Corporate Clout: The Influence of the World's Largest 100 Economic Entities

 

Of the world’s 100 largest economic entities in 2009, 44 are corporations.  If you look at the top 150 economic entities, the proportion of corporations rises to 59%.

 

The largest in 2009, Wal-Mart Stores, had revenues exceeding the respective GDPs of 174 countries[i]including Sweden, Saudi Arabia and Venezuela and employed over 2 million people, more than the entire population of Qatar. If it was a country, it would be the 22nd largest in the world.

Shell has bigger revenues than the combined GDPs of Pakistan and Bangladesh, the sixth and seventh most populous nations in the world, together home to 350 million people. Sinopec, China’s leading energy and chemical company, is bigger than Singapore. The insurer AXA is bigger than Nigeria. Even with the troubles of the automotive industry, Ford is bigger than New Zealand.

Together, the 44 companies in our top 100 list generated revenues of US$ 6.4 trillion in 2009, equivalent to over 11% of global GDP.[ii]  These combined revenues are larger than the combined economies of 155 countries, that is, all the countries in the world except the largest 40 in terms of GDP.

The contribution of the companies in our top 100 to global employment falls far short of their economic clout. Together, they employed over 13.5 million people in 2009, just 0.4% of the world’s economically active population.[iii]  However, this still exceeds by over a million people the combined total populations of Switzerland and Singapore.

The Changing Shape of Corporate Clout

Our analysis of the 2009 top economic entities was conducted against a backdrop of global financial and economic turmoil.  The recession was biting deep into both national and corporate coffers. So we also analyzed the trends over the last decade and looked back to earlier similar analyses, such as the one conducted by Sarah Anderson and John Cavanagh noted in the sidebar.

Interestingly the number of corporations among the world’s 100 largest economic entities has been falling slightly over the last 15 years.  In 1996, Anderson and Cavanagh found 51 in the top 100, while in 2000 we found 50.  By 2005 this had fallen to 45 and in both 2008 and 2009, the number was 44.  This trend offers various hypotheses which need further exploration. One possibility is that the larger national economies may be growing faster than corporations, which may reflect the rapid growth among RDEs and the fact that many of the world’s largest corporations are headquartered in and have traditionally focused on slow growth developed economies.  Another hypothesis is that increasing competition among companies, particularly in fast growth markets in Asia and beyond, has meant that the “pie” is becoming shared more widely.

This latter hypothesis is interesting particularly because the analysis of the companies appearing in each year’s list – and in the Fortune Global 500 annual ranking, from which the company base data is sourced – shows an increasing number of corporations from RDEs appearing each year.    A decade ago the list of the largest companies in the world was dominated by firms from developed economies; now Fortune’s Global 500 2010 shows that 3 of the top 10 are Chinese, with almost 20% (95 companies) of Global 500 firms headquartered in rapidly developing economies, an increase of over 50% versus just 5 years earlier.  Among the 44 companies on our top 100 economic entities list for 2009 are 4 companies from RDEs, 3 from China and 1 from South Korea.  This is half the number of the previous year and may reflect the impact of the economic crisis, as the trend from 2005 to 2008 was for an increasing number of companies from RDEs in the Top 100 list.  Interestingly the fall in the number of companies headquartered in the developed countries is almost entirely due to Japanese companies falling off the Top 100 list, with only 3 making the 2008 and 2009 lists versus 16 in 2000.  The numbers of US companies has increased by 1 over this period to 17 in 2009, while European companies number 20 in 2009 versus 17 in 2000. 

Number of Companies from Developed Countries and RDEs in the Top 100 Global Economic Entities 

Sources: IMF, Fortune, SDGL Analysis

If we were to extend the list to the top 150 entities, in 2009 the number of companies from RDEs would triple to 12. Again the trend from 2000 is clear as the number of RDE companies in the Top 150 global economic entities rises from 5 to 12 during this period, with China accounting for 5 of these companies in 2009 versus 2 in 2000.

Number of Companies from Developed Countries and RDEs in the Top 150 Global Economic Entities

 

Sources: IMF, Fortune, SDGL Analysis

The development of companies originating in RDEs into contenders for global leadership in the market spaces in which they compete, has been assisted by: Favorable starting positions in RDEs, the ambition to go for global leadership and a willingness to reach outside for rapid growth.[iv]     They have also been assisted by a growing and enthusiastic audience in developed economies for the radical innovations they bring from RDEs to developed economies.

While there may not be a huge growth in the number of corporate making future lists of the world’s largest economic entities, we do expect to see greater diversification in terms of origin of the companies as these new global challengers progress.

