If you had to choose between your business and your family, what would it be? Sixty percent of the respondents chose business, and just 20 percent chose family. Another 20 percent couldn't decide between the two.
Why are emerging markets doing so well?
Submitted by SHNS on Fri, 07/25/2008 - 16:07. business and economy By GORDON PITTS, Toronto Globe and Mail
A weekly newspaper in China's Wenzhou province asked its readers: If you had to choose between your business and your family, what would it be?
Sixty percent of the respondents chose business, and just 20 percent chose family. Another 20 percent couldn't decide between the two.
The clear-cut majority in favor of commerce is the kind of unambiguous response you would not expect in the Western world, where managers and workers talk of being torn between the demands of career and family life.
For Jim Hemerling, a senior partner with Boston Consulting Group and recently managing director of the firm's China practice, it underlines the intangible competitive edge enjoyed by the new breed of corporate challengers from the developing world.
The companies, their managers and employees simply have more fire in their bellies. They want to succeed more than our companies do, he says. After years of being treated as poor cousins by Western partners, of seeing their countries dismissed as ne'er-do-wells in the global economy, they are driven by an insatiable hunger that leaves other considerations -- such as family and leisure -- in the dust.
The Wenzhou survey, cited in a recent book "Globality," co-written by Hemerling and two BCG colleagues, is part of a new way of looking at the changing balance of economic power.
The stunning emergence of companies like Tata, the Indian conglomerate, Embraer, the Brazilian aerospace giant, or Goodbaby, the Chinese baby products colossus, reflects more than superior financial resources. They possess qualities of attitude, drive and nationalism that are less evident among incumbent rivals in North America, Europe and Japan.
As a new academic study points out, one of these intangible, and irrational, factors is the strong sense of national pride that, according to the study, drives these new developing country challengers to pay higher prices for acquisitions in the developed world than their entrenched competitors.
The study, co-written by two academics from the Rotman School of Management at the University of Toronto and a third from the University of Oklahoma, documents the higher premiums -- an average of 16 percent -- paid by developing world buyers such as Brazil's Companhia Vale do Rio Doce in its takeover of Canada's Inco and by Tata Steel in its buyout of European giant Corus.
The researchers then did an examination of 295 takeovers and discovered bid premiums were twice as high in 36 cases where national pride was clearly involved. That often reflected media hype around the symbolism of the deals. When national pride is not on the line, companies did not pay as much.
The study acknowledges that there may be other factors driving these high bids. Managers of the acquiring companies may be getting benefits from their governments at home for incurring the high costs. Indeed, one of the authors, Rotman's Ole-Kristian Hope, acknowledges it is possible these companies are overpaying for assets, but that is not part of the study. It is also possible they are blessed with lower-cost domestic financing, perhaps from national sovereign sources.
What is clear is that the new players simply want to succeed more than their rivals -- and Hemerling suggests these factors make it increasingly difficult for incumbent firms to compete unless they understand the dynamics. Echoing the findings of the academic study, Hemerling and his co-authors argue that the new challengers "have a strong desire to prove themselves and are keen to take a role on the world stage."
These factors increasingly come into play, he says, as global business goes through a new phase. During the latter part of the 20th century, the driving force in world business was globalization -- companies from the industrialized world stretching their tentacles into new markets.
Now, he says, the competitive landscape is dominated by "globality" -- not just the expansion of Western firms into new markets, but, as the book's subtitle says, "competing with everyone from everywhere for everything."
"Now for the first time, we really have competition flowing in every direction," Hemerling says.
He cites several factors that have allowed these new players to emerge more quickly than they might have in the past. For one thing, they learned their craft while serving as local distributors and suppliers for Western firms. When they were ready to step on to the world stage, they were beneficiaries of a new age of access, as trade barriers collapsed and the Internet wiped out distance barriers, allowing them to tap international ideas and design.
Hemerling says the new challengers of India, China, Brazil, Russia and elsewhere have the extra advantage of having emerged from competitive local economies with large populations, allowing them to scale up to significant size even before they stepped out of their backyards.
(Distributed by Scripps Howard News Service, www.scrippsnews.com.) |
