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STUDY ON THE FEATURE OF THE FORTUNE 500 AND THE ENLIGHTENMENT BASING ON THE 2014 RANKING
XUE MINGYUE University of Quingdao, Shandong, People Republic of China e-mail: admission@at0086.com
ZHANG ZHIFENG University of Quingdao, Shandong, People Republic of China e-mail: admission@at0086.com
The world's 500 biggest companies have drawn more and more attention since the journal Fortune started the ranking, Summarize the law of development of the world top 500 enterprises to develop China's enterprises has an important reference and enlightenment function. This paper carries on an overall analysis of the world's 500 biggest companies, summarizes the shortcomings of Chinese largest companies and offers suggestions to the process and strategy towards the world's 500 for Chinese enterprises.
Key words: global 500, Chinese enterprise, industrial distribution, industrial structure.
Fortune China announced the latest ranking of the Fortune 500 on July 7th 2014. China has reached a new record of having 100 companies on the list. The Fortune 500 is an annual list compiled and published by Fortune magazine and it has been the the most famous and authoritative list in measuring large corporations' development scale and business performance. Big Chinese firms have significant growth rate in recent years, but compared with other developed country, there are still plenty of room for performance improvement in average profit rate and industry structure. With the development of knowledge economy and this worldwide industrial restructuring, it should be a great chance for China to promote.
1. General Analysis
The total income of Fortune 500 companies in 2014 is $3106bn, with a 2.5 % increase on last year. To-
tal assets are $12348bn with year-on-year growth of 1.6 %. The most notable change of the 2014 list is the soaring profit, the total profit has increased by 27 % to $195.62bn.
1.1 Quantity Analysis
There are 100 Chinese companies on the list this year with 7 new entrants.Chart1 shows the quality change of Fortune 500 firms from USA, Japan and China over the period of 1995 to 2014, there has been significant change in the geographical distribution of the companies in the Global 500 rankings. The number of Japan-based companies have reduced from 149 in 1995 to 57 in 2014, whereas the contribution of China-based companies have increased rapidly from 3 in 1995 to 100 in 2014. The share of American-based companies have decreased marginally from 151 to 128 over the decade.
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chart 1 : Glial i ty change of conpani es from USA Japan and Chi na over the period 1995-2014
SOCIAL AND ECONOMIC PHENOMENA AND PROCESSES
1.2 Industry Analysis
Fortune 500 industries mainly concentrate in financial, energy and manufacturing sectors. Among the Top 50 enterprises, there are 13 enterprises work in finance, 19 work in energy industry and 7 engaged in manufacturing industry. Chart2 shows industry classification of
1.3 Profitability Analysis
The number of Chinese listed enterprises has increased more than 30 times in the last 20 years. But on the list of average turnover and average profit, China is only slightly higher than the average, the gap is even wider compared with American companies. The average profit of American companies is $6.24bn, nearly twice as much as that of Chinese company. Meanwhile, the average number of em-
2 . Countermeasures and Suggestions 2.1 Expand enterprise scale and build multinational brand through merger and combination
Basically there is no brand with international reputation in the shortlisted enterprises of Chinese mainland list, and their influences are mostly limited to China. In order to become an international-level corporation in a short period, the Fortune Global 500 enterprises usually take the measures of large-scale external expansion. They will rapidly scale up the operation and make the enterprise scale grow exponentially
Fortune 500 firms from USA, Japan and China, we can see from the chart that compared with USA and Japan, China has serious structure disequilibrium, shortlisted enterprises of Chinese list mainly concentrated in traditional industries, owned in part or whole by the state itself while the innovation and service sector is underdeveloped.
ployees of Chinese company is 1.5 times that of American.
