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Management Report

Management reports, briefs issued by Samsung Economic Research Institute

The Global Corporate Landscape in 2006

The Global Corporate Landscape in 2006


Jan. 23, 2006

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It was a year of upheavals and turbulence for the global business giants. Credit ratings of some of the world's leading carmakers - General Motors Corporation and Ford Motor Company - dropped to a junk-bond status in 2005.

If this demonstrated a remarkable tumble in fortune, there were bright spots as well: some digital companies armed with innovative business models rose to the premier position in the world. For example, Google catapulted itself to the No. 1 Internet search engine company with its new keyword-targeted ads, a novelty system by which related ads are released along with search results. It was so innovative that it threatened what was once thought to be an impregnable position of Microsoft Corporation in the Internet business. Similarly, Apple rose to become a new conqueror on the global market for mp3 players with a smashing new iPod model, combining software with hardware.

The size of global merger and acquisition (M&A) market set a new record in 2005, surging by a stunning 38% increase from a year ago to over US$2.9 trillion. M&A deals engulfed leading companies of Asia-Pacific countries as well as those in the US and Europe, as if they were a panacea for enhancing competitiveness of the corporate behemoths. One such case was the acquisition of Gillette by Procter and Gamble for US$57 billion, transforming it into the world's biggest consumer goods maker.

Not everyone sat on the bed of roses, of course. Lackluster performance prompted the ouster of some of the mighty chief executive officers (CEOs) of big-name companies. Many heads rolled in the first seven months of 2005: the number of US companies replacing their CEOs rose an astounding 90% from a year earlier. As sales plunged and operating profit margins shrank to a mere 1%, Japan's electronics titan Sony Corporation named Howard Stringer as its new group chairman, making him the first non-Japanese ever to rise to the pinnacle of a Japanese multinational.

In the drama of similar downfalls, the US computer giant Hewlett-Packard (HP) Development Company, despite its acquisition of rival Compaq, reeled under the beatings of its rival Dell in the personal computer sales. This cost the head of Carly Fiorina, HP's CEO and one of the most celebrated women in corporate America, as sales in the servers market plummeted. Strategy failures and weakening competitiveness were the main reasons of their reshuffle.

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