Governments, especially those in mature markets, should recognize challengers as a positive force for growth in jobs and investment. Rather than imposing restrictions, governments should be actively encouraging acquisitions and investments, developing regional hubs in order to attract overseas investment, and avoiding excessive nationalism and protectionism.
Allow cross-border M&A and investment without undue restrictions. Under the right conditions, acquisitions and investment by challengers can create jobs in mature markets. In the U.S., several members of the Chinese 2013 BCG global challengers are becoming major employers. Wanxiang America has 6,000 employees. In the fiscal year ending in March 2011, Tata Consultancy Services alone hired 1,150 people in the U.S. In 2012, Tata-owned Jaguar Land Rover created 2,500 jobs in the U.K. The Tata group of companies collectively employs about 45,000 people in the U.K., making it the largest manufacturing employer in the country.
Challengers have often contributed to job creation after entering a market through M&A or a partnership. A joint venture between Cnooc and Chesapeake Energy to acquire and manage oil and gas assets has created 4,000 to 5,000 new U.S. jobs.
Develop regional specialties to drive local investment. Governments in both mature and emerging markets can play a positive role in helping to develop regional hubs of expertise. The Malaysian government has been setting up public institutions such as technical schools, industrial training institutes, and skills development centers to meet the growing requirements of the industrial sector. These hubs can encourage outside investment and job creation.
Encourage economic development. Challengers are contributing innovation, capital, and jobs to the countries in which they operate. Huawei, for example, sourced about $6.6 billion in parts from U.S. companies in 2011. Governments should embrace and leverage the innovation that challengers can bring to regional development.
The Sustainable Economic Development Assessment can assist governments in economic development by showing where they should be focusing their energies.
The 2013 BCG global challengers are game-changers in their global industries. They are meeting the needs of customers in the world’s high-growth markets, and they bring greater choice to customers everywhere. Challengers are now an established fact of global business. But if they aspire to global leadership they must continue to step up their game. Meanwhile, multinationals must both compete and partner with these challengers in order to thrive.
We are just at the dawn of a major new era of global competition—of challengers and multinationals, of allies and adversaries.
To Contact the Authors