The Multinationals New Competition
The Boston Consulting GroupThe desire for growth essentially drives the globalization of these companies. Having realized that a strong presence on their home market is not sufficient to secure their long term sustainability, they move abroad, in search of continued growth and the ability to compete with other global players.
The development of new skills, such as research and development (R&D) expertise, as well as the experimentation with new business models boosts their expansionist plans.
Usually six globalization models, adopted by RDE challengers in their effort to expand, can be distinguished.
- Taking RDE Brands Global: Having established their brand identity in their home markets, companies attempt to take their brand global. Usually their expansionary growth is entirely organic, as witnessed at India’s Bajaj Auto or Brazil’s Nature cosmetics.
- Turning RDE Engineering into Global Innovation: Low labor costs and strong R&D performances offer RDE companies global competitive advantages, as with Brazil’s Embraer, the world’s third biggest aviation company.
- Assuming Global Category Leadership: Faith in their own product’s strength drives some of the challengers to an attempt to assume a leading role in their line of business. China’s battery producing BYD has successfully realized such a strategy.
- Monetizing Natural Resources: Spurred by soaring commodity prices, the challengers can increasingly use mergers and acquisitions (M&A) to expand globally and to secure viable growth. An example would be India-based Hidalco’s recent purchase of Canada’s Novelis.
- Rolling Out New Business Models to Multiple Markets Companies such as the Mexican mobile-network operator America Movil adapt their branding and marketing strategies to different regions, while retaining their basic business model. This has allowed them to expand their business into new markets while localizing operations in each.
- Acquiring Natural Resources Assisted by their government, some challengers — especially Chinese ones — focus on securing their access to resources to ensure long term growth.
Today, the RDE companies’ overall combined revenue amounts to $1.2 trillion. And the trend is rapidly rising: predictions state that by 2015, combined revenues will add up to $11.8 trillion, while their share of global GDP has risen from 13.4 to 17.3 percent between 2000 and 2006.
Moreover, they command an increasing share of world trade, while the share of high-value-added goods, such as telecommunications products and IT services, has also risen. At the same time, economic co-operation between RDE is increasing, thus trade between China and India rose by 38 percent in 2006.
Yet, these companies do not necessarily present direct competition to established MNCs. For those that react in due time, the “challengers” could very well become key customers, suppliers, or even strategic partners.
The summary above was prepared by Benjamin Schoo of the Atlantic Community editorial team, from a paper by the Boston Consulting Group: The BCG 100 New Global Challengers, available online here.
Related Materials on Atlantic Community:
- The Economist: A Lack of Real Innovation in India and China
- Johannes Linn: The Awakening of Central Asia
- The McKinsey Global Institute: Emerging Global Finance Giants: The New Power Brokers
