Documente Academic
Documente Profesional
Documente Cultură
Global Leaders,
Challengers, and
Champions
THE ENGINES OF EMERGING MARKETS
The Boston Consulting Group (BCG) is a global management consulting firm and the worlds
leading advisor on business strategy. We partner with clients from the private, public, and not-for-
profit sectors in all regions to identify their highest-value opportunities, address their most critical
challenges, and transform their enterprises. Our customized approach combines deep insight into
the dynamics of companies and markets with close collaboration at all levels of the client
organization. This ensures that our clients achieve sustainable competitive advantage, build more
capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with
85 offices in 48 countries. For more information, please visit bcg.com.
2016 BCG Global Challengers
GLOBAL LEADERS,
CHALLENGERS, AND
CHAMPIONS
THE ENGINES OF EMERGING MARKETS
DANIEL AZEVEDO
VINCENT CHIN
DINESH KHANNA
EDUARDO LEN
KASEY MAGGARD
MICHAEL MEYER
DAVID C. MICHAEL
BURAK TANSAN
PETER ULLRICH
SHARAD VERMA
JEFF WALTERS
6 WINNING WAYS
Where Are the Past Challengers Now?
The Global Footprint of B2B Companies
The First Wave of Consumer Challengers
The Strategic Importance of M&A
$33 $43
TRILLION TRILLION
4
82% 75%
2009 2014
Emerging-market companies Mature-market companies
Sources: CapIQ; BCG analysis.
2014
2005
$236
BILLION 4x $944
BILLION
SHARE OF
40% INTERNATIONAL REVENUES 46%
100
Continued success as
global challengers
193
TOTAL
19
Graduated
to become
global leaders
4 70
Unable to deliver on promise: Sources of success
shrinking and losing money have shied1
Engineered products
Other B2B and infrastructure
the past ten years. (See Exhibit 5.) But their A word of caution: the end point for most of
sources of success are different. our analysis in this report is 2014, before the
drop in commodity prices and the slowdown
Commodity Companies. Commodity in infrastructure spending, so it remains to be
companies from emerging markets have seen how the composition of future lists of
succeeded globally by keeping their costs global challengers may change.
low while achieving global quality stan-
dards. They have also benefited tremen-
dously from Chinas thirst for natural The First Wave of Consumer
resources. Challengers
Consumer companies historically have been
underrepresented on the global challengers
Few fast-moving-consumer- list. (See Exhibit 6.) There are plenty of suc-
cessful consumer-oriented companies, but rel-
goods companies make the atively few global fast-moving-consumer-
goods companies. Instead, many of the global
global challengers list. consumer companies based in emerging mar-
kets have relied on low costs (the Chinese ap-
pliance makers, for example) or on access to
EPI Companies. EPI companies break commodities (the Brazilian and Southeast
into two broad groups: construction Asian food manufacturers).
companies and heavy-equipment manu-
facturers. The construction companies A few have also emerged from capital-inten-
have benefited from massive spending in sive, highly regulated industries, such as air-
their home markets, which they have lines and telecoms. Middle Eastern air carriers,
parlayed into success in other emerging for example, have benefited from their hubs in
markets. Heavy-equipment manufactur- an important long-haul region that was less af-
ers, on the other hand, started at the low fected by the global financial crisis, while the
end to acquire scale and then invested in Asian and Latin American airline challengers
R&D and innovation as a way to expand have offered better routes and lower costs
into new segments. than most of their regional competitors.
2005 2014
Global market share (%) Global market share (%)
50 50
Construction Aluminum
Commodity chemicals and engineering
40 Construction and engineering 40
Motorcycle manufacturers Oil and gas
Motorcycle
manufacturers
30 30
Commodity chemicals
0 20 40 60 80 0 20 40 60 80
Export share (%) Export share (%)
Sources: CapIQ; BCG analysis.
Note: Export share is emerging-market companies average share of the international revenues of the top 100 companies in each industry. Global
market share is emerging-market companies share of the overall revenues of the top 100 companies in each industry.
