Future mega-firms 'based in emerging markets'

PHOTO: Future mega-firms 'based in emerging markets'

A formidable new breed of firms notching up more than US$1 billion (S$1.25 billion) in sales a year will rise up in the next 10 to 15 years from emerging economies, a new report predicts.

These new titans will challenge the long-held grip of Western multinationals (MNCs), it added.

The "tidal wave of new companies" will not only change the competitive landscape globally, but some little-known names may also become global industry leaders, said the report by McKinsey Global Institute (MGI).

The institute says many of these giant firms are likely to be based in fairly obscure cities.

About 8,000 firms worldwide currently make more than US$1 billion in sales a year and 73 per cent of them are based in developed markets.

That is set to change dramatically by 2025 with an additional 7,000 firms joining this club. And seven out of 10 will be based in emerging economies, said the MGI report titled Urban World: The Shifting Global Business Landscape. "The long-established dominance of Western multinationals is about to be challenged," said Mr Richard Dobbs, MGI director and one of the report's authors.

Big companies with annual revenues exceeding US$1 billion create jobs and boost incomes, so they play a pivotal role in their respective economies.

The "geographic rebalancing" of the business landscape is set to dramatically shift more of the world's decision-making, capital, standard-setting and innovation to emerging markets, said the report.

For now, the robust growth in emerging economies, which account for one-third of world gross domestic product, has yet to leave a corresponding stamp on the global corporate landscape.

Companies in these regions are home to only a quarter of the world's large firms. But not for long, as they are expected to more than triple by 2025 from 2,200 now.

"This reflects rising incomes and growing local market opportunities in these regions," the report said. "Also, local companies are expanding, maturing and reconfiguring through mergers or acquisitions."

The report by MGI covers all large companies, just over half, or 53 per cent, of which are publicly traded, 37 per cent privately owned, and 10 per cent state-controlled.

MGI has also mapped each company to the city where it is headquartered to understand where large companies are based and how their distribution might influence the way they operate.

anitag@sph.com.sg


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