London Business School lectures on Expansion into Emerging economies

June 26, 2013 - PRLog -- The BRICS are seen as having fast growing pace while on the other hand, the West is striving against post-financial crisis debt.  However, based on a research done by London Business School, the West has missed significant investment opportunities due to the deficiency in local business practice.

The live poll, conducted at London Business School’s Global Leadership Summit last week, found that over a half of senior business executives say that deficiency in comprehending local business practice is the greatest hardship for expansion in growing economies.

Martin Gilbert, Chief Executive of Aberdeen Asset Management, with 75% of its equities in emerging markets, said at the Summit: “When we started Aberdeen in ’83, I was fortunate enough to have as a colleague, Hugh Young, and he was the market leader in Asia and equities. In ’92, he came to me and said: ‘We have to open in Asia.’ And that was the single best decision we ever made as a business, because we became the largest asset manager in Asia.”

Some investors might choose to have safe investment options in the BRICS and held off by what Gilbert recognized as ‘the absence of a formulaic approach’.  With 120 Aberdeen Asset Management fund managers on the ground in emerging markets, he stressed on the importance of face-time with companies.

“It’s really about having people on the ground doing research. It’s fundamental bottom-up investment.”

Yet, it can be complex when doing the research as Andrew Scott, Professor of Economics, London Business School, explained: “The other problem is cultural relativism. When I visit China and I talk to someone, for me it’s terribly confusing whether I am talking to a business person, a Communist Party member, a civil servant or a Red Army official – they could all be one and the same thing.”

The answer for this maybe something that Scott and Gilbert both agree on, that in fact you are investing in companies instead of economies.  The most important thing is to understand your property rights and the benefit you can get, as well as to believe that the company will take care of your interest as a minority shareholder.

Gilbert mentioned Thailand and India where good investments can be made even with political difficulties, while Scott looked back at the economies of the last century.

“If you look at many of the economies of 120 years ago, which were at this stage of growth and momentum, you’d also be concerned about investing in them. America’s a great example. Look at the 20th century US. The US had to do all sorts of institutional reforms to stamp out corrupt politicians, mafia and corporates who weren’t always acting in the broad based interest.”

It is mentioned by 82% of business leaders at the Summit that a prolonged economic recovery may take between two to ten years while 50% of them admit that more people challenge the existing viewpoint of leadership will determine better long term decisions and the BRICS challenge may be well timed.

Professor Scott and Mr Gilbert’s discussions came during the Summit, which was held with Deloitte on the topic of future of global leadership and a debate about the influence of economic slowdown on the BRICS is included.

For more information on Asset Management, visit: http://www.london.edu/programmes/executiveeducation/inves...