How Local Companies Keep Multinationals at Bay

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  • Topic: Multinational corporation, Emerging markets, Developed country
  • Pages : 17 (6702 words )
  • Download(s) : 440
  • Published : January 6, 2011
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How Local Companies Keep Multinationals AT BAY
Contents
1. A Six-Part Strategy for Success
2. How One Local Winner Wove Its Strategy
3. Beating the Locals at Their Own Game
4. Fifty Homegrown Champions
To win in the world's fastest-growing markets, transnational giants have to compete with increasingly sophisticated homegrown champions. It isn't easy SINCE THE LATE 1970s, governments on every continent have allowed the winds of global competition to blow through their economies. As policy makers have lowered tariff barriers and permitted foreign investments, multinational companies have rushed into those countries. U.S., European, and Japanese giants, it initially appeared, would quickly overrun local rivals and grab the market for almost every product or service. After all, they possessed state-of-the-art technologies and products, enormous financial resources, powerful brands, and the world's best management talent and systems. Poor nations such as Brazil, China, India, and Mexico, often under pressure from developed countries, let in transnational companies, but they did so slowly, almost reluctantly. They were convinced that global Goliaths would wipe out local enterprises in one fell swoop. That hasn't happened, according to our research. Over the past three years, we have been studying companies in 10 rapidly developing economies: Brazil, China, India, Indonesia, Malaysia, Mexico, Poland, Russia, Slovakia, and Thailand. In those countries, smart domestic enterprises are more than holding their own in the face of foreign competition. They have staved off challenges from multinational corporations in their core businesses, have become market leaders or are catching up with them, and have often seized new opportunities before foreign players could. Many of them dominate the market today not because of protectionist economic policies, but because of their strategies and execution. When we drew up a list of 50 homegrown champions, we found that 21 had revenues exceeding US$1 billion in 2006 and that the entire group's sales had risen by about 50% between 2005 and 2006 (see the exhibit "Fifty Homegrown Champions"). The skeptics should have remembered that David slew Goliath - not the other way around. Consider a few local companies that have fended off foreign competition during the past five years or more: • In Brazil, Grupo Positivo has a larger share of the PC market than either Dell or Hewlett-Packard, and Totvs is the enterprise resource planning (ERP) software leader in the small- and midsize-company market, ahead of the world's largest business software provider, SAP. • In China, daily use of the search engine Baidu exceeds that of Google China by fourfold; QQ, from instant-message leader Tencent, is ahead of MSN Messenger; and online travel service Ctrip has held off Travelsky, Expedia's eLong.com, and Travelocity's Zuji.com. • In India, Bharti Airtel has taken on Hutchison Telecom, which sold its Indian operations to Vodafone in 2007, and emerged as the leader in the cellular telephone market. • In Mexico, Grupo Elektra, which has created one of the country's biggest retail networks, has taken the battle to Wal-Mart. • In Russia, Wimm-Bill-Dann Foods is the biggest producer of dairy products, ahead of Danone and Coca-Cola. The local companies' success doesn't augur well for the developed world's corporations, many of which are seeking growth and profits in emerging markets. Two-thirds of respondents to a survey of transnational corporations we conducted in 2006 said they planned to expand their commitments to developing economies over the next five years. That isn't surprising. According to the Economist Intelligence Unit, rapidly developing economies will account for 45% of world GDP and 60% of annual GDP growth by 2010. At the same time, several Western and Japanese corporations have been unable to enter or have retreated from emerging markets. For instance, Yahoo and eBay...
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