Emerging Giants
Companies in emerging markets must choose among three kinds of strategies to compete successfully, both at home and abroad. by Tarun Khanna and Krishna G. Palepu
Giants
Building World-Class Companies in Developing Countries
Emerging
I
N 2003 , JUST MONTHS AFTER Mahindra & Mahindra launched
a smartly designed sport-utility vehicle called the Scorpio, CNBC India, BBC World’s Wheels program, and others were heaping Car of the Year awards on the SUV. That was no mean achievement: The made-in-India automobile won top honors ahead of global best sellers such as the Mercedes-Benz E-Class and Toyota Camry sedans. To M&M, which manufactures tractors in several countries as well as vehicles targeted at India’s semi-urban and rural markets, the awards signaled that it could finally take the world’s automakers head-on. Even as the Scorpio successfully battles multipurpose vehicles like Toyota’s Innova and GM’s Chevy Tavera at home, M&M has started marketing the SUV in South Africa and Spain. Clearly, the $1.73 billion Indian
60
harvard business review | hbr.org
ALEX NABAUM
B u i l d i n g W o r l d - C l a s s Co m p a n i e s i n D ev e l o p i n g Co u n t r i e s
company is on the road to becoming a player in the global automobile industry. M&M isn’t the only company from an emerging market that is making the world sit up and take notice. Over the past two-plus decades, waves of liberalization have all but washed away protectionist barriers in developing countries. As those nations integrated themselves into the world economy, multinational corporations from North America, Western Europe, Japan, and South Korea stormed in. Many local companies lost market share or sold off businesses as a result, but some fought back. They held their own against the onslaught, restructured their businesses, exploited new opportunities, and built worldclass companies that today are giving their global rivals a run for their money. Some emerging giants compete
Giants
Building World-Class Companies in Developing Countries
Emerging
I
N 2003 , JUST MONTHS AFTER Mahindra & Mahindra launched
a smartly designed sport-utility vehicle called the Scorpio, CNBC India, BBC World’s Wheels program, and others were heaping Car of the Year awards on the SUV. That was no mean achievement: The made-in-India automobile won top honors ahead of global best sellers such as the Mercedes-Benz E-Class and Toyota Camry sedans. To M&M, which manufactures tractors in several countries as well as vehicles targeted at India’s semi-urban and rural markets, the awards signaled that it could finally take the world’s automakers head-on. Even as the Scorpio successfully battles multipurpose vehicles like Toyota’s Innova and GM’s Chevy Tavera at home, M&M has started marketing the SUV in South Africa and Spain. Clearly, the $1.73 billion Indian
60
harvard business review | hbr.org
ALEX NABAUM
B u i l d i n g W o r l d - C l a s s Co m p a n i e s i n D ev e l o p i n g Co u n t r i e s
company is on the road to becoming a player in the global automobile industry. M&M isn’t the only company from an emerging market that is making the world sit up and take notice. Over the past two-plus decades, waves of liberalization have all but washed away protectionist barriers in developing countries. As those nations integrated themselves into the world economy, multinational corporations from North America, Western Europe, Japan, and South Korea stormed in. Many local companies lost market share or sold off businesses as a result, but some fought back. They held their own against the onslaught, restructured their businesses, exploited new opportunities, and built worldclass companies that today are giving their global rivals a run for their money. Some emerging giants compete