UK: Heller on Management - Europe is the global springboard.

UK: Heller on Management - Europe is the global springboard. - Robert Heller urges UK companies to shake off their insularity, grab what a pan-European structure has to offer and use it as a springboard to global power.

Last Updated: 31 Aug 2010

Robert Heller urges UK companies to shake off their insularity, grab what a pan-European structure has to offer and use it as a springboard to global power.

The courtship of Daimler-Benz and Chrysler, coming hard on the euro's heels, signals a new era in global management. Whatever politicians say or do, UK managers are left with little choice: they must become globetrotting Euromanagers - or fail.

The comfortable illusion is that leaner and meaner UK companies are in the finishing straight, leaving dozy continentals in the starting blocks.

The truth is that larger and richer continentals, with their economies rebounding, are proving aggressive in their pursuit of global penetration and are boosting their management prowess to achieve this. Complacent UK companies should take note.

The Benzites are breaking with their past and trying to throw aside the self-regarding, inner-directed culture that has long dominated German engineering. Yet, there is no precedent for Stuttgart's transformation from a specialist, high-cost, high-priced, up-market manufacturer into a full-line supplier of vehicles, competing all the way down market. And enough of its previous culture remains to raise interesting doubts about its mating with Chrysler, whose renaissance has been sustained thanks to bold steps (by Detroit standards) into the new age of teamwork and supplier partnerships.

While UK companies have seen some sweeping transformations themselves, the trend has been towards narrowing, rather than broadening their markets.

ICI, for conspicuous example, has opted for specialisation, moving away from its past as a full-range chemical conglomerate. GEC, too, is concentrating on defence rather than majoring in the opportunities that abound in civilian electronics and telecommunications. But specialisation does little to relax the imperative need to command the heights of well-found markets.

Rolls-Royce Motors, that ultimate specialist brand, is a good example of how narrow-mindedness can result in the failure of UK business to build on assets such as unique brand value and high engineering skills. The struggle between VW and BMW for Rolls-Royce Motors also symbolises the new German expansionism. But other UK companies have realised that they can build on their specialisation by establishing a powerful presence in the US and continental Europe.

New-age specialisation can be beautiful and big. Siebe, for example, has bucked the trend and, through its acquisition of Eurotherm, the British company has become a world leader in process automation.

The need to become established in continental European markets is becoming particularly strong, geographically and strategically. We are only a year away from a borderless Europe with a common currency. This is the last year in which national management, marketing and manufacture make any kind of sense. Corporations should likewise know no frontiers and no impediments to the flow of investment and revenues.

Meanwhile, a new breed of Euromanagers is emerging, younger, more aggressive and transnational in outlook. In Britain, companies have already seen the first wave of what will be many top appointments pulled from the continental pool. Pilkington, which transferred operational control to the continent, has turned to an Italian, Paolo Scaroni, to resuscitate its fortunes in the fight against St Gobain. But others, such as Siebe with Allen Yurko, have picked Americans. In this new era, you appoint the best qualified, irrespective of origin.

The new men (and women) are unlikely to run their overseas interests in the traditional manner, as the colonial outposts of a British empire.

Too much of the imperial attitude survives, however, which explains the sluggish spread of UK competitors in retailing (where the Dutch-owned C&A, for better example, is integrating its chain across Europe) and in financial services.

In the latter, the City's performance is especially curious. While continentals surge into London, their larger UK 'competitors' are mostly on the outside, looking in, as their markets go global. Liffe's acute problems in holding its derivatives markets against German competition are a sinister straw in the wind. The starting point must be Europe because that is the new home market, insofar as 'domestic markets' have any meaning now. By comparison, US companies can afford their insularity, thanks to their vast local markets.

But when even a retailer such as Wal-Mart is expanding into Germany from a base in Bentonville, Arkansas, the writing must be on the wall.

For those who can read that message, the response is clear. Adopt the euro as your corporate currency, following in the footsteps of ICI and British Steel. Treat the British market as merely one entity in an integrated pan-European structure. Recruit and promote widely among your corporate nationalities. Make global management skills the core of development programmes.

Envisage Europe as the springboard for global power. Recognise that the competition is coming, not only from Japan and the US, but also from a resurgent continental Europe. And be inspired by Airbus' successful battle with Boeing: play the new world game to win.

Robert Heller was founding editor of Management Today.

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