EMERGING MULTINATIONALS FROM        LATIN AMERICA          Lourdes Casanova                 INSEAD        lourdes.casanova...
The new reality Dec 2008, Washington                                                                 L. Casanova          ...
‘La década prodigiosa’                           L. Casanova        Agenda       I.  Emerging
         Mul.na.onals
     I...
I. Emerging Multinationals                        L. CasanovaNumbers are Growing: 92 = 19% (FORTUNE 2010)                 ...
Market capitalization in US $ (31 December 2010)   1      Exxon-Mobil                              US                     ...
Being eaten by the dragon.      What it feels like to be bought by a Chinese firm   .   The Economist. Nov 11th 2010      ...
Research Areas• Emerging
mul3na3onals
 • Khanna,
T.,
&
Palepu,
K.
(2006),
‘Emerging
Giants:
Building
World‐   Class
Compan...
Research Areas: Multinationals• The
making
of
a
mul3na3onal
and
Natural
Markets:
language,
history
 • Doz,
Y.
&
Santos
&
W...
II. Global Latinas IDB/INSEAD project (2007-2009)• Defining
Global
La.nas:
ownership,
geography,
na.onality
  • Excluded
10...
L. Casanova            Questions and methodology1.
Why
have
La.n
American
firms
emerged
and
expanded
beyond
their
 own
regi...
Question 1. Why Global: Macro level• MACRO
ma_ers
    • Economic
vola.lity
    • Liberaliza.on
policies

compe..on
at
hom...
Question 2. How? International Strategies     • Geographic
diversifica3on
as
hedging
       • Cheaper
financing
     • Brazi...
Innovation in Emerging Multinationals• Innova.on
in
emerging
mul.na.onals
in
La.n
America
 • Business
model:
Embraer’s
rev...
Is Poverty a business issue?                             L. Casanova          Agenda         I.  Emerging
           Mul.n...
III. The day after: Coming back home• La.n
America:
‘pain
but
not
panic’
     •  Intraregional
trade
growing
     •  Stock...
Agenda                           I.  Emerging
                             Mul.na.onals
                        II.  Globa...
InnovaLatino• Joint
OECDdev/INSEAD
research
funded
by
Fundación
Telefónica
  • Innova.on
for
development
from
an
emerging
...
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The Rise of Emerging Multinationals from Latin America

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Emnchec2011

  1. 1. EMERGING MULTINATIONALS FROM LATIN AMERICA Lourdes Casanova INSEAD lourdes.casanova@insead.edu 12 April 2011 L. Casanova Agenda The
New
Reality
 I.  Emerging
 Mul.na.onals
 II.  Global
La.nas 
 III.
The
Day
A:er 
 IV.
Looking
Forward
 L. Casanova 1

  2. 2. The new reality Dec 2008, Washington L. Casanova ‘Nuestra hora’CLACS (CEALC in Spanish), 23 Feb 2010 Playa del Carmen, México 4 L. Casanova 2

  3. 3. ‘La década prodigiosa’ L. Casanova Agenda I.  Emerging
 Mul.na.onals
 II.  Global
La.nas 
 III.
The
Day
A:er 
 IV.
Looking
Forward
 L. Casanova 3

  4. 4. I. Emerging Multinationals L. CasanovaNumbers are Growing: 92 = 19% (FORTUNE 2010) RECORD IPOs 2010Brazilian 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 4

  5. 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 203bnReliance, 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 L. Casanova 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
 L. Casanova 5

  6. 6. Being eaten by the dragon. What it feels like to be bought by a Chinese firm . The Economist. Nov 11th 2010 L. Casanova Reverse Innovation US$250 notebookUS$2.500 L. Casanova 6

  7. 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
 L. Casanova 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)

 L. Casanova 7

  8. 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
 L. Casanova Agenda I.  Emerging
 Mul.na.onals
 II.  Global
La.nas 
 III.
The
Day
A:er 
 IV.
Looking
Forward
 
 L. Casanova 8

  9. 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
 L. Casanova Internationalization PhasesPhase 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 L. Casanova 9

  10. 10. L. Casanova Questions and methodology1.
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
 L. Casanova 10

  11. 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
 L. Casanova 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
 • LearnCompe..ve
advantage

virtuous
circle

 L. Casanova 11

  12. 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 L. Casanova 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
 L. Casanova 12

  13. 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
 L. Casanova 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)
 L. Casanova 13

  14. 14. Is Poverty a business issue? L. Casanova Agenda I.  Emerging
 Mul.na.onals
 II.  Global
La.nas 
 III.
The
Day
A:er 
 IV.
Looking
Forward
 
 L. Casanova 14

  15. 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
 L. Casanova 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)
 L. Casanova 15

  16. 16. Agenda I.  Emerging
 Mul.na.onals
 II.  Global
La.nas
 
 III.  The
Day
A:er 
 IV.  
Looking
forward
 L. Casanova 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
 
 L. Casanova 16

  17. 17. InnovaLatino• Joint
OECDdev/INSEAD
research
funded
by
Fundación
Telefónica
 • Innova.on
for
development
from
an
emerging
market
perspec.ve
• The
innova.on
ecosystem/country
 • Ins.tu.ons:
FINEP
(Brazil),
Fundación
Chile,
CONACYT
 • Large
companies:
Petrobras,
Cemex,
Cinépolis
 • SMEs:
Pineda
Covalin,
Cris
Morena

• Broadening
types
of
innova3on,
beyond
R&D
and
patents:

 • Product:
Ethanol,
microcredit
 • Marke.ng
(Havaianas)
and
branding
(Peruvian
cuisine,
Chilean
wine)
 • Business
model
Innova.on:
‘pre‐paid’
mobile
 • Social
Innova.on:
CDI
(Brazil),
Recicla
(Chile),
Patrimonio
Hoy
 L. Casanova Should we celebrate success? Have Global Latinas made it?
 L. Casanova 17


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