Taking advantage of emerging markets

Leno?s comment may be tongue in cheek but the joke encapsulates an attitude that prevails in many western businesses. Datamonitor?s ?Building Business with BRICS? study reveals that, while their executives understand that Brazil, Russia, India, China?the so-called BRIC nations?have accounted for 30% of global growth since 2000, few are taking advantage of the opportunities for collaboration this presents. Even fewer are really prepared to engage with what seems to be a new world economic order.

The study shows that, even though more than six out of 10 directors of large American, British, French and German companies accept that these emerging economies will ?reshape? the global business landscape, many have only a rudimentary knowledge of their business environments. Only a tiny minority of western directors can name all the BRICs currencies, and more than 70% believe that organisations in the developed world have technology that equips them better to work internationally than those in BRICs.

Actually, the reverse is often true. In many respects, the BRIC nations have moved well beyond catching up and have everything they need to make a big impact on the global stage. For example, as the commentators John Seely Brown and John Hagel pointed out as early as 2005, most leading Indian IT outsourcing companies operate at level 5?the highest level of expertise of the Capability Maturity Model (CMM), an international measure of technical skill. Most of the IT departments in western companies operate at level 2 or 3.

The BRIC nations also understand the collaborative power of technology. In their book, The ?Only Sustainable Edge?, Seely Brown and Hagel talk about a company called Li & Fung. Based in China, it helps clothing designers configure and operate highly customised supply chains to produce and distribute garments around the world.

Even back in 2002, Li & Fung had revenues of $5 billion, was achieving a return on equity of 30%-50% and had 7,500 suppliers in 37 countries. The authors argue that the success of China?s low-cost manufacturers is not just a result of cheap labour. It stems from a finely honed ability to orchestrate networks of specialist suppliers, using IT to mobilise resources and facilitate collaboration up, down and across the supply chain.

Indeed, according to figures from the IDC, the BRIC countries invested more than $63.8 billion in IT technology in 2005 alone. And while the US might lead the pack today with more than 60 million Internet users, China is fast closing the gap. It?s set to overtake the US sometime this year. The truth is that the under-investment that blighted the BRIC countries 25 years ago has positioned them to surge ahead.

While western countries grapple with the challenges of upgrading or replacing outdated infrastructure, the BRIC countries have ?greenfield? sites ready and waiting for state-of-the-art solutions. What?s more, they have a real hunger to succeed.

The consequence of the disconnect between western directors? perceptions and reality is that, if they do not wake up soon, many ?old-world? businesses are going to miss out on big opportunities.

So what?s to be done? Jim O?Neill, the chief economist at Goldman Sachs who invented the term ?BRIC?, made a good point when he said that western countries need to ?open their minds and their borders?.

Western companies need to do the same. Their executives need to re-evaluate the BRICs, reassess the skills they offer, and take time to understand how their markets work. There?s a great deal to gain.

As ?Building Business with BRICS? reveals, the message that the BRIC nations are no longer catching up and, in some cases, are ahead of the game clearly has not filtered through to many senior executives. Rather, it is these executives who have most need to catch up.

?The author is chairman & managing director, BT India