Small Firms Wary of One-Market Europe
FOR Luc Doublet, the key to succeeding in Europe's single market will be treating everybody the same, while knowing what makes people different. His philosophy may sound contradictory. Yet the Lille, France, manufacturer of flags, banners, and traffic-control products says that two-tier approach will be the answer for small and medium-size companies that want to succeed in a 12-nation borderless Europe after 1992.
``It's a variation of the absolutely essential advice to `think globally, but act locally,' '' says the employer of 350 people from France to Belgium, Spain, and California, who works out of a pyramid-shaped headquarters and quotes futurist Alvin Toffler.
To make his point, Mr. Doublet notes that his company is about to publish a European-sales catalog in which all prices will be listed in the European Community's ECU - European Currency Unit. ``That way, the price will be the same for everyone, each customer will feel he's being treated like the next,'' he says.
Doublet also says that companies branching out from a local market will be wise to understand what makes their various customers different.
Here he gives another example: ``We had to be ready for the effect the Gulf war would have on us,'' he says. Flag sales in the United States, ``a country I understood would need to identify itself as a nation,'' jumped 30 percent. In France, on the other hand, ``an old and hardly gregarious nation,'' sales plummeted 45 percent.
Doublet is a Euro-enthusiast. For many of Europe's small and medium-size companies, however, the prospect of a market of 350 million consumers, with no barriers to the free movement of goods, capital, and persons, is daunting.
Economists say the single market, which has sometimes been criticized as a boon primarily to large corporations, holds traps and opportunities for smaller companies. In many cases they will have to expand to survive; in other cases, their specific talents will be sought out by larger companies looking to boost their own products' attractiveness.
``Many small companies are going to die in the single market, but I am not pessimistic about their future in Europe,'' says Arnoud De Meyer, a specialist in European manufacturing at the European Institute of Business Administration, or INSEAD, one of Europe's top business schools, in Fontainebleau, France. ``Those that learn to become part of emerging networks will do very well.''
Europe will emerge as a ``laboratory'' for 21st-century manufacturing, where companies will learn to produce efficiently nearly customized products, Mr. De Meyer says. He says companies that give up the idea of ``protecting a piece of a local market'' but instead learn to capitalize on their specific talent, selling it on a regional basis or subcontracting to a large corporation, will succeed in a culturally diverse Europe.
Still, problems of information, financing, language, and culture, remain high hurdles for many companies.
``The big corporations are already multinational, so they generally know what they are doing. But 90 percent of the small and medium-size companies do not have a strategy,'' says Bruno Calzia, an Italian attorney and consultant specializing in helping small companies survive in the European market.
To ease the transition for businesses, the EC set up a network of 195 ``Euro Info Centers'' in its 12 member countries (the centers are linked to Brussels by computer) to disseminate information on new laws and opportunities concerning the single market. The Community has also set up a network to help companies find potential joint-venture partners in other EC countries.
Despite these programs, ``The Community really hasn't developed an environment for small companies,'' De Meyer says. ``There is definitely a communications gap.''
Three principal changes will affect the way Europe's successful smaller companies operate, De Meyer says: a ``regionalization'' of markets across national lines; the growing need for large companies to have diversified supply networks; and a greater customization in the manufacture of products.
``Rather than thinking about making the best product, companies are going to have to think about making the best components to use in the most versatile ways,'' says De Meyer. ``The advantage for small companies is that they are very good at components.''
This trend in production toward extreme specialization favors European small businesses, says De Meyer, because they are accustomed to Europe's cultural diversity.