India?s GDP may be a fourth of China?s ($1.43 trillion versus $5.75 trillion), but it has 20 of the Boston Consulting Group?s global challengers as compared to China?s 33. That means India has 14 challengers per trillion dollars while China has 5.8. Indeed, while China has seen a drop in the number of challengers, from 41 in 2008 to 33 in 2011, India has seen two new additions?Bharti Airtel and Lupin?to its tally of 18 last year. The list of global challengers, Sharad Verma, partner and director, BCG India, is quick to point out, is not driven by only by structural advantages such as low costs. The study, he says, ?found that the firms are driven by innovation.?
That the number of companies and composition of the Indian list has held stable since 2008 can be attributed to the fact that ?Indian companies have not been impacted as much by the credit crunch?, Verma said. Together, Indian and Chinese companies constitute over 50% of the 2011 global challengers list according to the BCG study, Companies on the Move: Rising Stars from Rapidly Developing Economies Are Reshaping Global Industries .
What makes global challengers
Although the size of a company (of over $1 billion) is a determining factor in its quest for inclusion, it is not the only factor. The firms must also have a significant revenues from international operations and a sound business model that is internationally focussed. This is highlighted by the challengers? announced international M&A deals in 2010 worth twice the average of 2009, their annual growth of 18% from 2000-2009, triple the average achieved by global peers as well as non-financial firms in the S&P500.
Factors that will determine future challengers
The new Chinese challengers are mainly infrastructure and power companies. In the Indian context, as the economy grows, India will also see the emergence of big infrastructure and construction companies and similar growth in the kind of additions to the list as China has seen in the past decade.
Across the list of 100 challengers, an interesting point that emerged was that of the 20 Indian companies, six hailed from the Tata Group. This is in line with the study that names the rise of diversified global conglomerates and the creation of global brands as a trend that will ?shape commerce?not just for global challengers but for all companies that play on the world stage?.
What lies ahead
?The next decade will see RDE challengers as either opportunities or threats to the incumbents. The incumbents can either see them as competition or partners?, said Verma, and their choice will shape the battle for the emerging customer segments and industry leadership.