Lecture by Prof Debraj Ghosal on Doing business with China organized by TiE

[Debraj Ghosal]

Dear SIMSR students,

                   You would be happy to note that i was invited to deliver a session on Doing Business with China organized by TiE (The Indus Entrepreneurs) at Nagpur on 22nd May 2015. Some 70 to 75 business men ,Industrialists and Budding Entrepreneurs attended the two and half hour event asking lots of questions and showing interest to understand and do business with China.

 (The Indus Entrepreneurs (TiE), was founded in 1992 in Silicon Valley by a group of successful entrepreneurs, corporate executives, and senior professionals with roots in the Indus region. There are currently 13,000 members, including over 2,500 charter members in 61 chapters across 18 countries. TiE’s mission is to foster entrepreneurship globally through mentoring, networking, education, incubating, and funding. Dedicated to the virtuous cycle of wealth creation and giving back to the community, TiE’s focus is on generating and nurturing our next generation of entrepreneurs.).

Attaching some of the photographs  of the event. 

Hope you all are doing well and your corporate responsibilities are increasing and becoming more interesting . Do share with me your initial experience in the corporate world  and the projects/clients you are handling ?

Also sharing a good article on Emerging market for your reading in free time.If your companies are doing or planning to do some work on emerging markets like China,Africa etc do let me know.

SIMSR is rocking with excellent new batch with lots of work experience,inward foreign exchange students from Europe planning to spend a semester in SIMSR ,excellent placements last year etc.

But i do miss you all in campus ,so whenever in Mumbai do come over to SIMSR campus and meet me. 

All the best to my students.

best regards

Prof Debraj Ghosal,

SIMSR

Phone: 022-67283055,9773069606

Twitter @DEBRAJGHOSAL

debraj...@gmail.com

Why emerging-market companies acquire abroad

Long focused on deals to acquire technology, brands, or know-how, more emerging-market companies have begun using M&A to tap into new markets.

July 2015 | byDavid Cogman, Patrick Jaslowitzer, and Marc Steffen Rapp

After years of using cross-border deals to acquire strategic and natural resources, multinational companies headquartered in emerging markets are increasingly looking to penetrate new markets—just like multinationals in developed markets do.

Growth in such deals over the 14-year period from 2000 to 2013 reached double digits on an annual basis, and by 2013, deal activity accounted for about 37 percent of the world market for cross-border deals. Moreover, when we analyzed more than 1,000 cross-border acquisitions¹ by emerging-market companies and categorized them by the most common reasons companies pursue acquisitions, we found that the main reason emerging-market companies reach across borders has been to fill capability gaps caused by limited access to strategic resources, such as technology, management capabilities, or other intangible assets in their home markets. (Exhibit 1).² Over the longer term, only about a third of cross-border M&A deals by emerging-market companies have been made to enter new markets, acquire natural resources, or improve efficiency—deal types that are more common among developed-market buyers.

Exhibit 1

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That pattern, however, is changing. As emerging-market companies have developed and matured, they’ve completed fewer deals in pursuit of strategic resources and more deals to tap into new markets, often located in other emerging countries (Exhibit 2).³ Companies that followed this rationale include Latam Airlines Group, which merged its Chilean LAN Airlines with TAM Airlines of Brazil in 2012, and the Philippine food and beverage company San Miguel Corporation, which acquired Australia’s National Foods in 2005. In general, market seekers are mostly from nondurable consumer-goods industries or wholesale and retail.

Exhibit 2

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Around every fifth dollar spent for cross-border M&A by emerging-market companies has been in pursuit of natural resources—though the scarcity of certain resources, such as rare earths, has not led to proportionately more deals to secure access to them since 2010. Well-known landmark transactions of this type include the acquisition of Canadian mining company Inco by Brazilian metals and mining company Vale in 2006 and the takeover of Udmurtneft, a large Russian oil asset, by Chinese oil and gas company Sinopec that same year. These companies tend to generate most of their revenues in the domestic market and are disproportionately large. Often, natural-resource seekers are state-owned enterprises, such as Sinopec or Russian gas giant Gazprom.

The least common reason for emerging-market companies to acquire abroad is in pursuit of efficiency. Motivated by low labor costs or specific government policies related to import barriers or investment incentives, acquirers move manufacturing capacity to foreign markets by acquiring production-related companies abroad. The small but admittedly growing portion of efficiency-seeking M&A by emerging-market bidders mainly flows into other emerging countries, where production factors are comparatively cheap. Notable examples of such deals are the acquisition of Malaysia’s Titan Chemical Corporation by South Korea’s Honam Petrochemical in 2010, or Singapore-based Biosensors International Group’s takeover of Chinese JW Medical Systems in 2011.