The 11 listed multinational companies of the Dhaka bourse are bagging higher profits than their local counterparts thanks to their superior skillset, research-based investment and astute management of operational costs. The top five companies with the highest earnings per share (EPS) are multinationals: Bata, Reckitt Benckiser, Linde Bangladesh, British American Tobacco Bangladesh and Marico Bangladesh, according to data from the Dhaka Stock Exchange (DSE). Three other multinationals—Berger Paints, Grameenphone and Heidelberg Cement—also made their place to the list of top 20 companies with the highest EPS. “The multinational companies have world-class people and they pay higher salaries,” said Masud Khan, chairman of GlaxoSmithKline Bangladesh. Moreover, they emphasise on training, which yields higher earnings. “In contrast, local companies do not focus on training and they pay lower salaries as they think it as a cost. But, the multinationals think that cost is an investment,” he said, adding that such investment ultimately benefits the companies. There is a big difference in corporate governance practices of the multinationals and the locals, said Khan, who was also an adviser to the CEO of LafargeHolcim Bangladesh. The multinationals follow a lean business model based on the manufacture of a select few products only and not their packaging. In contrast, the local companies manufacture many products and they are involved in the backward linkage too, he said, adding such a production model also creates difference in their earnings. By and large, locals are fond of buying land, whereas multinationals run their businesses on rented properties and effective branding, which make a big difference in their profits. Furthermore, local companies invest to increase production capacity more than their needs, so their depreciation cost and interest burden rises, added Khan, who was previously the CEO of Crown Cement Group. The multinational companies plan very well when they start a business and they execute their plan to the point, so their business turns into a highly profitable one, said Md Moniruzzaman, managing director of IDLC Investments, which invests in stocks of multinational companies. “They run their business by taking inputs from research. Sometimes, they bring in many changes in their business on the basis of research.” They are very good at expense management too, so they can make profit with comparatively lower costs, he added. The multinationals benefit from their global research and development, which enables them to offer differentiated high-quality products often at a premium price, said Nakibur Rahman, executive director of DBL Group. They can also draw in from their central resources, which reduces their expenditure on functional areas like marketing, finance and human resources. Ethics are strongly upheld by the multinationals, so their officials know they will be punished if they do any wrong, which ultimately lowers their informal cost. The multinationals have created a system and process, which happen to be tried and tested and world-class. “But the locals are doing everything on an ad hoc basis,” said Rahman, who was previously the managing director of GSK Bangladesh.
Source – The Daily Star.
