Business units [in Europe] still tend to focus on individual countries and in OCUS managerial practices still follow long-standing national patterns.
For firms within Europe, the euro eliminates currency risk, and so “Pan Euro pea thinking becomes not only practicable but essential.” The success of
companies within Europe, then, will depend on their efficiency in streamlining
and consolidating its processes and in integrating product and marketing plans
across Europe. The challenge is to balance the national and the continental view,
because a common currency does not bring about cultural or linguistic union.
Clearly, both European and non-European companies will need to recon side their European, and indeed global strategies, now that the EU has become
a reality, complete with common currency, the euro. “Foreign” managers, for ex ample need to develop an action program to ensure that their products have
continued access to the EU and to adapt their marketing efforts to encompass
the whole EU. The latter task is difficult, if not impossible, however, because the
“citizen of Europe” is a myth; national cultures and tastes cannot be homogenized. With many different languages and distinctive national customs and cultures, companies trying to sell in Europe must thread their way through a maze of varying national preferences. These and other challenges lie ahead, along with numerous opportunities.
UPS is one of many firms experiencing this double-edged sword. Its managers realize that Europe is still virgin territory for service companies, and they expect revenue to grow by 15 percent a yeas there. However, it has run into many conflicts, both practical and cultural. Some of the surprises “big Brown” had as it put its brown uniforms on 25,000 Europeans and sprayed brown paint on 10,000 delivery trucks around Europe were:
indignation in France, when drivers were told they couldn't have wine
with lunch; protests in Britain, when drivers' dogs were banned from
delivery trucks; dismay in Spain, when it was found that the brown UPS trucks resembled the local hearses; and shock in Germany, when brown shirts were required for the first time since 1945.
Meanwhile, adventurous European businesses are spreading their wings across neighboring countries as they realize that open markets can offer as much growth and profitability as does protectionism - probably more. British Airways, for example, took the German market under its wing by buying 49 percent of a local airline and using a new Euroname, Deutsche BA. And, in one of Europe's biggest mergers, the Zeneca Group P.L.C., of Britain acquired Astra A.B., of Sweden. The resulting pharmaceutical giant was deemed necessary to fund new drug research and to compete in a market dominated by U.S. corporations. Early European mergers were dominated by British companies. But now that Continental European companies will have their shares denominated in euros, there wifi likely be more cross-border deals among those countries because they will be free of currency-exchange problems.
Companies within the EU are gaining great advantages by competing in a continental-scale market and thereby avoiding duplication of administrative procedures, production, marketing, and distribution. The Italian company Benneton Group SPA is one such company - competing by being technologically efficient. For insiders, a single EU internal market means greater efficiencies and greater economic growth through economies of scale and the removal of barriers, with the consequent lowering of unit costs.
Stiffer competition, however, has resulted both within the market and outside of it, leading to a shakeout of firms; mergers and acquisitions will increase so that larger firms will be strong enough to survive. The twelve “Euroland” countries already have a combined 19 percent of world trade, compared to 17 percent for the United States and 8 percent for Japan, and continued strong growth is projected.
Companies based outside the EU enjoy the same advantages if they have a subsidiary in at least one member state. But they sometimes feel discrimination simply because they will be outside what for the member states is a domestic market. In other words, the EU may build a protectionist wall - of tariffs, quotas, and competitive tactics - to keep out the United States and Japan. However, the EU will also create opportunities for nonmembers - a market with a potential purchasing power of $2.5 trillion, for instance. Many companies, especially MNCs, will start from a better position than some firms based inside the community because of (1. their superior competitiveness and research and development, (2. an existing foothold in the market, and (3. reduced operating expenses (one subsidiary for the whole EU instead of several). But, European harmonized standards, while seeking to eliminate trade barriers within Europe, serve to limit access to EU markets by outside companies through the standardized specifications of products allowed to be sold in Europe. The harmonization laws set minimum standards for exports and imports that are EU-wide. However, those standards also frequently hinder European companies from efficient sourcing of raw materials or component parts from “foreign” companies. Opinions differ about the long-term impact on U.S. firms: the EU could unify its markets, adversely affecting some U.S. industries; market access could be reduced; and demands for reciprocal market access in the United States may ensue.
Others feel that the new single market provides little threat to and considerable opportunity for Americans. Many U.S. firms (in anticipation of protectionism) have invested in Europe since the beginning of the Common Market in 1958, and they now feel satisfied with their current positions. Indeed, U.S. companies (GE, Dow, 3M, Hewlett-Packard) who already have well-es- tablished European presences enjoy the same free flow of goods, services, capital, and people as Europeans.
Those U.S. companies not yet established in Europe must examine the EU internal market to decide on their most effective “European strategy.” Many firms are opting for joint ventures with European partners, sacrificing their usual preference of 100 percent ownership (or majority control) to extend operations around Europe; this strategy also opens doors to markets dominated by public procurement, as with the AT&T - Philips venture to produce telecommunications equipment. But for a number of firms - both foreign and European operating in Europe has become cost prohibitive. The average Western European earns more, works fewer hours, takes longer vacations, and receives more social entitlements and job protection than those in Asia and North America. European MNCs have the highest labor and taxation costs among the TRIAD nations.7 Siemens AC of Germany, for example, shifted almost all its semiconductor assembly work from its plants in Germany - where it was not permitted to operate around the clock or on weekends - to a plant in Singapore, where it operates 24 hours a day, 365 days a year, and pays $4.40 an hour for workers.
Suzuki, Toyota, Nissan, and other Japanese companies are also experiencing the dilemma of operating in Europe. They are reluctant to freely pour yen into Europe, but they want to keep a foothold in the market. Suzuki, for example, found that in its Spanish plant it took five times the number of workers and cost 46 percent more to produce a Suzuki Samurai than in Japan.
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