The Best since Sliced Bread (Digest Summary)

More than 1,000 companies in emerging markets have sales exceeding $1 billion. The author explores features and trends among these megafirms and their role in the global economy.

Large emerging market firms are making inroads in their home markets where growth is prevalent, and others are also pushing into global markets. The Boston Consulting Group (BCG) has been providing annual studies of the top 100 of such “global challengers” since 2006. Criteria include revenues of more than $1 billion, of which foreign revenues equal at least 10% of the total, and credible global aspirations according to select criteria and the opinion of industry experts.

Once dominated by companies in the BRIC countries, the list now includes firms from 17 nations. In 2006, heavy industries dominated the top 100; now, consumer services prevail. Large firms compete on price, innovation, and creation of new business models. They are also buying foreign companies as a way to enter new markets and acquire new skills.

The overall number of state-owned enterprises on the list has declined from 36 to 26 over the last seven years, but 9 new state-owned enterprises are on the 2013 list. They may survive because of an advantage in their home market and politically driven government intervention.

Undaunted, emerging market firms are encroaching on Western competitors, with some making a big splash in other developing economies. Chinese firms control 37% of Africa’s construction market, for example. The presence of such behemoth companies in the developed world is a double-edged sword because they create both growth opportunities and disruption. These firms employ many workers and are big customers for developed-world companies.

As the author aptly concludes, emerging markets continue to emerge. The findings of the BCG study highlight that although some firms from the original list are gone, new and more nimble ones are replacing them.