Companies from Emerging Markets Take on Developed Countries

It was in 2009 when Mexican company Grupo Bimbo became a baking giant, as they bought part of Weston Foods for $2.3 billion. The acquisition made them the biggest baking company in US soil – a feat they topped a couple of years later when they bought Sarah Lee’s American baking operations for $960 million. For the past few months, they’re trying to further strengthen their foothold in the industry; by trying to acquire what’s left of Hostess Brands’ bread business, as the once iconic pastry company starts to close its business.

Grupo Bimbo isn’t just about buying other properties, though, as the company is responsible for several bread-related breakthroughs, including introducing sliced loaves to Spaniards, as well as being a pioneer in the packaging of bread in clear cellophane. Additionally, Grupo Bimbo has also proven itself to be masters of efficiency and logistics – it is their business savvy and cost-efficiency that allowed them to become successful in foreign soil, boasting of $10.8 billion of sales in 2011 alone.

At the moment, emerging market countries have more than 1,000 firms with annual sales that exceed $1 billion, but many of these firms are operating locally, as they find that their local economies are growing much faster than developed countries. Grupo Bimbo is the exception, as the company has shown an aggressive desire to venture abroad and buy foreign companies. Their drive to sharpen old skills while acquiring new ones has put them at the forefront of a massive shift in the industry.

Nowadays, companies from emerging markets are starting to compete in terms other than price – and for good reasons. The wages in countries with emerging markets are starting to rise, so the advantage of cheap labor is starting to disappear. Fortunately for these companies, they find that they can compete equally well, when it comes to innovation. For instance, Chinese electronics firm Huawei has half of their 150,000 employees working in R & D. Another Chinese company, Alibaba Group, has devised a way to solve one of the main problems in online selling, which is low trust, by starting their own escrow payment service, dubbed “Alipay.”

Reversal of Fortune

It is ironic, since a lot of western companies have outsourced or offshored their work due to cheap labor, but emerging giants nowadays are employing lots of western workers. For instance, India’s Tata Group is currently employing 45,000 people in Britain, while Chinese car parts maker Wanxiang has 6,000 workers in America.

Nothing is set in stone, though! It appears that the top ranks of the emerging-market multinationals are still more volatile than their Western peers, as half of the companies at the top in 2006 have already been overtaken. Unfortunately for Western companies, the other emerging giants that replaced them have proven to be more sophisticated and ambitious, serving as a dire warning for companies in the rich world that they need to be up on their toes or risk eating the dust of these new emerging titans.

Source: The Economist

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