On February 7, 2013, José Plá Barber, who holds a Ph.D. in Economics and Business Administration from the University of Valencia, delivered Universidad ORT Uruguay lecture at Universidad ORT Uruguay on a topic that is becoming increasingly significant in the global economy. “New Multinationals from Emerging Countries: How to Turn Necessity into a Virtue?” was the title of this talk, in which the speaker analyzed the common behavioral patterns of multinational companies emerging from developing countries, which distinguish them from traditional models.
Barber, who also taught the course on Internationalization Strategy as part of the Master of Business Administration (MBA) program, began his speech by discussing how this new economic and business phenomenon—which often goes unnoticed—is reshaping the landscape of “global competition.”
“A company of this type isn’t one that sells products, nor is it one that manufactures in different countries; it’s a company that has value generators in different countries, and these come from emerging markets,” Barber explained. He also noted that, in addition to changing the geography of multinationals, companies from emerging markets are closer to their founders and are not as concerned about “market volatility,” which can be an advantage.
“In 2011, 25% of all foreign investment worldwide came from developing countries,” Barber noted, offering a global overview of the significance of these rapidly expanding new multinationals—for example, those from China, India, and Brazil
Advantages. Barber spoke about stereotypes. These companies are often viewed as producers of unsophisticated products, with outdated production facilities, little-known brands, and limited marketing expertise. However, he clarified, they also have several advantages: they come from countries with specific natural resources or significant markets. Others, he noted, come from countries where the entrepreneurial spirit thrives or where government guidelines are very clear.
Another advantage Barber mentioned is that, in many cases, the strategy of multinationals from emerging markets focuses on day-to-day execution: “They have a more flexible timeline, are creative in managing costs, and are obsessed with operational excellence.”
In addition, they are better able to identify market niches than multinationals from developed countries, have the ability to operate in challenging environments—such as regions plagued by corruption or a shortage of suppliers—and possess strong cross-cultural skills, tending to be more humble and trusting of foreign partners.
Barber also pointed out that these new companies have a strong ability to make smart acquisitions: seeking out capabilities they lack or consolidating their global position through integration strategies. “They were founded on the philosophy of being globally efficient and adaptable to changing needs,” he said.
Difference. These types of companies that are cornering markets follow a different path to internationalization than developed countries. Barber noted that in developed countries, this process tends to be sequential and gradual. Emerging countries, on the other hand, “enter new markets very quickly.”
“Companies from developed countries first expand into similar countries or those with very different risk profiles, and then into others,” he said, adding that multinationals from emerging markets follow “a dual approach: expanding into both developed and emerging markets.” Furthermore, companies from developed countries enter new markets through subsidiaries, which is a very slow process. Companies from emerging markets, on the other hand, do so through partnerships.
Multilatinas. To refer to the region, Barber used the term “multilatinas,” which refers to Latin American companies that are expanding. The expert categorized them into three groups: those entering neighboring countries, those also entering the United States, and those expanding into Europe.
Brazil is the leading country among Multilatinas, but other countries are catching up rapidly, such as Mexico and Chile.
Barber also mentioned “springboard countries” to refer to companies that use their subsidiaries as a catalyst for growth. Thus, rather than growing from the company’s home country, it uses one of its subsidiaries because of better conditions for growth, as well as economic and cultural proximity.
Spain is a clear example of this, as it acts as a mediator—among other things—for Nordic companies looking to establish a presence in Latin America. Barber emphasized that Uruguay is well-equipped to play this role.
Challenges. Finally, Barber discussed the challenges faced by multinational companies from emerging economies as they seek to grow and expand. First, he emphasized, it is necessary to improve the country’s image and the company’s image, as these serve as the gateway to new markets.
“We also need to address governance issues,” he added, “by incorporating internationalization experts into our workforce. Furthermore, we must adopt a new perspective on corporate responsibility and ethics, develop a new environmental consciousness, and eliminate corruption.”