Emerging-Market Companies Shaking Up Global Competition in Automotive Supply, Construction Equipment, and Chemicals

MUNICH, GERMANY--(Marketwired - Jun 24, 2015) - Companies based in emerging markets are dramatically transforming the global automotive-supply, construction equipment, and chemical industries and rapidly closing the gap with leading multinational corporations (MNCs) in terms of global revenues, according to a new report released today by The Boston Consulting Group (BCG).

The report, titled Dueling with Dragons 2.0: The Next Phase of Global Corporate Competition, notes that the top ten emerging-market players (EMPs) in most industries have been growing five to ten times faster than the ten leading MNCs, driven in large part by rapid growth in their home markets, cost advantages, and acquisitions. EMPs already account for three of the world's five biggest global chemical companies. If EMPs can maintain their current growth rates, three EMPs will rank among the top five construction-equipment companies in 4 years, and the automotive-supply industry will reach that point in 13 years.

"Even though the automotive-supply, construction equipment, and chemical industries are radically different in terms of their natures and competitive landscapes, the leadership positions of multinationals in each industry are under urgent threat from emerging-market players," says Nikolaus Lang, a senior partner, lead author of the report, and head of BCG's Global Advantage practice in Central Europe, the Middle East, and Africa. "Many MNCs will have to undergo a full transformation of their organizations to remain competitive with these new challengers."

The report, which draws on insights from more than 100 key industry executives and experts, is part of ongoing research by BCG into market disruptions from global challengers -- fast-growing emerging-market-based companies with worldwide ambitions.

In previous installments, we have identified the patterns that ultimately led to the disruption of the photovoltaic and telecommunications equipment industries. The new report finds that similar trends are occurring in the automotive-supply, construction equipment, and chemical industries. First, the, challengers become leaders in their home markets. They then gain scale and experience as low-cost providers in other rapidly growing emerging markets. Next, the challengers use their low-cost advantages to expand into developed markets. "In the final stage, the challengers acquire the capabilities they need to compete head-on with MNCs for global leadership," says Andreas Gocke, a BCG senior partner and the firm's global sector leader for process industries.

This does not mean that the game is over for MNCs. "In all three industries, several MNCs are proving to be agile enough to defend their leadership positions and to even grow in new markets," says Brian Collie, a BCG partner and a coauthor of the report.

The report offers a mix of strategies for both MNCs and EMPs that seek to win in the next phase of intensifying global competition. The strategies focus on three dimensions: products and technology, operations, and go-to-market approaches.

The key strategies for MNCs include the following:

• Focus on retaining global leadership in technology and innovation.
• Transform operations to become more cost-competitive with EMPs.
• Target rapidly growing global demand for "value" and "middle market" products, rather than only high-end goods that often are too complex and expensive for the needs of many customers in emerging markets. 
• Expand manufacturing and distribution footprints in emerging markets through local partnerships.
• Create differentiation from low-cost competitors by expanding offerings of value-added services.

The key strategies for EMPs include the following:

• Boost spending on R&D to close the technology gap with MNCs.
• Broaden product portfolios to offer a greater range of offerings to key customers.
• Strengthen the global value of emerging-market brands.
• Build global manufacturing and operations footprints to better serve the needs of key customers around the world.
• Develop the organizational capabilities, such as talent management and M&A expertise needed to realize global aspirations.

Improving organizational capabilities is particularly important for EMPs that are striving to become global leaders in their industries. "We often find that, during the years of hypergrowth, emerging-market-based companies did not have sufficient time to professionalize their processes and capabilities," says Bob Zhai, a BCG partner and a coauthor of the report. "This now needs to be an urgent priority."

BCG has developed an approach for success in the increasingly competitive global environment that applies to both MNCs and EMPs. Companies first must acquire a clear understanding of the market forces, technological trends, and customer demands that are reshaping their industries. They then need to develop a winning mix of strategies covering the localization of the whole value chain. Finally, companies need to pursue those strategies relentlessly. Properly aligning their organizational and governance structures and exploring partnerships are two key ways to prepare for change.

"Globalization will continue to bring dramatic shifts in the automotive-supply, construction equipment, and chemical industries," says Lang. "To win in these times of turbulence, companies will have to be both agile and decisive."

To request a summary of the research findings or to arrange an interview with a BCG expert, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 82 offices in 46 countries. For more information, please visit bcg.com.

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