strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: August 25, 2004

 
 

Think Global, Act European

• Information Availability. Internet shopping makes product pricing much more transparent to the consumer, reinforcing the intended effect of the euro. With a Web search, the consumer can find the lowest price and compare by geographical location as well.

• Improved Transportation Infrastructure. With the removal of border controls and customs duties, and the advent of faster and more efficient transportation channels, tracking of merchandise and the distribution of goods within Europe are easier than ever. In the past, each country required a different transportation infrastructure, which bore an additional cost.

Yet the New Europe is, undeniably, still a mélange of different cultures, life experiences, expectations, and habits. Some of the differences that still prevent it — and may forever prevent it — from being treated as a single, U.S.–style market are:

• Computer Penetration. The number of PCs per 100 inhabitants averages 31 in the E.U., but it varies from nine in Greece to 56 in Sweden. The volume of e-commerce and the benefits of Internet-based marketing and communication are equivalently variable.

• Internet Adoption. Although half of West European households have Internet access, the variance is large here too: 23 percent in Greece, 43 percent in France, and 68 percent in Sweden. (By comparison, 70 percent of U.S. households and 65 percent of Japanese homes have Internet access.)

• Channel Development. Retail channels reach more deeply into some markets than others. Half the computers sold in Germany last year moved at retail, but less than one-third in the U.K. did so.

• Taxes. Efforts at tax harmonization are far from over. Within the E.U., VAT rates range from 16 percent in Spain and Germany to 26 percent in Sweden. (As a point of reference, the VAT in Switzerland, which is not a member of the E.U., is 7.6 percent; and although U.S. sales tax varies by state, it is under 10 percent everywhere.)

• Pricing. Increased transparency notwithstanding, prices vary dramatically across Europe. An audio CD’s price can vary by 40 percent in euro countries, according to the Dresdner Kleinwort Wasserstein investment bank. This price variance in the euro zone is “roughly twice as large as in America,” the bank reports.

• Gross Domestic Product. Per capita GDP in 2002 ranged from $21,450 in Spain to $29,400 in Switzerland (which, although not an E.U. member, is inextricably tied to the union culturally and economically). That compared with $36,406 in the U.S. With E.U. enlargement, that economic variance is widening: The 10 newest E.U. members collectively have per capita GDP that is a little more than half that of the older 15 members, according to The Economist. Per capita GDP for countries under consideration for admission in 2007 is only 25 percent of the “traditional” E.U.

Even some of the areas that have trended toward homogeneity are beset by les différences. Although English is largely accepted as the language of business, average proficiency, let alone fluency, differs enormously, even among next-door neighbors like Germany and Italy.

And, of course, even some of the E.U.’s most prominent, longstanding members have yet to adopt the euro as official currency!

Some differences may simply create cultural flavor. But others are so central to a country’s identity that they may represent material inhibitors to the creation of a common European management policy.

How to Centralize
The increasing sophistication of non-U.S. markets has given old-fashioned, centralized, multinational management a bad reputation. Almost any description of centralization makes it sound unappealing in a business environment that prizes diversity.

In contrast to decentralized management, in which multiple processes are created independent of one another and managed on a country level, centralized management creates one process that is implemented consistently in all countries, usually overseen from a company’s global headquarters.

 
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store