1. Introduction
An emerging economy is not only a developing economy (Cavusgil, 2002). The country must have started economic reforms to liberalize the market and achieve a steady growth in Gross Domestic Product. The main reforms a country can start to be considered as emerging are reforms in the economic system to be able to attract Foreign Direct Investment and must invest as well to improve the infrastructures in the country.
The reasons for companies to go to any emerging markets will be mainly to go away from stagnant developed economies. Those new markets will enable the companies to take advantage of cheap labour forces and large population as pool of labour forces and as customer base.
The relationship of companies from developed countries with emerging economies is quite complex. Those new markets will act as market for the company’s product, supplier as the company will source lots of their purchases from emerging economies to benefit from low costs of raw material and finally as competitors with the local companies now being able to compete in their domestic markets and in international markets.
Since the end of the Soviet Union in 1990, mass liberalisation and privatization happened in Central and Eastern Europe (Appendix 1), creating a huge market, both in surface and in population. In Central and Eastern Europe, thanks to the massive privatization and the numerous reforms to create a favourable investment environment is now considered as an emerging market and is attracting lots of foreign companies.
The aim of this essay is to determine why companies are attracted by Central and Eastern European countries and what the risks are for those companies. The essay ...