How will this largest enlargement in the history of the Union affect the prospects of the European economy as a whole? What economic future awaits the new members of the Union? How do leading European companies - the backbone of the economy of the "twenty-five" - assess their own performance and opportunities? What is it like to be a businessman in the conditions of modern information flows? Answers to these and many other questions were provided by a study commissioned by UPS, writes the magazine "Europe".
This survey, named "UPS - Europe Business Monitor", has been conducted annually for 14 years. At the end of 2004, it involved 1,449 executives from Belgian, British, German, Dutch, Spanish, Italian, and French companies included in the list of 15,000 European firms with the largest turnover. The average revenue of these companies was €1.3 billion, and the average number of employees was 3,200.
Restrained optimism
As it turned out, overall, compared to the previous year, leaders of leading European companies assess their performance more positively: the number of executives who believe their company improved its results increased by 10 percentage points.
However, although this is a positive trend, there is little cause for optimism yet, since slightly more than half of respondents - 51% - are satisfied with their company's performance. Apparently, this explains why businessmen give very cautious forecasts for 2005: if, according to the previous survey, 59% of top managers believed their company would achieve growth, in the current year this figure has decreased to 52%. Some 38% of business leaders are confident that their company's position will not change in the near future.
One of the issues worrying the European economic community is job cuts caused by rising labor costs and the relocation of production to countries with lower costs.
This process is observed primarily in the most developed EU states, particularly in Germany. Alas, the forecasts of leading businessmen are very restrained: only 23% of respondents believe the number of jobs will increase, while 52% of executives at largest enterprises are convinced that staff numbers will remain at the current level.
The most pessimists are in Germany, Belgium, and the Netherlands, where the business community expects further job cuts. At the same time, Spain and the United Kingdom view this issue more optimistically, where executives planning to increase their company's staff in 2005 outnumber those preparing for cuts (29% against 17%).
Overall, the study showed that the situation in the UK is developing most favorably for business. This is believed not only by 62% of local entrepreneurs but also by 58% of their colleagues from other European countries. The leaders of German (9%) and Italian (4%) companies are the least satisfied with existing conditions.
Among the difficulties that European business people have to face is also the impossibility of accurately forecasting demand. Almost a fifth of respondents admitted that their company's supply chain does not manage to adapt to strategy changes. At the same time, about a third of businessmen reported that this issue is not acute for their firms.
Entrepreneurs place great hopes on the countries that joined the pan-European family last year. In the coming years, the most sustainable economic growth is expected in the three largest newcomers to the Union - Poland, Hungary, and the Czech Republic. The survey showed that 47% of business people consider Poland to be the most promising country, 31% - the Czech Republic, and 23% - Hungary. Among EU veterans, the most sustainable economic growth is still observed in Spain. Some 23% of executives are confident in its future brilliant results.
Information stress
How do perpetually busy businessmen cope in the age of information technology? Many have to adapt on the fly to rapidly developing and ever-intruding means of mass communication. After all, today, timely and complete information is the main competitive advantage of most companies. But what serves as a powerful weapon in the struggle for the market sometimes turns against those who use it.
Even while on vacation, European businessmen try to keep track of the company's situation: 77% of respondents do not turn off their work mobile even during legal rest, and 48% regularly check their email. By this indicator, the most accessible are Belgians (87%), Italians (86%), and Spaniards (85%). British businessmen have a calmer holiday, with only 62% trying to stay constantly in the know.
While at the workplace, EU entrepreneurs, despite their numerous responsibilities, strive to be accessible and not isolate themselves from the outside world with the help of secretaries and receptionists. The vast majority of businessmen (90%) answer email themselves, 76% conduct negotiations on a direct line, and 73% independently plan meetings and events.
Such a responsible attitude to business also has negative consequences. Although European business leaders have mastered new information technologies well, they are not very enthusiastic about their further development. As it turned out, 36% of them do not need to improve their own information tools. Conservatism in the use of these tools is shown by 39% of all European businessmen. At the same time, the French (34%) and Italians (32%) are most interested in innovations in this area.
