The Boston Consulting Group’s (BCG’s) “Global Challengers List” for 2011, continues to be dominated by companies from China, India, Brazil, Mexico and Russia, though their collective share has fallen. Africa, with four entries, is a notable entrant in the most recent list. The firms that qualify are predominantly characterised by innovative business models in tune with emerging market realities and the financial puissance to avail of opportunities to buy assets globally and compete with established competitors from developed economies. Twenty Indian companies have made the list, a number exceeded only by China with 33. However, all Indian “challengers” are privately owned, unlike their Chinese counterparts, where a significant number are state-owned enterprises or have substantial government holding. Six of the 20 Indian firms belong to the Tata Group, while the rest expectedly comprise sector or industry leaders in India. By industry, “automobiles” (including ancillaries) is the largest contributor with four listings, followed by “information technology” and “engineering” (three each), “mining and metals”, “pharmaceuticals”, “telecom”, “engineering”, “diversified firms” (two each) and one each from “FMCG” and “steel”.
The arrival of these firms on the global stage is a consequence of the post-liberalisation ethos in India, following the reforms of 1991. They are, in Prime Minister Manmohan Singh’s words, the “children of liberalisation”, characterised by soaring global ambitions, undeterred by the presence of incumbents. What started as a defensive response to increased competition and the limitations of the Indian market has now assumed a “me-first” character. These firms, as well as several other Indian enterprises, are aggressively scouting for natural resources to fuel their expansion plans as well as acquiring companies internationally to achieve both scale and scope, and expand the geographies in which they operate. The rapidly growing Indian market puts these companies in a sweet spot, in that they can now leverage their presence in both domestic and global markets. For new products and services, gaining economies of scale in domestic markets that can be exploited domestically is a strategy that we could increasingly expect to see in the days to come.
Several of them are already among the top-ranking firms globally in their respective industries. For example, Tata Steel, through the acquisition of Corus and smaller firms in Egypt and Malaysia, is the world’s fifth largest steel producer. Reliance Industries’ grassroots refineries in Jamnagar are the world’s largest, while Hindalco and Vedanta are among the world’s largest producers of non-ferrous metals. Bharti Airtel’s acquisition of Zain has allowed it to compensate for the saturation of the Indian market, following 10 years of hyper growth, by operating in an as yet untapped geography.
A word of caution is in order — the reform agenda is far from complete. India is still one of the most difficult places in the world to do business in, as reports by diverse agencies indicate. If Indian companies have flourished and gone on to establish a global footprint, it is despite numerous hindrances by way of outdated regulations, red tapism, bureaucratic apathy and political corruption. Successive governments have admittedly made efforts to simplify the regulatory process and establish more responsive administrative mechanisms, but progress on the ground has been tardy. Getting the policy framework right and addressing supply-side constraints can still unleash many more “global challengers” from India.
