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Global Economics

Multinationals Turn to China & India to Fight Recession

With developed markets reeling in recession, global companies are looking more to emerging markets, launching tailor-made products and services

K.P. Unnikrishnan, Sun Microsystems' regional marketing director of emerging markets region, said in an e-mail interview: "Emerging economies are changing the global business landscape, providing incredible opportunities for companies like Sun."

Concurred Manish Bahl, research manager at Springboard Research: "Looking at the current global situation, we believe the strategy to focus on India and China is considered to be a safe and viable option for multinational companies (MNCs) that want to expand operations and even for those who plan to enter these markets."

In July 2008, Sun made a strategic business decision to strengthen its presence in fast-growth markets such as India and China. To closely align sales with key growth areas, Unnikrishnan said it created a business division focusing on emerging markets sales region, which includes Latin America, Greater China, India and SEE (Russia, Balkins, Africa, the Middle East, Turkey and Greece).

Manufacturers of consumer durables, car, telecom and infrastructure companies are also focusing more on emerging market in these tough times. For instance, LG Electronics India expects 15 percent growth in 2009 and believes India is not as badly affected by recession.

This month, IT security company Trend Micro set up three technology support labs in India as part of its Affinity Partner program. Amit Nath, the company's country manager for India and SAARC, said Trend Micro will continue to develop in India and work with its customers and partners in order to provide "the best-of-breed secure content management solutions".

Nath told ZDNet Asia in an e-mail interview: "There are not too many economies in the world that will grow at 7 percent."

Booming markets

The optimism over India and China is manifested in foreign direct investment (FDI) inflows. While China registered a total FDI inflow of US$92.4 billion in 2008, up 23.6 percent from 2007, India's FDI inflows rose from US$19.1 billion in 2007 to US$32.4 billion in 2008.

India and China had attracted the attention of MNCs way before the onset of the economic crisis. However, with the recession having a relatively lesser impact in these countries, it made sense to focus more on these booming markets.

Bahl said: "Favorable economic indicators such as rising per capita income, increasing domestic demand for goods and services, change in spending pattern of consumers as well as factors like well-controlled inflation, only go on to prove that a sharper focus on these economies can bring better growth for MNCs."

The results are already visible. For instance, Sun's emerging markets sales region reported revenues of US$1.969 billion in its financial year 2008, an increase of 13.8 percent over 2007. Total revenue for the emerging markets region in the second quarter of 2009 was US$558 million, up 20.5 percent from US$463 million in the first quarter of 2009.

Unnikrishnan said: "The emerging markets sales region opens more opportunities for Sun [to work] with governments, businesses and developers. This allows Sun to serve the unique needs of customers in these markets where infrastructure growth demands are very strong."

The flurry of new product launches and initiatives for emerging markets only goes on to reinforce this trend. For instance, Microsoft India recently showcased a host of custom-made offerings for the Indian market.

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