4.5. Analyse:

a) the two contrasting approaches to corporate strategy put forward by Don Sull of London Business School. Draw examples to illustrate the difference between these approaches;

b) the following statement made by the author: "In fast-moving consumer goods, agile Procter@Gamble of America thrives on its streamlined product range whereas Europe's Unilever is panting to keep up, with too many brands in too many markets".

4.6. Supply details to prove that European companies face competition from new directions.

4.7. Provide arguments to support or refute the following ideas: a) Europe for many years played a large part in global business; b) America, by and large, stands for agility; Europe for absorbtion.

V. Writing.

5.1. Write out of the article sentences representing the author's point of view on Europe's deeper integration into the global economy. Comment on these ideas.

5.2. Write your comments on the following passage from the text:

Forty years ago the late Jean-Jacques Servan-Schreiber, in an influential book, “Le Défi Américain”, warned Europeans that the American multinationals such as IBM, Ford and General Motors would confront them in Europe. Today it is not just American firms that are moving into Europe but companies from all over the world. And yet Europe's big companies seem to be rising to the challenge.

5.3. Make a detailed analysis of the following assumption: The absorption approach works well in mature industries, but emerging economies are producing nimble companies that may prove capable of shaking up slow-moving sectors.

Unit 3.

I. Pre-reading.

1.1. Before you read the article below, say what you know about such companies as Siemens and Philips. Find out more about them, using other available sources.

1.2. Read the following article and then

a) say if these statements are true or false, give reasons for your answers:

1. European companies are incapable of restructuring.

2. Such giant companies as Siemens, Philips, Nokia and the like are immune from troubles of the modern business world.

3. The companies in question are turning old and incapable of innovation.

4. To survive, these companies have to move upmarket.

5. Both Siemens and Philips are truly multinational companies.

b) make a gist of the article.

Home and abroad

How two European giants keep up with the global race

SIEMENS and Philips are bastions of European business that have been global since the 19th century. By 1865 Siemens had opened up shop in Britain and was building telegraph lines all over Russia. Today it is Europe's largest engineering firm, operating in 190 countries. In the year to September 2006 it had revenues of €87 billion. Some 80% of its sales, 70% of its factories and 66% of its 475,000 workers are outside its homeland. In 2005 America became the company's largest single market, overtaking Germany.

Philips started making light bulbs in Eindhoven in the Netherlands in 1891. In the first half of the 20th century it was busy with X-ray machines and radio equipment and in the 1970s it moved into the record business. Today it employs 122,000 people in 60 countries in its diversified business.

Both these giants are prime examples of successful global European companies. They have done lots of restructuring, giving the lie to the idea that this is something European companies are incapable of doing. They have responded to the rise of low-cost manufacturing and the opening of the Chinese market by moving mass production to Asia. At home they now concentrate on the design and manufacture of high-added-value products.

Both companies have had their ups and downs lately. Siemens got into a spot of bother over its handset-maker, BenQ, which it sold to a Taiwanese firm in 2005. Less than a year later the buyer shut BenQ down, with the loss of thousands of German jobs. The blame fell on Siemens, which had to pick up the €35m bill for retraining the redundant workers of a firm it no longer owned.

The company is also fighting allegations of widespread bribery that are still far from resolved. Last June it agreed to pool its telecoms equipment business with Nokia, a leader in wireless systems. The deal was announced in June, but since then Nokia executives are said to have been fretting over potential hidden liabilities from the bribery scandal. The fusion of the two businesses has been postponed. Even so Siemens reported a healthy 25% increase in profits in the third quarter of 2006, part of a continuing recovery in recent years.

Philips has been engaged in an endless round of restructuring in an effort to make it more competitive. Things came to a head in 2001-02 when the company suffered huge losses and had to shed 55,000 jobs, about a quarter of its workforce. Thirty separate divisions, each with heavy overheads, were cut down to just five—domestic appliances, lighting, medical, consumer electronics and semiconductors. A net loss of €3.2 billion in 2002 turned into a net profit of €2.8 billion in 2004, although the company has reported some poor quarterly results in the past 12 months, complicated by acquisitions and disposals. Philips has also got out of the mobile-phone business and joined forces with LG of South Korea for liquid-crystal displays, the key technology used in flat screens for TVs and computers.

Last August Philips announced that it was selling a majority holding of its semiconductor business to a private-equity buy-out led by KKR. Microchip production had been one of the pillars of its business, but high European costs and global competition persuaded it to retreat. However, only three months later Philips was back in the market, buying a Belgian firm that is a leader in advanced lighting products.