These are multinational enterprises from developing countries. Much of the world’s economic growth is occurring in the rapidly developing economies (RDE) such as Brazil, China, India, Mexico, Russia, and others. MNEs (multinational enterprises) from the developed economies have flooded these markets. However, as a result, in the last few years we have seen a new phenomena, MNEs from the RDEs are returning the favour and are increasingly active on the world stage.
For decades multinationals from the developed world invested foreign direct investment (FDI) in the developing economies. The flows were mainly one way, knowledge, capital and expatriate employees went in the direction of the developing economies. In the last decade we have seen the growth of a much more two way relationship between the rapidly developing economies (RDEs) and the developed economies.
One of the new phenomena is a range of low cost products, as a result of what the late C.K. Prahalad called the customer at the bottom of the pyramid, designed for the millions of lower income customers in the RDEs being adopted in the developing economies. The other is the rise of MNEs from the RDEs, particularly China, India and Brazil. Many of these firms are now global players that have not only substantive operations based in their home countries but also operate in the developed economies.
What has been a surprise to many is how fast they have risen through the ranks of global players. In just two years, from 2006 to 2008, the number of Brazilian, Chinese, Indian and Russian MNEs on the FT Global 500 more than quadrupled from 15 to 62, in September 2010 there were 80.
In the 2010 version of the FT Global 500 for the first time, a Chinese company, PetroChina, has overtaken Exxon Mobil as the world’s most valuable company, of the 500 firms over 100 were from RDEs. Not only are they competing on low price but increasingly on innovative products, some as result of products for the customers at the ‘base of the pyramid’ but also from burgeoning R&D labs.
India outsourcing giant Wipro, started out as a vegetable oil trading company in Western India. In the late 1970s, when IBM left India, Wipro first entered the IT sector. In the early 1990s, Wipro set its sights on the markets outside of India.
By 2010 it had close to 110,000 employees, a global footprint, and had become one of the largest IT companies in the world. It now competes on equal footing with other global IT firms from the developed economies.
Embraer is also a good example of a firm that has taken flight from its’ base in Brazil to become the fourth largest civil plane maker in the world. It started out in 1969 as a government owned corporation that focused exclusively on the local market.
After being privatized in 1994 it put considerable effort into the small commercial market place and soon followed with regional jets. They also turned their attention more on world markets outside of their home country. Today they are seen as one of the four key players in the civil aviation market along with American Boeing, European giant Airbus and Canada’s Bombardier.