Action IS0701: ‘Comparative analysis of enterprise data: Industry dynamics, firm performance, and worker outcomes.’

1. Fernando Alonso Complutense University of Madrid 29th April 2011 Action IS0701: ‘Comparative analysisof enterprise data: Industry dynamics, firm performance, and worker outcomes.’ The impact of the southern multinationals on theEuropeanUnionEconomy Multinationals from emerging economies. Leuven, 2011

2. INDEX Emergingeconomiesleaderships (2) Worldrelevance (3-12) Tipology (mainfeatures) (13-15) Strategies (16-19) European role: Case Study (20-26) Conclusions (27) Multinationals from emerging economies. Leuven, 2011

3. Emerging colossus leaderships Multinationals from emerging economies. Leuven, 2011

4. Emerging Multinationals Multinationalcompaniesfromtheemerging world are a relatively new phenomenon. A decadeago, 20 companieson the Fortune Global 500 list were based in emerging economies; three years ago, 70 were. In all, emerging economies are home to an estimated 21.500 multinationals. Over the past decade the world’s corporate pecking order has been disturbed by the arrival of a new breed of plucky multinationals from the emerging world. These companies have not only taken on Western incumbents, but also snapped up Western companies and launched exciting new products. They have challenged some of the West’s most cherished notions of how companies ought to organise themselves. Multinationals from emerging economies. Leuven, 2011

5. Relevance of FDI from Emerging Countries Multinationals from emerging economies. Leuven, 2011 Source: Comtessi y Hoda from UNCTAD Database

6. Economy size and TNTs development Slowing GDP growth levels Causabilityreasonsbetweenthe GDP growthcouldexist; theinsertion in the global economicsystem and theconsolidation of born global companies. When USA dominatedtheworldeconomicsystemwithhalf of theworldeconomy (60´s), itsmultinationalsconqueredtheglobe. At present China and otheremergingeconomies (BRICM) are taking off, theirmainenterprises are reachingleadership in theworldcompetition. Multinationals from emerging economies. Leuven, 2011

7. Projected growth - new multinationals vs.GDP Multinationals from emerging economies. Leuven, 2011

8. China • China produced the most new multinationals between 2005 and 2009, rising from 54 in 2005 to 141 in 2009. This came against a backdrop of extremely strong export as well as overall economic growth in China during which its share of the world economy rose from 9.5% to 12.1%. • The ranking demonstrates that size matters; the countries with the largest economies in the sample are China, India and Korea. These countries also produced the most new multinationals. But trade openness also matters; Singapore and Malaysia outstrip Brazil and Russia in the number of new multinationals they produce, but have much smaller economies. For example, Brazil’s GDP is nearly seven times larger than that of Malaysia, but there were 25 fewer new multinationals in Brazil than in Malaysia in 2008.

9. Estimations New Multinationals (global) We estimate that the total number of new multinationals from these 15 key emerging economies rose significantly in the years preceding the global economic downturn. There were 352 new multinational companies which emerged in 2005, rising to 613 in 2008, before decelerating to 470 during the global economic recession. Multinationals from emerging economies. Leuven, 2011

10. New Multinationals (Countries) Multinationals from emerging economies. Leuven, 2011

11. Ranking Forbes 500

12. Stock Exchange Market ranking Multinationals from emerging economies. Leuven, 2011

13. From the south to the north Multinationals from emerging economies. Leuven, 2011

14. Domestic Market Champions International adventure Regional dimension World Leadership Steps to reach their World position • There are twodifferenttypologies: • Enterpriseswithlongexprience in domesticmarkets, highvolatilityenvironment and flexible organizationalstructureswith horizontal integration • Enterprisesclasified as bornglobals. • Both of themhave a commonpattern: Takeadvantage of difficulties, intuitiontobuy sectorial oportunities and flexible structurestoget a perfectadaptationprocesstothemarketconditions. 1 Multinationals from emerging economies. Leuven, 2011 2 3 4

15. Domestic/Regional/Global Championships As economic and political power shifts worldwide, ‘new champions’ are emerging regionally that force us to rethink solutions to global and industry challenges. How can old and new champions collaborate in a highly competitive global environment? Theirowndomestic histories determine and clarifyperfectlytheevolution in chaoticsituations. One of themainreasonstoinvest in developedcountriesistheposibilitytoaccesstolowinterestrates in integratedfinancialsystems. Multinationals from emerging economies. Leuven, 2011

16. Methodology and expansion Take some factors in account Multinationals from emerging economies. Leuven, 2011

17. Subsidiaries Reply the headquarters structure Multinationals from emerging economies. Leuven, 2011

18. Ilustración Multinationals from emerging economies. Leuven, 2011

19. Motivations to invest abroad • According to the main stream of international business literature on the topic of multinationals from emerging countries, there are generally five motivations for multinationals to invest abroad; they seek resources, technology, markets, diversification, and strategic asset (e.g., Dunning, 1993; Khan, 1986; Wells, 1983). A careful analysis of the data and the investment by multinationals indicates the similar motivations. • Initially, some Chinese multinationals invest abroad to acquire natural resources or sustain the export markets; with increased international operations, however, they may use their activities as a means to improve their global market position by acquiring new sources of competitive advantage. Multinationals from emerging economies. Leuven, 2011

