The.Economist.2007-02-10 (966424), страница 28
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At one point recently the board ofNestlé did not contain a single Swiss citizen.Necessarily globalGiven its small home market, Swiss business has alwaysneeded to be international to survive. The same goes forScandinavia, which comes third after America. The position ofthe next three, Britain, Belgium and the Netherlands, partlyreflects the imperial and trading heritage of these relativelysmall countries.
Germany, Spain, Italy and Austria are all belowthe average for 25 European countries, though Germany hasabout 500 small and medium-sized (Mittelstand) companiesthat are world leaders in tiny niche markets, as well as a strongcar industry and corporate giants such as Siemens and BASF,the world's biggest chemical conglomerate.So why does America lead in the fast-growing high-techsectors, and why does Europe hold its own only in more matureindustries? Europe's computer companies of the 1960s more orless disappeared but America's survived, albeit consolidatedinto fewer groups. Britain's ICL, Italy's Olivetti and theNetherlands' Philips have all left the IT industry; the onlysurviving computer-hardware company in Europe is a jointventure with Japan, Fujitsu Siemens, and the only leadinginternational software house is SAP.
America's giants—IBM, HP,Intel, Microsoft, Oracle and Google—dominate IT globally.Hans-Paul Bürkner,global president ofBoston ConsultingGroup, sees a cleardifference in approachbetween Europe andAmerica that helps toexplain why Americanhigh-tech businessesare so much moresuccessful. In the1970s, he says, manyAmericans started toget out of moretraditional industriesand into IT hardware,software and biotech.He thinks one of thebiggest obstacles toprogress in Europe is adesire to preserve thestatus quo.
Butdespite thisconservatism, hepoints out, Germany has remained the world's leading exporter, with companies that put togetherproducts and services from all over the world.In a forthcoming book, Don Sull of London Business School identifies two contrasting approaches tocorporate strategy: absorption and agility. Strategic agility means that a firm is able to exploit changes inthe environment faster and more effectively than rivals. Absorption describes management's way ofprotecting an organisation from such changes by, for instance, diversifying out of the core business orgrowing “too big to fail”.The difference between the two approaches is illustrated by the most famous boxing match of the 20thcentury.
The “rumble in the jungle”, staged in (then) Zaire, pitted George Foreman, the worldheavyweight champion, against the veteran Muhammad Ali, who was making a comeback bid. Ali'snormal style was agility personified—“float like a butterfly, sting like a bee.” But faced with the youngerForeman, Ali spent six months learning to absorb heavy punishment. From round two he went defensive,leaning on the slackened ropes to absorb blows. In the eighth round, when Foreman had exhaustedhimself, Ali sprung off the ropes and knocked him out. His blend of absorption and agility had paid off.As an example from the world of business Mr Sull quotes Pepsi, which uses a skilful mix of absorptionand agility to try to overtake Coca-Cola.
In fast-moving consumer goods, agile Procter & Gamble ofAmerica thrives on its streamlined product range whereas Europe's Unilever is panting to keep up, withtoo many brands in too many markets. America, by and large, stands for agility; Europe for absorption.When dancing elephants trip upWhen stodgy European firms decide they, too, can become agile, they sometimes come to grief. ICI andGEC—at the time the twin pillars of Britain's manufacturing industry—both tried it in the mid-1990s.
ICIspun off its profitable pharmaceutical business (now part of AstraZeneca) rather than build it up byacquisition. It then decided to get out of bulk chemicals and borrowed and paid too much to buy thespecialty chemicals bit of Unilever. Its shares collapsed, and the company that for 70 years had been thebellwether of British industry dropped out of the index of leading companies.John Mayo, the dealmaker who advised ICI on the Zeneca deal, also helped wreck GEC.
Its defensivestrategy had been to ally its power engineering and telecoms businesses with France's Alsthom and withSiemens. Guided by Mr Mayo, GEC sold its defence arm to British Aerospace and bought internetequipment firms in America at the height of the telecoms bubble. When that burst, this supposedly agilestrategy turned out to be nothing more than a flawed financial deal. BAE Systems has proved nimbler onits feet: it is reinventing itself as an American defence contractor, selling its minority stake in AirbusIndustrie so it can add to its transatlantic portfolio of businesses. The attraction is that America is by farthe biggest defence market, whereas the European defence business is fragmented and nationalistic.Mr Sull observes that many European businesses are able to soldier on thanks to their bulk and solidityrather than their capacity for innovation.
