EMERGING

ECONOMIES
Emerging multinationals
Emergence of BRICS
 BRICS is an informal group of states comprising the Federative Republic of
Brazil, the Russian Federation, the Republic of India, the People’s Republic of
China and the Republic of South Africa.
 BRICS account for about 32 percent of the global GDP (in terms of the
purchasing power parity of their national currencies). The total BRICS
population is 3 billion (42 percent of the entire global population), and the five
countries cover 26 percent of the planet’s land.
 It was the Russian side that initiated the creation of BRICS.
 On 20 September 2006, the first BRICS Ministerial Meeting was held at the
proposal of Russian President Vladimir Putin on the margins of a UN General
Assembly Session in New York.
 On the Russian initiative on 16 June 2009, Yekaterinburg hosted the first BRIC
Summit.
 https://economictimes.indiatimes.com/topic/BRICS
EMNEs
 Among the top 100 global companies (Forbes, March 2020):
 The market capitalisation of the Global Top 100 companies increased by 20% ($4,301bn) from
March to December 2019, before decreasing by 15% ($3,905bn) in the three months to March
2020 as COVID-19 took hold.
 US companies (50% in terms of number and value), Chinese companies (35% by value),
Europe (10%).
 In the top 500 companies : Mexico, Russia, Brazil, Indonesia, India, Korea.
 some world leaders in the following sectors : Mining and Crude Oil Production as well
as metals, banking (all but one of the 5 world leaders are Chinese), engineering and
construction (all top five are Chinese), IT consulting (3 among the world largest are
Indian : TCS, Infosys and Wipro), e-commerce (Alibaba, and Wechat).
 Emphasis on revenues and expansion, rather than profits and market capitalization
 2015 only 27% of the Fortune Global 500 firms from emerging countries achieved a profit
margin above 5%, versus an average of 39% for the totality of Fortune Global 500.
 Emphasis on medium term goals rather than short term goals.
 Price competitive : in different sectors : white goods (Haier), smartphones (Oppo and Xiaomi),
laptops (Lenovo), and TVs (Hisense)
 forced established developed global firms to lower their prices as well
Comparative costs EMNEs and other countries
Countries in Fortune Global 500
Rise of China which dominates E20 countries.
EMNES in Fortune Global 500
Fewer companies after 2008 except for China (yet the US retains their lead in
market capitalisation)
Mergers and acquisitions

Drop in
Mergers and
Acquisitions
for EMNEs
and in
Europe. But
China
increases
greenfield
investment
(creation of
subsidiaries
abroad).
Research and development

US and China
are dominant.
EU share in
R&D is
falling.

Who will lead

innovation in
the third
phase of
globalisation?
When and which sectors? 1st phase of expansion

 2000s : internationalisation of multinationals from emerging

countries
 India : steel and car sector. Tata took over British steel assets
and Jaguar in the early 2000s.
 December 2004 Lenovo acquired 90% interest in IBM
Personal Systems Group
 Qindao Haier Co Ltd, China’s No. 2 appliance maker
acquired Panasonic Corp’s Sanyo Electric washing machine
and refrigerator units in Japan and Southeast Asia in 2011
and Fisher & Paykel Appliances Holdings Ltd New Zealand
in 2012.
 Internationalisation strategies in First Phase of
EMNEs expansion (2000s)

 Secure access to commodities

 Securing upstream natural resources for conversion into end products for home
market : ex Bharat Petroleum (India), Chinalco (China)
 Securing downstream markets for natural resources : ex Lukoil (Russia), Vale
(Brazil)
 Minimize risks in neighbouring countries or other emerging countries:
optimizing and adapting products to the conditions of the home market ex
rugged, low-cost vehicle in India has a market in other emerging countries.
 Acquire knowledge of advanced technology

Low cost partner : supplier partner of western company ex : Lenovo/IBM,

Infosys and Wipro
 Global consolidator : through takeovers ex Lenovo/IBM PC; Tata Steel,

Hindalco/Canada’s novelis, South African Breweries/beer makers,

Cemex/cement companies in Australia, the UK and the US,
Wanxiang/western auto parts suppliers
Specific assets of EMNEs
 Country Specific Advantages (CSA)
 Large home markets with low income population and rising middle classes, large
unskilled and skilled labour force, raw materials
 Firm Specific Advantages (FSA)
 Firm ownership:
 State owned enterprises (SOEs) are common. Codelco (copper mining, Chile), INVAP (defense
technology, Argentina), and the State Grid Corporation of China (SGCC) electricity, China.
 Mixed ownership (public and state-owned) : Petrobras (oil, Brazil), Ecopetrol (oil, Colombia),
and the Industrial and Commercial Bank of China (ICBC) (finance, China).
 Preferential industry policy
 Trade agreements
 Products suited to emerging markets
 Production and operational excellence
 Adversity advantage : spurs innovation, cost efficiency and resilience
 Traditional intangible assets : aircraft (Brazil), R&D (India).
 Haier, a case study
 Qingdao Refrigerators originally.
 1992 acquired an air conditioner factory and a freezer factory
 1992 Haier Ltd Group certified ISO 9001
 1992 licensing agreement with Liebherr
 1992 OEM contracts to export to Indonesia
 1990s : OEM contracts with the USA
 1994 joint venture with US Michael Jemal
 1996 joint venture with company in Indonesia
 1997 joint ventures in Yugoslavia and the Netherlands (Philips)
 1997 started to sell under its own name in Germany. Established European
headquarters in Italy (Varese)
 1999 set up a manufacturing plant in South Carolina
 2000s production plants in Indonesia, the Philippines, Dubai, Iran, Algeria,
Jordan, Pakistan, Bangladesh.
 2001 : first European acquisition, Meneghetti Equipment’s refrigerator plant.
Haier : specific advantages
 Adversity advantage
 Strategic partners and alliances
 R&D and innovation
 Differentiation strategy : niche markets
 Quick internationalisation