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Published: December 2, 2013
 / Winter 2013 / Issue 73

 
Business Literature: Best Business Books 2013
 

Best Business Books 2013: Globalization

On the other hand, the “Diaspora Route” is far more tactical, and simply requires following first-generation emigrants into developed markets, as many of these potential customers retain at least some of their traditional brand preferences and consumption patterns. This provides a foothold from which the brand can subsequently be launched into more and more consumer segments. Notable examples include India’s Reliance BIG cinemas and Malaysia’s Maybank Islamic banks. A variation is the “Reverse Diaspora” path, through which a brand such as Hong Kong’s Mandarin Oriental Hotels or Mexico’s Corona beer successfully expands globally by tapping the awareness generated by tourists and other visitors to its home market. Another tactical path is the “Positive Campaign Route,” which some emerging market firms have used to overcome potentially negative consumer perceptions by obscuring the country-of-origin association, among other tactics.

Unfortunately, not all of the eight routes are equally compelling, and the last, the “National Champion Route,” seems largely disconnected from the rest and comes across as a bit of an afterthought. It is also unfortunate that many of the case studies are from China and the automotive industry, as neither author is an industry expert or native to China, so their explanations occasionally sound a bit naive. Nevertheless, Kumar and Steenkamp provide plenty of useful, real-world examples, and the book is well grounded in academic research, yet admirably free of scholarly jargon.

Beware Rough Diamonds

The large companies described by Kumar and Steenkamp are probably already on the radar of established MNCs; however, a second wave of lesser-known emerging market firms are just beyond the horizon and rapidly approaching. These new competitors are smaller, privately held companies from the BRIC nations (Brazil, Russia, India, and China), and some of them are already posting long-term growth rates far higher than those of most of their counterparts in both emerging and developed economies.

Under the auspices of the SKOLKOVO Institute for Emerging Market Studies, Seung Ho Park and Nan Zhou, professors at the Moscow School of Management SKOLKOVO, and Gerardo R. Ungson, a professor at the College of Business at San Francisco State University, spent three years identifying and studying these companies using a five-step process that included several screens of data analysis (financial metrics and frontier analysis to evaluate each company’s resource allocation efficiency), secondary data analysis, and field interviews. They ended up with a list of 70 “stars of the future”—22 in India and 16 each in China, Russia, and Brazil—that are the focus of their book, Rough Diamonds: The Four Traits of Successful Breakout Firms in BRIC Countries.

In it, the authors report that this select set of companies grew at an average rate of 43 percent per annum from 2000 to 2009. Moreover, they write, “in terms of profit margins and return on assets over an extended period of time, these rough diamonds match and often exceed the top five hundred private firms in their respective countries, not to mention the top twenty-five manufacturing firms in their countries and comparable firms worldwide.”

How did the rough diamonds achieve this feat? The authors trace their success to a progressive sequence of four strategies that they label “the Four Cs of High Performance.”

First, the rough diamonds capitalize on being latecomers to their industries, which are often global and already mature, with well-established technologies and scale advantages—all formidable barriers to entry. The rough diamonds can deal with this because they are unusually adept at spotting the opportunities that arise in established markets during economic transitions, such as market liberalization, privatization, and shifts in consumer demand. For example, Russia’s OMK (United Metallurgical Company), which was cobbled together at low cost through the acquisition and consolidation of several run-down, state-owned metallurgical companies, found success by focusing on two nascent markets: railroad wheels and large-diameter piping.

 
 
 
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