Building World-Class Companies in Developing Countries
N 2003 , JUST MONTHS AFTER Mahindra & Mahindra launched
a smartly designed sport-utility vehicle called the Scorpio, CNBC India, BBC World’s Wheels program, and others were heaping Car of the Year awards on the SUV. That was no mean achievement: The made-in-India automobile won top honors ahead of global best sellers such as the Mercedes-Benz E-Class and Toyota Camry sedans. To M&M, which manufactures tractors in several countries as well as vehicles targeted at India’s semi-urban and rural markets, the awards signaled that it could ﬁnally take the world’s automakers head-on. Even as the Scorpio successfully battles multipurpose vehicles like Toyota’s Innova and GM’s Chevy Tavera at home, M&M has started marketing the SUV in South Africa and Spain. Clearly, the $1.73 billion Indian
harvard business review | hbr.org
B u i l d i n g W o r l d - C l a s s Co m p a n i e s i n D ev e l o p i n g Co u n t r i e s
company is on the road to becoming a player in the global automobile industry. M&M isn’t the only company from an emerging market that is making the world sit up and take notice. Over the past two-plus decades, waves of liberalization have all but washed away protectionist barriers in developing countries. As those nations integrated themselves into the world economy, multinational corporations from North America, Western Europe, Japan, and South Korea stormed in. Many local companies lost market share or sold off businesses as a result, but some fought back. They held their own against the onslaught, restructured their businesses, exploited new opportunities, and built worldclass companies that today are giving their global rivals a run for their money. Some emerging giants compete in several countries – for instance, Brazil’s AmBev (which in 2004 merged with Belgium’s Interbrew to form InBev); Chile’s S.A.C.I. Falabella; China’s Baosteel, Galanz, and Lenovo groups and Huawei Technologies; India’s Dr. Reddy’s Laboratories, Infosys, NIIT, Ranbaxy, Satyam, Tata Group, and Wipro; Israel’s Teva Pharmaceuticals; Mexico’s Cemex; the Philippines’ Jollibee Foods; and South Africa’s SABMiller. Others operate mainly at home–for example, China’s Wahaha Group; India’s Bharti Tele-Ventures and ITC Limited; and Turkey’s Koç and Do˘u¸ business groups. g s What strategies did these globally competitive businesses deploy to overcome the myriad obstacles that their home environments pose? Why and how did some of them move from their dominant positions at home to establish an international presence? Must every emergingmarket company follow suit? What sequence of steps should wannabe giants take to build stronger businesses at home or to enter markets overseas? Six years ago, we decided to study several companies in developing countries as they created global businesses and emerged on the world stage. Academics such as Harvard Business School’s Louis T. Wells, Jr. (who in 1983 popularized the term “Third World multinationals”) and MIT’s Alice H. Amsden (who in 2000 called ﬁrms in emerging markets “companies that rise from the rest”) have studied similar businesses. Our focus, however, wasn’t on the role that economic policy plays in creating globally competitive companies but on strategies and business models. That’s important; several countries have opened up to foreign competition over the years, which has recast the challenges companies in emerging markets face: Survival is tougher, but the opportunities are more enticing than ever. We identiﬁed 134 major companies in ten emerging markets – Argentina, Brazil, Chile, China, India, Indonesia, Mexico, Poland, South Africa, and Turkey–and
analyzed data on each company, from its strategies to its stock market...