A lot has changed in Europe over the past half century. When I was born in Stuttgart, Germany, shortly after “the war,” that city lay in ruin … many experts estimated that about 90 percent of the city was in rubble.
Of course, those days are long past, thanks to years of hard work on the part of the Europeans, not to mention a great deal of U.S. generosity. Today, Stuttgart stands as a gleaming giant, a model for late 20th century industrialization. Like the rest of the world, European countries have been through a number of business cycles since then, building a worldwide reputation for quality and dependability, if not cost.
Still, those earlier days remind us of the ingenuity, the optimism, the nose-to-the-grindstone work ethic of the European people. You learn much about people by how they handle adversity, and the greater the adversity, the more you learn.
For the past two years we’ve devoted an entire issue of Expansion Management to the subject of American business expansion to Europe. We do this because a significant percentage of our readers are actively considering expanding their business operations there. We also do it because we firmly believe there’s a lot of opportunity in that part of the world for American businesses.
There’s also a lot of confusion among Americans as to what is going on in Europe these days. In fact, I’m sure most Europeans are confused, too. So, what should expanding U.S. companies make of what is going on in Europe these days?
Much of this issue is devoted to the single Euro currency and to the emerging “nation” of Europe. Will it really happen? The Euro? Sure. A united Europe? I’m less sure about that and, even if it does, its impact on the United States will be greatly diminished if it doesn’t include the United Kingdom.
Is a single European currency really important to U.S. companies operating in Europe? It certainly eliminates an unnecessary variable, but it also eliminates an opportunity to make a little money on the side.
What about standard labor practices? Outside of establishing broad – very broad – standards among the participating countries, diverse countries that have been at each other’s throats for more than a thousand years aren’t going to settle all their differences in a couple of years. That’s going to take a while.
What about labor costs? Sure, they’re higher than in the U.S. for most of Europe. However, the same can be said when comparing the Northeastern and Southeastern regions of the United States. All other things being equal, there’s no doubt personnel costs are cheaper in Alabama or in New Mexico than they are in France or Germany, particularly on the benefit side. And if it doesn’t matter where you are in the world, it obviously makes good sense to go where your operating costs are less.
But if business considerations drive you to a European location – just as they might drive you to New York or California – the difference in labor costs between the U.S. and Europe become less important than the difference in costs among the various European nations.
There’s no question that doing business in Europe is different from doing business in the U.S., but it’s not like they’re new to commerce and manufacturing. Europe has been going through a shakedown in many ways similar to what we went through in the 1980s and, when they finally get through it, you’ve got to believe that their economies will be stronger than ever.
The question is not if, it’s when.
Bill King is the editor of Expansion Management and can be reached at BillKing@penton.com.
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