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Mnc's Emerging

By EliasEli Sep 08, 2013 1092 Words
The landscape changes a lot of multinationals at the moment: with rising commodity prices and the fantastic development of Chinese economy and, to a lesser extent, India, new actors are appearing every month on the world stage from countries emerging. Giants such as China's Lenovo and Huawei, India's Tata or Russia's Gazprom are noticed incursions into territories previously reserved for Western firms. The Russian gas company Gazprom recently has become the first European company by market capitalization.

They are Indian, Chinese, Brazilian or Mexican, some large companies no longer have the competitive advantage for one low cost of labor. Emerging multinationals from emerging countries are now in battle to compete with the dominant groups of global capitalism from the U.S., Europe or Japan. The strategy consulting firm Boston Consulting Group (BCG) has released Tuesday, Dec. 4, the list of 100 "new global challengers' business often overlooked with the potential to dominate the next century.

China, India and Brazil provide the bulk of the quota: 41 Chinese companies, 20 Indian and 13 Brazilian. The total turnover of these 100 groups totaled 1,200 billion (817 billion euros) in 2006, average annual growth of 29% between 2004 and 2006. They cover a broad spectrum of activity, from raw materials to computer services through the consumer goods, automotive and telecommunications. They multiply acquisitions both in developed economies than in emerging, to develop skills or brands.

These new "majors" will soon place the other, the "old" in a situation of challengers.

Gone are the days where companies from India, China or Mexico had only competitive advantage for the low cost of labor. Multinationals in these countries are in battle to compete, or build alliances with companies of the trio dominating global capitalism: the United States, Europe and Japan. The strategy consulting firm Boston Consulting Group (BCG) has released Tuesday, Dec. 4, the list of 100 "new global challengers."

To identify the best, the firm initially selected fourteen emerging markets "rapidly developing" the thirty listed at the beginning, according to macro-economic criteria (GDP, amount of exports and investments in abroad).

Argentina, Brazil, China, Chile, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, Poland, Russia, Thailand and Turkey have been selected.

Then the consultants selected the first companies in their respective countries, keeping only those whose sales exceeded $ 1 billion (680 million). Finally, they gauged the degree of internationalization of companies by, among other things, the number of sites or research centers abroad, but also their distribution network.

The intention of BCG was not to award trophies, but rather to analyze the current position of these new players, their rate of progression and the way they do.

The results are impressive. China and India provide the bulk of the contingent with 41 Chinese companies (including 34 publicly traded) and 20 Indian (all listed). The total turnover of 100 challengers stood at 1,200 billion in 2006, average annual growth of 29% between 2004 and 2006. Moreover, "this growth has not made any how, by tapping into the deep pockets of their shareholders, says Pascal Cotte, senior partner of BCG. These firms have combined strong external growth and profitability. "

Their operating profit amounted to 17% in 2006, three points higher than the average of the 500 companies included in the composition of the Standard & Poor's 500 Wall Street, nine points more than the Nikkei 225 of the Tokyo Stock Exchange, and 10 points more than thirty firms in the DAX in Frankfurt.

These good results allow them to buy companies increasingly costly: a third of businesses acquired by the 100 challengers in 2006 were worth over $ 500 million. All sectors are concerned, the challengers covering a broad spectrum of activity, from raw materials to computer services through the consumer goods, automotive and telecommunications. They buy as much in developed economies than in emerging, not only to achieve economies of scale. They also pay to acquire research skills or brands

have fared poorly in developing countries. All the anecdotal evidence we have gathered suggests that since the 1990s, American corporations have performed better in their home environments than they have in foreign countries,especially in emerging markets. Not surprisingly, many CEOs are wary of emerging markets and prefer to invest in developed nations instead. By the end of 2002 - according to the Bureau of Economic Analysis, an agency of the U.S. Department of Commerce American corporations and their affiliate companies had $i.6 trillion worth of assets in the United Kingdom and $514 billion in Canada but only $173 billion in Brazil, Russia, India, and China combined. That'sjust 2.5% of the $6.9 trillion in investments American companies held by the end of that year. In fact, although U.S. corporations' investments in China doubled between 1992 and 2002, that amount was still less than 1% of all their overseas assets. Many companies shied away from emerging markets when they should have engaged with them more closely. business

(China's Haier Group in household elec-
trical appliances) and novel business
models (India's Infosys in information
technology services). Western compa-
nies that want to develop counter-
strategies must push deeper into emerg-
ing markets, which foster a different
genre of innovations than mature mar-
kets do.
If Western companies don't develop
strategies for engaging across their value
chains with developing countries, they
are unlikely to remain competitive for
long. However, despite crumbling tariff
barriers, the spread of the Internet and
cable television, and the rapidly im-
proving physical infrastructure in these
countries, CEOs can't assume they can
do business in emerging markets the
same way they do in developed nations.
That's because the quality of the mar-
ket infrastructure varies widely from
country to country. In general, advanced
economies have large poolsof seasoned
market intermediaries and effective
contract-enforcing mechanisms, whereas
less-developed economies have unskilled
intermediaries and less-effective legalBusiness School, and we have all been

project on China and India at Harvard
Business School, and we have all been
involved in McKinsey & Company's
Global Champions research project.
We have learned that successful com-
panies work around institutional voids.
They develop strategies for doing busi-
ness in emerging markets that are dif-
ferent from those they use at home and
often find novel ways of implementing
them, too. They also customize their ap-
proaches to fit each nation's institu-
tional context.firms
that take the trouble to understand the
institutional differences between coun-
tries are likely to choose the best mar-
kets to enter, select optimal strategies,
and make the most out of operating in
emerging markets.

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