To win in the world’s fastest-growing markets, transnational giants have to compete with increasingly sophisticated homegrown champions. It isn’t easy.
by Arindam K. Bhattacharya and David C. Michael
Since the late 1970s, governments on every continent have allowed the winds of global competition to blow through their economies. As policy makers have lowered tariff barriers and permitted foreign investments, multinational companies have rushed into those countries. U.S., European, and Japanese giants, it initially appeared, would quickly overrun local rivals and grab the market for almost every product or service. After all, they possessed state-of-the-art technologies and products, enormous financial resources, powerful brands, and the world’s best management talent and systems. Poor nations such as Brazil, China, India, and Mexico, often under pressure from developed countries, let in transnational companies, but they did so slowly, almost reluctantly. They were convinced that global Goliaths would wipe out local enterprises in one fell swoop.
That hasn’t happened, according to our research. Over the past three years, we have been studying companies in 10 rapidly developing economies: Brazil, China, India, Indonesia, Malaysia, Mexico, Poland, Russia, Slovakia, and Thailand. In those countries, smart domestic enterprises are more than holding their own in the face of foreign competition. They have staved off challenges from multinational corporations in their core businesses, have become market leaders or are catching up with them, and have often seized new opportunities before foreign players could. Many of them dominate the market today not because of protectionist economic policies, but because of their strategies and execution. When we drew up a list of 50 homegrown champions, we found that 21 had revenues exceeding US$1 billion in 2006 and that the entire group’s sales had risen by about 50% between 2005 and 2006 (see the exhibit “”). The skeptics should have remembered that David slew Goliath—not the other way around.
Consider a few local companies that have fended off foreign competition during the past five years or more:
