The emergence of rapidly developing economies (RDE’s) such as China, India, Brazil and Russia needs little introduction. However, what is appealing to globally minded investors like us, is the speedy ascendency of companies based in these RDE’s who are now positioning themselves to challenge the incumbent industry leaders. Think about it. Your IBM ThinkPad is actually owned by Lenovo, China’s leading computer maker. The sleek Jaguars and powerful Land Rovers that were formerly owned by Ford Motor Company are now property of Tata Motors, a leading Indian automaker. And with ambition riding high, DP World, a company based in Dubai has even had the daring to launch a bid for the management of twenty two US ports! What these examples highlight is the exponential growth achieved by companies operating out of RDE’s in a limited period of time. In just two years, from 2006 to 2008, the number of companies based in Brazil, China, India and Russia on the Fortune Global 500 list quadrupled from 15 to 62. This is a trend that anyone interested in global markets must follow

So then, the question arises as to how exactly are these local powerhouse companies bursting out onto the international scene? How does Lenovo, who began operations in a two room shack just 25 years ago, purchase the giant that is the IBM PC division? The foremost reason is the challenger company’s privileged access to markets and resources. Many challenger companies enjoyed successes in their domestic markets because their government provided defense against incursions by industry leaders. Tata Motors firmly established itself in India because their cars were not subject to an import tax of more than 50%, imposed on foreign cars. These regulated environments enabled the challenger companies to cultivate the size and scale necessary to globalize their operations. Secondly, many RDE companies have access to low cost labor pools, enabling them to enjoy a significant cost advantage over competitors operating in a more developed country. These fast growing companies also provide exciting opportunities for new, fresh recruits and are always drawing in the best talent available in the country. Another major reason is the willingness of these companies to use acquisitions as a quick path to global leadership. Many challenger companies identify foreign peers with a solid management team and minimize interference in company operations, significantly increasing the chances of a successful acquisition.

It is vital that investors recognize this trend to base more of their portfolios in RDE companies. Inevitably, the majority of these companies are based in the BRIC countries but there are a few which operate out of the fast growing economies of the United Arab Emirates, Kuwait and Latin America. I, for one, favor investments made in the BRIC countries as nearly guaranteed successes in the long term, while money put into companies based in the fast growing economies of the Middle East and Latin America offer immense potential for quick returns in the shorter term. My favored stocks are the BYD Group in China, Tata Motors and Reliance Industries in India and Emirates Airlines in the United Arab Emirates. If you know of any company, similar to those above, feel free to share them with all of us and help us be more aware of global investment opportunities.