7% Overrepresented
Airlines
11%
Automotive
1%
24%
Resources and commodities
16%
20%
Industrial goods
17%
Consumer products
17%
24%
5%
Health care
11%
6%
Financial services
17% Underrepresented
Exhibit 7 | Revenue Growth and Margins of the Challengers Are Holding Steady
REVENUE GROWTH PROFIT MARGIN
2014 16 11.8
YEAR OF
REPORT 2011 14 12.5
2009 15.2 12
2008 14.7 12
GLOBAL CHALLENGERS 15 13
EMERGING-MARKET COMPETITORS 11 11
GLOBAL PEERS 4 11
Exhibit 9 | The Challengers Outperform Stock Indices, Despite the 2015 Downturn
TSR, indexed
600
400
200
0
January 1, January 1, January 1, January 1, January 1,
2006 2008 2010 2012 2014
Global challengers Global peers Nonfinancial S&P 500 MSCI emerging markets
Industrial goods 51 53
Consumer 16 17
Energy 13 10
Technology, media,
and telecom 11 10
Health care 5 5
Financial
institutions 4 4
Insurance 0 1
LOCATION %
China 29 28
Latin America 24 23
India 19 16
Southeast Asia 10 14
Middle East 9 10
Africa 5 7
Russia 4 2
One shift is that resource and commodity Another trend is the rise of a new breed of
companies may have passed their high-water consumer companies. The consumer-oriented
mark. These companies have always made up challengers on this years list are moving be-
a healthy share of the global challengers. And yond advantages based on cost and access to
they do so in this years report as well, ac- raw materials such as palm oil. They include
counting for 24% of companies on the list. Dalian Wanda, a luxury hotel and resort de-
But between 2014 and 2016, the number of veloper from China, and Discovery, a finan-
challenger energy companies declined from cial services firm from South Africa.
13 to 10. And none of the new challengers is
solely in the resource or commodity business. The new challengers are also appealing to
(The new challenger Grupo Mxico is also ac- the digital needs of the expanding middle
tive in railroads.) Moreover, as noted earlier, class in emerging markets. Two prime exam-
the effect of the drop in commodity prices ples are Axiata, a leading regional telecom
that occurred in 2015 is not reflected in the operator, and Xiaomi, a maker of smart-
composition of this years list. phones. Remarkably, the revenues of device
Several other new challengers are likewise Few global media companies have launched
emblematic of larger themes. The emergence from emerging markets, although that may
of China Eastern Airlines and Pegasus Airlines be starting to change. Chinas Alibaba has in-
as challengers reflects the rise of air carriers vestments in several online media properties,
in emerging markets. From 2005 through and Dalian Wanda is buying a majority stake
2014, the revenues of such airlines tripled, and in Legendary Entertainment, a Hollywood
their global market share rose from one-fifth studio.
to one-third. Six airlines based in emerging
markets are now global challengers, compared
with none ten years ago. (See Exhibit 12.) Building and Supplying the World
Emerging markets continue to play a signifi-
Pharmaceutical companies based in emerg- cant role in supplying the worlds raw materi-
ing markets have also grown rapidly, from $8 als and meeting the infrastructure needs of
billion in revenues in 2005 to $80 billion in both emerging and mature economies. That
2014. This growth reflects both inroads in ma- role is in flux, however, and most of the new
ture markets and rising health care spending challengers in this category are emphasizing
in emerging markets. Lupin Pharmaceuticals integration, value-added services, and other
and Sun Pharmaceuticals, both of India, have higher-end capabilities. The name of the
completed acquisitions to round out their game is no longer simply low cost.
Braskem (Brazil). Braskem is the largest OCP (Morocco). This fertilizer company
producer of thermoplastic resins in the has exclusive access to the largest phos-
Americas. The company manufactures phate-rock reserves in the world. OCP has
polypropylene, polyethylene, PVC, and focused on integration, ranging from
basic petrochemicals. It has grown both mining to the production of fertilizers and
organically and through acquisition. other value-added products, while reduc-
Braskem entered the global market with ing its environmental footprint. It has
the acquisition of Sunoco Chemical in 2010 production and distribution joint ventures
and Dows polypropylene business in 2011. in Asia, Europe, and Brazil, one of the
fastest-growing fertilizer markets in the
DMCI Holdings (Philippines). The main world, where OCP has created an innova-
businesses of this conglomerate are power tive supply channel. The company is also
generation, property development, pursuing growth in Africa by encouraging
construction, mining, and water distribu- the development of agriculture and the
tion. The growing economy and popula- smart use of fertilizer.
