The.Economist.2007-02-10 (966424), страница 29
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Microchip production had been one of the pillars of its business, buthigh European costs and global competition persuaded it to retreat. However, only three months laterPhilips was back in the market, buying a Belgian firm that is a leader in advanced lighting products.What's new?Christoph Loch, who teaches innovation, technology and operations management at INSEAD, a businessschool near Paris, thinks Europeans underrate the ability of European companies to survive globalisation.He reckons that although places such as Silicon Valley may get more attention, European companies suchas Siemens have quietly been innovating and going global for decades.Siemens systematically uses low-cost countries for making components for products that are assembledin Europe or America. But it goes further than mere offshoring of low-value-added work. It owns wholebusinesses, factories, service centres and distribution networks around the world, and also does much ofits research and product development abroad.
For instance, a lower-cost version of one of its expensivemedical body scanners, tailor-made for the Chinese market, was initially developed jointly at itsheadquarters in Munich and in China, where it is also being manufactured; but the latest version wasdeveloped entirely in China. This Chinese Siemens product is now sold in developing countries round theworld.Klaus Kleinfeld, who became chief executive of Siemens in early 2005, says that customers are happy tobuy budget scanners from Siemens rather than from, say, a start-up Chinese producer, because theyknow they can upgrade to the company's more sophisticated products and can stay with the samesoftware.
“They want to deal with a company that understands the future,” he says.Mr Kleinfeld, who comes across as a rather Americanised capitalist boss, arouses strong feelings inGermany. “He is not a proper German CEO,” snorts one German manager. His public-relations staff flinchat the Rolex watch adorning his wrist. He thinks that much of the high-value development and designwork in Germany will remain in Germany, but a growing part of it will join production and servicefacilities in countries such as India and China. He points out that India is the key to trade with much ofthe Middle East.
“When we sell power transportation [locomotives] in the Middle East we do it throughIndia.”Beautifully simplePhilips, too, is moving upmarket to survive in a world where most basic products can be made in China.Its chief executive, Gerard Kleisterlee, says that improving design across all its products is crucial to itsability to compete. Four years ago the company appointed its first marketing director for the wholegroup, Andrea Ragnetti, who was given the job of refreshing the company's brand to compete withcheaper products from China and South-East Asia. The idea was to concentrate on advanced productsthat were well designed and easy to use.
Philips is well aware of consumers' growing irritation withdevices that require a voluminous book of instructions.PLI, the Belgian firm Philips acquired in November, makes sophisticated lighting systems, using LEDsolid-state displays. They are, well, light years away from the simple incandescent bulbs the Philipsbrothers made when they started the business back in 1891. LEDs offer flexible lighting that can changein intensity and colour. Philips thinks such lighting will become part of interior design.
One recent Philipsproduct, called ambilight, will even change the feel of your room lighting to suit the film you arewatching.As well as moving upmarket, Philips, like Siemens, is also making ever more of its products, or at leastparts of them, in China. Its new acquisition has its headquarters in Belgium but does its manufacturing inChina and Hungary. Philips itself has a long Chinese history, having first opened its doors there in the1920s. One of its first exports to China was a personal X-ray machine for the use of the last emperorwhich was only recently discovered in a storage room in the Forbidden City.These days Philips is one of the largest Western multinational companies in China, with 20,000employees and sales of €6 billion, over half of which go for export, either as finished products or as partsfor use elsewhere.
Two years ago the company set itself the target of doubling sales to €12 billion thisyear. Some of the €2.6 billion a year that Philips spends on R&D will also go to China, where it has 15centres employing about 900 staff. In a speech three years ago Mr Kleisterlee said that “in some wayswe consider ourselves a Chinese company.” Recently he went further, saying that “for us China is notjust a workshop or a marketplace—it's a centre of innovation for new products and services with globalapplication.”For those Europeans who think of China as no more than an inexhaustible source of cheap labour thesemay be chilling words, but Mr Kleisterlee points out that three-quarters of the company's R&D is stillcarried out in Europe—even though over half of all Philips's manufacturing has moved abroad.
