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17.1.2.  The challenges of European industry

    Although European industry now benefits from the advantages of a single large market, it is faced with new challenges. Globalisation of economies and markets, which enables greater economies of scale to be reaped and better specialisation for distinctive market segments, entails the intensification of international competition. In the context of this globalisation, European businesses must be able to face international competition. Although it has not deteriorated, apparent labour productivity in European manufacturing still lags a good way behind that of the US and Japanese industry. Economic operators and public authorities in Europe must therefore pay more attention to the factors influencing productivity: technological development, investment in R&D, the rate of capacity utilisation, the cost and skill of the labour force, management skills and the organisation of production.

    Apart from globalisation of markets and competition, European industry must prepare to face the challenge of the new industrial revolution, the one resulting from the development of information and communications technologies. These reduce the traditional distinctions between electronics, information technology, telecommunications and the audiovisual sectors [see sections 17.3.5 and 17.3.6]. This revolution has far-reaching effects on production structures and methods. It spells changes in the way companies are organised, in managerial responsibilities and relations with workers, particularly concerning the organisation of work. There is therefore a need for structural adjustment and the steady shifting of resources towards the most productive outlets. In general, business competitiveness depends increasingly on the ability to innovate, notably by the development of new products and services.

    In the information technology sector, for example, almost 80% of income is derived from products that have been on the market for two years or less. It is therefore essential to promote innovative activities, including the creation of innovative businesses, and to facilitate the dissemination and exploitation of research results and support technology transfer. Innovation is a complex phenomenon involving many players (firms, universities, research centres and financial operators, etc.). Europe needs to exploit more effectively its research activities and its high level of creativity in terms of knowledge and know-how by ambitious innovation policies at European, national and regional levels in all sectors [see section 18.4]. The European Year of Creativity and Innovation (2009) aimed to support the efforts of the Member States to promote creativity, through lifelong learning [Decision 1350/2008].

    In a market economy, such as that of the EU, the main initiative and responsibility for structural adjustment lies with business. The role of public authorities is above all as a catalyst and pathfinder for innovation. This means that public authorities may take accompanying measures to assist and speed up the process of adjustment, particularly in the area of infrastructure provision (for example, education, energy, telecommunications and research), but can never substitute for the decisions to be made by business. The Commission recommends taking action in three areas to support structural change: improving the regulatory environment for business (by taking better account of the competitiveness dimension and providing a better assessment of the cumulative impact of regulation on specific industries); better mobilising the different Union policies which can work together to strengthen the take-up and use of knowledge, boost productivity and help companies to innovate; extending the sectoral dimension of European industrial policy to new sectors, such as the automotive sector or other areas of manufacturing [COM/2004/274].

    To compare the productivity levels, employment rates and export market shares of the European Union with those of its major competitors, the United States and Japan, the EU uses the tool of benchmarking, which makes it possible to monitor progress on an ongoing basis and assess the situation against continuously improving best practice worldwide [COM/96/463]. Key areas for improvement are the functioning of markets, innovation and intangible investment and the priorities within these areas, which are suitable for benchmarking, such as price, quality of service and the number of innovatory services provided. To disseminate the benchmarking technique, the Commission set up a High-level Group on Benchmarking consisting of industrialists and having as its task the selection of pilot projects, and the setting up of a network of experts to carry out the pilot projects in the Member States [COM/97/153]. A medium-term work programme aims at the organisation of an ongoing debate with industry on competitiveness, in order to ensure that all aspects of this question are taken into consideration.

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