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This year's winners, which include Toyota, Lenovo, and Infosys, have been pushing to build their businesses globally
There's no shortage of Asian companies that have prospered thanks to a laser-like focus on their home markets. But what wins enough fans to land on BusinessWeek's list of most admired companies in Asia is success overseas.
Over the past few weeks, we've been asking visitors to BusinessWeek.com to vote for the Asian companies they most admire. The results now in and one trend is clear. Whether it's Toyota (TM) in Japan, Lenovo in China, or Infosys (INFY) in India, the companies that have won recognition this year are those that have been pushing to build their businesses globally.
Toyota, of course, has a long history in the U.S. Now the Japanese automaker is beefing up its presence there even more. "We're committed to building cars where we sell them. We've done that, and there's no reason to think we won't be doing that in the future," says Jim Press, head of Toyota's North American operations.
Cruise Control? No Way
In North America alone, Toyota is in the process of boosting production by 600,000 units per year at five locations, including a new, 150,000-capacity, sport-utility vehicle plant in Mississippi scheduled to come online in 2010. Toyota isn't ignoring giant market opportunities closer to home, either. In China it has long taken a back seat to Honda (HMC). But this year it looks likely to overtake its rival to become the leading Japanese carmaker in the high-revving Chinese market.
Like Toyota, Nintendo boasts legions of American devotées. Of the 10 best-selling games in the U.S. in April, the top four were all made by Nintendo. They included Pokemon Diamond and Pokemon Pearl, which combined sold almost 1.8 million copies in April even though they only went on sale on the 22nd.
Thanks to the enduring popularity of the Pokemon game series and the runaway success of Nintendo's Wii game console, the company has been a favorite not just among gamers but also among investors. The stock price is up more than 47% this year, and the company now has a bigger market capitalization than Sony (SNE), even though Nintendo's sales are less than 12% those of Sony's.
Lenovo's Home-Court Advantage
The U.S. is also a make-or-break market for Lenovo, one of three Chinese companies on our list. Lenovo Group purchased the PC division of IBM (IBM) in 2005, and since then management has been trying to persuade American computer buyers to embrace the Chinese brand.
It's been tough going, but Lenovo is starting to see some results from its American push. In the quarter that ended Mar. 30, the company reported that it had an operating profit margin of 1.6% in the U.S. That might not sound impressive, but compare it to the negative 3.4% of the previous quarter, and the number becomes more meaningful.
"Lenovo finally achieved profitability in the U.S.," a quartet of Bear Stearns analysts led by Jack Tse wrote shortly after the results came out in late May. "Lenovo clearly has made a good progress."
While Lenovo still faces serious challenges from bigger rivals like Hewlett-Packard (HPQ) and Dell (DELL), not to mention Taiwanese competitor Acer, it remains the No. 1 player in its home market by a big margin. Other companies on our list enjoy similar dominance.
Consider, for instance, NHN. It's the top portal and search engine in South Korea, far ahead of Google (GOOG).
And like so many of the other companies on this year's list, NHN is branching out. It is now expanding its business to Japan. In that sense it's similar to Baidu.com (BIDU), the Beijing company that is the top search engine in China. Baidu also is crushing Google, with the American search giant a distant No. 2 in the Chinese market. And like NHN, Baidu earlier this year set up a subsidiary in Japan.
In tiny Singapore, the need to expand beyond the home market is more obvious than in a gigantic market like China or India. Both of the Singaporean companies on our list have been leading that push. Singapore Airlines is in negotiations to acquire a 25% stake in China Eastern, one of China's largest carriers. At the same time, the airline is expanding its reach through its subsidiary Tiger Air, a new, lower-cost carrier.
State-backed Singapore Telecom, meanwhile, already derives a big chunk of its profits from its Australian subsidiary, Optus. Now it's expanding in other parts of Asia. SingTel has a 30.8% stake in Bharti Airtel, one of the world's fastest-growing cellular carriers. And on June 28 the Singaporean company reached a deal to pay $758 million for a 30% stake in Warid Telecom International, one of Pakistan's top operators.
Another factor contributing to the popularity of the companies on BusinessWeek's list is technology leadership and innovation. Companies such as Infosys and Wipro (WIT) in India have well-established reputations as being top innovators in providing IT services for customers.
And as Korea's Posco (PKX) demonstrates, tech leadership pays off in old-style manufacturing, too. The Korean steelmaker inaugurated a new plant in May with a new type of technology that uses noncoking coal rather than the more expensive hard-coking coal favored by most steelmakers.
The Posco plant has "first-of-its kind technology," enthused Credit Suisse analysts Hocheol Kim and Seungwoo Hong in a June 21 research report. Thanks to that commitment to new technology, "the company has made a big step towards strengthening its global cost leadership," the two wrote, adding that Posco's tech advantage should come in handy as the company expands beyond Korea to India and other Asian countries.
See BusinessWeek.com's slide show for more of Asia's most admired companies.