The ambitions of Western firms in emerging markets far exceed their efforts

The ambitions of Western firms in emerging markets far exceed their efforts

Sep 14th 2013 |From the print edition

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SPEAK to the boss of a big, rich-world multinational company and he will soon wax lyrical about the attractions of emerging markets. Even recent wobbles in some of these countries have not curbed vocal enthusiasm for the BRICS and other collections of high-growth markets, whose prospects have more than offset a gloomy prognosis for the maturing, growth-starved domestic markets of the developed economies. So, with the source of future profits so clearly identified, presumably such firms are doing everything possible to succeed in emerging markets?Strangely, it seems they are not. Or so says a new report, “Playing to Win in Emerging Markets”, by the Boston Consulting Group (BCG). The consultancy polled over 150 executives from the world’s biggest multinational companies. So far, those firms have not done badly, earning on average 28% of their revenues in emerging markets. Yet nearly four-fifths of them expect to gain market share, which could be trickier.

Many multinationals base their entire senior management team at home, where they are too remote to tackle the challenges involved in conquering new territories. Those firms that have moved at least two of their top 20 executives to the new front line have outperformed their rivals by far, says BCG. Schneider Electric recently relocated several senior people, including the boss, to Hong Kong.

Global firms are also finding the going increasingly tough against local competitors. The domestic firm can focus better on its home market, adapt more swiftly to changing conditions and is often prepared to take more risk, says BCG. And nowadays it can tap the global market for the same people, capital and technology deployed by multinationals and attract talented local managers.

What can multinationals do to fight back? David Michael, one of the authors of the report, reckons they need to treat emerging economies as their “new core markets”, if necessary changing their entire business models to make themselves more nimble and entrepreneurial.

Why are multinational bosses not walking their emerging-market talk? One risk, as discovered last year by the (now retired) boss of Procter & Gamble, is that by devoting too much attention to emerging markets their company will lose focus on the rich countries that still, for now, provide the bulk of its profits.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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