New wave of global firms set to emerge

07 May 2010

LONDON: A new generation of global companies, billed as "international powerhouses", are set to emerge from countries like China and India in the next few years, a report has predicted.

PricewaterhouseCoopers assessed 15 markets, including Brazil, China, India, Mexico, Russia and Singapore, to gauge which nations were likely to produce the most "new multinationals".

This group, defined in terms of corporations that have established a presence outside of their home country, increased in size from 352 to 613 firms between 2005 and 2008.

While it then contracted in size to 470 organisations in 2009 as a result of the economic downturn, the overall trend appears to be positive.

For example, the number of brand owners based in the BRICs that featured in the Fortune Global 500 has grown from 27 to 58 in the last five years.

Millward Brown Optimor's latest BrandZ Top 100 Global Brands list also contained 13 members drawn from these four key countries.

China has been one of the main drivers of this process, housing 141 companies with a multi-market reach in 2009 compared with the figure of just 54 in 2005, according to PwC.

The business services group further predicted that over 40% of the "new multinationals" based in developing economies would be drawn from China and India over the period to 2015.

From 2018 onwards, however, India is set to boast the greatest density of these corporations, producing 20% more organisations than China by 2024.

"China's current level of investment intensity is unlikely to be sustainable ... while growing domestic demand is expected to help hold down the trade openness of the economy," the report said.

Malaysia and Singapore, which are largely export-orientated, Russia, boosted by its oil resources, and South Korea, which already has several global brands, will also account for a third of new MNCs.

By contrast, the South American nations featured in the analysis, a group that included Argentina and Chile, will be a "smaller source" of the next generation of major conglomerates.

Looking forward, PwC forecast that more of these corporations would shift their focus away from local and regional strategies, "going direct" to developed markets instead.

In evidence of this, the amount of Russian companies expanding in the CIS fell by 17% from 2005 to 2009, with the US, the European Union and Greater China all attracting heightened attention.

Similarly, it was suggested that many of the "powerhouses” of the future would move into sectors such as services and “high value manufacturing".

For example, the percentage of international Chinese businesses in the consumer goods, professional services and electronic components sectors rose from 2005 to 2009.

Despite this, the rise of the "new multinationals" will be gradual, not surpassing the total recorded in 2008 until 2015, but improving on this figure by 40% in 2024.

Data sourced from PwC; additional content by Warc staff