Emerging economies have gained ground in wealth and influence over the past two decades, bringing about radical changes in the global economic landscape. The rise of their multinationals, the so-called emerging market multinationals (eMNCs), are an illustration of this phenomenon.

The overseas expansion of eMNCs has indeed been remarkable: for instance, about 20% of global outward investment flows today are accounted for by a group of 20 top emerging economies, the E20[1]; who's share was 2% at the turn of the century. Not only have emerging market multinationals significantly increased their investment abroad; but they have also made significant inroads in the global corporate world.

For instance, today, about 30% of the firms in the Fortune Global 500 list (based on revenues) are enterprises from emerging markets; less than 10% of their value, ten years ago. True, China leads the trend: with 98 companies, it ranked in 2015 second in term of number of Fortune 500 firms - not that far from the US (128), and much more than the number 3, Japan (54). However, a wide array of emerging economies are represented: 14 countries of the above are mentioned in the E20 grouping, although sometimes with only one entry in the list. The new players come mainly from China, Korea, India, Brazil, Russia, Mexico and Indonesia.

Beyond the fact that emerging market multinationals significantly increased their presence among the largest corporations in the world, perhaps as remarkable is the fact that several have made it to the very top, becoming world leaders in their own sector. Let’s take eight key industries: banking, logistics, automobile, telecom, engineering and construction, petroleum refining, mining, crude oil production and mining. In 2004, based on the Fortune Global 500 ranking, there was no emerging market multinational among the top 5 world leaders in these industries while, in 2015, 40 % of such leaders came from emerging economies, largely dominated by China.

The shift has been particularly marked in banking (where all but one of the 5 leaders are Chinese), engineering and construction (where all top five are Chinese), and Mining and Crude Oil Production as well as metals. In less traditional industries, such as IT consulting for instance, three Indian corporations are among the world largest (TCS, Infosys and Wipro). In e-commerce, or platform industries, a similar trend is developing; witness Alibaba, and Wechat (Tencent) for instance.

While they have made remarkable inroads as global corporations, emerging market multinationals however still have some way to go compared to the more established western multinationals as regards to profits. Indeed, the average profit margins of emerging market multinationals lag behind those of their US and Japanese counterparts. This difference can be quite important: about 27% of the Fortune Global 500 firms from emerging countries in the above mentioned E20 group achieve a profit margin above 5%, versus an average of 39% for the totality of Fortune Global 500. This suggests that, in their present expansion phase, emerging market multinationals have a stronger focus on revenues and market growth than on profit margins.

The overseas expansion of emerging market multinationals has disrupted the global competition landscape. These firms have been deploying themselves not only in their natural markets – mostly other emerging economies– but also more recently and quite effectively in developed markets, conquering in the process industry leadership positions (as illustrated above).

The competition from these new leaders has become more acute both in developed and emerging markets. Is the trend going to continue? Is the balance tilting now in favor of these new comers, as some observers would argue, given the increasing weight and influence of emerging markets in the world economy and the importance of the consumer demand in those markets? It is an open question, even more today than before, and this is for several reasons:

1) Because growth has slowed down worldwide, including in many of the emerging market multinationals’ home markets. This is not really to the advantage of those firms that have surfed on this growth wave, many of them focusing as mentioned above on the search for revenues rather than profit.

2) Because the established players - the large corporations from developed economies - should not be underestimated in their capacity to react to this new competition, building on their long experience of operating in very competitive markets, and their capacity to overcome serious challenges and learn.

3) Because the past few months have brought about a significant degree of uncertainty, as protectionist measures are being seriously considered in a number of key economies. On the other hand, the past ten years have shown that many of the newcomers are fast learners, able to expand globally and reach the top at an impressive speed. We are in for interesting times.

[1] Mexico, Argentina, Brazil, Chile, China, Colombia, Egypt, India, Indonesia, Iran, Korea, Malaysia, Nigeria, Philippines, Poland, Russia, Saudi Arabia, South Africa, Thailand, Turkey.