Many European telecoms companies are part-owned bygovernments to protect them. Under a special law, voting shares in Volkswagen have long been limitedto 20% and a regional government has held a stake to keep the company safe (though that is set tochange this year). Banks such as HSBC and ABN Amro are diversified as well as too big to fail. Europe'spharma giants—GSK, Novartis and AstraZeneca—survive as much because of their past patent rightsthan by virtue of their current research producing big new earners.
Increasingly, however, they aremoving research to America because the rewards there are greater and the environment is morestimulating.The absorption approach works well in mature industries, but emerging economies are producing nimblecompanies that may prove capable of shaking up slow-moving sectors. As well as Arcelor, considerCemex, a Mexican company that took over RMC, a British-based building-materials company; or thefolding of Belgium's Interbrew into Brazil's Ambev in 2004 to form InBev. In aviation the market forregional passenger aircraft (up to 100 seats) has been taken over by two companies, BombardierAerospace of Canada and Embraer of Brazil.
They have seen off Fairchild Dornier, Fokker and Saab fromEurope because they have been prepared to introduce more innovative aircraft using modern jettechnology.Only a few years ago the railway-locomotive industry in Europe was spread among a handful of regionalcompanies. Today, after several rounds of consolidation, it is dominated by Bombardier Transportation,another part of the Canadian group. It has based its worldwide train business in Berlin, becoming, ineffect, a European global company—another example of the tide of globalisation lapping on Europe' sshores.Forty years ago the late Jean-Jacques Servan-Schreiber, in an influential book, “Le Défi Américain”,warned Europeans that the American multinationals such as IBM, Ford and General Motors wouldconfront them in Europe. Today it is not just American firms that are moving into Europe but companiesfrom all over the world.
And yet Europe's big companies seem to be rising to the challenge.Copyright © 2007 The Economist Newspaper and The Economist Group. All rights reserved.About sponsorshipHome and abroadFeb 8th 2007From The Economist print editionHoward ReadHow two European giants keep up with the global raceSIEMENS and Philips are bastions of European business that have been global since the 19th century. By1865 Siemens had opened up shop in Britain and was building telegraph lines all over Russia. Today it isEurope's largest engineering firm, operating in 190 countries. In the year to September 2006 it hadrevenues of €87 billion. Some 80% of its sales, 70% of its factories and 66% of its 475,000 workers areoutside its homeland.
In 2005 America became the company's largest single market, overtakingGermany.Philips started making light bulbs in Eindhoven in the Netherlands in 1891. In the first half of the 20thcentury it was busy with X-ray machines and radio equipment and in the 1970s it moved into the recordbusiness. Today it employs 122,000 people in 60 countries in its diversified business.Both these giants are prime examples of successful global European companies. They have done lots ofrestructuring, giving the lie to the idea that this is something European companies are incapable of doing.They have responded to the rise of low-cost manufacturing and the opening of the Chinese market bymoving mass production to Asia.
At home they now concentrate on the design and manufacture of highadded-value products.Both companies have had their ups and down lately. Siemens got into a spot of bother over its handsetmaker, BenQ, which it sold to a Taiwanese firm in 2005. Less than a year later the buyer shut BenQdown, with the loss of thousands of German jobs. The blame fell on Siemens, which had to pick up the€35m bill for retraining the redundant workers of a firm it no longer owned.The company is also fighting allegations of widespread bribery that are still far from resolved.
Last June itagreed to pool its telecoms equipment business with Nokia, a leader in wireless systems. The deal wasannounced in June, but since then Nokia executives are said to have been fretting over potential hiddenliabilities from the bribery scandal. The fusion of the two businesses has been postponed. Even soSiemens reported a healthy 25% increase in profits in the third quarter of 2006, part of a continuingrecovery in recent years.Philips has been engaged in an endless round of restructuring in an effort to make it more competitive.Things came to a head in 2001-02 when the company suffered huge losses and had to shed 55,000 jobs,about a quarter of its workforce.
Thirty separate divisions, each with heavy overheads, were cut down tojust five—domestic appliances, lighting, medical, consumer electronics and semiconductors. A net loss of€3.2 billion in 2002 turned into a net profit of €2.8 billion in 2004, although the company has reportedsome poor quarterly results in the past 12 months, complicated by acquisitions and disposals. Philips hasalso got out of the mobile-phone business and joined forces with LG of South Korea for liquid-crystaldisplays, the key technology used in flat screens for TVs and computers.Last August Philips announced that it was selling a majority holding of its semiconductor business to aprivate-equity buy-out led by KKR.
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