By Ben Simpfendorfer of Silk Road Associates
The rise in China’s outbound investment is a divisive subject. On the one hand, some worry that Chinese multinationals will emerge as powerful competitors by leveraging their economies of scale and cheap funding. On the other hand, many firms are excited about the opportunities to collaborate with Chinese partners in their home markets.
For the most part, however, the hype is still greater than reality, and subsequent waves of investment will be very different to the one the world is currently witnessing. Read more
India’s outsourcers and industrial conglomerates have found success in western markets but consumer goods group Godrej sees its future in the developing markets of Africa and South America, where its experience of marketing to poorer consumers gives it an advantage. Adi Godrej, chairman, talks to the FT’s James Crabtree about marketing and innovation at the bottom of the pyramid.
The 7km queue of Venezuelans hoping to catch one last glimpse of Hugo Chávez resting in his coffin before his funeral tomorrow was a striking measure of the devotion among his adoring supporters.
But even those who didn’t exactly see eye to eye with the revolutionary leader while he was alive rushed to offer their condolences. Thursday’s newspapers were bulging with extra pages to fit in all the messages from private companies that Chávez so often scolded. Read more
After a string of cautious statements on China from US companies ranging from Caterpillar to Yum!Foods, the American Chamber of Commerce in Shanghai has declared that the days of relentless sales and rising profits are over.
The “new normal” is one of slower economic growth, rising costs, skilled labour shortages and an increasingly competitive business environment. Tougher times “will be the rule rather than the exception in the years ahead,” AmCham says in a report. Read more
By Ben Simpfendorfer of Silk Road Associates
The fate of China and the world’s multinationals are bound tightly together, both having benefited from the spectacular growth in global trade and investment over the past two decades.
So it’s no surprise then that the global crisis has challenged that once cozy relationship: China is rethinking its open-door policy to foreign firms, while the world’s multinationals are equally discovering opportunities in India, Brazil, and other fast growing emerging markets. Read more
As Reckitt Benckiser‘s results on Monday suggest, what emerging markets give, developed markets take away.
The consumer goods group, maker of products such as Finish dishwasher tablets and Nurofen painkillers, reported a slight increase in first half profits of 2 per cent, to £1.07bn. But the flatish number hides a see-saw in the company’s geographical performance. Read more
One might normally assume that big multinational companies hold a lot of advantages in emerging markets. Besides the financial clout and extensive supply chain options, they have access to the fabled global talent pool and management strategies honed through decades, perhaps even centuries, of experience.
However, research by management consultants Hay Group suggests that multinationals may be putting themselves at a disadvantage to domestic companies in emerging markets through their reluctance to decentralise management responsibilities, and let go of cherished strategies that work in home markets. Read more
It is all well and good to cut interest rates, but Beijing mandarins know better than anyone else that what China needs is not a stimulated economy, it needs a more innovative one.
Now there is some surprisingly good news on that front from Booz & Co, the management consulting firm in Beijing. They asked multinational and leading Chinese companies with mainland operations whether China was catching up with the world in terms of ability to create rather than fake – and found that 45 per cent of multinationals said some of their mainland competitors were just as innovative – or more so – than the multinationals themselves. Read more
What’s the best way of investing in emerging markets? Local companies or multinationals with big exposure to emerging markets?
How about getting the best of both worlds, says Martijn Cremers, of Yale University. Cremers shows in a study published on Monday that emerging market-listed affiliates of multinationals perform much better in the stock market than their parents. The 92 such affiliates comfortably out-perform both emerging markets and developed world markets. Take a bow, Hindustan Unilever, Walmart Mexico, and Coca-Cola Icecek (Turkey). Read more
Hope springs eternal: multinational companies are counting on China to save them from the global financial crisis – just as their ability to compete on the mainland has eroded more than ever before. Read more
Update intellectual property laws: check. Build vast new subway system: check. Start internationalising the renminbi: check. Teach more English to graduates: check. Modernise stock market: check. Increase taxes on foreigners so that expatriates in China can enjoy Chinese healthcare and pensions: hey, wait a minute. Read more
It’s one thing to get your multinational into China. It’s another to get China into your multinational, as Henkel (HEN3:GER), the German industrial conglomerate, has found out.
Kasper Rorsted, chief executive officer, has voiced concern over an unwanted side-effect of China’s phenomenal growth – his Chinese managers are turning down opportunties to gain crucial international exposure for fear of missing out on chances at home. Read more
By Javier Santiso
Since 2000, the global economy has undergone a huge rebalancing towards the emerging countries. Trade and financial flows shifted in the direction of the emerging countries. Not only did investors in developed countries rush to raise their stakes in emerging markets. South-south investment also blossomed, with emerging multinationals from Brazil, China, India and Russia bursting on to the world scene.
Now other countries are jumping on to the bandwagon. In Latin America in particular, the international expansion of companies from Mexico, Brazil and Argentina is being followed by groups from Chile, Colombia and Peru. Read more
It can still be a bit disturbing for western executives to discover that a Chinese contractor is building motorways in Poland, but China Overseas Engineering Group is not alone in landing business around the globe.
As a report published on Tuesday by Boston Consulting Group highlights, state-backed Chinese contracting groups have expanded their overseas orders at an annual rate of 29 per cent and captured market share at the expense of western, Japanese and South Korean rivals.
BCG sees the development as so important that it ranks it among the five “emerging trends that will shape commerce…for all companies that play on the world stage”. So you can’t say you weren’t told. Read more
Emerging markets consumers are drinking more soda and buying more computers, as Coca-Cola and IBM attested in their earnings reports this week. And America’s industrial heavyweights are also profiting from the east and south, with sales of airplanes, helicopters and other equipment gathering pace.
The FT’s Ed Crooks and Hal Weitzman report that “US manufacturers have rejected fears of a global slide into recession with a series of strong results and positive statements, showing the benefit of strong growth in emerging economies in Asia and the Middle East.” Read more
Corona has come of age: the Mexican beer is now one of the world’s 100 best brands, according to the latest listing by Interbrand, in a sign of how international many Mexican companies have become over the last decade Read more
By Leslie Hook in Hong Kong
A push by China to exploit its domestic energy resources, especially gas shale reserves, could lead to the country importing less gas from abroad in coming decades.
But the strategy will be anything but self-sufficient. It will depend crucially on engaging foreign companies to share costs, risks and technology. Read more
Eurasia Group put out a succinct note today on the spat between Google and China, which – to many observers’ surprise – came to a positive conclusion last week, when China renewed the search engine’s license. The key to resolving the issue seems to have been: keep the scientists onside. Read more
Last week, I moderated a panel on multinationals in emerging markets for the London Business School’s Global Leadership Summit. Four prominent business leaders–Paul Bulcke, CEO Nestlé; Anshu Jain, who runs Deutsche Bank’s investment banking business; Vittorio Colao, the CEO of Vodafone; and John Connolly, the global chairman of Deloitte shared their insights on several topics, including which multinationals (other than their own) they most admired for their success in emerging markets.
People often use the term “emerging markets” as a catch all phrase implying that all countries within this category are broadly similar to one another. In reality, of course, the differences between India and China or Brazil and Russia dwarf their similarities. The heterogeneity of emerging markets raises questions for companies seeking to invest in these countries: How should we prioritize investments across emerging markets? How do we differentiate a more attractive market from a less attractive one? What criteria should we use in evaluating and comparing different markets? Read more