Question

What are the roles of business groups in emerging markets as a response to the presence of institutional voids and market failure?

Answer 1

Business groups legally independent businesses operating in multiple industries and bound together by persistent formal and informal ties are an important feature of the global business landscape given their enduring presence in several emerging markets like India and China and late-industrializing nations like South Korea .

business groups can be conceptualized as:

(a) Pseudo-markets that help in market coordination for their member firms by acting as resource generators and mobilizers for inputs like labor, capital, and intermediate products .

(b) Market gateways that can facilitate the market entry process for potential alliance partners (from other countries) by virtue of the groups’ familiarity with their domestic sociopolitical landscapes and economic aspects of the respective micro- and macro-environments.

(c) Market innovators that pursue meaningful innovation (in the form of product and/or service improvements) either due to their presence in diversified business sectors, their partnership in business alliances, or other enabling factors.

While such a conceptualization helps advance marketing theory in the context of emerging markets, the managerial implications for marketing are no less significant. Marketing practitioners who occupy central positions in business groups need to be fully alert to the changing dynamics of their respective domestic markets if they seek to increase their market power. They would have to ensure a proactive approach to market innovation—by fostering an innovation-conducive organizational culture, being highly receptive to ideas generated by employees, developing stronger market-sensing capabilities to maintain their market positions—to keep on top of market trends and spot the next big opportunities. As business groups move forward into an increasingly liberalized global economy, such a perspective would be integral to their continuing success and growth.