Probably, the cautious attitude towards new products is due to the fact that they lead to an acceleration of an already fast pace of life and an increase in information flows that a person is simply unable to perceive. Company executives across Europe admit: in everyday life, new technologies cause stress and irritation. At the same time, email is named as the main source of negative emotions: 57% of executives lose their temper because of continuous streams of messages, and 35% are irritated by spam (electronic junk) that relentlessly attacks their mailboxes. About half (48%) of Belgian top managers admitted that endless streams of unnecessary electronic messages have tired them out.
European businessmen are also dissatisfied with the state of the equipment they have to work with. A faulty computer becomes a source of irritation for 27% of respondents, and slow Internet access for 23%. German businessmen are most upset by this problem (34% are dissatisfied with computers, 35% with the quality of connection to the World Wide Web).
Alluring East
Expensive labor and a number of other factors prompt heads of European firms to think about ways to reduce production costs. One such method is outsourcing, that is, placing production in different regions of the world where it is most profitable.
When asked to name the three most promising Asian countries for outsourcing, the majority (90%) of businessmen named China. Following it, India (53%) and Japan (27%) are considered the most attractive.
European companies see Asian countries not only as a market with enormous consumer demand, but also as a source of cheap labor: 67% of respondents cited this as the most important argument in favor of developing their business in Asia.
However, entrepreneurs understand: expansion to the East is fraught with significant difficulties. Thus, 41% of all executives consider the language barrier to be the biggest obstacle to expanding their business in this direction. There are other problems: 52% of Belgian executives fear Asian corruption, and British businessmen fear political instability (42%) and corruption (41%).
Despite all these difficulties and concerns, 24% of companies participating in the study already use outsourcing. British firms have become leaders in this area, with 32% of them having moved their individual business processes outside the country. At the same time, many European companies do not intend to take their divisions abroad.
What to do?
How do European entrepreneurs see the answer to the difficulties associated with the current economic situation? How do they assess the situation on the European market?
It turned out that the Europeans themselves doubt how strictly EU members follow existing regulations. According to top managers, France is the country where the directives in force in the Union are least observed. However, it also took second place among countries where, according to top managers, legislative norms are best observed. And the list of states that most strictly follow the directives is headed by Germany.
Almost half of the surveyed heads of leading European companies are convinced that the most positive impact on the competitiveness of the EU economy can be made by reducing labor costs. This opinion is most common in Germany (60%), Belgium (53%) and the Netherlands (52%). At the same time, Spanish and Italian executives are confident that the priority is investment in scientific research (67% and 55%, respectively). In turn, British businessmen believe that the competitiveness of the economy of the “twenty-five” should be increased through strict industrial standards and regulatory norms.
A comparison of the legislative climate in Europe and the United States, according to the study, turned out not in favor of the European Union. The majority of respondents agreed that, thanks to more flexible labor legislation, the United States gains an advantage over European countries.
In this regard, European business places great hopes on support from the World Trade Organization (WTO). More than two-fifths of top managers (41%) believe that the WTO needs to simplify customs procedures. Approximately the same number believe that this organization should develop transparent competition rules. Moreover, European businessmen spoke about the need to liberalize the services sector. Imperfect legislation in this area hinders the further development of European business. Meanwhile, according to the President of the European Commission, José Manuel Durão Barroso, it is the services sector that has the greatest untapped growth potential. “If we cannot apply this potential, then European workers and consumers will lose a great deal,” he said, speaking at a meeting with entrepreneurs in Brussels before the next EU summit.
In addition to the services sector, European businessmen expect improvements in legislation in the area of export-import policy, attraction of foreign investment, and increased transparency of public procurement policy.
In addition, the European business community is concerned about the refusal of the US administration to ratify the recently enacted Kyoto Protocol. According to top managers, if Washington does not join this important global initiative, it will put Europe in a disadvantageous position from the point of view of competition. While recognizing the benefits of the Kyoto Protocol for the environment, almost half of businessmen predict an increase in costs for those companies that will have to comply with the requirements of this international treaty.
Speaking at a business forum in Brussels, J. M. Durão Barroso expressed concern that some Europeans, after the enlargement of the Union, have not had time to restructure their thinking. “Today, some have not yet adjusted their processors to the enlarged EU. They still think that the Union includes 15, not 25 countries,” he said.
In this regard, a survey conducted for UPS showed that European businessmen were among the first to quickly adjust their mindset and perfectly understand what potential the new EU members represent.