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While Asia dominates the headlines, corporate reality homes in on Europe
New research by Pleon shows Europe’s business leaders put domestic European opportunities for growth ahead of opportunities in Asia.
The spotlight is back on Europe as it gains a new focus on the business and investment agenda of corporate leaders. According to new research conducted by Pleon, the CEOs of the leading European companies have identified domestic innovation in Europe as a primary engine for growth, ahead of opportunities in Asia. In the new study – “Business Agenda of Europe’s Top 100 Companies” - Pleon analysed the assessment of the most pressing business issues affecting the top 100 European companies.
With three years of cost cutting and downsizing behind them, the study shows that European CEOs now look forward to growing their market share. Growth is the number one job for them and innovation is seen as the key to this. 82 per cent of CEOs, regardless of the industry they represent or the country they are based in, highlight innovation in Europe – new products and services coming from R&D units in Europe – as the primary source for future growth and see this as the major investment area. As a result, while Asia dominates the headlines, it's Europe that heads corporate reality.
Business is undergoing a new phase of “Europeanisation”. Much of this is due to the European Union’s new momentum: it now counts 25 members, with a new parliament just elected, the next EU-commission under way and a new constitution being ratified. As a result, European politics are turning towards a structure that aims at developing Europe into the most dynamic economic area of the world over the next five years.
The new European focus is set against a background of the American election, and the likely impact on business of a new political agenda, as well as the dynamism of Asian markets. Despite these global factors, it is clear that Europe's business leaders first want to consolidate their position in European markets.
This reality presents companies with new opportunities and challenges. Their responses may differ – through new alliances or mergers, by developing new organisational structures and marketing processes or through political and economic dialogue – but the aim is the same: to build a truly European identity. CEOs are keeping a close watch on European restructuring and are reshaping their strategies to benefit from a unified market place.
At the same time, they are being more prudent in their approach and are concentrating on their core competences. 71 per cent of the CEOs believe that it is more important to consolidate their current business than to expand. They express the need to streamline their portfolios to concentrate on those areas where they are able to reach top positions. And in striving to reach the top, they want to be the leader at home first. The next step in their growth strategy is to extend business in neighbouring markets. As a result, companies are customising their products and services to the needs of these markets.
The Pleon study also shows that the ability to sustain growth is constrained by several external factors. Euro-dollar fluctuation is one such factor, especially for an export region like Europe. Not surprisingly, about three-fifths of the European CEOs cite the sliding dollar as a key risk to their businesses. Factors such as demographics and regulations also have a long-term impact on business models, products and services. The research shows that concerns are rising fast about the negative impact of demographic development and regulations on employment market, tax and competition. These factors are among the biggest impediments to the growth of European businesses.
The research was conducted in September 2004 and was based on what the CEOs are saying to key audiences – shareholders, the analyst community and the financial and economic press – on their business strategies and agenda. For this purpose, the study analysed about 1800 articles for the period January to June 2004 and the annuall and quarterly reports of Europe’s top 100 companies.
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