Re: So, with Sarkozy, another conservative, pro-business pol elected in France one should have expected that Franco-German relations would have been restored. The article suggests that is not so.
Indeed, and the reason for the French-German rift is basically that Sarkozy is pro-FRENCH-business whereas Merkel is pro-GERMAN-business.... The problem is that corporate France doesn't follow the same pattern as corporate Germany. Germany's so-called Mittelstand(*) faces practically NO competition abroad --hence it doesn't suffer from a rising euro. There's just no way for the world's industrial wannabes (China, India, Brasil, even the US) to compete with German machine-tools, precision mechanics,... Ditto with Germany's car makers: Mercedes, BMW, Porsche, Audi,... Now compare the latter with their French competitors: Renault, Peugeot, Citroën. Of course, there's a sizable market for small, inexpensive cars but the snag is that Western manufacturers in that market sector face serious competition from Asia --it used to be Japan and Korea but now China has joined.... I think the problem is that French business has been too consumer-oriented: Danone, LVMH, Axa, BNP-Paribas, Carrefour,... are all corporations that cater to individual consumers, not other corporations (granted, Axa and BNP-Paribas, as financial institutions, have a corporate clientele as well). France's consumer-oriented champions face a stiff competition from low-cost countries, especially in Asia, and even French luxury brands are much more vulnerable than the German ones. After all, it's much easier to counterfeit a Hermes scarf or a Cartier gold-watch than a Porsche or a Trumpf laser-cutter, isn't it?
That's why Sarkozy keeps calling for the ECB to lower interest rates and drive the euro down --in order to give French companies an edge over their dollar-priced competitors...
Gus
(*) Germany's hidden champions
By Richard Milne and Peter Marsh
Updated: 1:10 a.m. ET Sept. 20, 2007
Germany's small industrial companies that are market leaders have more than doubled in size in the past 10 years and outgrown their competitors in spite of the rise of low-cost manufacturing countries and Asian rivals.
These "hidden champions" – a term used by management consultant Hermann Simon to describe companies with annual sales under €3bn ($4.1bn) that are in the top three of their sectors – have recorded average annual revenue growth of 9 per cent and created 1m jobs in the past decade, according to his new book.
"The development is just staggering. While the big listed German groups have been in the headlines for all sorts of negative things, the small innovative companies have been growing at Chinese rates," Prof Simon tells the Financial Times.
Such companies – which include laser cutter Trumpf, headphones maker Senn-heiser, bottling machine maker Krones and wind energy company Enercon, among others – have a highly defined focus on a market where they are not only leaders but often have more than a 50 per cent share. They spend heavily on research and development and are also characterised by a strong international presence.
Many have been in China for decades. Most of them are also family or privately-owned.
Hans-Jochen Beilke, head of EBM-Papst, a motor and fan manufacturer, says his company added 1,200 new jobs last year – more than 10 per cent of its workforce – with half of these in Germany. "We may be smaller than Siemens, Daimler or Bosch but we are more representative of the German economy," he says.
Diether Klingelnberg, supervisory board chairman of gear cutting machine maker Klingelnberg, said the market had become much larger for small companies with the opening up of China, Russia and India. "Globalisation is a huge chance for the Mittelstand [the small companies that make up the backbone of the German economy]."
One weakness of the Mittelstand is that in spite of their economic clout they have little lobbying power and many are reluctant to talk in public. Prof Simon says: "We are losing a whole lot of positive motivation examples both in the country and in companies themselves. The companies speak out too little to protect their interests."
Prof Simon's book – "Hidden Champions in the 21st Century" – shows how the groups have outperformed their nearest competitors. The hidden champions – drawn from 700 world leading companies in Germany – have improved their relative market share, which measures how much bigger they are than their nearest competitor, from 1.56 in 1996 to 2.34 last year. "This is remarkable," said Prof Simon.
He says China and Germany should emerge as the winners of globalisation. "That China will become the factory of the world is perhaps correct but who will build this factory? Germany."
Copyright The Financial Times Ltd. All rights reserved.
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