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.”)
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.
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 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.)
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.)
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.)
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.