Download Putting the Global 500 into perspective

Inside business
Inside business
Putting the Global 500
into perspective
The growth of colossal
companies, each producing as
much as entire countries, has
fascinated economic
observers. But a closer look at
the statistical dynamics tends
to ignore the significant impact
of smaller firms.
120 - longitude #52
T
he annually published Fortune Global 500 list tells us some interesting
things about the world economy and
its development. In 2013, Wal-Mart was
ranked number one in the world with revenue of $486 billion – an amazing figure.
Wal-Mart earns on average over $1.3 billion
on each day of the year. Looking back about
20 years to 1995, Mitsubishi was ranked
number one with $184 billion. Since then,
the revenue of the world’s biggest company has tripled. The world economy and the
world’s leading companies have grown immensely over the last few decades.
Wal-Mart’s revenue is about the same as
the GDP of Taiwan or Argentina, which
were ranked 25th and 26th in the world.
This means that 88% of the approximately
200 countries of the world have a GDP that
is smaller than the revenue of one single
company. Of course, this comparison isn’t
entirely correct, as the GDP is the sum of a
country’s value added and not its revenues.
Still, the comparison reveals the enormous
dimensions from other perspectives.
The biggest German company on the
Global 500 list in 2013 was Volkswagen with
revenue of $266 billion.VW is ranked eighth,
one slot ahead of Toyota. In 2005,Volkswagen
was ranked 15th with $111 billion. In this
period of time,Volkswagen grew a considerable 11.5% per year. Acquisitions obviously
played a major role in this. It must be said
though that the presence ofVW on this list is
rather atypical for German companies.
In 2005, 37 German companies were
among the Global 500. In 2013, this number
dropped by 19% to only 28. Germany’s development is right in line with many other
countries. In 2005, 176 US companies belonged to the Global 500; in 2013, it
dropped by 27% to 128. It’s a similar situation for Japan where in 2005 it had 81 firms
and eight years later 57. French firms on the
list dropped from 39 (2005) to 31 (2013)
and British from 35 to 27. Chinese companies are the primary reason why these companies are getting pushed off the list. While
China had 16 companies on the list in 2005,
in 2013 it experienced a 533% increase to
reach 95. The growth of individual Chinese
companies is even more breathtaking. In
2005, Sinopec, the company with the high-
J.D HANCOCK
by hermann simon
and danilo zatta
Bambi versus Godzilla.
est revenue in China, was ranked 31st with
$75 billion. Today, the third and fourth slots
of the Global 500 list are held by Sinopec
and China National Petroleum. With 457
and 432 billion dollars respectively, they
aren’t far behind Wal-Mart. Of the top 100 in
2005, there were exactly three Chinese companies; in 2013, there were 15. Such comparisons are even better than macroeconomic figures in revealing how dramatic
China’s role in the world economy has
changed – and will keep doing so. The shift
in country figures represents the largest
change in the Global 500 list.
What kind of role do Global 500 firms
play in the ever-increasing global economy?
What do the balance sheets, total revenue,
profits and employee figures look like? This
exceeds our powers of imagination. These
500 companies generate $31.058 trillion a
year – a sum that is almost double the
amount of the US GDP, which was $16.799
trillion in 2013. In other words, each company earns an average of $62.1 billion. Even
the smallest of the Global 500 firms reports
a revenue level of almost $24 billion. Their
total profits equal $1.956 trillion. That’s almost $4 billion per company. The balance
sheet total is $123.476 trillion. It should be
noted here that the list includes banks and
insurances companies. The total number of
employees, 65 million, sounds rather mod-
est in contrast to this figure. Each Fortune
500 firm averages 130,000 employees. In
May 2014, Germany alone reported 42.1
million workers. So basically, the Global
500 firms employ “only” about 1.5 times
more people than Germany in total.
And that’s why we need to adjust how we
think, which is naturally influenced by the
press. In 32,116 reports from 5 German media sources about companies, industries
and managers, a study showed that 83.8%
were about major corporations and only
16.2% were about small and mid-sized firms.
This doesn’t really fit the reality of the job
market, where only about 20% work for Fortune 500s and 80% for the rest of the market.
In the media, the world economy is often equated with the performance of the
major league players of the world. Yes, the
Global 500 are the big players, but they
aren’t the world economy. The international
importance of the world’s biggest firms
should be weighed carefully, despite their
fantastic numbers.
Hermann Simon is the chairman of the consulting
firm SimonKucher & Partners.
danilo zatta is partner of Simon-Kucher
& Partners.
ey are authors of the books Aziende vincenti and
I trend economici del futuro.
longitude #52 - 121