Good Stuff Happens in 1:1 Meetings: Why you need them and how to do them well
Emnchec2011
1. EMERGING MULTINATIONALS FROM
LATIN AMERICA
Lourdes Casanova
INSEAD
lourdes.casanova@insead.edu
12 April 2011
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Agenda
The New Reality
I. Emerging
Mul.na.onals
II. Global La.nas
III. The Day A:er
IV. Looking Forward
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2. The new reality Dec 2008, Washington
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‘Nuestra hora’
CLACS (CEALC in Spanish), 23 Feb 2010 Playa del Carmen, México
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3. ‘La década prodigiosa’
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Agenda
I. Emerging
Mul.na.onals
II. Global La.nas
III. The Day A:er
IV. Looking Forward
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4. I. Emerging Multinationals L. Casanova
Numbers are Growing: 92 = 19% (FORTUNE 2010)
RECORD IPOs 2010
Brazilian state oil company Petrobras raised $70 billion (September 2010)
General Motors$22.1 billion (November 2010)
The Agricultural Bank of China raised $22.1 billion (July 2010) L. Casanova
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5. Market capitalization in US $ (31 December 2010)
1 Exxon-Mobil US 368bn
2 Petrochina China 303bn
3 Apple US 295bn
4 BHP Billiton Australia/UK 243bn
5 Microsoft US 238bn
6 Industrial Commercial Bank of China China 233bn
7 Petrobras Brazil 229bn
8 China Construction Bank China 222bn
9 Shell UK/Holland 208bn
10 Nestle Switzerland 203bn
Reliance, Petrobras, Tata Group among most innovative companies in the world (BW/BCG 09)
Carlos Slim, richest in the world, Mittal, Ambani and Deripaska in 10 richest
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Milestones Acquisitions ‘South’ to ‘North’
eMNC Country Acquisition (EU or US)
Bimbo Mexico Weston Foods operations in Canada (Dec 08) US$2.4bn
Sara Lee (US) (November 2010)
Tata India Jaguar (Ford) 2008, Corus (steel) 2006
Cemex Mexico Rinker 2007, RMC 2004
Hindalco India Novelis (Canada) 2007 (aluminium and copper)
CVRD (Vale) Brazil Inco (Canada) 2006
Lukoil Russia
$300 billion 2007 2000
Nelson 2005, Getty Petroleum
Lenovo China IBM PC 2004
Brazil, China, Kuwait, Qatar, Russia, Saudi Arabia, Singapore, ‘sovereign funds’
Western’ mul.na.onals are dependent for much of their growth on emerging markets
More beer, TVs, cell phones, refrigerators and (soon) cars sold in emerging markets than west
Brain drain reversal
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6. Being eaten by the dragon.
What it feels like to be bought by a Chinese firm . The Economist. Nov 11th 2010
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Reverse Innovation
US$250 notebook
US$2.500
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7. Research Areas
• Emerging mul3na3onals
• Khanna, T., & Palepu, K. (2006), ‘Emerging Giants: Building World‐
Class Companies in Emerging Markets, Harvard Business Review
• Van Agtmael. A (2007) The Emerging Markets Century.
• Ghemawat, P. & T. Hout (2008): Tomorrow’s Global Giants? Not the
usual Suspects. Harvard Business Review
• Ba_acharya A. & D. Michael. (2008). How local companies keep
Mul.na.onals at Bay. Harvard Business Review
• Ramamur., R. (2009) Emerging Mul.na.onals in Emerging Markets
• Khanna, T., & Palepu, K. (2010) ‘Winning in Emerging Markets ‐ A
Road Map for Strategy and Execu.on’, Harvard Business Press
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Growing Managerial interest
• Mckinsey (2007) Building Global Champions
• BCG (2006) New Global Challengers
• Accenture (2008) Mul.‐polar world
• BRIC from Goldman Sachs (2001) to Yekarterinburg (2009)
• UNCTAD (WIR), IADB, ECLAC
• Academic/Experts Networks
• WEF. The new Global Champions (2006)
• UNCTAD (2007) Experts mee.ng
• EmNet Network OECD (2007)
• FiveDiamond Conference (2008) (Columbia, FDC, ISB, Skolkovo,
Fudan)
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8. Research Areas: Multinationals
• The making of a mul3na3onal and Natural Markets: language, history
• Doz, Y. & Santos & Williamson. (2001) From Global to Metana.onal:
How Companies Win in the Knowledge Economy
• Guillén, M. (2001): The limits of convergence.
• Casanova, Lourdes (2002), ‘Lazos de familia: Las inversiones
españolas en Iberoamérica’, Foreign Affairs (Spanish version), vol. 2
• Ghemawat, P. (2004): Distance s.ll ma_ers. Harvard Business Review
• Rangan. S. and A. Drummond (2004) Explaining Outcomes in
Compe..on Among Foreign Mul.na.onals in a Focal Host Market.
Strategic Management Journal
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Agenda
I. Emerging
Mul.na.onals
II. Global La.nas
III. The Day A:er
IV. Looking Forward
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9. II. Global Latinas IDB/INSEAD project (2007-2009)
• Defining Global La.nas: ownership, geography, na.onality
• Excluded 100% state‐owned and financial ins.tu.ons in the first phase
• Assets in US or EU (coming of age)
• Unambiguous na.onality
• Ad hoc sample (21): Variety of sectors, sizes, public/private and countries
• Mexicans: América Móvil, Bimbo, Cemex
• Second phase: Grupo Carso, Grupo Modelo, Televisa, TV Azteca
• Brazilians: Vale, Embraer, Petrobras,
• Second phase: Banco Itaú, CSN, Pão d’Açucar, Sadia
• Emerging Global La.nas (SMEs): Concha y Toro (Chile), Natura & Politec
(Brazil), Pollo Campero (Guatemala) and Astrid y Gastón (Perú)
• Second phase: Chile & Argen.na: Grupo Luksic, Techint/Tenaris
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Internationalization Phases
Phase Years Economic Policy Strategy
I 1970 – 1982 Import substitution Timid expansion in natural market
II 1982 – 1990 Lost decade Survival
III 1990 – 2001 Privatization Competition at home
IV 2002 – 2008 Emerging markets Global Latinas: South – North
V 2009 – … ‘Natural Markets’ Natural Markets
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10. L. Casanova
Questions and methodology
1. Why have La.n American firms emerged and expanded beyond their
own regional markets?
