Get Ready to Compete With Anyone from Anywhere for Anything

I spent a lot of time in airports traveling to TM Forum’s Regional Spotlight in Buenos Aires, Argentina last week. I was determined to spend my time as far away as I could from any high-calorie, high-fat foods, so to “kill time” I started to look for any news on emerging markets I could find on magazine racks. I couldn’t stay away from the chocolate and lattes, but I did stick to my “emerging markets” plan. 

I still had the article on the richest people in the world  in my laptop case (Forbes Magazine, March 2010). Bill Gates and Warren Buffett are no longer the richest; Carlos Slim, a Mexican telecom mogul, is the new wealthiest person. Of the 97 new members on the billionaires list, only 16 percent are from the U.S. Asia made the biggest gains, adding 104 magnates (just 14 fewer than Europe). China alone has 27 new billionaires in the rankings and the most outside the US with 89. Russia has 62 billionaires. Eleven countries have at least double the number of billionaires they had a year ago, including India, Turkey and South Korea.

Wait a minute…  The fact that a billionaire from an emerging market tops the list isn’t just a fortuitous occurrence. Affluence is beginning to globalize.

The next magazine I find is Strategy+Business, and there’s an article on the China challenge. As Chinese corporations become more successful, they grow to be global competitors and some of them are having an impressive effect on their industries. “The next five to 10 years will see the emergence of a new generation of Chinese companies, bigger but leaner, better able to compete, and prepared to operate on a global basis.” The same magazine talks about India’s Tata, one of the world’s largest conglomerates, and its ambitious global strategy to expand outside India.

Then I found the April 2010 issue of Harvard Business Review, where there’s an article also on China (“Is It Too Late to Enter China?”). As I flip through the pages, I read that of the Fortune 500 companies, about 480 are already in China. Honeywell, for example, has more than doubled its personnel in China, where its revenues grew fivefold in the period 2004-2009. China’s and India’s expansion may make Asia the source of about 50 percent of the world’s GDP by 2030.

Then I realize that The Economist is running a 14-page special on innovation in emerging markets in its April 17 issue. This article truly resonated with me, as it talks about an issue that I’ve been focusing on for quite some time. Companies in emerging markets are redesigning not just products, but entire production processes, and expanding economies of scale into new areas.

 “Emerging-market companies are harnessing technologies such as mobile phones and the mobile Internet in much the same way as American companies harnessed the railroads and the telegraph… They are turning disadvantages (such as poverty and dreadful distribution systems) into strengths.”

Of course, there is no such thing as homogeneity or a single business paradigm when it comes to emerging markets, but they do have something in common. “They face similar challenges (such as large numbers of poor people) and similar opportunities (such as rapid economic growth). And emerging-market companies interact all the time, learning from each other and poaching each other’s customers.”

What amazes me the most is the number of emerging market companies already interacting and doing business among themselves (sometimes without almost any participation from the developed world). “Mahindra & Mahindra is working with a Chinese company, Huawei has opened a research centre in Bangalore, and Lenovo is now applying the model that served it so well in China to India. It has also moved its global advertising headquarters to Bangalore. Brazil’s Embraer has found keen customers in Saudi Arabia, Panama and Poland and set up a joint venture in China.”

What about productivity? The Economist answered the question for me: Emerging-market companies are increasing productivity, not just lowering cost. “Last year productivity in China grew by 8.2 percent, compared with a rise of 1.0 percent in America and a decline of 2.8 percent in Britain.”

But the comment that follows was to me the “icing on the cake” and something I’ve been writing about in previous columns: “In some areas emerging-market firms are leapfrogging Western ones.” Examples are companies pioneering mobile money in Kenya, computer-games makers introducing several innovations in the emerging world, or the redesign of mobile-phone base stations so that they can run on a solar-powered battery, to name a few. 

I need to get to my gate now. My plane is about to take off…