March 26, 2007
New world contenders for business
By Aftab Ahmad
UNTIL a few years ago, the world knew only about globally established multinationals originating from the West A new breed of ambitious multinationals is rising on the world scene, presenting both challenges and opportunities for established global players, says Business Week. These new contenders hail from developing nations such as Brazil, China, India, Egypt and South Africa and from a resurrected Russia. They are shaking up entire industries, from farm equipment and refrigerators to aircraft and telecom services and changing the rules of global competition.
A few of the emerging names have already earned considerable reputation and are now known world-wide. Indian software co Infosys, Tata consultancy services and Wipro have, according to the report, completely transformed the $650 billion technology services industry.
Mexicoââ¬â¢s America Movil, which claims to have 100 million Latin American subscribers and led Business Weekââ¬â¢s latest rankings of the worldââ¬â¢s top 10 companies, may soon become the biggest international cellular provider, the report says.
Brazilââ¬â¢s Embraer has left behind Canadaââ¬â¢s Bombardier as the worldââ¬â¢s No. three aircraft manufacturer and is receiving mid-size-jet orders, which should otherwise have gone to Airbus and Boeing.
Chinaââ¬â¢s Huawei Technologies Co received new orders worth $8 billion in 2005, including contracts from British Telecommunications PLC for its $19 billion programme to transform Britainââ¬â¢s telecom network. The deal is reported to have created a stir among the rest of the worldââ¬â¢s telecom manufacturers.
Many more companies are using their bases in the developing countries as springboards to build global empires, such as Mexican Cement giant Cemex, Russian Lukoil which has hundreds of gas stations in New Jersey and Pennsylvania and Indian drug maker Ranbaxy Labs, now a leader in countries like Nigeria and Brazil, a top supplier in large parts of Europe and has 58 generic drugs awaiting US approval by the FDA.
A Boston Consultancy Group (BCG) recently published a study based on data collected from 3,000 companies in 12 developing nations. BCG identified 100 emerging multinationals that appeared positioned to transform industries and world markets, giving a tough time to established global players, in the coming years. These 100 companies were reported to have a combined $715 billion in revenue in 2005, $145 billion in operating profits and $500 billion in assets.
Of these 100 companies identified by the BCG, Business Week has named 25 companies, which appear to have the potential to reach the top rank of global corporations. Six of the 25 companies are from India namely Infosys Technologies, Tata Consultancy services and Wipro (for IT services), Ranbaxy Labs (pharmaceuticals), Mahindra & Mahindra (tractors, autos) and Tata Motors (auto). Seven of the 25 companies are from China (including CNOOC for oil and gas and China Mobile for telecom services), while the remaining 12 companies are from Mexico, Brazil, Russia, Turkey, Egypt and Hong-Kong.
As projected by the World Bank, developing nationsââ¬â¢ share of world gross domestic product is expected to grow from one-fifth to one-third over the next decade, while Goldman Sachs & Co. has predicted that during the next two decades, China, India, Brazil and Russia alone would add to their population some 225 million consumers (more than the combined population of Germany and Japan), earning at least $15,000 a year.
What had helped these new contenders to rise to their present enviable status? Of course, one of their key advantages was their access to some of the fast-growing and dynamic global markets, in an era marked by growing global economic integration.
Second, most of these companies had been able to survive amid stiff competition in their own domestic markets which enabled them to make profits at price levels considerably lower than those in the international markets. Indian generic drug makers, for instance, often sold their products in their home market at a price that was only 1-2 per cent of the price charged in the US. Similarly, cellular companies in North Africa, Brazil and India offered phone services for pennies per minute. These companies had no difficulty in competing in the foreign markets, price-wise.
Third, the pool of low-cost resources available to the new contenders in the form of modestly-paid production workers, engineers or low-cost raw material provided them with an edge over their foreign competitors, to compete in the global market.
Last but not the least, many of the emerging companies are headed by people trained in the West who knew how to attract talent from the world market. Thus, Indiaââ¬â¢s IT Company Wipro engaged Vivek Paul from GEC, who had helped build Wipro into a highly profitable organisation of international repute. Similarly, Shanghai Automotive Co had hired Philip Murtaugh who used to run the China office for its joint venture partner General Motors Corp.
Unfortunately, the list of 25 emerging companies identified for having the potential of reaching the top rank of global corporations, did not contain a single name from Pakistan. How could this be explained?
As a matter of fact, our industries have mostly flourished under the protective umbrella of the government, for a long time. Such protection was made available to local industries through higher tariffs until a short time ago on the plea that these were infant industries. As a result, the culture of competition could not develop. That is why our textile industry is presently unable to compete in the international market not only against China and India but also against a smaller country like Bangladesh which depends on imported cotton for its textiles exports.
Instead of competition, the industrial scene in Pakistan is characterised by cartels and monopolies. Sugar and cement are well-known instances. In the absence of competition, the industries neither need to cut their costs nor improve their quality. Obviously, manufacturing companies falling in the above category cannot enter the international market.
Besides, the private sector in Pakistan has remained shy to invest in new areas. Therefore, steel, defence production and engineering industries are in the public sector in this country. Even in case of automobiles, local entrepreneurs came forward because of joint ventures with foreign investors.
And above all our private sector has never given due importance to research and development (R&D), because of its focus on short-term gains. In an era marked by knowledge-based development, industries neglecting R&D can never think of reaching international standard.
