While many analysts are still skeptical of the near-term prospects for Indian and Chinese multinationals, IMD predicts they will rise faster and prove even more disruptive to certain industries than the Japanese who came before. Garelli thinks the Indians and Chinese will start to claim a significant share of key global markets within three to five years. Those markets are now much more open to newcomers, especially in the United States, where giant discounters distribute cheap products nationwide. Wal-Mart is already familiarizing consumers with mini-refrigerators from Haier, the poster child for Chinese potential. (The first Japanese cars attracted so little interest from American dealers that they had to sell through repair shops.) In China, says Garelli, the companies to watch out for are appliance makers like Haier and Midea, and electronics firms such as TCL. India offers a wider spectrum, including software companies like Wipro and Infosys and pharmaceutical makers such as Reliance.
Consumers in the United States and Europe have developed new buying patterns in recent years, aggressively seeking bargains that China and India are well positioned to provide, says IMD. Japan’s wages caught up with the West’s within 15 years, but with much larger labor pools, wages in China and India could take at least 30 years to rise that high. Thanks in part to the outsourcing boom, China and India are also developing world-class technology and manufacturing skills, as well as sophisticated management practices.
This openness to foreign investment should help companies from India and especially China hit the ground running. Japan, by contrast, was too closed in the 1970s to take advantage of investors. And while the Japanese still value loyalty to old business partners, companies in India and China are quick to dump a substandard supplier.
The new supernationals will likely develop in stages. With little experience in global branding, Chinese companies may have to marry with Western brands to get started. That’s why TCL makes everyone’s list of top new contenders. In November it merged its TV business with that of France’s Thomson, and last month did the same with Alcatel for mobile phones. Business historian Wilbur Chung of the Wharton School of Management thinks Western companies initially will stumble across these new rivals in “somebody else’s sandbox.” As American and European multinationals leave their mature home markets to chase growth and profits in emerging economies, they are likely to find the Chinese there first.
The skeptics are still very dubious, but some acknowledge that the rise of Chinese and Indian companies may be only a matter of time. When Bain & Co. consultants went looking for Chinese companies with the unique products, fast growth and financial muscle to make it as global brands, they found only nine candidates. But Bain’s head of China business, Paul DiPaola, concedes that all the elements are there: a large domestic market to build up scale, political stability and a trained labor pool. Tom Hout, a former Boston Consulting partner now teaching business in Hong Kong, thinks savvier Western companies learned from Japan and will not be blindsided by new Asian competitors. They will, however, have to keep their eyes open.
