Over the last few years European and American corporations have benefited from the growth of emerging economies, through access to low-cost labor and fast-growing markets. Now it's the turn of the new multinationals from emerging countries to benefit from access to Western economies. Chinese, Indian, Russian, Brazilian, Turkish, Malaysian corporations are taking on world markets. These new multinationals are not only exporting goods and services, they are acquiring existing companies and build new plants, research centers and commercial subsidiaries to have access to Western markets, technologies, brands, and managerial tools. An interesting example is China-based Huawei Technologies (among world leaders in telecommunication solutions) which in 2001 opened a research center in Kista, in the midst of the so-called Swedish Wireless Valley.

  But how similar are the growth strategies of the new business players vis-à-vis those of Western transnational corporations? A study considering a sample of Russian and Chinese companies has found two typologies of strategic behavior in foreign markets. Some firms, such as Russian Lukoil (oil and gas), MTC (a telco), Vympelkom (a telco), and Vimm-Bill-Dann (food) have adopted prudent strategies, starting their internationalization process from setting up shop in neighboring markets: Ukraine, Belarus,  Kazakhstan, Romania, Bulgaria. Such internationalization strategies are similar to those chosen by many European firms in the early 1900s.

  However, the management guru Peter Drucker famously said that successful top managers are those who seek to focus their attention on existing opportunities, rather than on potential problems. Companies limiting their internationalization to neighboring countries, because they are similar in cultural, economic and political terms, are in effect focusing on the so-called liability of foreignness, which has to do with the structural diversity of foreign markets and strategic orientation of local firms, as well as with differences in legislation and climate conditions. Thus managers' attention, by focusing on potential problems in close-by markets, gets diverted from business opportunities in other markets.

  Many companies based in emerging economies have learned this lesson and have started early to internationalize in far-away markets: we can cite the experience of China Fishery Group (fish products), Corgi International (toys and collectibles), TechTronic industries (electrical equipment), Haier (white goods and consumer electronics), Sinopec (oil and chemical), CDC Software Corporation; and the same can be said for the following Russian companies: Gazprom (oil and gas), RusAL (metals), and Severstal (metals). In order to be able to become important players on global markets, the new multinationals must seize market share of the same order of magnitude than the one accumulated by their Western competitors over the past decades. Similar aggressive growth strategies on foreign markets have been adopted by Hutchison Whampoa (a Hong Kong conglomerate operating in logistics, telecommunications, and other industries), American Movil (a Mexican telco), and Mittal Steel (India and Indonesia), and many others.

  What impact can these strategies have on European corporations? Certainly the challenges posed by the local productive capacity of the new multinationals combined with their the access to the technologies, distribution networks, and sometimes the historical brands inherited through acquisition (such is the case, for instance, of the Italian Benelli which was acquired by the Chinese Quinjiang) are to be taken very seriously.

by Olga Annushkina,
Contract Professor of Strategy and Entrepreneurship, SDA Bocconi School of Management