British Exhorted to Prepare for 1992
WESTERN Europe faces a massive business shake-up once trade barriers within the European Community (EC) fall, creating a single internal market at the end of 1992. Weak or ill-prepared companies are likely to go to the wall. Sir John Harvey Jones, former chairman of Imperial Chemical Industries, forecasts that only half of European businesses will survive in the keener commercial environment of the single market. The rest, he says, are likely to disappear in the next five to seven years through mergers and acquisitions, or going bust, a possibility especially likely for smaller companies.
Barriers to internal trade are scheduled for removal in the 12 nations of the Community by Dec. 31, 1992, affecting every company. Products will have to conform to common standards. Documentation and checks at frontiers will be minimized. Capital will move freely within the Community.
This will make the EC Britain's largest export market. The EC (including Britain) has 320 million potential customers - one third larger than the US market, and twice the size of Japan's. Doing business in Brindisi, Italy, ought (in theory) to be as easy as in Bangor, Wales.
But theory will not become practice without a lot of effort by individual companies. The Harvey Jones recipe for survival in post-1992 Europe is blunt: Companies that do not want to go under need to streamline their managerial structures, produce goods and services that appeal to a broader range of customers, and then sell them vigorously, using foreign languages as one of their chief weapons.
Sir John is not alone in his warning to British managers. John Banham, director general of the Confederation of British Industry says: ``Any company which thinks 1992 will pass them by is deluding itself. Small and medium-sized businesses in particular need to smarten themselves up. If they fail to do so, not only will European markets elude them; continental exporters will move into Britain, selling goods and services at competitive prices.''
According to Mr. Banham, there is no longer any excuse for British companies to say, when 1992 arrives, ``nobody warned us.'' Lord Young, former secretary of trade and industry, bombarded businesses with speeches, statements, and brochures about 1992 in the two years before he resigned his post last July. Even though the general message has sunk in, some firms are having trouble getting the detailed advice they need to ready themselves. They are having to rely on local initiatives, some of them taken by universities.
In England's northeast, for example, Durham University Business School has established a small business center to help companies eager to take advantage of 1992 but lacking the necessary resources.
Ted Fuller, deputy director of the center, says managers identify foreign language services as one of their main needs. ``It's an obvious need, of course, either to have executives speaking the languages of target countries, or able to gain access to high-grade translation. We can help them prepare for this.''
Another initiative has been taken by Stirling University with help from its Scottish Enterprise Foundation. Foreign language graduates placed with companies taking part in the scheme are asked to concentrate on opening up new markets in Europe. Their language skills help establish contact with customers in other EC countries and learn about potential commercial challenges.
The Stirling scheme is available to firms with up to 200 employees - the size of enterprise considered most vulnerable.
Marianne Neville-Rolfe, head of the European policy division at the Department of Trade and Industry, says 90 percent of companies are aware of the challenges ahead, but many smaller companies are dragging their feet. ``Two out of every three firms with over 250 employees say they are taking some form of action, but only one out of three with a work force of under 100 are doing so,'' she says.
A similar pattern is reported by Banham - with an optimistic twist for big companies. More than 75 percent of firms with a turnover of more than 100 million ($158 million) are taking specific steps, including acquisitions and joint ventures, to prepare for 1992.
Banham's deputy, John Owens, warns: ``Even if you think your own business is not affected, your suppliers and customers are likely to be.'' Banham talks of determined efforts by French and German companies to penetrate the British economy.
Vigorous action by large British companies to prepare for 1992 may, however, compound the problems of small ones, according to Barry Baldwin, a senior executive with the accounting firm Price Waterhouse. He sees the ``big fish'' as a potential threat to the ``minnows.''
Mr. Baldwin has in mind a situation in which a large British company, taking advantage of eliminated trade barriers, finds that it can deal more profitably with suppliers and purchasers in another EC country. Sentiment toward traditional business partners would quickly evaporate, he believes.
``Nobody will be able to shelter behind Margaret Thatcher's handbag once the single market is a reality,'' says Banham.