rise of BRIC

The Rise of the Big Emerging Markets of Brazil, Russia, India, and China: Implications for International Business Teaching in the Next Decade Joanna Scott-Kennel Asta Salmi ABSTRACT. The rise of Brazil, Russia, India, and China will shape global resource use, the location of market demand and international institutions and interdependencies in the decade to come. In this paper we argue that an understanding of the historical and institutional context of the BRICs, and the potential shift towards a multi-polar world is important for developing curricula and content in international business courses in the future. Implications for international business theory and teaching are discussed. KEYWORDS. Emerging markets, international business, inter- national integration, IB theory, teaching, BRIC Dr. Joanna Scott-Kennel is Senior Lecturer in International Business, School of Marketing and International Business, Victoria University of Wellington, P. O. Box 600, Rutherford House, 23 Lambton Quay, Wellington, New Zealand (E-mail: joanna.scott-kennel@vuw.ac.nz). Asta Salmi is Professor in International Business, Helsinki School of Economics, P. O. Box 1210, FI-00101 Helsinki, Finland (E-mail: asta. salmi@hse.fi). Journal of Teaching In International Business, Vol. 19(2) 2008 Available online at http://jtib.haworthpress.com © 2008 by The Haworth Press. All rights reserved 142 doi: 10.1080/08975930802118085 Joanna Scott-Kennet and Asta Salmi 143 INTRODUCTION The spectacular economic growth and imposing size of the big emerging markets has brought their current—and future—role in the global economy under increasing scrutiny and speculation. While big emerging markets initially attracted foreign investors from developed markets due to an abundance of cheap resources, today they are increasingly attractive as markets in their own right and as low-cost locations for investment into knowledge-based activities (UNCTAD, 2006; Garten, 1997). They are generally defined by a large population with low per capita income, but rapid pace of economic development. Most also have governments which favor economic liberalization and are in the process of moving towards free market economies. Although parts of Africa, Asia, Latin America and the Middle East are all big emerging markets, four countries—Brazil, Russia, India, and China (or BRIC, a term first coined by investment bank, Goldman Saehs) are thought to hold the most potential in the next decade (Grant Thornton, 2007). The foeus of this paper is the eeonomie and political rise of the BRIC countries and the implications for teaching in international business in the next deeade. Business interactions increasingly involve MNEs from the BRICs and this shift from the classic North-South dichotomy will fundamentally change the global business arena (OECD, 2006; UNCTAD, 2006). Such trends require consideration of a broader range of perspectives than the current—and relatively narrow—Western-based approach to theory and teaching in inter- national business. The article is structured as follows. The first part diseusses three key issues with regard to the BRIC countries in the international business environment; namely, markets, resources and international integration. The paper finds that the spatial, temporal and institu- tional contexts surrounding the rise of the BRICs and the shift towards a multi-polar world raise questions with regard to current approaches to theory and teaching. Thus, the second part outlines teaching implications from both theoretical and practical standpoints and suggests that a global mindset and problem-based learning approach be adopted, with emphasis placed on developing skills and capabilities. Key challenges and suggestions for teaching are offered. The article concludes by underscoring the need for teachers of 144 JOURNAL OF TEA CHING IN INTERNA TIONAL BUSINESS international business to not only draw on past theories and events, but simultaneously encourage a critical and constructivist approach to capturing the turbulence that will characterize the next deeade. THE BRIC COUNTRIES In 2003, Goldman Sachs predicted that by 2025 the BRIC economies together could account for more than half the size of the G6 countries (in US dollar terms), and be larger than the G6 in less than forty years (Wilson & Purushothaman, 2003). These predictions not only fuelled intense interest in the BRICs, but suggested major changes to the international business environment as we know it today. From an economic standpoint, the infiuence ofthe BRICs is already apparent. Since 2000, the BRIC countries have accounted for 30% of global growth and their share of global GDP has risen, in dollar terms, from 7.8% to 11% (Johnson, 2006). The Economist reports they currently account for two-fifths of the total GDP of all emerging economies. At market exchange rates, China and Brazil rank among the world's top ten economies. In purchasing power terms, all four BRICs are included in the top 10—with China and India being the largest (The Economist, 2006) (see Table 1). Over the next few years, development of the BRICs (and in particular, industrialization in China and India) could push the world growth rate above 4% (Wilson et al, 2004). The 'rise' of Russia, India, and China is better thought of as 'return,' as these economies have traditionally accounted for a large proportion of world population and output. Today, China's economy is driven by manufacturing, India's by services, Russia and Brazil by primary commodities (Brazil has fallen behind the others—despite rapid growth prior to 1980—it has not lived up to Goldman Sach's predictions). Tables 2 and 3 present BRIC growth projections and economic profiles and in doing so reveal some of the enormous diversity and disparity that exists between the BRIC economies. Commonalities are fewer, but include: network-oriented business systems, inequalities (each is clearly split by ethnic, social or geographic divides in terms of opportunities for wealth); corruption and collusive forms of business (including government); and a need to increase total factor productivity by shifting to higher value-adding Joanna Scott-Kennet and Asta Satmi 145 TABLE 1. BRIC Rankings 2006 Brazil Russia India China GDP(ppp) 10 9 4 2 GDP 10 11 13 4 Population 6 9 2 1 Labor force 5 6 2 1 Internet users 11 12 4 2 Oil consumption* 9 5 5 2 Electricity consumption 9 4 5 2 Military Expenditure (market exchange rates) 14 7 10 4 Exports 22 13 29 3 Imports 27 18 17 3 Forex & gold reserves 10 3 6 1 External debt 26 20 28 18 People living with HlV/AIDs 15 13 2 14 Human Development Index 69 65 126 81 Corruption Perception Index 70 121 70 70 Life Expectancy 92 137 139 82 Economic Freedom Index 70 120 104 119 Sources: www.worldfactbook.org, www.hdr.undp.org, www.heritage.org, www.transparency.org, www. un.org/esa, and www.imf.org. * Figures for China and Russia are for 2005, and India for 2004. TABLE 2. BRIC GDP Projections to 2020 Country Brazil Russia India ' China United States Projected US$ GDP (US$bn 2005) 2010 916 1200 1129 3450 14215 2015 1295 1702 1680 5539 15838 2020 1803 2326 2455 8176 17582 Projected US$ GDP per Capita (US$ 2005) 2010 4685 8523 977 2560 45979 2015 6347 12352 1369 3975 49095 2020 8523 17305 1893 5715 52323 Projected Real GDP Growth (% 2005- 2010 4.0 4.5 6.2 7.6 2.8 2010- 2015 4.0 3.4 5.7 6.0 2.2 YOY) 2015- 2020 3.7 2.9 5.5 5.0 2.1 Source: Adapted from O'Neill, et al., 2005, pp. 20-21. 146 JOURNAL OF TEA CHING IN INTERNA TIONAL BUSINESS TABLE 3. Economic Profile of the BRIC Countries Economic reform Economic Growtii Reai GDP Growth Rate 2006* Composition of GDP 2006 (2005 for india)* Comparative Advantage (industry) Strengtiis Weai