NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

The January 10th edition of the Economist takes note, in two separate pieces, of the huge successes of a handful of large MNCs.

It highlights how these firms have successfully shaken up their industries and acquired well-known brands in their efforts to capture large swaths of global market share. Usually this wouldn’t mean much for the BoP. In fact, what does the potential acquisition of a luxury brand like Jaguar, or a deal for a steel giant, “cooked up… [by father and son] during their annual skiing holiday in St. Moritz,” have to do with the BoP?Maybe not much, but maybe the Economist is on to something. What the magazine was so interested in reporting was not the private sector’s search for growth, but rather that all of these MNCs are from “poorer countries” (India, Brazil, China), and each one is making major headway in capturing rich markets. They have also done well in their home markets, meaning that while we are definitely talking about an internationalized business elite, we are talking about one that does business at home, too.

The emergence of ?developing country’ MNCs – Embraer, Mittal, Tata Motors, Cemex, and others – seems to turn on its head the anti-globalization movement’s typical characterization of MNCs as Western neocolonial forces working to suck developing countries dry. One wonders if soon the “Western” element will be conveniently dropped from those arguments about capitalist imperialism, or if the arguments will have to be re-defined altogether.

But rhetoric aside, these articles and this trend pose interesting questions about how these MNCs will be viewed by the very large BoP populations in their home countries. Will these MNCs be viewed as a source of national pride, of the hope of a more prosperous future for all? Or will they be seen as profiting from an abundance of cheap labor to make their fortunes abroad and become focal points of social agitation? Will they be icons of the “haves” to the have-nots, or will they be seen as job-creators and leaders of national growth?

From the companies’ perspective, more questions abound: how will these MNCs view their relationship with the BoP? Although the sample size is small, it seems that already a couple of these emerging market MNCs have latched on to the idea of the BoP as a market worth catering to. NextBillion has written extensively about Cemex’s Patrimonio Hoy program that enables low-income families to more easily finance the purchasing of materials to build new homes. We have also covered the much-awaited and hotly debated Tata 1-lakh “People’s Car” – recently released and dubbed the Tata Nano – in great detail.

These examples may be evidence that MNCs originating in emerging markets are better positioned, more capable, and possibly more willing to serve BoP markets as part of their overall business plan. True, the fact that Brazilian regional jet specialist Embraer is now the world’s third-largest aircraft company doesn’t mean much for a favela resident who is unlikely to ever ride on one. But it’s worth noting that Ratan Tata has been championed by a number of NextBillion commentors as an innovator for India at large, and attracts a huge amount of national pride. Development and innovation by Indians, for many Indians, if you will.

Every emerging market MNC mentioned by the Economist article, including Tata Motors, counts low-cost labor in their home countries as a crucial element of their competitive advantage strategy. I would suggest, however, that unlike the traditional MNCs that hail from advanced economies, these new players are unlikely to draw much criticism for this advantage. That is, so long as these companies continue to inspire the hope that their entire countries are rising with them.

I’d welcome all readers’ contributions and comments on the roles, both positive and negative, that these new MNCs may play for the BoP.