The document discusses strategies for companies in emerging markets to build world-class companies and compete against multinational corporations. It identifies three key strategies: 1) exploiting local understanding of product and resource markets, 2) treating institutional voids as business opportunities by filling gaps, and 3) focusing on strong execution and governance. Emerging market companies can gain advantages over MNCs by deeply understanding local customer needs and markets as well as leveraging local talent and resources.

1. EMERGING GIANTS
BUILDING WORLD-CLASS
COMPANIES IN DEVELOPING
COUNTRIES
PRESENTED BY-
RAJALAXMI
PRAKASH

2. Introduction
• Liberalization made developing countries to open up to
foreign competition and loosen up their protectionist
barriers.
• By the storming in of companies from N. America, W. Europe,
Japan and S. Korea, most of the local companies lost market
share and sold off businesses.
• But some fought back and worked to built world-class
companies giving some MNCs a run for their money. For ex,
M&M’s SUV Scorpio.
• The authors identified 134 major companies in 10 emerging
markets viz. Argentina, Brazil, Chile, China, India, Indonesia,
Mexico, Poland, S. Africa and Turkey, and studied their
strategies, business models, stock market performance, etc.
for 6 years.

3. Blunting the Multinationals’ Edge
• MNCs from developed countries have a host of superior
aspects like well-known brand names, efficient innovation
processes and management systems, sophisticated
technologies and access to vast reservoirs of finance and
talent.
• But, emerging markets have certain advantages over these
MNCs which if utilized effectively can prove fruitful.
i) Managers at local companies know how to work around the
institutional voids which is difficult for the MNCs.
For ex, India’s Tata Group, Philippines’ Ayala Group. They
have created mechanisms for raising capital and developing
talent.

4. ii) If the countries get themselves listed on NYSE or Nasdaq after
demonstrating a degree of success, it becomes easy for them
to sell equity shares or bonds as they then become the
investors’ favorites.
Also the intermediaries from developed countries who want
to fill the gaps help these local businesses to become more
competitive.
For ex, American and European business schools.
iii) MNCs are reluctant to tailor their strategies, products,
services and communications for every developing market as
it’s costly, cumbersome and risky.
Their organizational processes and cost structures makes it
difficult for them to sell their products and services at optimal
prices.

5. Market Structures in Developing
Countries
• Market structures in developing countries consist of 4 tiers
viz. Global, Glocal, Local and Bottom.
• MNCs find it difficult to serve anything other than the Global
tier because of the institutional voids, insufficient knowledge
about the customers’ tastes and of the local talent pool.
• The emerging giants overcome these difficulties and also
adapt their strategies to the local markets and hence gain an
edge over their foreign competitors.
• They do so by adopting any 3 of these strategies:-

6. Exploit Understanding of Product
Markets
• The emerging companies capitalize on their knowledge of the
local product markets and by wisely adapting to the special
characteristics of the customers at home.
• They also exploit the similarities in the geographically nearer
countries.
• They even use their understanding of local preferences to
cater to the tastes of the Diaspora from their home markets.
• For ex, Jollibee Foods of Philippines, S. Africa’s Nandos,
China’s Haier

7. Building on Familiarity with
Resource Markets
• They capitalize on their knowledge about local factors of
production like talent and capital markets. For ex, Indian IT
majors TCS, Infosys, Wipro, Satyam Computer Services ahead
of MNC software services providers like Accenture.
• Some capitalize their knowledge about the supply chains. For
ex, Taiwan-based Inventec, Bunge.
• Businesses built around raw materials are global from their
inception either because they serve customers in advanced
markets or they are a part of a global value chain.

8. Treat Institutional Voids as
Business Opportunities
• By filling institutional voids as they facilitate the flow of
information, or enhance the credibility of the claims the
sellers make, or analyze information and advise buyers and
sellers.
• They also facilitate transactions by aggregating and
distributing goods and services or by creating forums where
buyers and sellers can conduct their own transactions.
• For ex, China’s Emerge Logistics
• MNCs enjoy an edge in the intermediaries business as they
possess expertise, credibility and experience.
• But emerging companies can overcome this for 3 reasons:-

9. i) Intermediaries are people-intensive which requires familiarity
with the local language and culture.
ii) Intermediaries are information-intensive which requires local
expertise to access scattered information and analyze data of
variable quality.
iii)Government prohibit MNCs to from setting up some
institutions like media and banking as they are of national
importance.
• In countries like Brazil, India, China and Russia, institutional
businesses can become large even if they focus only on the
home market.
• In smaller emerging markets, they can grow by exploiting
adjacent opportunities in filling institutional voids. For ex, a
bank can diversify into asset management and investment
banking.

10. Importance of Execution and
Governance
• Execution and governance is as important as the identifying
the right growth strategy.
• The research suggests that excellent execution and good
governance are specially important in newly industrializing
countries.
• The manner of achieving good governance varies in different
emerging markets.
• The companies who earnestly protect the interests of
shareholders and employees and ensure that they both get
the worthy return on investment become emerging giants.

11. Conclusion
• The research indicates that there are many ways of achieving
success for emerging companies.
• Some compete in several countries. For ex, China’s Baosteel,
Lenovo Groups, Huawei Technologies, India’s Dr. Reddy’s
Laboratories, Infosys, Wipro, NIIT, Tata Group, etc.
• Some operate mainly at home. For ex, China’s Wahaha
Group, India’s Bharti Tele-Ventures, ITC Ltd.
• The research shows that financial performance of world-class
companies is not any superior than those who haven’t
diversified across countries.
• Thus, emerging giants can be successful even if they don’t
have global footprints.

12. Source : HBR on Emerging Markets