Tomorrow's Global Giants

  • Ghemawat P
  • Hout T
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Abstract

Multinational corporations from developed and developing economies alike are aggressively expanding their global presence, particularly in emerging markets. Industry traits largely determine the winners -- but that needn't always be the case, say Ghemawat, of IESE Business School, and Hout, of the University of Hong Kong. Companies can break the pattern by anticipating or creating new customer segments, managing cost convergences, or reworking the value chain. Some established MNCs are succeeding in production- and logistics-oriented businesses, where local rivals usually have an advantage. One way is by using technology and capital to accelerate segments' growth. Samsung, Sharp, and others surprised Chinese producers with vicious price competition in flat-screen TVs, which quickly collapsed the demand for conventional TVs, bottoming out Chinese profits. Another way established MNCs are beating emerging players is on costs, as home appliance companies in the United States did when Haier tried to enter the U.S. market for midsize refrigerators. Conversely, some emerging-market challengers are outperforming established MNCs in knowledge- and brand-intensive industries. Bharti Airtel has built the largest mobile-services operation in India by specializing in a limited part of the value chain (customer care and the regulatory interface) and outsourcing the rest, which freed up capital, made Bharti's cost structure more variable, and allowed the company to radically undercut advanced-market prices. Firms such as India's Suzlon Energy are also spotting opportunities to bundle ancillary services and products in which they have an advantage. The authors point to these examples and others to suggest that conditions are right for aggressive global players to move outside their industry comfort zones. [ABSTRACT FROM AUTHOR]

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Authors

  • Pankaj Ghemawat

  • Thomas Hout

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