emerging Indian market is good for the companies that take time and develop themselves.

Another cause of business risk is the economic causes that result from the changes that occur in the market. Also, they can be a change in the level of competition. Moreover, government policy can in one way or the other affect the business because the performance of the business depends on government policies. Physical causes are another cause of business risk. For example, change of technology can compel the company to use a piece of new machinery hence affecting the company's performance. Another risk of doing business in India is the legal risks. Legal risks refers to a type of risks that result from lack of compliance of legal obligations and liabilities. For example , the government can come up with laws and regulations that in one way or the other affect the operations of a company.

In addition, the government can design a law to challenge a company and this may affect the company because it was unexpected. For example, in 2008 Vodafone was subjected to high taxes after buying cell phones and they were very surprised because they did not expect. To address the political risk there is need to diversify risk in different countries because diversification tends to minimize risk by transferring risk to another country. In this regard, it is important for country to invest in other countries apart from India to hedge the political risk (Asher & Novosad 2017). For example, if the Indian government increases the corporate tax, the risk can be minimized if the company had invested in countries like China and USA because countries cannot increases taxes at the same time (Brink 2017).

In this regard, diversification of investments ensures that the operations of a business are not affected by the problems that result from a certain country. The other risk that might affect businesses in India is the poor corporate governance. For example, the emerging market of India has corruption this hinders the growth of upcoming businesses. The emerging markets will continue to provide opportunities for most of the businesses because they are growing at a fast rate. However, the success of these companies will in most cases depend on how they minimize and mitigate the potential risks associated with these emerging markets. To mitigate these risks, business need to invest in research and resources because the emerging markets usually have hidden risks that cannot be easily identified.

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