Recently, I was invited to chair a panel debate at HEC Montreal on ‘Newly Emerged Economies and Traditional Multinationals.’ It was a lively session, which included Mr. Zubin Irani, Senior Managing Director, Commercial Companies, United Technologies India; Mr. Robert Bieler, Vice President of Investment for SNC-Lavalin Capital; Mr. Liping Xie, Senior Managing Director, UTC Aerospace-China; and Dr. Jianwei Zhang, President of Bombardier China.
At the start of the panel debate, I reflected on the paradox in the title: “Newly Emerged Economies and Traditional Multinationals”. While the companies represented by the esteemed panel, operated in more “traditional” industries such as building, construction, aerospace, or manufacturing, I argued that their approach to emerging markets was anything but “traditional”. In fact, it was exactly their non-conventional, customized and creative strategies in markets like China and India that allowed them to succeed, often despite intense domestic competition, unfavorable government policies, regulatory barriers and other challenges.
According to the International Monetary Fund’s latest growth forecast from September, China will continue to lead the world’s growth at 9% in 2012; India follows at 7.5%. By contrast, Canada growth is forecast at only 1.9%, the U.S. growth is at 1.8% and Europe is at an anemic 1.1%. It’s no wonder that in PriceWaterhouseCooper’s recently published annual CEO Survey, 84% of worldwide CEOs said they’ve fundamentally changed their company strategy in the past two years to focus on emerging markets, primarily China and India, where they are seeing growth. Although the pace of foreign-direct investment into China has slowed a little in recent months, the fact remains that China and India are the two nations who received the highest levels of FDI. But investment levels alone are not enough to succeed in these markets.
I then turned our discussion towards three focal areas where the panelists’ organizations have adopted creative and “non-traditional” strategies to succeed in these markets: Innovation, Talent and Sustainability. This ‘magic three’ is frequently cited as key to driving transformation and performance in fast-growing markets.
Each of the companies represented on the panel innovated in emerging markets through product or service customization. Liping Xie gave the example of Carrier Corporation, which set up an engineering center in Shanghai in 2002 based on the notion “In China, for China” to reduce costs and localize designs to better suit the China market. The center became the driving force for product innovation, and today 85% of all Carrier’s HVAC products sold in China are newly developed in China.
The availability of talent in newly emerged markets is universally regarded as the biggest constraint for MNC’s growth. Our panelists went so far as to say that those MNCs that win the talent war in China, will win in China — full stop. Despite a high level of education or high degree of enthusiasm, markets like China and India have limited supplies of skilled candidates.
The importance of employer branding in relation to attracting and retaining talent is something that Charlotta Lagerdahl, MSL China, touched upon during her recent talk at the Swedish Chamber of Commerce in Shanghai. You can read Charlotta’s post, From Mao to More: The Talent War in China which explains what China’s ‘Generation More’ expect from an employer today. In India, Hanmer MSL & the Indo-French Chamber of Commerce and Industry recently held a joint event which again explored, why you need employer branding. In markets such as India and China, this is not a nice to have, this is now a must have. You can read the wrap up executive report, Why You Need Employer Branding here.
Lastly, the panel shared their thoughts on sustainability. The aim to meet human needs while preserving the environment for generations to come is more crucial in China and India than possibly anywhere else in the world because unchecked rapid growth can have many negative consequences. The three dimensions of sustainability (or “triple bottom line”) consist of economic development, social development and environmental protection.
Zubin Irani shared a recent survey by Global Insight which showed 60% of Indian consumers viewed sustainability as very important when deciding which brands to buy. This emphasis is even higher than in developed countries like France, Germany or the U.S. To address this with UTC in India, Zubin shared sustainability examples among his own 3 key dimensions of products, processes and people: Otis Gen2 elevator products that deliver 70% energy savings; reduced factory emission processes that have awarded UTC the first prize from the Indian Bureau of Energy Efficiency – 4 years in a row; and building a culture among their people to engage in the community, resulting in 1 million trees planted with the Delhi government and over 200 schools served across India.
If you enjoyed this post, I also encourage you to take a look at my recent post on the Five Trends That Are Shaping Asia, which draws on a speech I did at the American Chamber of Commerce in Taiwan.