Changing Trends in the Global 500
I recently accompanied my colleague Andy Serwer, managing editor of Fortune, to his talk at Peking University’s Guanghua School of Management. His gracious host for the occasion was Dean Cai Hongbin.
A full room of some 150 undergraduate, MBA and EMBA students listened to Andy’s reflections on how changes in the Fortune Global 500 list over the years reflects trends in the world economy.
The first Fortune 500 list was published in 1955, but included only US companies. In 1957, a separate list of the largest companies outside the US was published. From the beginning, Fortune editors determined that a company’s revenue would be the key denominator of ranking, since it is the single most reliable, verifiable, and meaningful indicator of relative growth and success.
In 1976, the first international 500 list was published, but this was comprised solely of companies outside the U.S.
It wasn’t until 1995 that the first combined list of U.S. and international companies was published: in effect, the first Global 500 list. It is this 1995 list which is often used as the baseline for comparisons with subsequent years’ performance data, of companies, industry sectors, countries, etc.
That first Fortune Global 500 ranking in 1995 was dominated by Japanese companies, which numbered 149 on the list, and together represented some 37% of total revenues of all companies on the list.
By comparison, the current 2012 list (based on 2011 company results) has only 68 Japanese companies. In other words, from their peak in 1995, Japanese companies’ position on the list has shrunk, both in number and share of revenue.
US companies peaked in number in 2001, with 197 making the top 500, contributing 42% of total revenues. In the 2012 list, US companies number 139, representing 29% of total revenues.
Of course, a story very well known in China is the remarkable growth of Chinese companies on the Fortune Global 500 list, from only 3 in 1995 to 73 on the current list. During that same time period, Chinese companies’ share of total revenue grew from less than 1% to 13.5%.
Of the 73 companies on the current list, 68 are state-owned enterprises. A wide variety of industries are represented, with an especially strong showing in the industrial, financial services and energy sectors.
With this year’s strong showing, China overtook Japan in the number two spot, with the US remaining in first place.
The one Chinese company which has been on the Global 500 list each year from 1995 through the present is Bank of China.
As Andy Serwer told the audience, he and his colleagues estimate that within the next two years or so, there could be 110 Chinese companies on the list.
If that trend line continues, that raises the very interesting prospect of Chinese companies taking first place on the list within the next 5 years or so.
Other countries whose companies have grown dramatically in number on the list in recent years include India, Brazil and Russia.
In hindsight, it is significant that the history of the true Fortune Global 500 list dates only as far back as 1995. That is a reflection of how recent a phenomenon the globalization of world trade and the growth of large global companies really is.
Apart from the phenomenal growth in number and revenue of Chinese companies on the list, one fact sometimes overlooked has been the rapid growth of non State-owned enterprises on the list. It’s true that 68 of the current 73 are SOEs, but that’s still a five-fold increase in the number of non-SOEs within a very short time frame. My own view is that is a trend line which will continue.