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Fast-Expanding Markets (FEMs)

2 October 2015

The article at a glance

New terminology is needed to move beyond ‘macroeconomics’ and ’emerging economies’ in order to identify new areas of growth, says study on …

New terminology is needed to move beyond ‘macroeconomics’ and ’emerging economies’ in order to identify new areas of growth, says study on ‘Fast-Expanding Markets’ (FEMs) co-authored at University of Cambridge Judge Business School.

Fast Expanding Markets

The scandal over Volkswagen’s diesel engines, though tragic for Germany’s engineering sector, will surely rev up development of cleaner engines or better electric cars – creating or accelerating a fast-expanding market. Likewise, the stream of tens of thousands of refugees into Europe, difficult as it is, holds the promise of exciting new market opportunities.

At the same time, central banks and other policymakers have been wrestling with the limitations of traditional economic terminology and theory.

So an alternative focus on “Fast-Expanding Markets” (FEMs) would help policymakers and business strategists identify and nurture new areas of growth, argues a new paper co-authored at University of Cambridge Judge Business School, published in Thunderbird International Business Review. Such FEMs cross industries and countries, and include mobile banking in France, Western-style cheese in India and food trucks in the US (growing annually at a double-digit rate in recent years).

This new “FEM” terminology recognises a wide swathe of important economic activity and, at the same time, reflects the fact that the terms “developing economies” and “emerging markets” have lost much of their usefulness given that China, which was recently classified in those ways, is now the second-largest economy in the world.

Dr Khaled Soufani
Dr Khaled Soufani

“Our unquestioned loyalty to macroeconomic data is way past its sell-by date,” says co-author Khaled Soufani, Senior Faculty in Management Practice and Director of the Executive MBA Programme at Cambridge Judge Business School. “Looking only at a country’s GDP tells us some things about overall growth, but it doesn’t tell us about the workforce or regional development or wealth disparity. Focusing on FEMs provides a bottom-up approach that can reveal where opportunities lie and where they may have been missed.”

The paper entitled “Fast-expanding markets: the revolution of the microeconomy” is co-authored by Terence Tse, Associate Professor at ESCP Europe, who earned his PhD at Cambridge Judge; Mark Esposito, a Senior Associate at the Cambridge Institute of Sustainability Leadership and a Professor at Grenoble School of Management in France and Harvard University Extension School; and Khaled Soufani of Cambridge Judge Business School.

“Excessive dependence” on macroeconomic data “can be damaging and counterproductive to what really counts,” the study says.

For example, many big Western companies lured by the macroeconomic data of China, a country recently growing by 9 per cent a year, have been sourly disappointed by the local realities: Home Depot entered China in 2006 and pulled out completely in 2012, not anticipating that the do-it-yourself culture of the US wouldn’t translate into a country with abundant and relatively cheap helpers. Similarly, attention to gloomy Japanese macroeconomic numbers masked encouraging “pockets of exceptional growth” such as the fast-expanding market for light-emitting diodes (LEDs) in Japan.

According to the article, there are fundamental problems to a rigid adherence to a macroeconomics-based analytical approach, including a mistaken belief that history will repeat itself in a linear fashion in the future (according to a population forecast in the early 1900s, the US would have been 80 per cent Italian and Polish by 1930 if trends had followed a linear progression).

The authors studied more than 40 FEMs around the world, ranging from the Vitamin D testing market in Italy (which benefits from humans’ increasing lack of direct sun exposure), to organic food production in Spain (with a downturn in the property market, the government drove policies to convert land to organic farming), to video game production in Turkey (designing games that conform to Islamic values).

The study acknowledges that many may dismiss such markets as insignificant compared to major global industries like machine manufacturing, yet the authors contend that such a response leads to losing out on “new insights and opportunities” that such pockets of excellence can generate.

“One of today’s catchiest buzzwords is growth,” the study concludes. “Talking about growth is easy – but finding ways to achieve it is daunting at the very least. Macroeconomic data, while useful, can be misleading in guiding business decisions in specific markets. Analysis, decisions and actions need to go at a much more granular level.”

This article was published on

2 October 2015.