tion of the Philippines are increasing
demand for energy, infrastructure, water,
and real estate. Despite softening nickel Capturing Middle-Class
and coal prices, operational efficiency has Consumers
helped DMCI Holdingss mining business Many emerging markets are relatively young
continue to generate value. countries with a rapidly expanding middle
class. This generation of consumers is opti-
Grupo Mxico (Mexico). This conglomer- mistic, with the disposable income required
ate is the fourth largest copper producer to spend on goods and services.
in the world and operates the largest rail
network in Mexico. Grupo Mxico benefits Eight of the new challengers are serving the
from a low cost structure, geographical needs of these consumers, although only
diversification, fully integrated operations, three of them are traditional fast-moving-
and strong finances. consumer-goods companies.
companies in their industry, but there is no Operating Model. The operating models of
guarantee that they will get there. Our 19 global leaders are built to go global and to be
graduates, on the other hand, have reached adaptive. They are not modified versions of
that peak. What separates those companies the model designed for the companys home
from the challengers? market. Global leaders build global processes,
especially for risk management and other
core activities, but are willing to bend the
Five Under-the-Hood Success rules so that local markets can make adapta-
Factors tions. Hindalco, for example, has deliberately
In seeking to understand the difference be- created a portfolio of high- and low-margin
tween challengers and graduates, we uncov- products in order to provide a buffer against
ered five under the hood attributes that ups and downs in the economy.
separate global leaders from the pack. Col-
lectively, they constitute a winning combina-
tion that is greater than the sum of its parts.
(See Exhibit 13.) Indeed, all of our 19 gradu-
Leaders build global process-
ates have acquired at least four of these five es but allow local markets to
attributes.
make adaptations.
Vision and Culture. In the case of all 19
graduates, their vision is easy to describe and
see in action. Amrica Mvil aspires to be the Talent and Organization. Talent and larger
fastest-growing telecommunications company organizational issues are often what distin-
in the world, while Tata Motors ambition is guish global leaders, since the demand for
to be the car company most admired by great people is so intense, especially in emerg-
customers, employees, and shareholders. ing markets. Global leaders build global
Johnson Electric aims to be the most innova- leadership and talent programs, rotate top peo-
tive and reliable supplier of motors and ple through geographies, and create opportuni-
motion systems. Many former global chal- ties for star talent outside of the home market.
lengers also articulated a compelling vision. They build an employer-of-choice brand in key
But they failed to create a culture that unified recruiting markets. They know how to inte-
grate talent and retain key aspects of their ingredients in its breweries. In Africa, for
culture when they acquire other companies. example, it offers many bottle and can sizes
They create cost-effective training engines for and uses local crops like sorghum to brew
line workers and middle managers. Tata affordable beer.
Consultancy Services, for example, has learned
how to scale its recruiting, onboarding, and
training engines for the 50,000 or more Winners Versus Losers
employees that join the company each year. To better understand these factors, we exam-
Such companies as Lenovo and Emirates ined two pairs of companies in two indus-
Airlines have created a diverse and interna- tries. They started in similar positions of
tional workforce at all levels. strength, but their fortunes took dramatically
different turns.
Go-to-Market Model. Global leaders under-
stand how to be successful in many markets. In one case, a large industrial goods conglom-
They make smart local acquisitions and erate took advantage of a favorable cost
develop local partnerships to fill in the gaps structure, strategic M&A, and strong leader-
in their coverage, product portfolio, or ship to rise to the top of its sector. Managers
distribution networks. Meat processer JBS, for knew how to execute and how to work with
example, has created strategic partnerships in local partners in new markets. The other
key geographies, established direct-sales company focused on achieving efficiency and
teams, and located production facilities in reaching production targets, but management
low-cost countries. conflicts and low-performing assets kept it
from continuing on its growth path. The first
Innovation and Reinvention. Global leaders company is now a global leader. The second
are continually innovating and, when neces- has fallen off the global challenger list.
sary, reinventing themselves to stay relevant.
