Rich People Poor Countries: The Rise of Emerging-Market Tycoons and Their Mega Firms by Caroline Freund

Author:Caroline Freund [Freund, Caroline]
Language: eng
Format: epub
ISBN: 9780881327045
Publisher: Columbia University Press
Published: 2016-01-14T23:00:00+00:00

Emerging-Market Firms Displace Advanced-Country Firms

Emerging-market companies are growing rapidly, overtaking advanced-country firms at the top of the Forbes Global 2000 list. As recently as 2009, all 10 of the world’s largest firms were advanced-country firms. In 2010 the Chinese bank ICBC became the first emerging-market company to be part of the top 10; by 2014 Chinese banks captured the top three places on the Global 2000 list, with a fourth Chinese bank taking the number 10 spot.

Figure 5.4 shows the change in the number of advanced-country and emerging-market mega firms between 2006 and 2014 by sector. Most industries fall in the bottom right-hand quadrant, where firms are entering from the South and exiting from the North. In banking, for example, 61 emerging-market firms joined the list between 2006 and 2014 and 77 advanced-country firms exited.

In others sectors the growth of mega firms in the North and the South is more even, with both groups showing rising shares. These sectors (shown in the upper-right-hand quadrant) include household goods, oil, and capital goods. Growing emerging-market demand helps explain these booming global sectors. As the number of consumers in the world grows and they get richer, demand for household goods rises. The infrastructure investment needed for structural transformation also boosts global demand for capital goods and oil.

The South has seen big gains in materials producers, such as Jiangxi Copper (China) and Magnitogorsk Iron and Steel (Russia). This shift is also related to structural transformation. As emerging markets play a bigger role in the global economy, there is more demand for raw materials, such as steel and coal, to build industry.

Business school professors, investors, and consulting companies are closely watching these emerging-market mega firms. Studies of their extraordinary growth have incited fears that they will steal consumers from established advanced-country firms. Typical titles include Emerging Markets Rule: Growth Strategies of the New Global Giants (Guillén and García-Canal 2013), The Emerging Markets Century: How a New Breed of World Class Companies Is Overtaking the World (van Agtmael 2007), and The Rise of the Emerging-Market Multinational (Accenture 2008).

Figure 5.4 Replacement of mega firms from advanced countries by mega firms from emerging markets, by sector, 2006–14

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