Opportunity or threat

Last weekend I received an innocuous looking post facto graph from a friend. The chart depicted how the Chinese companies have gained prominence during the first two decades of the twenty-first century. Evidently, these developments have already occurred and are there for everyone to see and feel. There is nothing about this that can be changed.

The graph depicts that the number of Chinese companies in the Fortune Global 500 list have grown from 10 in 2000 to 121 in 2020, a 12.1x rise in two decades. Three Chinese companies now figure in the list of top 10 global companies. The new 111 Chinese entrants in the coveted list mostly replaced the companies from the US (55) and Japan (54). Besides the US and Japan, companies from the major European economies (Britain, Germany and France) have also fallen in their global rankings.

The top 10 ranked global companies are an interesting mix. The list is topped by two retailers (Walmart, 1, USA; Amazon, 2, USA). Besides, it comprises – one utility (State Grid, 3, China); three petrochemical giants (Saudi Aramco, 4, Saudi Arab; Sinopec Group, 5, China; China National Petroleum, 6, China) one consumer electronics (Apple, 7, USA), two healthcare solution providers (UnitedHealth Group, 8, USA; CVS Health, 10, USA) and one investment company (Berkshire Hathway, 9, USA).

Insofar as India is concerned, only 9 companies figure in this list of top 500 global companies. Out of these nine, five are public sector enterprises (LIC, IOC, SBI, ONGC and BPCL) and four are private companies (RIL, Tata Motors, HDFC Bank and Rajesh Exports). RIL (ranked 86), is the top-ranked Indian company in the list of 500.

Since this data is published every year, and I have been observing this evolution of Chinese companies for more than a decade, prima facie I did not find anything exciting in this graph. On a second thought, however, a forceful inquisition perplexed me.

I wondered if the Indian economy has risen to find a place in the top five economies of the world, and is well on the course to enter into the top 3 club in the next few years, why not many Indian corporations have scaled up to the global scale!

I find it worth examining if it is a massive opportunity for the Indian investors or a potent threat.

It could be an opportunity, if we find that there are several Indian companies that are in a position to displace the legacy European and Japanese companies from their leadership position. These large sized companies could offer a material upside to the investors, as these transcend to become global corporations, exponentially growing their revenue and profitability.

It may also be a threat, if we find that the Indian companies are failing to match the global standards of innovation, scale, competitiveness and financial strength. In this case, many of the large companies might be at a risk of losing their respective domestic position as well to the global corporation, as the Indian economy is opened up further to sustain its global standing.