Emerging market firms: measuring their success with strategic positioning mapsJournal of Business Strategy


Ajay Kumar Singal, Arun Kumar Jain
Strategy and Management / Management Information Systems


Emerging market firms: measuring their success with strategic positioning maps

Ajay Kumar Singal and Arun Kumar Jain

D uring 2011 only ten Indian firms made it to the Forbes Top 500 global corporations list: Reliance Industries, the State Bank of India, Oil & Natural Gas, Indian Oil, ICICI

Bank, NTPC, Tata Motors, Bharti Airtel, Coal India and Tata Steel. Most of these companies belong to infrastructure sectors such as banks, oil and gas, metals and mining, and are operating primarily in domestic markets. The question that arises is how scholars can compare the relative strengths of firms from emerging markets to well-established global peers originating from developed markets.

One tool to identify relative positioning is the strategy control map (SCM) of Bryan et al. (1998).

Using equity size and market performance, SCMs identify the choices available to build the market capitalization required to compete successfully in the global arena. The framework rests on the assumptions that market capitalization is a robust indicator of future opportunities, and that capital markets are efficient and transparent. However, this may not be so in the case of emerging markets because of poor institutional environments, managerial and technical knowledge, and poor managerial motivations for going abroad (Kirca et al., 2011; Makino et al., 2002; Nachum, 2004). Also, SCMs cannot be applied to ‘‘born global’’ firms, which begin operating in several foreign markets from inception or within a few years of operation instead of going through a patchy cycle of learning and action. These mostly small, knowledge-intensive, service-related firms defy the prevailing logic that international business is the sole preserve of large and mature multinationals (Oviatt et al., 1995).

Firms from emerging markets are, generally, smaller in size compared to their global counterparts from the developed markets because of internal and local focus. They need a change in their focus toward international markets and need to build or acquire product capabilities prior to gaining market capitalization and acceptance in the international markets (Singal and Jain, 2012). Firms having advantages in technology and labor-intensive production capabilities usually attain high overall performance in international markets (Kirca et al., 2011).

Prior to deregulation in the early 1990s, the focus of Indian firms, except those in technology and pharmaceuticals, had been domestic. They had a limited vision for international growth.

But the trend has changed, evidenced by the increase in outward foreign direct investments (OFDI) from India. From 2004 to 2009, Indian firms signed 712 OFDI deals worth $US72bn across the globe (United Nations Conference on Trade and Development, 2010). To attain a global scale, companies such as Tata Motors, Tata Steel, Hindalco, and Suzlon made acquisitions that were far bigger than their existing size. In this scenario, there is a need to evaluate the position of Indian firms against global players. How can they meet globalization challenges? Do they have the necessary direction, vision and focus to compete at the global level?

Emerging market firms face the dual challenge of achieving performance (market capitalization), and globalization (international intensity) to compete effectively against

PAGE 20 j JOURNAL OF BUSINESS STRATEGY j VOL. 35 NO. 1 2014, pp. 20-28, Q Emerald Group Publishing Limited, ISSN 0275-6668 DOI 10.1108/JBS-04-2013-0026

Ajay Kumar Singal is based at the Institute of

Management Technology,

Dubai, United Arab

Emirates. Arun Kumar Jain is Professor of Strategy and

Innovation at the Indian

Institute of Management

Lucknow, Lucknow, India. global giants. These characteristics reflect the scale, efficiency and possession of globally relevant organizational capabilities. Market capitalization indicates the overall organizational capital, tangible or intangible, possessed by firms, available future growth opportunities, firm-specific advantages and profit expectations of shareholders. International intensity measures the ability of a firm to diversify its product and market risks across the globe. An increase in international intensity reflects how a firm is able to leverage its capabilities and experience in foreign markets. International intensity is a composite measure of the scale and scope of foreign operations (Aggarwal et al., 2011). Scope captures the number of countries where the firm has operations (equity investments in subsidiaries). Scale is the percentage of foreign sales in relation to total sales. Foreign sales may come through external subsidiaries or as exports from the home country. Market capitalization is an interplay of market performance and equity size.

We compare the top 100 Indian firms to the top 100 global firms on two dimensions – i.e. international intensity and market capitalization – to map their relative strategic positions.

Then we suggest a framework called the ‘‘strategic positioning map’’ (SPM). Firms scoring highly on market capitalization and international intensity are established global players with products and services that satisfy global customers. Firms that score low on both parameters are focused local players who may be vulnerable to acquisition by global players looking to expand their scale across geographies or to enter emerging markets.


Our sample is the top 100 Indian firms by revenue, drawn from the ET500 (a list released by

The Economic Times) and the top 100 global firms from the Forbes Global 2000 list for the year 2011. From the base sample, we excluded the subsidiaries of foreign firms since they are considered global by nature of their association with their parent. Similarly, firms from the financial sector and government-owned firms were not considered, as they have different operating characteristics. After satisfying above criteria, our sample has 54 Indian firms and 69 global firms. The industry composition of the samples is not comparable, and, given the conceptual nature of our analysis, we ignore it. The four variables used to compare Indian with global firms are: 1. size (book equity); 2. market performance (market price to book ratio); 3. scope (number of countries in which the firm has a presence); and 4. scale of international operations (ratio of foreign sales to total sales).