German companies have to face increasing competition by new competitors from low-wage countries, in particular from Asia. This is the alarming finding of a study carried out by the consultancy The Boston Consulting Group (BCG), which presents the “100 new global challengers” from China, India, Brasil and Mexico who are about to conquer Europe.
These pioneers of internationalization have grown on average by 24 percent in the period from 2000 to 2004 and generate virtually one third of their turnover abroad. They employ 4.6 million staff, sold products worth 715 billion US dollars in 2004 and reach a return on turnover of up to 20 percent. The price-earnings ratio of their shares from January 2000 to March 2006 amounted to 150 percent. The volumes of their investment and purchasing might are huge: 2004 they invested 110 billion US dollars and spent 9 billions on research and development, bought raw materials and energy worth 200 billion, component parts for 50 billion and services worth 40 billion US dollars.
Even some of the major companies of these 100 pioneers are virtually unknown such as Hisense from China or Nemak from Mexico. 44 of the companies presented in the survey come from China, 21 from India, 18 from Brasil and Mexico and the remaining ones from Egypt, Russia and Turkey. The new competitors are present in nearly all branches of industry, in particular in the car industry, mechanical engineering, consumer goods electronics and energy/raw materials. Their expansion power is based on their leading position in big and protected home markets which ensure a high production acitivity and stable sources of revenue thereby enabling more risky investment in other countries.
German companies are to keep an eye on possible competitors from emerging markets as early as possible: What are their strategies, their strengths and weaknesses? Where do they attack? Defending strategies may be quite different: A well planned attack on the home market of the challengers or an acquisition might be as suitable as a strategic co-operation. Further findings of the study are available here.