What is Competitiveness and Where Does it Live?

Markus Christen, INSEAD Associate Professor of Marketing

"It doesn't matter whether you're a lion or a gazelle. When the sun comes up it's a whole new game." Over the past few years European firms have kept their position in the Forbes rankings while US firms have dropped.

The US is well behind the top 15 European companies in the Google pages classification of "world market leaders." There is more to innovation than just new products and services and high-tech companies. Not having Google or Apple or Microsoft or Oracle doesn't make European un-innovative, Professor Christen told the INSEAD Global Business Leadership conference in Paris.

"There is still a lot of mass manufacturing done in Europe and there is still a lot they do with products made by these American companies. Rolls Royce no longer makes jet engines; it sells "power by the hour". You turn on the engine and the rest is handled by Rolls Royce. Air Liquide does the freezing - art of frozen foods; Syngenta sells planted rice fields to countries, not just seeds - it's solutions these companies are selling."

INSEAD Professor Ilian Mihov's Conversation with Jean-François Copé

M Copé is the Secretary-General of the French Political Party UMP, a member of the French parliament (Seine-et-Marne) and Mayor of Meaux.

The future of Europe is contained in one word: imagination. The definition of this word is "competitiveness." Those were Jean-François Copé's opening words. "The crisis that we have been facing now for five years forces us to re-think our economy. Falsely stimulating purchasing power does not make for sustainable growth. We know that... and this is the most fundamental weakness of political decision-making in Europe."

Competitiveness is the new frontier for Europe; reducing public debt is not enough. The challenge is more difficult for an old continent than for a new one such as the US.

Copé points out three key issues:

1. Stabilize the financial sector. All eyes in Europe are focused on this short-term question, but this is also the future of our capacity to finance the economy. "If we cannot sort this out we will be unable to sort out anything else," he said.

2. Limit public spending - this will be a real revolution in Europe.

3. Build new conditions for competitiveness.

Copé favors the unified banking system which emerged as part of the recent pan-European meeting concerning the banking and debt crises in Spain and Italy as this agreement makes the pressing issue of financial stability more controlled. "But the real issue now is to control public spending," he told the INSEAD Global Business Leadership conference in Paris. "This is more important than even reducing debt because it proves we can do better with less."

But how to do this? "If you say to people you will reduce taxes they like it; but if you then tell them as a result you will be cutting pubic spending...they don't... nobody wants to see cuts in their own cities."

From the opposition

As expected, Copé is concerned about budget plans under recently-elected French President Francois Hollande. "We know that we cannot reduce the number of civil servants if we reduce the amount of public spending," he said. "I know Spanish and Italian public opinion is worrying... the growing unpopularity of Mr Monti is growing." Copé said France can accept cuts if the capacity to bring the country to a high level of competitiveness is there.

"Competitiveness means reducing public spending and creating a flexible labour system and modernizing the social system... but the public is not ready to do this and this is the key issue for now."

We have to reform the labour legislation and we have keys for this in a European model. We need legislation for innovation and we have to build up small and medium sized enterprises as Germany is doing. We do have the keys to do the job. It will be difficult mainly because of a question of mentality rather than the economy. We have the means; we have to organize a European strategy."

Going forward

Going forward, the conservative politician sees two issues for Europe:

1. Problem of European governance. The idea of a federal Europe is not possible - there can be no 'United States of Europe'. How do we build a Europe which is efficient? Too much time is lost in discussions .

2. Strategic vision - this is not clear as each state as its own problems and levels of development and this could be at odds with European strategy...so we need leadership and this leadership cannot be achieved without a strong link between France and Germany.

Copé said he's worried that the new French government cannot effect this close link.

Does European Competitiveness Have a Future?

Senior international executives and INSEAD faculty discuss competitiveness vis a vis the future of the European economy and business.

European competitiveness is one of the issues INSEAD students are studying today, made more challenging by heavy debt burdens of companies and countries, digging the continent into a deepening crisis. "It would be easy for INSEAD to ignore these challenges," said INSEAD Acting Dean Peter Zemsky," but we do not. "INSEAD was born in Europe in the mid 1950's at a time of European integration...and INSEAD would not have been possible without this European context into which we were born."
Zemsky pointed out that INSEAD's founder, George Doriot, was the founder of venture capital and a graduate of Harvard who, with several other young Harvard graduates, decided Europe needed a different kind of business school. That became INSEAD.

"Half of our students are from Europe today," said Claude Janssen,  Chairman Emeritus of INSEAD and one of those students who founded the school with Georges Doriot more than 50 years ago. "At this time of crisis in Europe, where competitiveness is discussed it is important to spend a day like today on the topic. INSEAD wishes to continue to contribute to the understanding of European problems and we will do whatever we can to help solve these problems in Europe."" 

The Future of European Competitiveness

What is the future of the European economy and business?

In the face of one of its worst economic crisis, an aging population and worsening public debt, the outlook for Europe is clouded at best .. Many believe that this is a “make or break” moment which will either propel Europe to greater competitive heights, or cause it to lose its footing and fall behind the growing economies of the East.

To address this issue, the European Commission has proposed a 10-year plan for a “smart, sustainable, and inclusive growth” in its Europe 2020 growth strategy. Will this strategy be enough to turn the economic tide and make Europe a major player in the global market? What are Europe's key strengths that business and political leaders can leverage to address the current challenges? How can Europe best contribute to the dynamic global economy and assure the growth needed to sustain its high standard of living?

At the INSEAD Global Business Leaders Conference, we bring together senior business leaders, eminent academics and distinguished political figures to debate and share their thoughts on “the future of European competiveness” from both a European and international perspective. Speakers include Thierry Breton, Jean-François Copé and David Arkless.