In the situation, manufacturing companies in Pakistan can become global players only if they learn to cut costs, improve the quality of their products and invest in R&D, in order to come at par with the international companies, in the long run.
http://www.dawn.com/2007/03/26/ebr15.htm
New world contenders for business
By Aftab Ahmad
UNTIL a few years ago, the world knew only about globally established multinationals originating from the West A new breed of ambitious multinationals is rising on the world scene, presenting both challenges and opportunities for established global players, says Business Week. These new contenders hail from developing nations such as Brazil, China, India, Egypt and South Africa and from a resurrected Russia. They are shaking up entire industries, from farm equipment and refrigerators to aircraft and telecom services and changing the rules of global competition.
A few of the emerging names have already earned considerable reputation and are now known world-wide. Indian software co Infosys, Tata consultancy services and Wipro have, according to the report, completely transformed the $650 billion technology services industry.
Mexicoââ¬â¢s America Movil, which claims to have 100 million Latin American subscribers and led Business Weekââ¬â¢s latest rankings of the worldââ¬â¢s top 10 companies, may soon become the biggest international cellular provider, the report says.
Brazilââ¬â¢s Embraer has left behind Canadaââ¬â¢s Bombardier as the worldââ¬â¢s No. three aircraft manufacturer and is receiving mid-size-jet orders, which should otherwise have gone to Airbus and Boeing.
Chinaââ¬â¢s Huawei Technologies Co received new orders worth $8 billion in 2005, including contracts from British Telecommunications PLC for its $19 billion programme to transform Britainââ¬â¢s telecom network. The deal is reported to have created a stir among the rest of the worldââ¬â¢s telecom manufacturers.
Many more companies are using their bases in the developing countries as springboards to build global empires, such as Mexican Cement giant Cemex, Russian Lukoil which has hundreds of gas stations in New Jersey and Pennsylvania and Indian drug maker Ranbaxy Labs, now a leader in countries like Nigeria and Brazil, a top supplier in large parts of Europe and has 58 generic drugs awaiting US approval by the FDA.
A Boston Consultancy Group (BCG) recently published a study based on data collected from 3,000 companies in 12 developing nations. BCG identified 100 emerging multinationals that appeared positioned to transform industries and world markets, giving a tough time to established global players, in the coming years. These 100 companies were reported to have a combined $715 billion in revenue in 2005, $145 billion in operating profits and $500 billion in assets.
Of these 100 companies identified by the BCG, Business Week has named 25 companies, which appear to have the potential to reach the top rank of global corporations. Six of the 25 companies are from India namely Infosys Technologies, Tata Consultancy services and Wipro (for IT services), Ranbaxy Labs (pharmaceuticals), Mahindra & Mahindra (tractors, autos) and Tata Motors (auto). Seven of the 25 companies are from China (including CNOOC for oil and gas and China Mobile for telecom services), while the remaining 12 companies are from Mexico, Brazil, Russia, Turkey, Egypt and Hong-Kong.
As projected by the World Bank, developing nationsââ¬â¢ share of world gross domestic product is expected to grow from one-fifth to one-third over the next decade, while Goldman Sachs & Co. has predicted that during the next two decades, China, India, Brazil and Russia alone would add to their population some 225 million consumers (more than the combined population of Germany and Japan), earning at least $15,000 a year.
What had helped these new contenders to rise to their present enviable status? Of course, one of their key advantages was their access to some of the fast-growing and dynamic global markets, in an era marked by growing global economic integration.
Second, most of these companies had been able to survive amid stiff competition in their own domestic markets which enabled them to make profits at price levels considerably lower than those in the international markets. Indian generic drug makers, for instance, often sold their products in their home market at a price that was only 1-2 per cent of the price charged in the US. Similarly, cellular companies in North Africa, Brazil and India offered phone services for pennies per minute. These companies had no difficulty in competing in the foreign markets, price-wise.
Third, the pool of low-cost resources available to the new contenders in the form of modestly-paid production workers, engineers or low-cost raw material provided them with an edge over their foreign competitors, to compete in the global market.
Last but not the least, many of the emerging companies are headed by people trained in the West who knew how to attract talent from the world market. Thus, Indiaââ¬â¢s IT Company Wipro engaged Vivek Paul from GEC, who had helped build Wipro into a highly profitable organisation of international repute. Similarly, Shanghai Automotive Co had hired Philip Murtaugh who used to run the China office for its joint venture partner General Motors Corp.
Unfortunately, the list of 25 emerging companies identified for having the potential of reaching the top rank of global corporations, did not contain a single name from Pakistan. How could this be explained?
As a matter of fact, our industries have mostly flourished under the protective umbrella of the government, for a long time. Such protection was made available to local industries through higher tariffs until a short time ago on the plea that these were infant industries. As a result, the culture of competition could not develop. That is why our textile industry is presently unable to compete in the international market not only against China and India but also against a smaller country like Bangladesh which depends on imported cotton for its textiles exports.
Instead of competition, the industrial scene in Pakistan is characterised by cartels and monopolies. Sugar and cement are well-known instances. In the absence of competition, the industries neither need to cut their costs nor improve their quality. Obviously, manufacturing companies falling in the above category cannot enter the international market.
Besides, the private sector in Pakistan has remained shy to invest in new areas. Therefore, steel, defence production and engineering industries are in the public sector in this country. Even in case of automobiles, local entrepreneurs came forward because of joint ventures with foreign investors.
And above all our private sector has never given due importance to research and development (R&D), because of its focus on short-term gains. In an era marked by knowledge-based development, industries neglecting R&D can never think of reaching international standard.
In the situation, manufacturing companies in Pakistan can become global players only if they learn to cut costs, improve the quality of their products and invest in R&D, in order to come at par with the international companies, in the long run.
http://www.dawn.com/2007/03/26/ebr15.htm
.what a crock. they will not be able to compete with even uncle Timmy's convenience store.worse part is they are not only monopolized they are also subsidized heavily.but the pain is comming today or tommorow.
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