Someone May Be Gaining on Us - Barron's Online

Someone May Be Gaining on Us - Barron's Online By HAROLD L. SIRKIN

Highlights :

All together in 2004, the 100 companies from rapidly developing economies (RDE) accounted for $715 billion in revenue (the total should hit $1 trillion this year) and $145 billion in operating profit. That produced a 20% profit margin, compared with 16% for companies in the Standard & Poor's 500, 10% for those in Japan's Nikkei and 9% for those in Germany's DAX.

Some 28% of the RDE 100's revenue, about $200 billion in 2004, came from international sales. The companies grew 24% a year from 2000 through 2004, which is 10 times faster than the U.S. gross domestic product, 24 times Japan's rate of growth and 34 times Germany's.

The challengers know how to market and sell profitably to low-income customers. They know how to deal with immature logistics and distribution networks. They know how to navigate ambiguous legal environments. They know how to manage successfully, despite shortages of management talent. And, in most cases, they have developed the ability to innovate quickly and make very rapid decisions. These qualities -- as much as the well-documented advantages they enjoy as a result of significantly lower labor, capital and raw-material costs -- will serve them well as they look beyond their home markets and prepare to go head- to-head with current leaders.