The Still-Emerging Markets

SAN FRANCISCO – Today’s turbulence in emerging-market equity markets has triggered a wave of obituaries for their growth miracles of recent decades. But confusing short-term wobbles with terminal decline is a gross misreading of what is happening. The wave of industrialization and urbanization that is boosting the incomes of millions of people in emerging economies has not run its course.

Indeed, emerging-market bears are missing an important new driver of continued growth in these countries: their increasingly powerful and dynamic companies. Emerging economies today are much more than a collection of new consumer markets and plentiful (and increasingly skilled) labor. They are also home to thousands of new companies, many of which are quickly becoming large, global leaders in their fields.

Twenty years ago, who would have guessed that Mumbai’s Tata Group would be the largest private-sector industrial employer in the United Kingdom; or that Mexican companies Cemex and Bimbo would become the United States’ market leaders in cement production and bread-making, respectively; or that Beijing-based Lenovo would be on a par with Hewlett-Packard as the world’s largest seller of personal computers? Moreover, the transformation in the world’s business landscape is in its early stages and should bolster growth in emerging markets for years to come.

The MGI CompanyScope, a new database of all companies with revenues of $1 billion or more, reveals that there are about 8,000 large companies worldwide. Three-quarters of them are still based in developed regions. By 2025, however, there are likely to be an additional 7,000 large companies, with seven out of ten based in emerging regions. The share of global consolidated revenue generated by these emerging-market corporate giants is set to increase from 24% today to 46% in 2025.