The Economist: Tata sauce

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, 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.

Many emerging-market multinationals are focused companies that are admired in the West: the likes of India’s Infosys Technologies (for IT services), Brazil’s Embraer (aircraft) and South Africa’s MTN (mobile phones). But others are highly diversified. In some ways these groups look like throwbacks to old-fashioned Western conglomerates such as ITT. But in other ways they are sui generis: much more diversified and readier to blur the line between public and private.

The most remarkable of these is India’s Tata group, active in everything from cars to chemicals and from hotels to steel; Tata is so big that several of its companies are important multinationals in their own right (see article). But others are also global forces: they include Alfa from Mexico, Koc Holding from Turkey and the Votorantim Group of Brazil. And dozens more are trying to break free of their national moorings. Tarun Khanna, of the Harvard Business School, calculates that such organisations are the most common business form in emerging markets. In India about a third of companies belong to wider entities. In Hong Kong 15 families control more than two-thirds of the stockmarket.

There are plenty of reasons to doubt the durability of these business groups. Many of them have thrived because they have close relations with their national governments. They are far too susceptible to scandal (witness the current furore in India over the sale of mobile-phone licences to favoured groups). Others are incapable of managing their diverse portfolios. Western stockmarkets habitually apply a discount to conglomerates’ shares. Yet there is more to these groups than cronyism. A growing number of them are proving that they can compete in global markets as well as in sometimes rigged local ones. The Boston Consulting Group lists the rise of diversified global conglomerates as one of five trends…..Read More

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Posted by Jose Reyes on Mar 10 2011. Filed under Current News, Economy, Post To Slider. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry