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Business / Economy

'Global' road rougher for enterprises

By Zheng Yangpeng in Tianjin (China Daily) Updated: 2014-09-12 07:24

Though Chinese firms have been making big strides in the global arena, they are increasingly facing stiff competition from companies in other emerging economies, says a report published on Thursday by the Boston Consulting Group.

According to the global management consulting firm, the number of Chinese companies that have made successful inroads in overseas markets stood at 29 this year, compared with 30 in 2013 and 36 in 2009.

Though there has been a slight change, it does not indicate that the "going global" process of Chinese companies has stalled or declined. Rather, it reflects the stiff competition among the companies in various emerging economies. In 2006, when BCG first conducted the study, it had identified 100 "global challengers" from emerging economies, with 44 from China.

At the same time, companies from emerging economies such as Thailand and Turkey have increased their share. The 2014 BCG global-challengers list includes companies from 18 countries, eight more than on the original 2006 list. The BRIC nations of Brazil, Russia, India and China, once home to 84 challengers, are now down to 65.

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Carol Liao, managing director of BCG Greater China, said the drop did not reflect a setback for China's "going global" process in absolute terms. One of the key reasons, she said, is the quality of the companies on this year's list. "I think it is a fair statement that the 100 companies back in 2006 were not comparable with today's list," she said.

According to BCG's report, from 2008 through 2013, the 2014 BCG global challengers increased their employment by 32 percent, compared with 11 percent for the nonfinancial S&P 500. The average revenue per employee of the global challengers exceeded that of the nonfinancial S&P 500 companies - $479,000 compared with $440,000.

BCG selected the 100 global challengers from emerging economies through a set of quantitative and qualitative criteria. A company has to lead its domestic market in certain industries, and have annual revenue of at least $1 billion and overseas revenue above 10 percent of its total revenue or $500 million.

The rapid growth of developing companies in other emerging economies has also contributed to the lower growth of Chinese firms on the list.

Fast emerging firms are represented by Jollibee Foods, a quick-serve restaurant chain from the Philippines, Chile's Concha y Toro, the world's seventh-largest winery, and Thailand's Thai Beverage.

Another reason why there are fewer Chinese companies on the list stems from the attractive domestic market in China, said Liao. "Many Chinese companies are refocusing their attention on the domestic market," she said.

Three Chinese companies that made it onto the list for the first time include Tencent Holdings Ltd and Fuyao Glass Industry Group, due to their growing merger and acquisition activities abroad. Three companies have "graduated" from the list to become "global leaders": Huawei Technologies, Lenovo Group and Li & Fung.

Liao said that despite the progress, China's corporate sector still has some weak spots, like the lack of challengers in the consumer goods sector.

"Companies in the consumer goods sector who really want to expand globally have to have an acute sense of local customs and the ability to adapt. In this area, Western multinationals still have the upper hand," she said.

Rich Lesser, president and CEO of BCG, said the pressure to be global is less for Chinese companies, which explained the tepidness. But in the long term, being "global" is a very important aspiration and capability.

"In many other smaller economies, you have to be global. But here it is much more a management and leadership choice because the domestic market is among the largest in the world and growing substantially," he said.

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