The effect of these new competitors—from large enterprises pursuing global brand breakouts to the rough diamonds to the startups—on established MNCs from developed markets will no doubt be profound. The incumbents will have to not only develop new markets for their products and services in emerging economies, but also simultaneously defend their global leadership positions against increasingly formidable competitors. Further, they’ll have to do so in a vastly more complex political and business environment, as, contrary to the conventional wisdom, economic convergence will not necessarily lead to cultural or political convergence, any more than the “death of distance” means that the world has suddenly become flat.
Most MNCs have only just begun to develop the organizational capabilities they’ll need to meet this challenge. For example, merely a handful have shifted significant innovation resources to one or more emerging markets to acquire the frugal engineering capabilities required for developing the low-cost products demanded by local customers. Fewer still have mastered managing their emerging market distribution channels, partnering with local players, and successfully navigating the often treacherous political waters of emerging markets. Most importantly, few MNCs have developed truly global mind-sets, mainly because the leadership ranks of most of them continue to be dominated by executives from their home countries, with all the predictable global blind spots and misunderstandings this entails. But as this year’s best business books on globalization vividly illustrate, they will soon be dealing with a flood of new competitors—ready or not.