The formula for Swiss enterprises’ success

Switzerland is a "home" for 13 of European top 100 market capitalization companies and 12 of the global top 500 enterprises. The global highest density of Fortune 500 companies belonged to Switzerland. Multinational companies contribute about a third of Swiss economic output, a percentage much higher than the other countries of the same scale.

Swiss blue-chip companies (the big companies in market capitalization and reputable in the market) outperform their European counterparts. Swiss stock index is up 29% over the past five years, against 3% for Euro Stoxx 50, the index dominated by giants from France and Germany.

Swiss enterprises are well-known beyond Swiss borders and are widely known in such many fields as banking (UBS and Credit Suisse), insurance (Swiss Re and Zurich), pharmaceuticals (Roche and Novartis), food (Nestlé), merchandising (Glencore and Gunvor), watch manufacturing (Richemont, Patek Philippe and Rolex), hotels (César Ritz)...

The chart from top to bottom, from left to right: Market capitalization percentage to GDP (%) as of May 20, 2022, Global Fortune 500 companies' revenue to GDP (%), Percentage of Global Fortune 500 companies' net profit to GDP and Swiss percentage of global Fortune 500 companies per 1 million Swiss people in 2021 compared to some of the global powers. Graphics: The Economist

Secret of success

The news from Economist magazine that there are a few factors that help explaining why Switzerland becomes a fertile land for enterprises to nurture their success. Paul Bulcke, Chairman of Nestlé said that Swiss distinguishing feature is the "common sense", shown in "breathable" regulations, many top study universities as well as competition for education and taxes among states.

In the past, Switzerland was very poor because of degraded land, most land covered with snow year round. At the beginning of the states’ economic development in the 19th century, the authorities focused on high value-added industries. St. Gallen focused on textiles, Zurich focused on silk and spinning, Berne was the center of the cheese trade, and Basel was the center of the pharmaceutical and chemical industries.

Watch production was mainly located in Jura arc from Geneva to Basel, while the banking and insurance sectors were flourished in Geneva and Zurich.

Swiss "permanent neutrality" was also remarkably supportive. Swiss policy saved the nation from the two world wars, while it also benefited from the influx of skilled refugees fleeing the conflicts from the other places as well as from the cash deposited in Swiss banks.

For James Breiding, the author of "Swiss Made, the untold story behind Swiss success", the key factor is openness to the world, which helps attracting international talent.

Aliens are the hub for Swiss business success. Including Henri Nestlé, the founder of the company of the same name, from Frankfurt, Germany; Antoni Norbert Patek, the founder of Patek Philippe luxury watch brand, used to be a Polish cavalry officer... about half of the chief executives (CEOs) of Swiss largest companies are aliens.

For the outside world, the Swiss people deem to have no special relationship with their compatriots in other states. The states only want to remain the independence and become a larger unified entity to defend themselves against the outside forces. The states are, however, actually bound together in a way that fosters the independence and accountability.

This approach makes the management less tight from top to down. The government consists of 7 members with equal powers and each member serves as the president for 1 year. While the federal council has very little power, the 26 states and more than 2,000 municipalities hold a lot of power.

The states govern their own health care, welfare, education, law enforcement, and fiscal policy themselves. That allows them to compete to be more attractive to enterprises and employees. For example, Lucerne relieved half of 2012 corporate tax rate, Zug’s minimum corporate tax rate is 11.9%.

In addition, the states sponsor the top universities and the close linkage between universities and enterprises mean students are equipped with the necessary skills before graduation.

Challenges and hopes

Notwithstanding the foregoing successes, Switzerland has become less attractive as a hub for multinational companies for over the past three decades.

In 1990, two-thirds of the top 20 American companies, including General Motors, Hewlett-Packard and IBM, based their European headquarters in Switzerland. When Switzerland decided to be a member of the European Economic Area with access to the European Union (EU) market in 1992, some of the global most successful companies such as Amazon, Alibaba and Samsung shifted to Amsterdam, Dublin and London.

Last year, Switzerland missed another opportunity to smoothly obtain the access to one of the global largest markets, when they could not turn 120 bilateral agreements into a comprehensive treaty with the EU.

In addition, there are the questions what to form Swiss corporate strength. Russia-Ukraine war made few Swiss people think of their nation’s neutral status. Many ones were surprised when their governments joined other Western countries in imposing sanctions on Moscow.

Moreover, Switzerland takes all efforts to restore the wealth and fund management industry, which was forced to purge its operations over the past 15 years after the US accused Swiss banks of aiding Swiss citizens to evade billions of US dollars in tax.

Asset management is still under threat because of lower investment returns and growing international pressure for financial transparency, said Mr. Breiding. Meanwhile, the pharmaceutical sector is struggling with the rapid increase in medicine innovation costs.

Switzerland is wished to overcome the challenge with the hard work and ingenuity as same as in the past.

Source : VietNam.Net (Premium)