If we rearrange all the shortlisted companies according to the profit level, three of the 10 highest return companies come from China, they are Industrial and Commercial Bank of China (ICBC), China Construction Bank and Agricultural Bank of China, of these, ICBC continued to top the list of the most profitable PC company in the world.
through merger, combination, reorganization and the like so as to rank among the Fortune Global 500. The Nobel Economics Prize laureate George Joseph Stigler once pointed out that all large-scale enterprises in developed countries were developed by merger and combination. In the new merger wave of recent years, BP Amoco PLC formed by merger of British Petroleum and Amoco Corporation, Boeing Company formed by merger of Boeing Company and McDo ell Douglas, Mitsubishi Tokyo Financial Group formed by merger of Bank of Tokyo-mitsubishi and Japan Trustee Services Bank and the like arise. These com-
CT oss t ur nover Average Turnover G oss Fr of i t aver age pr of i t
USA 8558906, 4 66866, 5 798710, 8 6239, 9
Chi na 5708266, 2 61379, 2 301194,5 3238, 7
Japan 3085732, 9 54135, 7 166249, 9 2432, 5
Chart 3: Comparison of turnover and profit
XUE MINGYUE, ZHANG ZHIFENG
panies have expanded their operation scale, reduced cost of unit product and improved enterprise competitiveness by merger and combination.
We can gain enlightenment from the development methods of these Fortune Global 500 enterprises. According to the present situations and development prospect of Chinese enterprises, the way to build an international-level enterprise only depending on inner accumulation is impracticable due to low staring point and poor foundation of Chinese enterprises. To build the world famous brand, the hypernormal development path must be adopted with the help of asset management activities such as merger, combination and reorganization. Only in this way, the Chinese enterprises can catch up with the developed enterprises in a short period.
2.2 Speed up technological innovation and improve international competitiveness
The monopoly and quasi-monopoly enterprises supported by government policies account for a high proportion in the Chinese list, and these enterprises mainly gain high profit by financial support or resource monopoly. Compared with enterprises in developed countries, these enterprises generally lack technical advantages and market advantages and have less research input with lagging development in management and marketing. If Chinese enterprises do not strengthen their innovation and reduce the difference between themselves and the top enterprises in the world, they will not last long despite the number of the Fortune Global 500 enterprises is large.
Compared with the advanced enterprises in the world, the technological innovative ability of Chinese large enterprises is poor, while the research input has direct bearing on innovation ability of the enterprises. The research input of the large and medium-sized industrial enterprises in China only accounted for 0.93 % of the main business income in 2011. At the same time, the research input in developed countries ac-
counted for more than 2 %, and in Japan, it can even account for 3.57 %. We should greatly improve the proportion of research and development institutions established by large and medium-sized industrial enterprises, promote research and development institution of scientific and technological achievements by encouraging social capital contribution, support and complete financial and tax policies on enterprise technology innovation and promote enterprise innovation.
2.3 Transform development method of manufacturing industry and speed up economic structural adjustment
It can be obviously seen by comparing constitution proportion of manufacturing industries in China and America that economic developments of China and America are entirely in the different stages. The economic system of America is led by high-tech and service industries, while in China, energy and metal industries account for a major proportion since China is still in the industrial stage led by the second industrial revolution. That is to say, our economic structure has not accessed into a new stage, but it is still in a low level with small additional value. American economy has transformed to high-tech economy from basic industrial economy. Enterprises such as Dell, Mcdonald's, P&G, Nike and Apple were not well-known several years ago, but now they are all in the Fortune Global 500 list and become the world-famous enterprises. This transformation brings great challenges to traditional lifestyle, economic growth pattern and economic theoretical innovation, and therefore we should transform the development direction of manufacturing industry and try to have a head start in the new round of worldwide economic structural adjustment.
2.4 Readjust the industrial structure and accelerate the progress of civilian battalion economy
Industry Number Turnover Profit Average Turnover Average Profit
state-owned Ent er pr i se 82 5312527.2 270841.7 64786.9 3302.9
Pri vate Enterpri se 11 395739 30352.8 35976. 3 2759. 3
Chart 4.Comparison of state-owned enterprises and private enterprises
SOCIAL AND ECONOMIC PHENOMENA AND PROCESSES
State-owned monopoly enterprise has taken too much proportion in Chinese shortlisted enterprises. This imbalance will seriously restrict the sustainable development of social economy of China and the industry structure is in urgent need of readjustment. The government should relax its control on those state-owned monopolies and oligopolies and let more civilian-run enterprises join the competition. Industries with huge overcapacity, especially those redundant construction with no obvious change in technology content, should be strictly controlled to adjust and optimize the industrial structure. Government should also provide technical and financial support to encourage the development of civilian-run enterprises.
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