Chinese "challengers" seek growth

BEIJING: Lenovo, Huawei and Haier are among the leading Chinese "challengers" with considerable global potential, according to a report by the Boston Consulting Group.

BCG named 50 firms from the Asian nation which have worldwide "aspirations and momentum". All of these players had sales of at least $100m and were already demonstrating international strengths.

Members of this list included Huawei and ZTE, the telecoms company, as well as Lenovo, the IT giant, and Neusoft, the software specialist. Haier, the electronics manufacturer, also made the cut.

Galanz, the home appliances expert, Goodbaby, which makes children's toys and durables, New Hope Group, a conglomerate active in segments from food to finance, were included in the top 50, as were the Bright Dairy and Food Group and Zhangzigao Fishery Group.

In terms of size, the featured organisations generated annual revenues from $180m to $300bn, with 22 sitting in the $1bn to $22bn bracket. Nearly half of all businesses were private and 26 were state-owned.

By sector, industrial goods firms – ranging from machinery and parts suppliers to power equipment and oil services providers – were best represented, making up 11 of the 50 operators.

Natural resources companies delivered eight members of the charts, matching the score for consumer goods. The healthcare and alternative energy fields yielded four entrants each, as did technology and telecoms.

From 2001–11, the Chinese challengers tracked by BCG recorded sales growth of 20% a year, more than doubling the 7% logged by their global peers and 9% for the S&P 500 index of big US corporations.

During the last five years, a sample of 30 Chinese challengers for which data is available generated a total shareholder return of 4.1%, bettering the 0.8% achieved by a panel of 169 global firms.

These Chinese enterprises also posted sales growth of 21.6%, versus 4.7% for foreign operators. Looking at margins, however, the former group saw a decline of 13.1% in the last five years, compared with a 1.1% dip for the latter.

BCG suggested Chinese firms have been artificially aided by the size and "hypergrowth" of the domestic market, cost advantages and favourable regulations, which cannot be relied upon indefinitely.

"They need to become more adept at ... maximising the benefits of productivity and scale, developing innovative products tailored to overseas markets, acquiring and integrating companies, creating global organisations and brand, and developing deep talent pipelines," it said.

Data sourced from Boston Consulting Group; additional content by Warc staff, 12 September 2012

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