Rebounding from Recession – Emerging Markets Offer New Opportunities

By: Jon Reardon & Allison Jones //

The year 2010 could be seen as “the year of change” for many participants in the hard copy industry. After a weak start to the year, many expected the economic crisis to linger. Negative news about the economy, like troubles with the euro and a rising U.S. deficit, seemed to confirm that view. The recession also negatively impacted spending, as corporations tightened purse strings and cut spending. As the year progressed, however, we saw a turn in the economy.

Purse strings loosened, freeing up pocketbooks for discretionary spending. Companies looked at new technologies to invest in and, as a result, 2010 proved to be better than expected after two dismal years for equipment sales. Placements of printers and MFP devices grew. In fact, in 2010 placements grew 5.2% in the United States and 4.1% in Western Europe, indicating and industry on the path to recovery.

On a global level, the world economy was recovering. The world GDP rebounded from -2.2% in 2009 to 3.9% in 2010. Developed regions demonstrated slower growth rates as they attempted to pay off debt, while strong growth was seen in the emerging markets.

The emerging markets of Brazil, Russia, India, and China (BRIC) are often grouped together because experts believe these four countries are at a similar stage in their economic development. Although all of the BRIC countries were affected by the global economic downturn, and many challenges remain, the recession was a bump in the road for these emerging markets.

Today, they are back on track and expected to show strong growth moving forward. Brazil experienced record growth during 2007 and early 2008. The global economic crisis hit Brazil in September 2008, temporarily halting the growth in this emerging market. The country experienced two quarters of recession as global demand for its commodity-based exports dwindled and external credit dried up.

At the same time, however, Brazil was one of the first emerging markets to begin a recovery. Fueled by an export recovery, Brazil’s GDP growth returned to positive during 2010. While the United States has seen a flat recovery with high unemployment, Brazil represents one of the fastest-growing markets in the Americas. Large capital inflows have contributed to the rapid appreciation of Brazil’s currency, and its strong growth and high interest rates make it an attractive destination for foreign investors. India also felt the effects of the global economic downturn but its economy experienced a healthy rebound due to strong domestic demand and a large educated English-speaking population. Many other countries rely heavily on India’s products, services, and human resources.

Like Brazil and India, China also experienced a healthy recovery after the economic collapse. During 2010, China became the world’s largest exporter. China is second only to the United States in terms of the value of its services. Fueled by a strong export market, business confidence in China is higher than it is in any of the other BRIC countries. Over 66% of Chinese respondents were much more confident about their business prospects in the coming 12 months than they had been in the past year.

Although the other BRIC regions recovered fairly quickly from the global economic downturn, the Russian market was among one of the hardest-hit as oil prices plummeted and the foreign
credits that Russian banks and firms relied on dried up. The decline bottomed out in mid-2009 and economic growth returned during the first quarter of 2010. High oil prices have helped Russia’s recovery, but the region has been hindered by inflation and increased government spending. Out of all the countries in the BRIC region, Russian respondents also showed less business confidence than the other countries in the BRIC region. Nevertheless, over 60% of Russian respondents are more confident about their business prospects in the coming year than they were in the previous 12 months.

As hardware and supplies vendors look for new opportunities to grow their businesses, the emerging markets of Brazil, Russia, India, and China (BRIC) present new opportunities. As their bottom lines improve, businesses will become more open to investing in new technologies. As they rebuild themselves, businesses will likely gravitate toward competitively-priced equipment, supplies, and solutions with value-added features that increase efficiency.

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