2. What strategies did the Global La.nas adopt to expand their
opera.ons?
3. What are Global La.nas’ unique characteris.cs (especially regarding
their business model, strategy and opera.ons) that differen.ate them
from mul.na.onals corpora.ons from developed economies?
• Methodology
• Data from ECLAC, América Economía, IADB, UNCTAD
• Company reports, SEC filings, Investment bank reports
• Company visits and personal Interviews with top managers with open
ques.onnaire. Qualita.ve data
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11. Question 1. Why Global: Macro level
• MACRO ma_ers
• Economic vola.lity
• Liberaliza.on policies compe..on at home
• Trade Agreements: NAFTA, Mercosur
• ‘Stable framework’
• Free trade agreement for the region
• Economic bonanza 2002‐2008
• Commodity prices,
• Asia’s demand
• Government role: Brazil vs. Mexico
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Question 1. Why Global: Firm level
• Market seekers
• Efficiency (labor cost Mx< China in ’09)
• La.n America resources
• Hedge instability in home markets: Seeking (stable) markets
growth
• Compe..on at home best defense is to a_ack
• Percep.on of an opportunity
• LearnCompe..ve advantage virtuous circle
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12. Question 2. How? International Strategies
• Geographic diversifica3on as hedging
• Cheaper financing
• Brazilian companies more diversified expansion vs Mexicans (US)
• Smaller companies (IT Brazil) go global earlier than big MNCs
Phases Where: Natural Market How
1 Domestic Greenfield
2 Natural Market Acquisition
3 US/EU/Asia Acquisition
4 ‘coming back home’, Natural market Divest MNCs
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The Power of Natural Markets
• Markets that share language or history
• Connec.vity/network, informa.on flows, talent
• Moving to US/EU/Asia
• Spain, entry point to Europe for Spanish speaking La.n America
• Portugal, entry point to Europe for Brazilians: Embraer, Itau
• Angola, Mozambique entry point to Africa for Brazilians: Vale, Petrobras
• Southern states or with Hispanic entry point to US
• Only a:er succeeding in Natural markets they go global
• ‘Easier’ interna.onaliza.on: A_ract talent, knowing your compe.tor/client
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13. Innovation in Emerging Multinationals
• Innova.on in emerging mul.na.onals in La.n America
• Business model: Embraer’s reverse outsourcing
• Product: Natura
• Brazil’s ethanol
• Crea.ve industries: TV produc.ons, music, cuisine
• Outsourcing: Politec
• Marke.ng: Havaianas (Alpargatas)
• Social innova.on: CDI (Rodrigo Baggio)
• Patrimonio Hoy
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Question 3. Uniqueness
• Strong leadership at the top with long‐term vision
• Interna.onaliza.on as learning process
• Business model innova.on with efficiency in opera.ons (MLM)
• Understanding needs of the bo_om of the pyramid
• Ability to navigate through major crises
• Interna.onaliza.on as hedging
• Fast acquisi.ons to gain scale
• Flexibility and ability to adjust
• Learning and coopera.ng with Asian markets Mx vs Brazil
• Ownership: Family business and SOEs and Na.onal Champions, Brazil)
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14. Is Poverty a business issue?
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Agenda
I. Emerging
Mul.na.onals
II. Global La.nas
III. The Day A:er
IV. Looking Forward
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15. III. The day after: Coming back home
• La.n America: ‘pain but not panic’
• Intraregional trade growing
• Stock markets booming since March ’09 and external debt 20% of GDP
• Is there a La.n America?
• Mexico and Central America too close to the epicenter of the crisis
• Brazil emerging as a regional leader and La.n America
• South America emerging as an en.ty and now Cancún
• Coming back home
• Renewed interest for investments within your natural market
• Natural Markets more important than ever
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Looking South
• The ‘best of the class’ suffering more
• Risk is everywhere
• Stable currencies are not stable anymore
• Financing is difficult everywhere
• Opportuni.es: MNCs Disinvestments (2009)
• Bimbo acquired US opera.ons of Canadian food George Weston for $2.38 billion
• Luksic (Chile) buys back Banco de Chile from Ci. and
• Esteves (Brazil) Banco Pactual from UBS for US$2.5 bn
• Vale buys Brazil assets from Rio Tinto for US$1.6bn
• Local mergers in Brazil: Sadia‐Perdigão & Itaú‐Unibanco, Pao de Açucar+Ponto Frio
• Mexican Group Mabe buys Brazilian subsidiary of German BSH (owner of
Con.nental and Bosch) for US$35 m reiais
• Grupo México buys Asarco for US$7bn
• Petrobras acquired Exxon Mobil’s distribu.on assets in Chile (dec 08)
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16. Agenda
I. Emerging
Mul.na.onals
II. Global La.nas
III. The Day A:er
IV. Looking forward
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IV. Looking Forward:
the Role of the Private Sector
• MNCs create wealth for their home countries? Should emerging
countries have policies to support Outward Foreign Direct Investments
outside La.n America?
• Do emerging mul.na.onals have a social debt in emerging markets?
• Are ‘emerging markets’ natural markets for each other?
• Different models
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