Local companies struggling to keep pace with Chinese rivals: BCG

Indian companies seem to be struggling to keep pace with their Chinese rivals, reveals Boston Consultancy Group (BCG) survey that shortlists companies with potential to find a place in the Fortune Global 500 club in the next five years.

Only two Indian companies found a place in BCG’s fourth edition of the annual report on year’s 100 “rising stars” of business from developing economies, as against 10 from China.  

Bharti Airtel and Lupin Pharmaceuticals were the two companies among the 23 new companies picked by BCG from 16 emerging countries globally.

This takes the number of Indian companies to 20 as against 33 Chinese firms in the list of 100 companies that BCG believes could leapfrog past established multinationals in global industry rankings.

BCG’s study, “Companies on the Move: Rising Stars from Rapidly Developing Economies Are Reshaping Global Industries”, is another entrant to the mini-cottage industry that has sprung up in recent years comparing the Chinese and Indian business.
A lot of Chinese companies that have cashed-in the natural resources and commodities boom find a place in the list.

“Many of them have found huge backing from the state when they have gone to Africa for securing energy needs,” Sharad Verma, managing director of BCG New Delhi, and an author of the report, adding that there is a lesson for India to back energy and mining-focussed firms.

Still, Verma says that it would be unfair to study the report purely on the basis of the number of companies that enter the list.
“Yes, China has been very encouraging to business. But then ever since we first carried out the survey, we have seen Indian companies holding on while many of the Chinese firms have actually slipped out,” said Verma.

There were 40 Chinese companies in 2006, the first study by BCG, many of which were later replaced by companies from both China and other emerging economies.

So what do all these 100 firms have in common? According to the study, all of these companies have three central things: Having revenues of at least a billion dollars; at least 15% of total sales made outside your home turf and finally, a sound business model - read no body shopping or outsourcing.

Nonetheless, as many as four Indian firms from the auto and auto-ancillary space are among the 20 Indian firms, reflecting the growing dominance of the India firms globally.

Mahindra & Mahindra, Tata Motors, auto-ancillary firm, Bharat Forge and two-wheeler maker and Bajaj Auto Ltd find a place while Hero Honda, world’s largest bike manufacturer, was not considered as the study does not counts joint ventures. “But going forward, Hero would definitely be company to watch out for,” Verma said.

The study lauds Bharti for what it says was a “radical step” of outsourcing part of its network. This provided the company with more flexibility as the company does not have to bother with maintaining its own network infrastructure.

Bharti’s strategy of aggressively acquiring telecom firms - including the $10.7 billion acquisition of Zain’s African assets — also made the consultancy pick the company.

Lupin was picked by the consultancy for it believes the company is growing aggressively in the world’s two largest pharmaceuticals markets — the US and Japan - thereby helping the firm record $1 billion in revenues last year.

In America alone, Lupin through its subsidiary posted a 92% growth rate.

Some of the other Indian firms are Vedanta Resources Plc, Reliance Industries Ltd, Tata Steel Ltd, and engineering and construction major, Larsen & Toubro.