Investigating Differences in Annual Profitability Rates in Developed and Emerging Markets: A Multiple Case Study

Competitive factors related to differences in annual profitability rates of Global 500 firms in developed markets (DMs) and emerging markets (EMs) of Asia and Latin America were explored in this study. The problem to be investigated in this study is the differences in annual profitability rates of firms in the DMs and EMs (gap). A qualitative method with multiple-case study design was used to explore key competitive factors or strategies related to the annual profitability rates of firms in DMs and EMs of Asia and Latin America as perceived by 17 purposely selected experienced middle and upper-level executives (participants) from mid-cap and large-cap Global 500 firms. Four of Porter's models were used as the theoretical framework and for evaluating the results of this study: Five Forces of Industry Competition, Value Chain, Competitive Strategy, and Diamond of National Advantage. The results of the study found no major discernable factor differences between Global 500 firms in DMs and EMs along the four dimensions. The top findings were Global 500 firms typically: had greater bargaining power than their customers and few viable substitutes for their products; selling activities and operating and converting activities were paramount primary value chain activities; financial management and marketing and advertising support activities were top support value chain activities; no single competitive strategy universally employed across DMs or EMs; and presence of local sophisticated and demanding buyers were the main factors that added to the competitiveness and annual profitability rates of firms among the national macroeconomic factors. Practical recommendations for decision-makers included: comprehensive knowledge of the five dynamic competitive factors in their industries including related technologies; increasing use of technology in value chain activities to increase efficiencies and customer value; utilize the best generic competitive strategy or combination thereof most in alignment with their firm's objectives, resources, and competences; and integrate operations in countries with the most sophisticated and demanding buyers and supporting infrastructures. Further studies using different methodologies, populations, time period, or competing theories are recommended.