The Globetrotters Take Over
Since BUSINESS WEEK first launched its rankings of the world's most valuable corporations in 1988, the global economy has been transformed. More countries are open to international trade and investment than ever before. For corporate giants, the biggest opportunities are far beyond their home markets.
This year's Global 1000 is a barometer of such change. The rankings show investors are clearly valuing global champions while shunning domestic also-rans. From the U.S. to Europe to Japan, the companies moving up the rankings are those that have become worldwide names in technology, manufacturing, and consumer goods.
"FLUID GAME." As in recent years, the U.S. is at the center of the action. Corporate America increased its lead in the standings over Japanese and European rivals. The list contains a record 422 U.S. companies, up from 396 last year. Much of this ef course is thanks to an American bull market, which sent their combined value up 32%, to $5.1 trillion. The U.S. now accounts for 46% of the $11.2 trillion value of the entire Global 1000, compared with just 30% in 1988. And for the first time in the nine-year history of the Global 1000, a U.S. company--General Electric Co.--ranks No.1, with a value of $137.3 billion. Since 1988, GE Chairman John F. Welch has added $99 billion to the market value of the world's premier blue-chip company. "This is a very fluid, dynamic game," says Welch.
It's also a very different game from the late '80s, when mighty Japan was rapidly extending its reach. On our first Global 1000, the Japanese companies accounted for 48% of the list's then-$5.7 trillion value. Together, they were worth about 60% more than all the U.S. companies on the list. Now, the U.S. giants are worth 95% more than their Japanese counterparts. Japan accounts for just 23% of the Global 1000's value.
In Europe, blue chips such as Siemens, Heineken, and L.M. Ericsson have soared. But because of Europe's anemic recovery, its companies have slipped further behind their U.S. rivals.
Of course, because all companies are ranked in U.S. dollars, some of these shifts reflect currency swings. The Global 1000, compiled by Geneva-based Morgan Stanley Capital International, tracks some 2,700 companies in 21 countries. The publicly traded companies are ranked on a worldwide basis, using market value and other data measured at the end of May each year. This year, the dollar gained ground against the yen, wiping out most of the 30% rise in yen market value posted by Japanese companies.
Still, with the yen now worth only about 15% more than in 1988, the prominence of U.S. companies in the rankings isn't just a byproduct of currency fluctuations. U.S. officials have been quick to notice this comeback. Says Treasury Secretary Robert E. Rubin, other world leaders "are all looking at our companies--in a lot of industries--and saying, `[You have] the most competitive economy."'
The U.S. has done best in information technology. As its value jumped 45%, to $71 billion, Microsoft Corp. climbed to 12th on the list. In 1988, it wasn't even on the Global 1000, which then had a cutoff of $1.27 billion. Neither was Sun Microsystems Inc., which vaulted to 261 on this year's list, up from 644 last year. Netscape Communications Corp., the stock market darling some investors expect to rule the Internet, didn't even go public until last year. Worth $5.6 billion, it debuted on the Global 1000 at No.570.
EUROPEAN AGGRESSIVENESS. The computer industry remains brutally competitive. Apple Computer Inc., with the steepest drop of any company, fell from 543 on the list last year to 978, and remains vulnerable to Japanese rivals such as Sony. Still, the Japanese concede the U.S. retains the global lead. "When it comes to software operating systems and microprocessors," says Toshiba Corp. President Fumio Sato, "we envy the Americans."
U.S. consumer-products companies also lead in global markets. Take McDonald's Corp. It's now serving burgers in 94 countries, up from 53 in 1990. McDonald's is worth $33.7 billion--four times as much as in 1988. Coca-Cola Co. now gets 70% of its sales from overseas. No surprise that it rose to No.4, with a value of $115 billion.
In Europe, despite the Continent's problems, the best companies are displaying a new aggressiveness. In France, Carrefour, the retailer that invented the hypermarket in the '60s, is taking the concept global. With over half its sales from abroad, Carrefour rose 66% last year and now ranks 114 on the list, up from 188. "Germany has [also] become a distinctly two-tier equity market," argues Thomas R. Holmes of Shroder Munchmeyer Hengst Research in Frankfurt. Rising export profits made drug and chemical giants the big winners this year. Hoechst, up 55%, had the biggest increase, thanks in part to its $7.1 billion takeover of U.S. drug maker Marion Merrell Dow. Royal Dutch/Shell Group remains the world's most valuable oil company. Following a 19% gain, it ranks No.2 on the Global 1000.
Even in Japan, where the Nikkei is still trading 43% below its peak, investors are rewarding globalization. Despite the problems of the Japanese economy, "they have not been standing still in [certain] targeted industries," says TRW Inc. Chairman Joseph T. Gorman. Toyota Motor Corp., which remains the world's most valuable auto company, has nearly doubled its market value since 1988. The Japanese electronics giants remain equally fearsome. Sony Corp., now preparing a digital assault, rose 32%, to $23.8 billion last year, up from $9.7 billion in 1988.
But largely because of the rout of the Nikkei, Japan's less-competitive giants have suffered the biggest losses since 1988. Nippon Telegraph & Telephone Corp. fell to third this year after leading the Global 1000 virtually every year. In 1988, NTT was worth a staggering $296 billion. But once the stock market bubble burst, investors realized the monopoly was far behind its international rivals. Following a 10% drop this year, NTT is worth $180 billion less than eight years ago. Most of Japan's top 20 banks lost ground after posting a record $14.5 billion cumulative loss.
The losers haven't been confined to Japan. In Europe, Italy's Fiat slid from 117 to 198 on the Global 1000 when it didn't meet profit expectations. British laggard United Biscuit Holdings PLC, which sank to 976 last year from 689 in 1988, finally fell off the list, despite selling troubled cookie unit Keebler Co.
For investors, the question is not rankings themselves but how well a company competes in its business. Some Japanese exporters are gaining new strength from the weakening yen and will be strong rivals next year. But the highly valued U.S. multinationals are now globally entrenched. Stock market corrections won't alter their course.