Rise of Emerging Country Enterprises: A Look at the “Fortune Global 500”

Regression of US Enterprises

The US magazine “Fortune” publishes the “Fortune Global 500” rankings based on the annual revenue of enterprises, and the 2007 results were announced on July 9, 2008. By region, North America, Europe and Asia saw 172, 184 and 124 enterprises, respectively, place in the rankings. As a whole, while the continued emergence of Chinese enterprises was again notable, the decline of US enterprises was even more prominent.

Looking at the number of enterprises ranking in over the last four years by major country, the US lost a total of nine enterprises in 2007 (see chart). More US enterprises have dropped out over the last several years than in any other country. The subprime problem and rising oil prices have greatly impacted the performance of US enterprises, with automakers such as GM and Ford, financial and home loan enterprises such as Citibank, and major corporations such as Coca-Cola taking a fall in the rankings and major apparel enterprises such as Gap and Nike dropping out entirely. The subprime problem has turned into a financial crisis, and shows signs of further developing into an economic crisis; the presence of US enterprises is likely to diminish even further. (Refer to PDF file for charts).

Regarding Japanese enterprises, Toyota climbed from 5th to 6th while Softbank, Norinchukin Bank, Mitsui OSK Lines and Isuzu Motors all made the list for the first time. A majority of enterprises, however, saw regression in the rankings including drop-outs by Nomura Holdings, Japan Post, Sompo Japan Insurance, Kajima, Taisei, Nippon Express and Sumitomo Chemical.

European enterprises generally remained stable. Germany (37 total), Britain (34) and Italy (10) showed no change, while France (39) and Switzerland (14) increased by one each. Two Spanish enterprises (11) were added to the list while three Dutch (13) enterprises dropped out. It should be noted, however, that because evaluation is based on the US dollar, the fact that the Euro was strong at the time of evaluation means that sales figures were relatively high. The European economy is being hit harder by the financial crisis compared to Asia and emerging countries, and its presence is expected to decline.

Chinese Enterprises Continue March Forward

In contrast to retreating US and Japanese enterprises, Fortune 500 enterprises from emerging countries are increasing across the board. Chinese enterprises particularly stand out with an increase of about four per year. Five new Chinese enterprises cracked the rankings in 2007, bringing the total to 29 (including three from Hong Kong). While the total number is not particularly impressive, the growth rate is highest in the world. China National Petroleum fell one spot to 25th, but the remaining Chinese enterprises all moved up significantly. Excluding the Lenovo Group (PC maker), which made the list for the first time, all 25 Chinese mainland enterprises are large state-owned enterprises. Of these, 19 (energy, finance, raw materials, transportation, communications, automotive and etc.) are so-called “central enterprises” of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC); 5 are major state-owned financial institutions; and one is a regional government-supervised automotive enterprise. Many Chinese enterprises have their eyes set on the “Fortune Global 500” rankings, and with the continued expansion of state-owned enterprises by M&A and so on, about four new Chinese enterprises should be added to the list every year for some time to come.

In contrast to China, the other three BRICs either showed marginal increases or no change. India added one enterprise to the list for a total of seven. Unlike China, only two of these are state-owned enterprises; the remaining are all private. However, no Indian enterprises placed in the top 100 while China boasted three. One new Russian enterprise cracked the rankings, bringing the total to five. Gazprom, Russia’s largest enterprise, jumped from 52nd to 47th. The number of Brazilian enterprises remained at five. Among other major emerging countries, Mexico held on to its five enterprises while South Africa missed the rankings altogether.

Regarding Asian countries, South Korea increased by one enterprise to reach 15, while Taiwan held at six. Singapore, Malaysia and Thailand remained at one enterprise each.

Growth and Profitability

Among the “Fortune Global 500”, Tata Steel, an Indian enterprise which made the list for the first time, boasted the fastest growth (revenue). Tata Steel achieved a 353.2% growth rate by taking advantage of M&As. The State Bank of India recorded high growth of 48.2%, while the growth of other Chinese enterprises was also notable.

European and US enterprises monopolized the top 10 in terms of the most profitable. Exxon Mobil claimed the top spot with profits of US$40.6 billion. Meanwhile, Toyota Motor finished 12th with profits of US$15 billion while China National Petroleum’s profits of US$14.9 billion were good for 14th place.

In terms of growth in profits, Chinese enterprises stood out from the pack. China Life Insurance Company (1,588.4%), China FAW Group (842.8%), Shanghai Automotive (643.9%) and China Railway Construction (489%) finished 1st, 2nd, 4th and 6th, respectively, among the top 10 in growth in profits. By comparison, Japan’s Softbank placed 11th with a profit growth rate of 286% while Tata Steel landed at 17th with a rate of 224.8%.