Does your company specifically target emerging markets or, for that matter, partner with companies from those countries? I ask because I’m intrigued by the results of a new study, which found that top companies from emerging markets are riding the rapid growth of their regions and will shape the global economy over the next decade.
An article running on IndustryWeek notes that the top 100 fast-globalizing companies from rapidly developing economies are outpacing their rivals from developed economies in terms of expansion, job creation, and productivity, according to the Boston Consulting Group (BCG) study. These companies, which the firm calls global challengers, grew at an annual average of 16 percent from 2008 through 2011—four times the rate of their competitors in developed countries. Their average revenue hit $26.5 billion in 2011, compared to $21 billion for the non-financial companies listed on the S&P 500 stock index.
The BCG report, “Allies and Adversaries,” states that global challengers are full-fledged competitors making game-changing moves. They are companies poised to shape the global economy over the next decade, including in industries such as aircraft manufacturing, medical devices, mobile telephony, and e-commerce.
These companies have benefited, and are in a position to continue to do so, the report continues, from the fact that emerging markets have become the world’s economic engine due to growing numbers of consumers with disposable income. While these global challengers are increasingly seen as competitors by Western multinationals, those Western companies often stand to gain from partnerships, BCG says in the report.
That’s because these markets also offer great sources of talent, capital, and companies. Over the past five years, more than 1,000 companies headquartered in emerging markets have reached at least $1 billion in annual sales. Located in countries such as Brazil, China, India, Indonesia, Malaysia, Mexico, Russia, Thailand, and Turkey, these global challengers purchase more than $1.7 trillion of goods and services a year, creating enormous opportunities for Western companies that can win their business as allies, according to BCG.
“If ever there was a wake-up call for business leaders in the West, this is it,” says David C. Michael, coauthor of the report and head of BCG’s globalization practice. “We have been monitoring the rise of global challenger companies for nearly a decade, and the ambition of these companies—what we call the accelerator mindset—has never been stronger.”
As an example, I was interested to read in BusinessWeek that sales in emerging markets make up 55 percent of the revenue at Unilever, the world’s second-largest consumer-products company. Indeed, sales in those areas are growing faster than its U.S. and European businesses, which is a direct result of Unilever accelerating its sales growth, new-product development, and presence in emerging markets over the past three years.
“Many of its rivals are struggling amid the prolonged economic downturn but its Unilever’s moment in the sun,” says Harold Thompson, a Deutsche Bank analyst who follows the company, in the article.
One key to that growth is that in 2005, Unilever had 5,000 new-product projects in its pipeline but was only able to bring eight of them to 10 or more countries within a year of their debut. However, last year it cut the pipeline to 600 projects, and 90 of them were rolled out globally inside of 12 months, Paul Polman, Unilever’s chief executive officer, says in the article.
“You want fewer, bigger ideas,” says Polman. He adds that he won’t even look at a new project unless it can potentially generate at least €50 million in sales.
What about your company? How does it view emerging markets and other companies in those regions?