issue 9 - Roland Berger

p food for thought
two-thirds of european industries are not threatened by low costs elsewhere
Viva globalization!
Fear of the opening of markets abounds in industrialized nations. But are low-wage countries
and companies’ appetites for outsourcing actually a threat to European business
locations? Is globalization really a job-killer? Not if countries and companies know how
to use it. And, provided that regions such as Europe face the competition, the economic
integration offers primarily opportunities.
Minus one-third
According to the Institute for International Economics,
prices for IT hardware dropped by one-third
between 1995 and 2002 thanks to offshore production.
For one, the savings in this period benefited
all companies that use IT hardware—thereby improving
their profits. That in turn creates and safeguards
jobs in Europe. Inexpensive manufacturing abroad
not only benefits businesses, but private consumers
also save money.
Source: Institute for International Economics
32
of the top 50 transnational corporations are
based in Europe. In other words, European companies
are at the front of the pack in terms of globalization.
Source: United Nations Conference on Trade and Development
€34 billion
1995 2002
is how much it would cost, according to a study by India’s National Association of Software and
Service Companies (NASSCOM), if the UK economy chose not to outsource 272 000 jobs to offshore
locations (outside of Europe) by 2010. The reason for the high cost is a drop in productivity and the
associated decrease in gross domestic product (GDP). On the other hand, if outsourcing does take
place, productivity increases, as does the GDP. However, there are also costs of outsourcing: The
country has to spend €5.7 billion, primarily to absorb the social impact of job losses.
Source: NASSCOM
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For more than two-thirds of European industries
(measured by total value added) the rise
of the BRIC (Brazil, Russia, India, China)
countries represents no threat, but rather an
opportunity for growth. According to a Goldman
Sachs study, these industries manufacture
products that are not produced in the BRIC
countries, where lower wages therefore are no
competitive advantage. The biggest winners in
globalization include pharmaceutical companies,
engineering firms, energy companies and
the aerospace industry, as well as producers of
scientific instruments. Generally, northern
European companies profit the most.
Source: Goldman Sachs
2006
2005
Kuehne+Nagel
employees offices
45 000 830
25 000 620
Expansion in logistics
countries
103
98
The figures above describe the impressive network of the Swiss logistics company
Kuehne + Nagel in the last year. One year before that, it only had 25 000 employees
in 620 offices throughout 98 countries. The company benefits when greater international
production requires more goods to be shipped around the world.
Source: Kuehne + Nagel
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