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Introducing the 2013 BCG Global Challengers

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  • The 2013 BCG global challengers are from 17 countries, 7 more than were represented in 2006.
  • The BRIC nations, once home to 84 challengers, now account for 69 of the companies on the list.
  • For the first time since BCG began identifying challengers in 2006, the list includes representatives from financial services, health care equipment, and electronic commerce.
 

2013 BCG Global Challengers

The 2013 BCG global challengers are 100 companies from rapidly developing economies (RDEs) that are both growing and globalizing quickly. This is the fifth time since 2006 that BCG has compiled a list of global challengers, and this group is the most diverse yet, with wider geographic and industrial breadth than ever before. (See Exhibit 1.) They are hard at work transforming themselves into global champions. (For details on the selection criteria, see “Methodology for Selecting the BCG 2013 Global Challengers.”)

exhibit

Methodology For Selecting the BCG 2013 Global Challengers

We began our analysis by compiling a list of potential global challengers from companies based in RDEs. As in the 2011 report, we focused on companies located in developing Asia, central and eastern Europe, the Commonwealth of Independent States, the Middle East, Latin America, and Africa.

Our initial master list of potential global challengers was drawn from local rankings of the top companies in the geographic markets listed above. As in previous years, we excluded joint ventures and companies with significant overseas equity holders but included state-owned companies that compete internationally. A few of the global challengers are headquartered in global financial or commercial centers, such as London or Amsterdam but their operations take place primarily in RDEs. We have listed these companies in the markets that house most of their operations.

Next, we applied a set of quantitative and qualitative criteria. Companies needed to have annual revenues of at least $1 billion, a threshold that ensures they have the resources to go global. We sought companies in which overseas revenues either totaled 10 percent of total revenue or $500 million. In export-oriented industries, such as mining, oil, and gas, we also required companies to possess overseas assets of at least 10 percent of total assets or $500 million. We made a few exceptions when we strongly believed that companies would meet these thresholds in the next two years. A final set of quantitative measures were related to growth and performance.

We sought companies with credible aspirations to build truly global footprints, excluding those that could pursue only export-driven models. Accordingly, we analyzed each company’s international presence, the number and size of its international investments, M&A activity over the past five years, and the strength of its business model. We also compared the size of each company with the size of other challengers and multinational competitors in its industry.

We based our final selection on these criteria and feedback from industry experts around the world.

The Challengers by Country

The 2013 BCG global challengers are from 17 countries, 7 more than in 2006. (See
Exhibit 2.) As in previous years, China and India boast the highest numbers, with 30 and 20 global challengers, respectively.

exhibit

Brazil is next with 13, followed by Mexico, with 7, and Russia, with 6. South Africa increased its number of challengers from three in 2011 to five in 2013. Malaysia, with two, and Turkey, with three, increased their number of BCG global challengers by one each. The BRIC nations (Brazil, Russia, India, China), once home to 84 challengers, are now down to 69. Many markets beyond the BRICs are now producing global challengers as well.

The Challengers by Industry Sector

The span of industries represented on the 2013 BCG global challenger list is widening. The new list includes representatives from the financial services (Citic Group and China UnionPay), health care equipment (Mindray), and electronic commerce (Alibaba Group) industries.

But the list is still heavy on industrial-goods companies (38) and resource and commodity companies (20), which account for twice the share of the challengers list than these industries occupy on the S&P 500. The services sector, with 24 entries, is still underrepresented compared with the S&P 500 index. (See Exhibit 3.)

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Value Creation: A Tale of Two Eras

Global challengers have generated long-term value for their shareholders. Over the past 12 years, they have outperformed the S&P 500, the MSCI Emerging Markets Index, and their global peers (multinationals from the same industry and based in a mature market). Their average annual TSR of 17.3 percent is nearly 3 times greater than that of the MSCI Emerging Markets Index. The average annual TSR of the S&P 500 and global peers, by comparison, is negligible. (See Exhibit 4.)

exhibit

The picture changes dramatically when the time frame is compressed to the past year (from late October 2011 to November 2012). During that time, the S&P 500 and global peers both outperformed the global challengers by wide margins, while the challengers barely beat the MSCI Emerging Markets Index. (See Exhibit 5.)

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This recent weakness has at least two explanations. First, the global challengers bounced back earlier from the global financial crisis, while the recovery of companies based in mature markets has been much more recent. Second, declining stock prices of several large challengers in the commodities sector have pulled down the average, masking the relatively strong performance of smaller players.

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