Li & Fung will create and shutter business The companies in the second pair are both
units as necessary. Recognizing that beer involved in similar technology, media, and
tastes are regional, SABMiller uses local telecom businesses. One invested heavily in
Projected GDP growth rate (%) Projected GDP growth rate (%)
5.0 8.0
6.0
2.5
4.0
0.0
2.0
2.5 0.0
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
33
31 2020
29 2018 67
2015 69
72
REVENUES
2014
2011
2008
2005 $4.6
$3.6 TRILLION
$2.0
$1.0
TRILLION
TRILLION
TRILLION
Africa
61
Greater China
770
CHAMPIONS 18 20
GLOBAL CHALLENGERS 15 13
GLOBAL PEERS 4 11
Exhibit 19 | Many Global Champions Could Join the Top Ten in Their Sectors by 2020
sponsible for most of the worlds economic has grown by 18% annually over the past
growth through 2025. (See Exhibit 20.) five years, reaching $1.9 billion in sales in
fiscal year 2015, and the US Food and
In other words, within five years, the top-ten Drug Administration has certified more
lists of many industrial sectors will be popu- than 230 of its drugs.
lated by several companies that are virtually
unknown today outside their home market. Shenzhen O-film Technology is the
Here are just three examples of champions largest producer of touchscreens in the
that demonstrate their dynamism: world, with 2014 revenues of $3.1 billion.
Its annual revenue growth has more than
Aurobindo is one of Indias five largest doubled over the past five years. This
pharmaceutical companies, measured by Chinese company has created five R&D
both sales and market capitalization. It centers around the world and secured more
12%15%
15%
39%44%
10%
31%36% of revenues
of revenues
25%
of
revenues
16%24% 27%38%
than 1,100 patents. It has invested more es, such as shipping and port giant COSCO,
than 4% of revenues in R&D since 2011 and are facing pressure to restructure. Family-
used M&A to acquire key technologies. To owned companies, especially newer ones, will
diversify away from the slowing smart- likely need to transition to a new generation
phone market, Shenzhen O-film Technolo- of leaders. The average age of CEOs at fami-
gy has invested in smart car, fingerprint ly-owned businesses in Asia is 61, so this is a
sensor, and camera technologies. real and present concern. Conglomerates in
particular will need to focus on productivity
Alsea, of Mexico, is the largest restaurant and profitability, not just top-line growth.
operator in Latin America, running
quick-serve and casual-dining franchises Companies from emerging markets increas-
such as Starbucks, Burger King, Dominos ingly will need to rely on strategic M&A to
Pizza, and The Cheesecake Factory. It has build their capabilities and reach their goals.
created economies of scale across these Tech Mahindra, an Indian IT services compa-
brands by building several distribution ny, has thoughtfully expanded its business
centers and relying heavily on shared through deals. In 2015, Tech Mahindra and a
services. Alsea also has a presence in sister company bought Italian design house
Spain. Revenues have been growing by Pininfarina to expand their high-end capabili-
more than 25% annually in recent years. ties. That same year, Tech Mahindra also
bought Geneva-based Sofgen Holdings, to
move into the banking industry, and Light-
Facing the Future bridge Communications, to expand its net-
Against a backdrop of slower growth and work-services capabilities.
greater competition, global challengers, local
dynamos, and champions alike will need to Not all global challengers will be up to these
do more than float higher on the tide of an tasks. But if their past is any indication, most
expanding economy. They will need to of them will continue to be viable companies,
compete. and many will become global leaders. In the
ten years that we have been tracking them,
This will be tougher for some challengers global challengers have grown even faster
than for others. Many state-owned enterpris- and stronger than we initially expected.
To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcgperspectives.com.
6/16
Abu Dhabi Chicago Kiev Munich Shanghai
Amsterdam Cologne Kuala Lumpur Nagoya Singapore
Athens Copenhagen Lagos New Delhi Stockholm
Atlanta Dallas Lima New Jersey Stuttgart
Auckland Denver Lisbon New York Sydney
Bangkok Detroit London Oslo Taipei
Barcelona Dubai Los Angeles Paris Tel Aviv
Beijing Dsseldorf Luanda Perth Tokyo
Berlin Frankfurt Madrid Philadelphia Toronto
Bogot Geneva Melbourne Prague Vienna
Boston Hamburg Mexico City Rio de Janeiro Warsaw
Brussels Helsinki Miami Riyadh Washington
Budapest Ho Chi Minh City Milan Rome Zurich
Buenos Aires Hong Kong Minneapolis San Francisco
Calgary Houston Monterrey Santiago
Canberra Istanbul Montral So Paulo
Casablanca Jakarta Moscow Seattle
Chennai Johannesburg Mumbai Seoul
bcg.com | bcgperspectives.com