Emerging Giants

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Emerging Giants
Competing at Home How Emerging Market-Based Companies Can Build Competitive Advantage at Home

EXCERPTED

FROM

Winning in Emerging Markets: A Road Map for Strategy and Execution BY

Tarun Khanna and Krishna G. Palepu Buy the book:
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Harvard Business Press Boston, Massachusetts

ISBN-13: 978-1-4221-5914-9

5911BC

Copyright 2010 Harvard Business School Publishing Corporation All rights reserved Printed in the United States of America This chapter was originally published as chapter 5 of Winning in Emerging Markets: A Road Map for Strategy and Execution, copyright 2010 Tarun Khanna and Krishna G. Palepu. No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to permissions@hbr.org, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. You can purchase Harvard Business Press books at booksellers worldwide. You can order Harvard Business Press books and book chapters online at www.harvardbusiness.org/press, or by calling 888-500-1016 or, outside the U.S. and Canada, 617-783-7410.

Introduction

on emerging markets.1 The liberalization, growth, and globalization of these still-nascent economies have made them tremendous sources of interest, opportunity, and anxiety over the past twenty years. For households, emerging markets are a source of cheap consumer goods. For frustrated computer users, they are often the location of outsourced technical support. For executives of multinationals, emerging markets are growth drivers amid stagnation and financial crisis in developed economies—and the home turfs of powerful new corporate competitors. In the first six months of 2009, the FTSE International Emerging Markets Index was up 41.1 percent, whereas the FTSE All World Developed Markets Index was up 7.2 percent. China, India, and Brazil have reported robust and significant growth during this period as the developed world struggled to recover from financial crisis.2 For companies drowning in the crisis, these markets have offered life preservers of capital and growth. For upstart entrepreneurs and well-established companies alike, emerging markets are becoming testing grounds and incubators for innovation. For entrepreneurs, business leaders, and citizens in emerging markets, this newfound global standing is a great source of pride. For some workers in the developed world, however, these markets are a source of job security angst. This anxiety has only increased in the wake HE WORLD IS FOCUSED

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Winning in Emerging Markets

of the financial crisis and recession in developed markets. For others— such as Wall Street investment bankers displaced by the U.S. financial crisis—emerging markets can be havens of new job opportunities. For new university graduates and young professionals in emerging markets, this growth has created tremendous opportunities and recalibrated career aspirations. For politicians and pundits in the developed world, emerging economies are both derided as the destinations of offshored jobs and pitched as prospective customers for vaunted innovative products and green technologies of the future. For national treasuries in the developed world, the savings held in emerging markets have helped finance government deficits. For politicians from all over the world, emerging markets figure prominently in global trade and multilateral agendas. For environmental and labor rights activists, the rapid industrialization and undeveloped safeguards in these economies are cause for serious concern. In a small but telling sign of a growing perception that emerging markets were both important and distinctive, the Economist in 1994 began including a page of emerging...
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