He reckonsthat things like medical systems or fancy headlights for cars will continue to be made in Europe. But suchideas can change rapidly. In that speech three years ago Mr Kleisterlee also spoke of his company'ssemiconductor facilities in Hamburg and Grenoble as one of the pillars of the group. Now a majority stakein them has been sold.Copyright © 2007 The Economist Newspaper and The Economist Group. All rights reserved.About sponsorshipDriving eastFeb 8th 2007From The Economist print editionThe car may be German, but its innards are nearly all from eastern EuropeJEAN-MARTIN FOLZ, boss of PSA Peugeot Citroën until this month, caused a stir in the late 1990s whenhe suggested that the Toyota factory being completed in northern France at that time would be the lastcar-assembly line to be built in western Europe.
BMW subsequently proved him wrong by openinganother assembly line in Leipzig, but Mr Folz was not far out. He himself has recently been openingplants in Slovakia and the Czech Republic and sounding the death-knell for a factory in Britain that closedits doors last month.Peugeot is not alone in heading east in search of skilled workers at lower wages. Poland has Fiat, Opeland Volkswagen; Hungary has Audi; Romania and Slovenia have Renault; Slovakia has Volkswagen aswell as Peugeot; and the Czechs have enticed Toyota into a joint venture with Peugeot.Once you consider car parts as well as assembly lines, the rush east becomes a stampede. Peugeot'sparts manufacturing arm, Faurecia, has factories in five eastern European countries as well as one inTurkey. Volkswagen adds Ukraine to give it a total of five countries.
Bosch, the Stuttgart company that isEurope's leading parts-maker and one of the world's top five, has factories in ten eastern countries.But is the rush being overdone? A study by Ernst & Young, a firm of consultants, concludes that centraland eastern Europe will have a market of around 4.5m cars within five years. That sounds a lot, but it isless than a third of the 16m in western Europe.
The new investment in car-assembly plants will give theeastern region a capacity of over 5.5m by 2011, making it a net exporter of vehicles. This will add to theexisting overcapacity in the European car industry, currently estimated at approaching 20%.The pain is going to be felt mostly in those parts of western Europe where up to now cars have beenproduced relatively cheaply: Spain and Portugal. Already Renault has slashed output at its largeValladolid plant in northern Spain, It does not take a satellite navigation system to see where theEuropean car industry is going.Copyright © 2007 The Economist Newspaper and The Economist Group. All rights reserved.About sponsorshipBuy, buy, buyFeb 8th 2007From The Economist print editionEurope's businesses are changing hands at a record rateTHE past two years have seen displays of the best and the worst in European business.
There has been awave of cross-border mergers and acquisitions, reflecting a healthy market for corporate control, robustprofits and plenty of cheap credit. It also shows the single European market becoming more of a realityfor the service sector. Utilities such as privatised energy companies are at last getting big enough toprovide better service and become more profitable. More cross-border mergers mean more competition,to the benefit of consumers.Mergers and acquisitions in Europe last year were worth $1.59 trillion, overtaking the value of deals inAmerica (at $1.54 trillion), according to Dealogic, a data firm (see map for regional breakdown).
Of thetop ten deals launched worldwide in 2006 five were European, and of those two were cross-border—e.ONof Germany bidding for Endesa of Spain and Dutch-based Mittal for Arcelor of Luxembourg.A survey by Morgan Stanley of European finance directors shows that they see mergers and acquisitionsas their top priority for this year, so the recent wave of mergers—the biggest Europe has ever seen—islikely to continue through 2007. Last year Britain took the largest slice of Europe's M&A cake, with thevalue of deals topping $367 billion, ahead of Spain, with $190 billlion, and France, with $174 billion.Since 2004, when the current wave started to build up, the total value of European deals has almosttripled.But there has also been a surge of economic nationalism as French and Spanish politicians have blockedtakeovers of native companies by foreigners.
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