This is most clearly seen in the wave of restructuring that is altering the shape and ownership of several major industries. The current take- over battle in France between TotalFina and Elf Aquitaine, following closely on Olivetti's sensational victory in the battle for Telecom Italia, is the most recent example of the kind of activity that would have been virtually unthinkable 20 years ago. In many of these cases, the participants are being advised by American investment banks and American lawyers.
The restructuring process is driven by international competition and an increasingly demanding capital market. On both fronts, European integration is providing an additional spur. The arrival of the euro will tend to eliminate pricing differences between member countries, while making it easier for investors to treat Europe as a unified capital market. Steelmaking, for example, once the most nationalistic of industries, is beginning to acquire a global character as more companies seek to strengthen their market position through cross-border acquisitions and joint ventures. The proposed merger between British Steel and Hoogovens of the Netherlands is motivated partly by the quest for cost savings and partly by the need to offer a better service to customers, such as the car makers, which are themselves operating on a European scale. At the same time, the merging companies are under pressure to offer to their shareholders returns that at least match those available on comparable investments in the US.
Thanks in large part to the former prime minister, Margaret Thatcher, Britain started down this path earlier than other European countries. The recession of the early 1980s, together with the pro-competitive policies pursued by successive Conservative governments, forced British companies to come to grips with their internal weaknesses; raise their performance levels closer to the best international standards; and align their strategies to the world market's needs.
The rehabilitation of British Steel, once the most inefficient steelmaker in Europe, is rightly regarded as a triumph for Thatcherism, but similar, if less publicised, transformations took place in many other firms. The general trend then was toward specialisation and internationalisation - focusing on businesses that could hold their own on the world stage, and getting out of those that could not. In some sectors, such as televisions and cars, gaps left by uncompetitive British firms were filled by foreign companies which built or acquired factories in Britain.
Similar forces have been at work in parts of Europe, not least in Germany. During the 1960s and 1970s much of German industry was characterised by diversified companies that were more interested in top-line growth - a continuing expansion of sales and employment - than in bottom-line performance.
For a mixture of reasons, including the need to satisfy their increasingly numerous non-German shareholders, several of these companies have now drastically revised their strategies. The most celebrated example is the conversion of Hoechst from a chemical conglomerate into a focused "life sciences" firm. This has involved a complex series of acquisitions and divestments, culminating in the merger of Rhone-Poulenc of France to form Aventis, which will become one of the world's largest pharmaceutical manufacturers. The success of this operation is uncertain, but what Hoechst has done illustrates the willingness of even the most securely established German firms to make a break with their past.
A growing number of other German companies have embraced (with varying degrees of enthusiasm) the Anglo-American concept of shareholder value as the primary measure of corporate performance.
One of the role models for Juergen Schrempp when he took over as chairman of Daimler-Benz in 1995 was Jack Welch of General Electric, which had consistently achieved a return on equity of around 20 per cent.
As a first step, Mr Schrempp insisted that every business within Daimler- Benz must aim for a return on equity of at least 12 per cent. The culture change which Mr Schrempp engineered in Daimler-Benz helped to pave the way for this year's merger with Chrysler.
Despite the Olivetti-Telecom Italia and Total-Elf affairs, hostile take- over bids are still rare on the Continent. The furious political and trade union reaction to Krupp's hostile bid for Thyssen in 1997 showed the strength of Germany's attachment to the consensual model of industrial change. But the fact that the bid was made (with American investment banks playing an important role) was a sign of how far thinking in German boardrooms had moved in the American direction. Even though the bid was withdrawn, it led to an agreed merger between the two companies, facilitating a much- needed rationalisation of the German steel industry.
Powerful German trade unions undoubtedly will exert a brake on the speed with which the restructuring of firms and industries can take place. But there is a degree of realism among union leaders which was notably lacking in their British counterparts during the 1960s and 1970s. A strong incentive for the unions to co-operate is the ease with which German companies can shift manufacturing operations to lower-cost locations outside Germany.
Another obstacle to change has been the desire by European governments to protect their national champions from foreign take-overs, but here, too, there are encouraging signs of greater flexibility. But there is a growing recognition, even in an industry as intimately linked to national sovereignty as aerospace, that nationalism is incompatible with global competitiveness. Aerospatiale has already been privatised, and it is a reasonable bet that Airbus Industrie will in due course become a normal, shareholder-owned company, just like its American competitor.
What business can do in the way of restructuring is limited by the social and economic climate in which it operates. And there is an obvious danger that the centre-left governments which hold sway in several European countries will impose new restrictions on managers' freedom to manoeuvre. But there are powerful economic forces working for greater liberalisation and governments would be well advised not to stand it is way.
n Geoffrey Owen, a senior fellow at the Institute of Management, London School of Economics, was editor of the `Financial Times' from 1981 to 1990. This article was reprinted with permission of the `Wall Street Journal's' Dow Jones & Co. All rights reserved.Reuse content