Influence and Impact

The sheer size of major global corporations which operate across multiple countries and regions means their combined influence and impact is huge, on many aspects of how we live and work.   Their economic and employment contributions sustain nations, regions and local communities – in many cases exceeding the influence of the nations that host them – allowing them to influence nations’ policies and actions, both economically and politically.  A recent illustration of this influence is the investigation by US Senators of BP’s lobbying for a prisoner transfer agreement between the UK and Libya, to help secure a US$ 900 million exploration and production deal.  The question was whether this was connected to the release of Lockerbie bomber Abdelbaset Ali al-Megrahi by the Scottish Executive on compassionate grounds.  While the parties involved maintain there is no connection, the case is just one illustration of how corporate empires can influence geopolitical relations and actions.

Transnational corporations are a major force in the globalization of business practices, knowledge, technology and innovation, assisting rapidly developing economies (RDEs) to more quickly converge their outputs, standards and practices with those of developed nations. For example, corporate R&D spending continues to rise despite the economic downturn.  Booz & Co.’s Global Innovation 1000 Survey shows a 5.7% increase in R&D spending in 2008, below the 10% increase in 2007 but close to the 7.1% five-year compound annual growth rate for the Global Innovation 1000. Spending increased most rapidly in the BRIC countries, with R&D spend by companies headquartered in India and China increasing over 30%  per annum from 2003-08, building on a growing pool of highly educated knowledge workers.  

Share of Total Global R&D Spending

 

Sources: R&D Magazine (Emerging Economies Drive Global R&D Growth), 2009; Booz & Co Global Innovation 1000 study 2009

Advances in knowledge, skills and technologies offer rapidly developing economies the potential to “leapfrog” older technologies, and further accelerate their growth rates, for example through the much faster penetration of mobile telephony versus fixed telephony in RDEs.

The largest global companies also drive trade, which has grown much faster than GDP over the last four decades.  The World Bank estimates that from 1970 and 2004 the share of exports to GDP more than doubled to over 25% -- by 2030 it expects global exports to approach 35% of GDP.  Despite a sharp downturn in trade due to the economic crisis, trade has rebounded strongly in 2010.

Growth in Value of Global Exports

  

Source: World Trade Organization

The growth in trade, along with ever-expanding geographic reach of major multinationals means products and services from one country can be made available in other countries, influencing culture, purchasing behaviours and lifestyles. McDonalds may adapt its offerings to local tastes, but its core remains US fast food, which can be experienced on the streets of Paris or Tokyo. Similarly media content, such as films and television programs, which are readily available worldwide via many different technologies and channels from cinemas to internet-linked computers to mobile computing devices.  Aspirational goods for the emerging middle class in RDEs include many “Western” luxury brands – and they take pride in buying the real thing.  As goods and services become more readily available worldwide, corporations will continue to influence a globalization of cultures. This is already becoming more evident among the younger generations who have grown up in a digital world, where attitudes are often more similar within a generation across borders, than between generations in a single country. 

Looking Ahead: Nations Versus Corporations?

Looking at the clout of corporate and the intricate webs of influence they have globally, an intriguing question is who has more power, nations or corporations? In sheer economic terms, the largest nations probably still retain the edge, although if we were to compare government revenues/budgets rather than GDP with corporate revenues, the relative economic power between nations and corporations would shift strongly in favour of corporations.[v]

However, for smaller and poorer nations the question is relevant and relationships between nations, the societies they serve and corporations become critical.    In this context Botswana offers a good role model. Since independence in 1966, Botswana’s “economic miracle” has been widely reported. Over the last four decades this nation of 1.9 million people has transformed itself with among the highest economic growth rates in the world and per capita GDP putting it firmly among middle income countries, although it still faces substantial challenges in terms of income inequality, health (HIV) and environment, most notably desertification.  A key part of Botswana’s success has been the relationship between the state and business, with high levels of economic freedom, partnerships between the private and public sector in key industries, e.g. Debswana, the largest diamond mining operation in the country is 50% owned by the government, a competitive banking system and protection of intellectual property rights. 

The mutual interdependence demonstrated between nation and corporation in Botswana highlights a self-evident truth, one which is often promoted under the banner of corporate social responsibility: Nations, societies and businesses ARE interdependent. One cannot exist without the others.  The challenge is in recognizing this fact, and doing something constructive about it.  For too long, businesses, including the ones listed in our top 100, have viewed corporate social responsibility (CSR) as just another source of pressure or passing fad. But as customers, employees, suppliers—and indeed, society more broadly—place increasing importance on CSR, some leaders have started to look at it as a creative opportunity to fundamentally strengthen their businesses while contributing to society at the same time. They view CSR as central to their overall strategies, helping them to creatively address key business issues.[vi]

The challenge for the major corporates with global clout, both those on our top 100 and beyond, is to recognize and to act on the mutual interdependence between nations, societies and firms.  Because the locus of wealth created by these major transnationals has traditionally benefitted the developed, wealthiest economies where most are headquartered, there is increasing pressure to tackle the inequality this creates globally.

