Executive Interviews: Interview with Ravi Ramamurti on Bottom of the Pyramid
November 2008 - By Dr. Nagendra V Chowdary

Dr. Ravi Ramamurti
CBA Distinguished Professor of International Business & Strategy,
and Director of the Center for Emerging Markets at Northeastern University.

through acquisitions and new investments to become dominant domestic suppliers with strong cash flows. They then launch a program of cross-border acquisition in other emerging economies as well as developed economies. Examples include Lenovo's takeover of IBM's PC business; Tata Steel's takeover of Anglo-Dutch Corus; Hindalco's takeover of Canada's Novelis; South African Breweries takeover of several beer makers in Africa, Europe, China, and the US; Haier's expansion into many emergingmarkets as well as the US; Cemex's takeover of large cement companies in Australia, the UK, and the US; and Wanxiang's takeover of several Western auto parts suppliers. Not surprisingly, global consolidators typically originate in the larger emerging economies, such as the BRICs, Mexico, and South Africa. The final strategy type is the global first-mover, which involves an emerging market firmoperating at the global technology frontier, or one that is a trailblazer in a new emerging industry, rather than a late follower in a mature industry. Examples include Embraer of Brazil in regional aircraft, Huawei of China in 3G telecommunications equipment and Suzlon Energy of India in wind power. Other examples include pharmaceutical firms; such as Dr. Reddy's, that have the capability to develop new drugs or new delivery methods for existing drugs. The target market of the global firstmover is both emerging economies and developed countries, and it is likely to grow through a combination of greenfield investments in emerging markets and mergers/acquisitions in developed countries.

With the exception of the global firstmover, the other strategies typically involve EMNEs in mid-tech and mature industries. This seems to be the strategic sweet spot occupied by many EMNEs, a space in which they are differentiated fromother emerging market firms as well as developedcountry MNEs. The local optimizer and the global consolidator, as already discussed, are typically in industries that have matured in developed countries. The low-cost partner may work for customers in the full range of technologies, but its own activities are likely to be low- or mid-tech in nature. In all cases, the firms in question strive to move up the value curve to remain competitive and maintain profit margins.

• What do emerging multinationals from emerging markets hold for the global economy and global businesses? What are the distinct characteristics of emergingmarkets – competition, regulation, consumers, finance options, innovation, etc? What is your advice for companies operating in and planning to operate in emerging markets?
  I have touched on the answer to these questions in the earlier response. But let me step back here and discuss what we mean by "emerging economies."

  Don't forget that the term was coined in the 1980s by the International Finance Corporation, an affiliate of the World Bank, in the context of promoting capital markets in developing countries. The adjective 'emerging' referred specifically to the stock exchanges in these countries. It was not intended as a comprehensive classification of countries—the way it is used today.

  As a result, there is no single criterion on which all emerging markets are alike—and on which they are also entirely unlike all industrialized countries. If you take per capita income, for instance, some emerging economies (e.g. Hong Kong, Singapore) are actually richer today than some developed countries in Europe (e.g., Greece, Spain, Portugal). If you define "emerging markets" as countries with under developed institutions, then again the variation within emerging markets is quite high, and at least some developed countries have institutions that are weaker than those found in some emerging economies.

  That said, there are a few important criteria on which most emerging economies are significantly different from most developed economies. Those include lower per capita income, lower wages, weaker economic and political institutions, late industrial development, and lateness in integrating into the global economy. But, as a practical matter, I tell my students to never forget that every country is unique, and that the unique factors may cause profound differences in the firms it spawns. A large, low income country like China is quite different from an uppermiddle income country like Russia, but it is also quite different on many fronts from the other large lowincome countriea like India.

• How do you characterize the last century from the point of view of business and how do you foresee the coming century? Can the past century largely be interpreted as a Century of Conglomerates and a Century of Corporate Imperialism and the next century as a Century of Emerging Markets? Did the end of Cold War mean the arrival of Corporate War?
  The last century was characterized by prosperity, followed by economic catastrophe in the form of the Great Depression, followed by two ruinous World Wars. The second half of the century, on the other hand, was marked by unprecedented technological progress, and the triumph of democracy and freemarket capitalism over communism and central planning. The 20th century will probably be remembered as the American century, for it was in this period that European colonial powers declined economically and militarily, while America rose to become the world's leading economic and military superpower. By winning the Cold War, America also won the defining contest of the postwar period.

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