TECH TALK: Tech’s 10X Tsunamis: The East (Part 3)

Dragon Multinationals

In his book “Dragon Multinational: A New Model for Growth“, John Mathews describes dragon multinationals as companies that start with disadvantages as latecomers, but devise clever strategies of linkage and leverage to take advantage of the worldwide web of interfirm connections that characterize the global economy. They thereby accelerate their global coverage to become formidable competitors. Mathews, in his book, describes the success of companies like Acer, Ispat, Hong Leong and Li Fung. These dragon multinationals are from the Periphery, as opposed to the Triad of North America, Europe and Japan.

Companies like Indias Infosys, Satyam, TCS and Wipro are already at the heart of the worlds IT value chains. They are, in a sense, dragon multinationals. Theyve achieved great international success inspite of an almost non-existent domestic market. India today has crossed USD 10 billion in software exports, and expects to maintain a 20% growth in the near-term. Today, Indias software services companies are up there with the best in the world.

On the other scale, a company that has matched the best in the world and won is Chinas Legend. It is not really a dragon multinational in the sense that it is still focused on the Chinese market, but expect Legend to go international in the years to come. Writes David Sheff in Wired (August 2002) on how Legend lived up to its name:

By 1993, AST, Compaq, IBM, and HP had nearly two-thirds of what was becoming a fast-growing PC market in China. Early adopters were impressed by international brands and assumed (correctly) that Chinese technology was inferior. Foreign manufacturers were happy to have the business but paid much more attention to the booming US and European sectors. That gave Legend an opening. As the quality of its technology improved, Legend undercut the competition with low prices and better service. At the same time, Liu exploited the guanxi system to win government contracts, which at one point made up 50 percent of Legend’s business (and now constitute 20 percent).

Legend turned its first profit in 1993, went public in Hong Kong in 1994, and pushed ahead of Compaq to become the number-one PC seller in China in 1997. “It was astonishing, since no one – Chinese or foreign – thought a Chinese company could beat the respected international brands,” says Edward Tian, CEO of China Netcom, a Legend customer. “Legend is heroic because it gave confidence to Chinese people that our technology could be as good as any in the world.”

Each nation has its success stories. They are the inspirations for the next generation. They have sown the seeds of entrepreneurship in many. Armed with their masses of people creating the domestic markets and the workforce, its low-cost infrastructure, a capitalist fervour for wealth creation, along with technological innovations, the Eastern dragons and tigers are not just catching up, but have an amazing opportunity to leapfrog. If they succeed in doing so, they will be able to set the standards for the next generation of technology. The game is well set. Different Eastern nations and enterprises have differing strengths. If they are able to combine their strengths and their markets, the East could, for the first time in many centuries, pose a strong threat to the economic and technological dominance of the West.

Additional Reading:

  • Tech Talk: An Indian in China (March 4-8, 2002)

    Tomorrow: Networks

  • Published by

    Rajesh Jain

    An Entrepreneur based in Mumbai, India.