Ultimately, it’s not a question of nations versus corporations. Building solid relationships between nations and firms is simply not optional, and in fact can drive substantial benefits on both sides.

 

The World’s Largest 100 Economic Entities

Rank	Country/ Corporation	GDP/Revenues (US$ million, 2009)
1	United States	14,256,275
2	Japan	5,068,059
3	China	4,908,982
4	Germany	3,352,742
5	France	2,675,915
6	UK	2,183,607
7	Italy	2,118,264
8	Brazil	1,574,039
9	Spain	1,464,040
10	Canada	1,336,427
11	India*	1,235,975
12	Russia*	1,229,227
13	Australia	997,201
14	Mexico	874,903
15	Korea	832,512
16	Netherlands	794,777
17	Turkey	615,329
18	Indonesia	539,377
19	Switzerland*	494,622
20	Belgium*	470,400
21	Poland	430,197
22	WAL-MART STORES	408,214
23	Sweden*	405,440
24	Norway	382,983
25	Austria	381,880
26	Taiwan Province of China	378,969
27	Saudia Arabia*	369,671
28	Venezuela	337,295
29	Greece	330,780
30	Islamic Republic of Iran	330,461
31	Argentina	310,065
32	Denmark	309,252
33	South Africa*	287,219
34	ROYAL DUTCH SHELL	285,129
35	EXXON MOBIL	284,650
36	Thailand	263,889
37	BP	246,148
38	Finland	238,128
39	United Arab Emirates*	229,971
40	Columbia*	228,836
41	Portugal	227,855
42	Ireland	227,781
43	Hong Kong SAR	210,731
44	TOYOTA MOTOR	204,106
45	JAPAN POST HOLDINGS	202,196
46	Czech Republic*	194,828
47	Israel	194,825
48	Malaysia	191,463
49	Egypt	187,954
Rank	Country/ Corporation	GDP/Revenues (US$ million, 2009)
50	SINOPEC	187,518
51	STATE GRID	184,496
52	Singapore	177,132
53	AXA	175,257
54	Nigeria*	173,428
55	Pakistan*	166,515
56	CHINA NATIONAL PETROLEUM	165,496
57	CHEVRON	163,527
58	ING GROUP	163,204
59	Chile*	161,781
60	Romania	161,521
61	Phillipines	160,991
62	GENERAL ELECTRIC	156,779
63	TOTAL	155,887
64	BANK OF AMERICA CORP.	150,450
65	VOLKSWAGEN	146,205
66	Algeria*	140,848
67	CONOCOPHILLIPS	139,515
68	BNP PARIBAS	130,708
69	Hungary*	129,407
70	Peru*	126,766
71	ASSICURAZIONI GENERALI	126,012
72	ALLIANZ	125,999
73	AT&T	123,018
74	CARREFOUR	121,452
75	FORD MOTOR	118,308
76	New Zealand	117,795
77	ENI	117,235
78	Ukraine*	116,190
79	J.P. MORGAN & CHASE & CO	115,632
80	HEWLETT-PACKARD	114,552
81	E.ON	113,849
82	BERKSHIRE-HATHAWAY	112,493
83	Kuwait*	111,309
84	GDF SUEZ	111,069
85	DAIMLER	109,700
86	NIPPON TELEGRAPH & TELEPHONE	109,656
87	Kazakhstan*	109,273
88	SAMSUNG	108,927
89	CITIGROUP	108,785
90	VERIZON COMMUNICATIONS	107,808
91	MCKESSON	106,632
92	CRÉDIT AGRICOLE	106,538
93	BANCO SANTANDER	106,345
94	GENERAL MOTORS	104,632
95	HSBC HOLDINGS	103,736
96	SIEMENS	103,605
97	AMERICAN INTL. GROUP	103,189
98	LLOYDS BANKING GROUP	102,967
99	CARDINAL HEALTH	99,613
100	NESTLÉ	99,114

List Sources: Fortune Global 500 2010, IMF.  ^*Estimates  

 

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About the Authors

Tracey Keys is Director of Strategy Dynamics Global Limited and also works with the International Institute for Management Development (IMD), in Lausanne, Switzerland, where Thomas Malnight is a professor of strategy and general management.

©Tracey Keys and Thomas W. Malnight.  All rights reserved.  Not to be used or reproduced without permission.

For more information, see www.globaltrends.com.