For many years, Accenture has been carefully examining the growth of the 500 largest companies in Germany. This is what we know: For these globally oriented companies, which generate at least one billion Euros in revenue every year, export is the most important growth driver. However, an economic downturn in important boom markets, as well as mounting reservations about free trade are threatening to make this driving force misfire.
But do the best of the best among the Top500 perhaps already have strategies to capture new growth opportunities? After all, the Growth Champions among the largest companies in Germany have repeatedly proven their flexibility in volatile markets. In the course of our most recent study‚ “Germany’s Top500: Global growth in times of national focus,” we found some patterns that indicate top companies do, indeed, anticipate new obstacles to growth and initiate countermeasures. The results of the study provide some important information that can help other companies learn from the best of the best.
Accenture presents five scenarios to describe the current challenges presented by a national focus on a global level (and the risks for world trade related to that), as well as possible courses of action companies might take to secure revenue in foreign markets.
It is unlikely that further increases in current account surpluses will continue to contribute to growth of the Top500.
Key economic figures show the important role exports play for German companies. Between 2005 and 2015, the
current account surplus rose from 158.2 to 244.3 billion Euros. Over the same period, exports as a percentage of GDP went up from 38 to 47
At the same time, the current account surplus has turned into a risk factor. Important trade partners might push for balanced trade with Germany. Current account surpluses are indicative of imbalances in global trade that cannot be increased at will. Governments decide—with national and protectionist motives in mind—what framework conditions the Top500 will need to meet in foreign markets.
Statistical details, please see studyDownload
Regulations will change the competitive positions of national economies overnight.
In the seven most important export markets for German companies, political risks are on the rise. Regulations may
strongly limit growth for the Top500. According to the Centre for Economic Policy Research, in the G20 alone, the number of measures taken by
countries to protect their own economies has risen from 155 to 463 since 2009.
At the end of 2016, German companies were shocked by one such measure: It will no longer be possible to take profits in China out of the country in the form of dividends. Additionally, starting in 2018, there is going to be a quota for electric cars – a decision that places manufacturers of vehicles with large combustion engines at a great disadvantage. The regulation intensity is already very high in China today, according to an OECD indicator.
In its no. 1 industry – car manufacturing – the German economy is vulnerable.
A considerable 59 percent of the revenue increase of the Top500 companies in 2015 was generated by the automobile industry. The figures indicate the importance this leading industry has on the German economy. This industry, in particular, is strongly dependent on exports. The three largest car manufacturers, as well as the three largest car part suppliers, generate around 80 percent of their revenues abroad. Apart from the risk presented by a renewed national focus, the industry faces some challenges presented by new technology trends. Electric drives are increasingly replacing combustion engines. Self-driving cars will change the automobile industry a lot. Significant shifts in market share might be the result.
In world trade, jobs are the new currency.
For German car manufacturers, in particular, the discrepancy between foreign revenue and foreign employment is big: 82.9 percent of their proportion of revenue is generated abroad, while only 47.2 percent of employment occurs in foreign markets. The difference between these measures increased between 2006 and 2015. This is why, in the course of national focus, these companies might be exposed to protectionist pressure. The worry is this: In a global economy that is increasingly characterized by a focus on national interests, jobs might turn into the new currency. That means more value has to be created in a respective country to ensure business success.
More intense competition pushes German companies’ performance to new heights.
The Growth Champions among the Top500 anticipate challenges and find solutions earlier to ensure growth. The growing interest in mergers & acquisitions (M&As) can be seen as part of a strategy aimed at driving inorganic growth. In the first six months of 2016, more M&A deals involving German companies were completed than in any comparable time period since 2007. The volume of M&A activity more than tripled in comparison with the first half of 2015. What does this mean? Mergers and acquisitions—not building up their own structures and skills abroad—have increasingly contributed to the Top500’s success in other countries. Concentrating on megatrends like digitization and sustainability, as well as cost reductions, also helps the Top500 achieve new levels of performance.
For the seventh year in a row, Accenture identified the Growth Champions among the German Top500 companies. In 2015, 39 companies had managed, over the last five years, to exceed the total Top500 average, as well as their own industry
average, in terms of revenue growth. They also generated higher profits than their respective industry average over the same period. The line-up
of the Growth Champions reveals the industries to which particularly successful companies belong.
Which nine companies have been among the Growth Champions for the past three years? You can find out in the study.
The study “Global growth in times of national focus” examines five scenarios in which current political trends in the most important export countries might lead to serious obstacles to free trade. There is a danger that traditional exports might falter as a growth driver for the Top500. Accenture shows that even in a new era, where globalization is taking a break, there are actions companies can take to create new growth opportunities.
‘Until just recently, we were negotiating the Transatlantic Trade and Investment Partnership, and others, but all of a sudden the motto now is “everyone for themselves”’
Country Managing Director
Managing Director, Strategy