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BCG Local Dynamos Highlight the Successes of Homegrown Emerging-Market Companies

Fast-Growing, Ambitious, and Focused on Their Home Markets, These Companies Are Winning Against Multinationals and Global Challengers

BOSTON, MA -- (Marketwired) -- 07/10/14 -- The 2014 BCG local dynamos are a group of 50 companies based in emerging markets that have succeeded by staying home and beating both multinationals and local, often state-owned companies, according to a report by The Boston Consulting Group (BCG).

While many emerging-market companies have global aspirations, the local dynamos are winning by catering to the needs of customers in their home market. Many of them are also developing world-class capabilities rivaling much larger, older companies, according to 2014 BCG Local Dynamos: How Companies in Emerging Markets Are Winning at Home.

Between 2009 and 2013, for example, the revenues of the local dynamos grew by 28 percent annually. This faster growth has generated even greater returns for shareholders. Between 2009 and 2013, their total shareholder return has risen 26 percent annually, much steeper than benchmarks composed of similar companies such as the MSCI Emerging Markets index.

BCG first published its list of local dynamos in 2008. "We decided to reprise the list because emerging markets, and the companies within them, have changed so dramatically in the past six years," said David C. Michael, a BCG senior partner and coauthor of the report. "As global growth has slowed, global companies have flocked to emerging markets. The local dynamos have thrived despite rising competition."

Five examples illustrate the successes of the larger group of 50 local dynamos.

Xiaomi. This Chinese mobile-phone company has skyrocketed to success by capturing the enthusiasm of young people in China for the Internet. The company, founded in 2010, sold 18.7 million smartphones in China in 2013 at prices about half of those of comparable Samsung or Apple phones. Chief executive Lei Jun has ambitions to sell 60 million smartphones in 2014.

BIM. With more than 4,000 stores -- up from 21 in 1995 -- and despite the presence of global competitors Carrefour, Metro, and Tesco, BIM is the largest grocer in Turkey. BIM, a discounter with bare-bones store interiors and a product portfolio limited to 600 items, has revolutionized the retail market in Turkey, which historically has had a low share of modern retail shopping. BIM has won over the newly emerging middle class with good quality, low prices, and convenience.

Discovery Health. With more than 2.4 million members, Discovery Health is the largest private health-insurance administrator in South Africa. But what makes Discovery so intriguing is that it has changed the rules of health insurance. It is encouraging healthy behaviors, such as exercising or buying beneficial foods, by giving points similar to frequent flyer miles. The rewards range from reduced premiums to exotic holidays.

Banco Mercantil del Norte. In Mexico, Banco Mercantil del Norte, or Banorte, wanted to reach potential customers without investing in expensive bank branches. Banorte decided to rely on other companies' bricks and mortar, partnering with Telecomm-Telegrafos, a rural telecom operator with 1,621 retail locations; 7-Eleven, one of the fastest-growing convenience chains in Mexico, with 1,720 contact points; Tiendas Extra, a convenience store with 883 locations; Soriana, a supermarket chain offering 633 points of sale; and Grupo Control, with 75 points of contact as of March 2014. These partnerships aim to offer basic financial products such as deposits, credit cards, remittances, and withdrawals.

Shriram Transport Finance. This company was founded in India in 1979 to provide financing to owners of small trucks, a segment that financial institutions were largely ignoring. Shriram originally started financing new vehicles but soon realized that the owners could not afford the payments, so the company entered the used-truck financing market. Shriram has captured about a 25 percent share of the preowned commercial-vehicle financing market; most of the rest of that market is dominated by unorganized private financiers.

The report contains dozens of similar case studies of local dynamos. "These companies are not relying on low costs and cozy relationships with the state to prosper. They are truly dynamic and farsighted," said Vincent Chin, a BCG senior partner and coauthor of the report.

In order to identify the 50 local dynamos, BCG screened thousands of companies in search of innovative business models and approaches to winning in emerging markets. We conducted a broad search for successful private companies that had strong reputations and a domestic focus but did not have traditional sources of advantage, such as government ownership, large land ownership, or a monopoly license. We then narrowed the list to those companies that were succeeding by adapting to the unique challenges of their home markets and were among the leading private-sector companies in their industries.

The report, 2014 BCG Local Dynamos: How Companies in Emerging Markets Are Winning at Home, concludes with recommendations for global companies seeking to compete in these markets. These companies need to emulate the local dynamos -- their ambition, localized business models, and their ability to hire top local talent -- without abandoning their own core advantages, such as scale, brand, quality, and capital.

A brief video featuring David C. Michael discussing the report further can be viewed here.

A copy of the report can be downloaded at www.bcgperspectives.com.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or [email protected].

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries. For more information, please visit bcg.com.

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