20. Russian TNCs destination Multinationals from emerging economies. Leuven, 2011

21. Case Studies • DoubleStar Group is the market leader in the Chinese tire and rubber industries. However, it is currently diversifying its business and it is investing in other sectors, such as shoes or sportswear. The Chinese group employs more 40,000 workers and has 140 companies. The group is looking at the possibility of exporting all of its products to the European market. Initially, the decision was taken to focus solely on industrial rubber products made in China. They are also studying the possibility of introducing the tire brand DoubleStar into Europe. This initial phase is expected to see a total investment of between 12 and 14 million euros in Catalonia. • The Chinese company has decided to open its base in Catalonia thanks to the Chinese-Spanish Commercial Office (OCHE), which aims to help and attract Chinese companies to open up in Spain. It focuses on three Chinese business institutions: the Committee for China’s Economic International Promotion, the Chamber of Commerce and the Foreign Affairs Office of Quingdao. OCHE director, EsteveSolanes, said that “an economy such as China’s offers many possibilities and one of our main objectives is to enable the involvement of as many of our own home businesses in order to generate new economic activity”. Multinationals from emerging economies. Leuven, 2011

22. China Industrial and Comercial Bank ICBC, the Industrial and Commercial Bank of China, which is the largest by market capitalisation and the most profitable bank in the world , recently announced the opening of its five branches in European countries apart from Luxembourg. The bank has also renamed its Luxembourg subsidiary ICBC Europe. After the official opening of branches in Paris, Brussels, Amsterdam, Milan and Madrid, Luxembourg will serve as the headquarters for ICBC business in Europe. It took Luxembourg Finance minister Luc Frieden two years to convince the Chinese bank, which can boast 240 million customers, about the opportunities in Luxembourg, the Finance minister Luc Frieden told the press. "It is an enormous recognition for Luxembourg to have been chosen as European headquarters by ICBC, which is the world’s largest bank. For years now, our strategy has been to act as a gateway by which non Europeans can enter the European markets. This is good news for our financial centre and for Europe on a whole". More and more Chinese companies are investing in Europe and many of them are long term partners of ICBC. Luxembourg domiciled funds invest €20 billion in the Chinese market each year. Multinationals from emerging economies. Leuven, 2011

23. India TATA Industries Tata in Europe Several Tata companieshave a strongpresence in Europe, including in the UK, Germany, France and Switzerland.  Tata companies BrunnerMond Jaguar LandRover TajHotels Resorts and Palaces Tata AutoComp Tata Communications Tata ConsultancyServices Tata Global Beverages Tata Interactive Tata AG Tata Motors Tata Technologies Multinationals from emerging economies. Leuven, 2011

24. Multilatins (CEMEX) CEMEX is a global building materials company that provides high quality products and reliable service to customers and communities throughout the Americas, Europe, Africa, the Middle East, and Asia. Their operations network produces, distributes, and markets cement, ready-mix concrete, aggregates, and related building materials in more than 50 countries, and we maintain trade relationships in close to 100 nations. The company was founded in Mexico in 1906, and it have grown from a local player to one of the top global companies in building materials industry, with approximately 47,000 employees worldwide. The headquarter in Europe is located in Madrid since a decade. It includes its operational world managing department and the research center of the company. Multinationals from emerging economies. Leuven, 2011

25. Projections India is expected to produce the most new multinational companies, overtaking China as potentially the emerging world’s largest source of new multinationals; the South American countries (Argentina, Brazil, Chile and Mexico) are expected be present in the European Market because their cultural performance and geo-proximity (Multilatins or GlobalLatins). the export orientated South East Asian countries (Malaysia and Singapore), oil-rich Russia and reindustrialized South Korea are expected to continue to produce large numbers of new multinationals. Other countries (South Africa, Egypt, Morocco, Turkey, could appear in the next years with new patterns in emerging multinationals. Multinationals from emerging economies. Leuven, 2011

26. Current and projected share of new multinationals Multinationals from emerging economies. Leuven, 2011

27. Conclusions Relevance Features Expansion Future India & China Flexibility Forbes 500 Mergers & Adquisitions • India (software & financialservices) • China (Industry) • Multilatins (experiencedsectors) (1989) • -New actors • + 2000 Multinationals from emerging economies • 12% FDI to developed countries • Domestic training: (volatility). • Dinamic & rapid decisions adapted to the environment • Buyenterprises in objectivemarkets • Jointventuresis a residual method • Capabilitytobeadaptedto new situations.

28. Thanks for your attention falonsog@ccee.ucm.es