Frontier market analysis : a case study of Iraq's real estate industry

Abstract

Success in frontier markets could mean high returns for real estate developers and investors. In order to succeed, companies must determine how to provide their products or services in an environment that may not necessarily adhere to familiar institutional, legal or even ethical norms. Strategists may never feel informed enough to make educated decisions because there is not enough data to populate sophisticated financial models. However investors and multinationals have a growing desire to gain exposure to underdeveloped markets. This leaves managers with the challenge of evaluating frontier investment markets and navigating risky foreign business environments. This thesis attempts to answer the following question: to what extent can a researcher establish a viable framework to strategically plan for and operate in frontier market built environments? To answer this question, this thesis shall first address the nature of "frontier markets," then proposes a framework for entrepreneurs or multinationals intending to penetrate a frontier market's built environment through either direct investing or real estate development. The framework is a qualitative model, a compilation of analysis tools used by scholars, economists, political scientists, and investors working with and in emerging markets. The framework assesses markets on a broader, strategic echelon as well as an operational business management level. Lastly, we populate the framework with current information from Iraq, one of the most challenging and interesting frontier markets in the world today. The conclusion assesses the utility of the framework by highlighting information voids as well as potential business opportunities. The conclusion articulates that frontier market analysis will never be as valid as analysis of the developed markets because frontier markets are inefficient and information is difficult to ascertain, thus satisfying the definition of "frontier market". The analysis framework will not yield empirical findings like accurate forecasts of NPV, PV, IRR, etc. It will return, qualitatively, institutional voids in potential business opportunities. Keywords: frontier markets, Iraq, real estate.