Home » Opinion » China Knowledge
Emerging market giants assert global dominance
Print Edition
It has for some time been a truism that if you want to see the division of world power, you need to look beyond the map of nation-states.
A slew of multinational corporations have annual gross incomes that exceed the GNP of entire nations. Moreover, though they don’t have a seat at the United Nations, these corporations arguably wield much greater power than many nations on the world stage.
The familiar story of the rise of multinational corporations focuses on the usual suspects: long-standing powerhouses, mostly based in the United States and Western Europe, like Walmart, IBM, General Electric, Exxon, BP and Volkswagen. Japan’s massive post-World War II investment in modernization allowed it to become a leader in the automobile and electronics industries.
In the last 20 years, that story — and the multinational map of corporate power — has undergone a fundamental shift: away from established companies in the developed world and toward ambitious upstarts in the developing world.
In their book “Emerging Markets Rule: Growth Strategies of the New Global Giants,” Wharton management professor Mauro Guillen and co-author Esteban Garcia-Canal shine needed light on this new twist in the story, one that has been largely under-reported in the mainstream press.
When Forbes first published its Global 2000 list in 2003, the United States, Japan and the United Kingdom dominated. By 2012, emerging markets had broken that stronghold in a big way, in many cases leapfrogging established players like AT&T, Gulfstream and Sara Lee.
Emerging market multinationals (EMMs) are now at the top of markets as varied as household appliances, ready-mix concrete, seamless tubes for oil drilling, regional jets, meat, bread and candy.
Yet recognition of this trend has been spotty at best.
In 2010, for example, the Chinese battery and electric automaker BYD topped Bloomberg Businessweek’s Tech 100 list. Warren Buffett was so impressed he took a 10 percent stake in the company. Yet a March 2012 search of the previous year turned up only one mention in The New York Times, while the 98th-ranked firm, California-based VMWare, showed 1,100 results for the same period.
EMM revolution
The dramatic surge of EMMs certainly represents a sizable geopolitical shift. Yet just as significant as the fact of companies in developing countries asserting global dominance are the methods by which they have done so. This is a revolution not just in who but in how.
EMMs have made their mark by moving boldly, swiftly, strategically and often stealthily; by nimbly negotiating the often volatile political and economic landscapes of other emerging markets; and by treating joint ventures and other initial forays into acquisition and expansion as learning experiences.
This approach, the authors contend, stands in stark contrast to the more plodding, rigid, top-down methods traditionally employed by entrenched multinationals. Guillen and Garcia-Canal suggest a number of reasons why EMMs seem to exhibit a different approach, and an entirely different institutional culture.
Most of these companies, and their owners, cut their teeth in environments characterized by institutional instability and a range of limitations in infrastructure, technology and capital. Early on, they learned to make more out of less and to be comfortable with risk, volatility and uncertainty.
Many are family- or government-owned, free from the second-guessing of stockholders, and thus able to keep their eyes on the long-term prize, even if their strategy results in some short-term bumps in the road.
Based on their 20-year study of EMMs, Guillen and Garcia-Canal have distilled seven “axioms” that for them define the 21st century way of global business.
None is more important than the first: “Execute, Strategize, Then Execute Again.” These simple words imply two of the book’s central themes: that execution is of primary importance and that the best strategy emerges organically from practical experience on the ground.
Among old-guard companies, the authors argue, strategizing has become both a ritual and a crutch.
Not only do managers “agonize” over formulating the perfect strategy; once they think they’ve found it, they become infatuated with it, clinging to it even in the face of rapidly changing circumstances.
By contrast, the Mexican company Bimbo challenged and eventually overtook established power Sara Lee in the bread business through relentless attention to operational detail.
Faced with an uphill battle, the Mexican upstart knew its only chance was to win the battle of execution. Because freshness and timing are of the essence, Bimbo computerized its distribution network in a way Sara Lee never had. On the other hand, in expanding to China, the company deployed tricycles in order to make timely deliveries to older parts of town with streets too narrow to accommodate trucks.
Trojan Horse in niche markets
Harkening to the guerilla tactics first set out in Sun Tzu’s “The Art of War,” Guillen and Garcia-Canal view highly targeted niche markets as a kind of stealth weapon allowing emerging market upstarts to gain a toehold in the competitive and often more saturated markets of developed countries.
Established companies often neglect or fail to adequately serve these narrow markets. Having dismissed such markets as of marginal importance, they are not alarmed when a hungry overseas competitor sets up shop in their own backyard by entering an under-served niche. “They see an annoying gnat, not a Trojan Horse using the path of least resistance to take over the stronghold of an established brand.”
Adapted from China Knowledge@Wharton,http://www.knowledgeatwharton.com.cn. To read the original, please visit: http://www.knowledgeatwharton.com.cn/index.cfm?fa=article&articleid=2831
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
