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Kartik

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The Globe

F

A Cautionary Tale for Emerging Market Giants
PHOTOGRAPHY: GETTY IMAGES

How leadership failures in corporate Japan knocked its companies off the world stage by J. Stewart Black and Allen J. Morrison

ifteen years ago, Japanese companies accounted for 141 of the companies and 35.2% of the revenues of Fortune’s then brand-new Global 500 list. By 2000 their share of revenues had fallen to 20.8%, and by last year it had shrunk to 11.2%, with only 68 Japanese companies making the list. During the same period, U.S. firms’ portion of Global 500 revenues, which was 28.4% in 1995, grew slightly, to 30%. Firms from the European Union and Switzerland, meanwhile, increased their portion from 31% to 36%. Much of Japan’s loss has been a gain for firms from emerging markets. Since 1995 companies from the BRIC nations (Brazil, Russia, India, and China) have seen their combined share of Global 500 revenues leap from 0.9% to 10.4%. But will those countries lose their edge in the years ahead, as Japan did? Or will they find ways to remain globally competitive and protect their share—as the U.S. and Europe have done? To answer those questions, we first need to understand why Japan was unable to continue the meteoric rise it saw in the 1970s and 1980s, because the new generation of emerging-country multinationals bears a disturbing resemblance to corporate Japan in the 1990s. Over the past quarter century, we have tracked the rise and fall of Japanese business, and our research reveals that the very factors that enabled Japan’s early success led to its later failure. What gets you to the top is not what keeps you there. The problem for Japanese companies is that they’ve been unable to transform the cultures and processes that propelled their early exportled growth into those needed for global leadership.
September 2010 Harvard Business Review 99

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