urope still offers for many companies an interesting market. With 27 countries, more than 700 million inhabitants and a total GDP of more than US$13 trillion, the European Union is still the largest unified market in the world. After the U.S. it is the second most R&D intensive economy and it is the number one destination for direct investments abroad of American and Asian investors.
      Nevertheless, the worldwide economic downturn has clear impacts on economic growth (down), unemployment (up) and new investments (down) in Europe.
      The impact on various sectors of industry differs however. The capital goods sector and the automotive industry have difficult times, while high-tech companies and the IT sector also face growing challenges. But industry verticals like healthcare, (renewable) energies and food & beverages are less adversely affected, and are still growing in many European regions.       Buck Consultants International has identified 10 different corporate strategies to navigate through the storm (table 1), each focusing on one or more of the main shareholder value components: revenue growth, capital deployment and cost reduction.
      The first group of strategies has a market focus. Companies reinvent the customer again and intensify their business relations with "super pleasing," great after-market service and adjusted pricing.
      New, powerful markets are also to be found, whether it is a specific group within the client base (i.e. better segmentation) or new geographical markets. Take Moscow as an example. Despite all the problems in Russia, every week companies from all over the world open marketing and sales offices in Moscow.
      The second group of strategies is cost focused. Downsizing and taking out capacity is a logical step if demand decreases by, for example, 30 percent. Reduction of inventory, outsourcing of activities (manufacturing, customer support, shared services) and transforming fixed costs to variable costs (e.g. sale and lease back of real estate) are well-known capital and cost reduction methods.
      Meanwhile, as in 2001, 2002, and 2003, we see a surge of companies who are consolidating their back offices at the European level. Instead of having customer support, shared services or technical support organized country-by-country, they consolidate these back offices at a European level in many cases in low cost locations in Poland, Hungary, the Czech Republic and Romania.
      Relocation of production capacity to low-cost countries is also a favorite strategy, as Central and Eastern Europe seem to have become a stronger competitor with China (see sidebar on offshoring vs. nearshoring).
      The last group of strategies is centered around new products & innovation. Companies try to link up with the best talent pools in Europe for their specific products or services. Last but not least, leading companies broaden their technology base via open innovation. Let's dig a little deeper into this strategy.       The rat race for new technologies, products and processes urges corporations to adopt the open innovation model, i.e. more and closer cooperation with universities, technological institutes, spin-outs and SMEs. They realize that they cannot rely solely on their own R&D effort but have to tap from external technology bases as well.
      A good example is the (bio)pharma industry. A couple of years ago small biotech companies looked for the attention of biopharma at BIO, the largest biotech and pharma exhibition in the world. The 2008 event in San Diego saw the reverse picture. At the podium large pharmaceutical companies proclaimed their mood for cooperation, and invited small companies and start-ups with a promising pipeline to talk with them.       The response of European cities and regions to the open innovation strategies of companies has to be to detail the capabilities of their universities and tech institutes. According to a Buck Consultants International study, cities and regions have to map their technology base and then market that proposition to a selected group of companies which should have that specific proposition on their radar screen.
      Corporate investors are finding out that economic development organizations and investment promotion agencies that follow this path can be of great help in their technology search.
      The European economy is under pressure. But the picture is less negative than newspapers suggest: There are many companies still doing okay, and a variety of regions and cities which have a lot to offer for companies with a market, cost and/or innovation focus.

René Buck is founder and president of Buck Consultants International, a leading European independent location consultancy.
E-mail: rene.buck@bciglobal.com.
On the Web: www.bciglobal.com.