US companies enjoy operational head start in new Eurozone, claims KPMG Consulting

Citation

(1999), "US companies enjoy operational head start in new Eurozone, claims KPMG Consulting", European Business Review, Vol. 99 No. 3. https://doi.org/10.1108/ebr.1999.05499cab.002

US companies enjoy operational head start in new Eurozone, claims KPMG Consulting

US companies enjoy operational head start in new Eurozone, claims KPMG Consulting

Keywords Europe, Single Market, USA

The operational approach of US companies will give them a strategic head start on their European competitors in the new Eurozone, according to Phil King, principal consultant for Shared Services at KPMG Consulting. "US businesses are accustomed to doing business in an internal market with a population of more than 250 million, and their organisational and operational structures reflect this. By contrast, European businesses are used to thinking of Europe as a collection of different countries ­ with independent operations centres in each rather than as a single united market."

Speaking at the ICM Conference on Shared Service Centres in Stockholm (19 January 1999), Phil King said: "Following the introduction of the Euro, the European market now resembles more closely that of the US, but European companies are only just waking up to the idea. The new Europe requires a dramatic change in the way businesses operate. For example, European multinationals now have less need for entire headquarters in each country. Instead, operational tasks that are not dependent on geographical location for fulfillment, could be located in shared service centres. National offices could then rationalise their activities and refocus efforts on sales and entrepreneurship.

"It is estimated that, on average, savings of 25 to 35 per cent ­ which can add up to several million Euro ­ can be achieved by implementing shared service centres. However, approximately 75 per cent of the shared service centres currently based in Europe have been established by North American companies. This is because the geographical make-up of the US means that American companies are accustomed to dealing in a vast internal market. Consequently, they can envisage transplanting the structures they already have in place, in order to ensure a head start in the evolving European market. European companies, by contrast, are faced with having to undertake a complete overhaul of their operations and, more importantly, their cultural make-up.

"Faced with such a dramatic transformation," continued Phil King, "European companies are, understandably, dragging their feet. The major hurdle is not the operational changes, but overcoming internal, cultural resistance to change within companies. Implementing a shared services centre, for example, will inevitably involve a re-shuffle in the balance of jobs in national operations, and this is a thorny issue. However, if European companies do not embrace the Eurozone and adapt as required, then they will not be able to take full advantage of the expanded market. We anticipate that North American companies will.

"Ironically, it has often been argued that US companies setting up in Europe were at a considerable disadvantage because of the cultural and operational differences. Now the tables have turned and the balance of power has shifted to those with the experience and structures suitable for a large single market. European enterprises must adjust rapidly or risk severe damage in their newly expanded home market, even before they think of it as home!" concluded Phil King.