Emerging-market multinationals (EMMs) – companies based in emerging markets with operations in more than one country – are redefining the global socio-economic landscape. As one report noted, between 1980 and 2000, only 5% of Fortune 500 companies were EMMs. In this year’s ranking, over one-quarter of companies listed were EMMs. According to some estimates, by 2025, they will account for more than 45% of companies in the ranking.
In fact, for Liu Jiren, writing in the Outlook on the Global Agenda 2014, EMMs are becoming “key global players” and are already contributing “significantly to the dynamism and growth of the global economy”.
However, once described by the Economist as “the challengers”, EMMs are facing a few challenges of their own. According to experts from the Global Agenda Council on Emerging Multinationals, who met this week at the Summit on the Global Agenda 2013 in Abu Dhabi, one of the main challenges for EMMs is how to deal with demographic changes.
While some emerging markets are witnessing a huge growth in population and youth bulges, particularly in Africa, others have experienced declines. China, for example, is often said to be “growing old before it grows rich”. The future of EMMs will depend on how well they respond to these demographic changes, which raise issues on both a customer and workforce level. EMMs selling consumer goods, for example, will have to find a way to tailor their products so they appeal to young and old alike. In countries with shrinking workforces, the days of cheap labour are over, and some EMMs will have to rethink their economic models that frequently depend on vast and steady supplies of low-cost workers.
But as is so often the case, these challenges also present opportunities. Forced to develop new models, EMMs will have the chance to look elsewhere for growth. One such area where they have already been successful is in “disruptive innovation” – taking products that were historically prohibitively expensive and complex, and making them affordable and accessible. The one-lakh car, which launched in 2008 at half the price of its rivals, is just one example of a success story that could be rolled out on a larger scale.
Nobody doubts that EMMs have a lot of challenges to overcome if they are to continue to expand globally. But their rapid and sustained growth over the past decade proves that they should not be underestimated.
Image: Men are seen riding horses in the financial district of Sao Paulo REUTERS/Paulo Whitaker.