posted on Apr, 21 2010 @ 05:46 AM
I saw a really interesting article the other day, that i wanted to share with you...enjoy...
Forget the conventional wisdom. European firms are faster-growing, more profitable, and better at globalization than their American rivals.
It's become a truism that America is full of "can do" people and companies, while slow-moving Europeans are more likely to offer a "yes, but"
when faced with challenge. American firms set the bar for corporate excellence, or so the story goes, coming up with the hottest new products and
ideas, and then doing the best job of selling them in every corner of the planet. While the U.S.-generated financial crisis has, of course, tarnished
the patina of American banks, it really hasn't dented this idea about the supremacy of the American multinational, or the American corporate model.
Indeed, the worries about Europe's ability to compete on an ever-tougher global playing field have only been heightened by the fact that,
post-crisis, Europe is still trailing the U.S. in economic growth, even as it tries to stem its own high-profile problems like the threat of sovereign
default in Greece, sky-rocketing deficits, and a plunging euro.
But as is so often the case, a close look at the numbers tells a different story. Contrary to the widespread cliché of American dynamism versus
European economic stagnation, over the past decade Europe's top companies have beaten America's (not to mention Japan's) by an often substantial
margin. Despite the rise of China and the rest, Europe has held roughly steady, at about 17 percent, its share of world exports since 2000, while
America's has fallen by more than a third, from 17 to 11 percent—a crude but significant indicator of global competitiveness. Since the early
1990s, Europe has steadily expanded its share of the world's 100 biggest multinationals compiled annually by the U.N. Conference on Trade and
Development, from 57 in 1991 to 61 last year, while the U.S. number has dropped from 26 to 19. Europe has moved up these and other corporate rankings
with new and fast-expanding companies in such sectors as energy (Germany's E.On and France's GDF Suez), finance (Britain's HSBC and Italy's
UniCredit), and telecommunications (Spain's Telefónica and Britain's Vodafone)—while America's roster of large global companies has been mostly
static and declining, with new stars like Google the exception, not the rule.
What's more, Europe's growth has been highly profitable. According to a study of the top 3,000 global companies by the German business consultancy
Roland Berger, the European companies in the group grew profits at an average rate of 13 percent a year over the decade from 1998 to 2008, almost
double the 7 percent rate for their U.S. rivals. Berger CEO Burkhard Schwenker says corporate Europe now has higher earning power than America Inc.,
with gross earnings in the Berger sample averaging 19.8 percent of 2008 revenues in Europe, versus 13 percent in the U.S. Some of these numbers must
obviously be taken with a grain of salt—for example, 2009 earnings (a compilation of which Berger plans to release next month) show a significant
rebound for U.S. companies versus their European rivals, who were hit later and harder by the recession.
But amid all the uncertainty over economic prospects coming out of the crisis, these numbers offer an important starting point. At the heart of the
debate is the question over "rebalancing"—whether deficit economies like the United States' will need to move away from debt-driven consumption
and imports and compete harder on world markets, as Barack Obama said in his State of the Union address in January, when he promised to double
America's exports over the next five years. Until now, that debate has centered on macroeconomic data—trade balances, currency-exchange pegs, and
capital flows. But when you drill down to the level of actual companies, it's clear that in many sectors, European firms have out-competed American
rivals across the globe, and Obama's dream of rebuilding a world-beating export sector in which American firms trump European ones could be an uphill
slog, to say the least.
It's a picture that forces us to revise some old clichés about the European economy. "The myth of a sclerotic, no-growth Europe that is somehow
doomed to fail is just wrong," says Charles Roxburgh, director at McKinsey Global Institute in London. In fact, European per capita GDP has grown
slightly faster than the U.S. since 2000. That metric is crucial: because of its faster population growth, the U.S. must generate 1 percentage point
more growth than Europe each year just so Americans can hold on to their level of prosperity. Roxburgh attributes the European edge to a sharp rise in
employment after a series of labor-market reforms in the late 1990s and early 2000s. He also says many European export-oriented companies have
excelled when it comes to restructuring, increasing their competitiveness even as they face off against lower-cost rivals from China and other
CONTINUING IN NEXT POST...
[edit on 21-4-2010 by OddTimeSignature]