Towards Lisbon 2.1, Dr Fritz Kroeger, AT Kearney, Germany

1. European Portfolio of Industries September 28 th , 2007 Dr. Fritz Kröger Challenge of the Future Towards Lisbon 2.1

3. A major finding was the pattern of global industry consolidation: Merger Endgames. Notes: 1) CR3: Market share of the three largest companies of the total market based on Value-Building Growth database (34,000 companies) 2) HHI: Hirschman-Herfindahl Index corresponds to the sum of the squared market shares of all companies and is greater than 90% the axis logarithmically plotted Source: Value-Building Growth database; A.T. Kearney analysis 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%  45% - 10 - 5 0 5 10 15 20 25 0% 10% 20% 30% 50% 60% 70% 80% 90% 100%  45% - 10 - 5 0 5 10 15 20 25 Opening Balance/ Alliance Scale Focus HHI 2) CR3 1) Years Trucks & Trailer Paint & Resin Investment Companies Banks Airlines Medical & Surgical Supplies Div. Chemical Div. Metal Products Mfrs. Department Stores Adhesives Express Laundry & Homecare Business Machines & Office Equipment Electrical Automotive Supplier Aluminum Appliances & Consumer Products Publishing Div. Construction Employment Services Pumps Securities Brokerage Shipping Telecommunication Div. Electrical Automatic Controls Insurance Voltaik Cigarette Defense Electr. Ore Mining Shipbuilding Soft drinks Aluminum Producers Utilities Paper Entertainment production Operators

4. Profitability follows the endgame curve with a slight time lag. 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% -5 0 5 10 15 20 25 EBIT/ revenues Years Stage 1 Opening Stage 2 Scale Stage 3 Focus Stage 4 Balance/ Alliances Average profitability + Standard deviation + Standard deviation

5. On global scale consolidation stages follow a flat bell curve. Source: A.T. Kearney analysis Phases World Phase 1 Opening Phase 2 Scale Phase 3 Focus Phase 4 Balance/Alliances % of revenues 0% 10% 20% 30% 40% 50% 60%

6. US is well balanced. Source: A.T. Kearney analysis Phases World USA Phase 1 Opening Phase 2 Scale Phase 3 Focus Phase 4 Balance/Alliances % of revenues 0% 10% 20% 30% 40% 50% 60%

7. Europe has major weaknesses. Source: A.T. Kearney analysis Phases % of revenues World Europe Phase 1 Opening Phase 2 Scale Phase 3 Focus Phase 4 Balance/Alliances 0% 10% 20% 30% 40% 50% 60% Consolidation gab Innovation gab 400,000 academics in 10 years to NA

8. Germany is even more suffering from a gap in “young industries”. Source: A.T. Kearney analysis Phases % of revenues World Germany Phase 1 Opening Phase 2 Scale Phase 3 Focus Phase 4 Balance/Alliances 0% 10% 20% 30% 40% 50% 60%

9. Singapore is “front loaded” with young industries. Source: A.T. Kearney analysis Phases % of revenues World Singapore Phase 1 Opening Phase 2 Scale Phase 3 Focus Phase 4 Balance/Alliances

10. Asia has fewer weaknesses. Source: A.T. Kearney analysis Phases World Asia Phase 1 Opening Phase 2 Scale Phase 3 Focus Phase 4 Balance/Alliances % of revenues

11. Across the Endgames Phases the distribution of European companies is not even distributed. US EU J … with a fatal consequence for the wealth generation in Europe I II III IV

12. Europe has a significantly minor share (-23.6%) of global market leaders in higher consolidated industries … GDP nominal US $ Share of market leaders in consolidated industries (Phase III and IV) Rest mainly Asia US EU J … with a fatal consequence for the wealth generation in Europe I II III IV

13. Europe has major weaknesses. Source: A.T. Kearney analysis Phases % of revenues World Europe Phase 1 Opening Phase 2 Scale Phase 3 Focus Phase 4 Balance/Alliances Consolidation gap Innovation gap 400,000 academics in 10 years to NA