Be worried about these global competitors

New_Global_Challengers_May06.pdf (application/pdf Object)

This is the latest report I've read about the growing presence of new competitors coming from emerging countries. Through a consistent methodology it picks the 100 largest companies in BRIC and how they compete in the global turf. It is a must read for those who still think that competition from these countries will only be based on low wages. Reality is that these are huge markets themselves, where these companies learn to survive and develop creative solutions, and that enables them to compete with global incumbents.

If you've interacted with any of these companies in your business context, you can see how aggresive, hard-working and talented they are. So when they are pressed to globalize, they look abroad to find higher volumes, margins and revenues. That's where you find them. In the past, you didn't think you would be competing with one of these companies in your top-notch clients. Not any longer.

As you can learn in the report, these companies are taking their brands global, bringing their products to the international marketplace, leveraging the superscale they get from their own local markets. Under this premise, they can compete as a very good value for money alternative to established brands.

They are also becoming global innovation centers, leveraging very deep talent pools in their own countries. The level to which they can compete arbitraging costs remains to be seen, though. Today they are more attractive as an employer than their western competitors, but turnover rates are approaching 40% and pressure to grow salaries continues to raise.

The other important source of advantage is the way they monetize the natural resources, due to their ability to develop superior operating models for these markets. In addition to their home capabilities, they are in a shopping spree, acquiring companies abroad to create some of the biggest conglomerates with higher production capacity than their competitors.

The path looks clear and the analysis results are startling. According to the work by Goldman Sachs "Dreaming with BRICs : The path to 2050", in less than 40 years these economies together will be larger than the G6 in US dollar terms. This means that the relative importance of BRICs as an engine of new demand growth and spending power may shift more dramatically than expected. Greying populations and slower growth in advanced economies could be offset by the growth in these countries.

The name of the game is clearly changing. One of the most profitable exercises that every company could do today is find out which are their new competitors coming form these markets and defining a solid strategy for the new reality. Keep in mind that they are globalizing very fast and they are determined to conquer their market.