July 26, 2016 From Third World to First Rate

Volume 11 | Issue 2

Some of your greatest competitors on the global front are in countries whose growth is about to reshape the economic and trade landscape.

In 1952, French economist and demographer Alfred Sauvy described the world’s under-developed nations as the Third World. Today, many of the former “Third World” countries of Asia, Latin America and Central and Eastern Europe boast some of the world’s fastest-growing economies and global companies.
Some of these companies already are challenging the best U.S., Japanese and European companies for leadership in their industries. U.S. companies are fully capable of meeting the challenge if they recognize that standing still just won’t work.

To gauge this new wave of competition, we and several of our colleagues at The Boston Consulting Group (BCG) recently evaluated the performance of more than 3,000 top companies from countries with rapidly developing economies (RDEs). We identified 100 companies with the capital, products, technologies, leadership and appetite for growth needed to become global leaders.

The “BCG 100 New Global Challengers” span a range of industries. Thirty-four are in the industrial goods sector, 14 in the consumer-durables sector and a combined 14 in the food-and-beverage and cosmetics industries. Other industries represented include resource-extraction, shipping, telecommunications, information technology and business process outsourcing.

Asia is home to 66 of the BCG 100, including 41 Chinese companies and 20 from India. Brazil boasts 13 challengers. Mexico: seven. The remaining 14 companies come from Argentina, Chile, Egypt, Hungary, Indonesia, Malaysia, Poland, Russia, Thailand and Turkey.

MOVING FORWARD
The BCG 100 New Global Challengers – and other RDE companies that will attain the critical mass to move beyond their home markets in the years ahead – will be tough competitors.

To meet the challenge, U.S. executives need to both step back and move forward.

If they step back, they will see that these RDE-based companies are more than just competitors. Many of these companies also are potential customers, collaborators, merger and acquisition candidates, and even, perhaps, suitors. We estimate that when the final 2007 numbers are in, the BCG 100 will have spent some $320 billion on raw materials and energy, some $90 billion on parts and components, and more than $72 billion on services. The BCG 100 also are spending liberally on overseas merger and acquisition deals, completing 72 major foreign acquisitions in 2006, at an average cost of nearly $1 billion each.

Meanwhile, U.S. companies also need to move forward. The BCG 100 still have a lot of work to do. This gives American companies an important opportunity to identify new customers and markets, build new alliances, recalibrate their operations and take other steps necessary to stay ahead of the ever-changing competition.

The one thing they can’t afford to do with this opportunity is waste it by waiting to act. The threat from RDE-based companies will only intensify. If their recent 2004-2006 29 percent annual growth rate continues, the 100 companies listed in our report will have combined revenues of $3.3 trillion by 2010 and $11.8 trillion by 2015. U.S. companies are not without options. For starters, they should accelerate the pace of innovation – an area where they already excel.

U.S. companies also need to lower costs wherever possible. But perhaps the wisest thing American companies can do is engage the BCG 100 and other fast-growing RDE companies. While these companies have much to learn from successful top-tier global firms, U.S. companies can learn from them as well.

With companies as with nations, relationships are critically important. Building relationships with the New Global Challengers may be the real key to continued success.

As Fortune magazine founder Henry R. Luce observed, “Business, more than any other occupation, is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight.”

U.S. manufacturers need to heed these words when they consider the BCG 100 New Global Challengers and the rising tide of global competition. In the grand scheme of things, globalization is just beginning. One of the great strengths of American business over many decades has been its ability to anticipate and respond quickly and effectively to economic change. To succeed in the future, U.S. companies will have to know everything possible about the global competition, develop solid working relationships with the new challengers – and continue doing what American companies usually do best: innovate and adapt.

Harold L. Sirkin and Jim Hemerling are senior partners of The Boston Consulting Group (BCG) and co-authors of the recent report, “The 2008 BCG 100 New Global Challengers.” Their upcoming book, “Globality: Competing with Everyone from Everywhere for Everything,” will be published by Business Plus in June. They can be reached at hal.ops@bcg.com and hemerling. jim@bcg.com, respectively. To view the complete list of the BCG 100 New Global Challengers, go to: http://www.bcg.com/about_bcg/media_center/articles/GlobalChallengerslist.pdf To order a copy of the full BCG 100 New Global Challengers report, go to: http://www.bcg.com/impact_expertise/publications/request_form.html?report=global_challengers_2007

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