For vendors wondering about the success of China's equipment makers, or service providers looking at new rivals emerging from India, a new study by the Boston Consulting Group (BCG) might help.
The 'New Global Challengers' report is a survey of the top 100 enterprises from the developing world, where new global giants are being created across the economic spectrum.
These 100 companies grew at a rate of 24% per year from 2000-2004, ten times faster than the US GDP and 24 times faster than Japan.
BCG says they are the 100 biggest and most internationalized firms in ten markets - Brazil, China, the Czech Republic, Hungary, India, Malaysia, Mexico, Indonesia, Poland, Russia, Thailand and Turkey.
These enterprises are challenging world markets in virtually every segment. BCG observes that just several years ago only a dozen or so emerging market businesses were international players.
The first thing to note in the list is that China and India are over-represented. China's GDP accounts for 29% of the GDP of countries on the list, but 44% of the companies; India is 13% and 22% respectively. By contrast, Russia (seven companies) and Indonesia (one) are under-represented.
To make the list, enterprises needed to top $1 billion in revenue (as of 2004), with at least 10% of sales coming from offshore. Companies were evaluated on their global sales, manufacturing or R&D networks, as well as international M&As and access to capital.
There's no secret about why they're going global: for 88 of the 100, it's about expanding profitability. The other 12 are energy companies that need access to raw materials.
Different strategies
But BCG is interesting on the different globalization strategies required. Consumer electronics firms, for example, are out to build a global brand. By contrast, comms vendors like Huawei or ZTE are going global by engineering innovation.
For the service providers, globalization is a matter of M&A, mostly by targeting other emerging markets. No surprise there; that was the strategy behind China Mobile's failed tilt for Millicom a month ago. America Movil spent $5 billion on 15 acquisitions throughout Latin America in 2001-04.
The advantages for emerging market players are, firstly, access to lower-cost labor, property and raw materials. The labor cost alone can be as much as ten to 20 times less than developed markets.
Their operating assets are typically much younger, too; for manufacturing companies in China the average age of assets was seven years, less than half that of the US figure.
But the area where emerging market champions compare quite unfavorably is in innovation. Very few operate at the cutting edge. The companies in the five largest markets surveyed obtained only 3,900 US patents in 1999-2003. Japanese and Germany firms won 166,000 and 54,000 respectively. With the thousands of engineers pouring out of Indian and Chinese colleges, that's changing, suggests BCG, but they have a lot of ground to make up.
Yet while the methodology in this study is sound, it is hard to understand some of the results.
For reasons that are unclear, BCG has crowned both China Mobile and China Netcom in the top 100.