ceo* The magazine for decision makers. july-sept. 2005 Eastern European market. Romania, Bulgaria, Ukraine – towards Europe. Internet. The secret money-making machine: Fat earnings in online business. sia Abrasives. Number three on the global market with the ultimate finish. Crans-Montana. How a small village in the Valais is profiting from golf. Publisher: PricewaterhouseCoopers AG ceo magazine, Stampfenbachstrasse 73, CH-8035 Zurich, Switzerland Editors-in-chief: Alexander Fleischer, [email protected], Franziska Zydek, [email protected] Creative director: Dario Benassa, [email protected] Concept, editing and design: purpur ag, publishing and communication, zurich, [email protected] Photos: cover/page 40: Didier Maillac/REA/laif, page 3: Thomas Eugster, page 5: Martin Kollar/VU/laif, page 13: Ian Hanning/REA/laif, page 19: Nik Hunger, page 30/32: Marc Wetli, page 38/39/41/45: Roemers/laif, page 42: Hans Madej/Bilderberg, page 43: Pierre-Antoine Grisoni/strates, page 50: Courtesy Global Fund Lithography: CMS Sticher AG, Printing: Sticher Printing, Lucerne Copyright: ceo magazine PricewaterhouseCoopers. The opinions and views expressed by the authors do not necessarily reflect those of the publisher. ceo magazine appears three times a year in English, German and French. Circulation 40,000 00Free ceo/editorial subscriptions and changes of address: [email protected] Whether the issue is competing for location or potential migration of people and suppliers, changes in Europe loom larger for Switzerland than changes in Asia. We must get involved in these changes, help to influence them, play an active role. Markus R. Neuhaus, CEO PricewaterhouseCoopers, Switzerland What is happening with the Chinese econ- The up-and-coming European countries important determinant of location policy. omy is, of course, a historical event. That is should not be neglected when making A contribution from our firm in this issue of why we took a careful look at this market in investments – even if comparisons predict ceo* makes a strong statement about an earlier issue of ceo*. But a historical lower returns over the short term. In the Switzerland as a tax location. economic event is taking place even closer end, the question is one of strengthening to home. Fifteen years ago, we witnessed the whole of Europe and preventing Rationally speaking, in Switzerland we are the fall of the Iron Curtain in Europe and massive migration. Whether they involve well aware that the lion’s share of our pros- then forgot about it. Only now are we ex- competing for location or potential move- perity is the result of exchange and good periencing the regiopolitical aftershocks, ments of people and suppliers, changes in relations with our European neighbours. But and especially the economic consequences Europe loom larger for Switzerland than in the general debate these perceptions are of this event: the difficulties Germany is changes in Asia. In Germany these forces frequently eclipsed by two extreme beliefs. having digesting the costs of reunification, are already being strongly felt. They will be a The first is that Switzerland is a global place the assimilation of living standards within little slower to reach the Confederation. of business, where everything depends on the old EU, the race among the new enterprises whose home and marketplace is member states to catch up to this standard We must get involved in these changes, the world. The second belief is that Switzer- as quickly as possible, and the problems help to influence them, play an active role. land is self-sufficient and can let develop- that this state of affairs creates in turn for This issue of ceo* gives several examples ments pass it by with nary a care. Both the old EU member states. of Swiss enterprises that have positioned beliefs are unrealistic. What happens in themselves successfully in their industries Germany and France is more than a To the east of the EU lie states whose and includes the views of well-known “miscellaneous” item for Switzerland. And people also naturally want to live in prosper- CEOs on the strategic question, “focus or how Switzerland organises its relations with ity. In this issue of ceo* Bruno Affentranger diversify?”. the EU is not a subject that can be dealt introduces Romania, Bulgaria and the with in a footnote. The fact that Swiss busi- Ukraine and describes their enormous Some Swiss enterprises are much better ness has played a part in the vote on contrasts. The people of these countries are prepared than business as a whole. In view Schengen/Dublin is a sign that the country ready to pay a great deal for more prosper- of the young market economies in Eastern understands the economic importance of ity. It would be cynical to deny the legit- Europe, the attractiveness of Switzerland as this subject. This engagement will be imacy of this desire for a better standard of a place to do business must be measured rewarded in the vote on the Free Movement living. By the same token, it would be against new benchmarks. Tax policy is an of Persons in September. unwise not to consider thoroughly the consequences of this development for other I wish you a stimulating read. European countries and their economies. Markus R. Neuhaus ceo/editorial 03 ceo2/05. july-sept. contents James J. Schiro, CEO of Zurich Financial Giorgio Behr, CEO of Behr Bircher Cellpack, Matthew Robin, CEO of Ypsomed, writes Services, writes in the ceo* Forum: writes in the ceo* Forum: “Market leadership in the ceo* Forum: “It is not our objective “No company can save itself to prosperity. must be the entrepreneurial goal: only those to expand at any price. Growth must It must invest in the future and work who hold a top position can earn money in have a strategic background. Only then smarter.” this market.” is it effective.” 06 08 10 Internet report. Online business as a money-making machine. In Success with polish. Peter Schifferle, CEO of sia Abrasives. Switzerland, transactions worth an estimated CHF 2.6 billion were The number three on the global market for flexible abrasives conducted via e-commerce in 2004. Tendency: rising sharply. After favours leadership in technology. Manufacturing and assembly the burst of the Internet bubble, big earnings are again being made. are deliberately located in Switzerland. 12 20 04 ceo/contents Trend: Open innovation. Professor Georg von Krogh on the possibility of exchanging knowledge with customers, suppliers and even competitors – to gain long-term benefits. 18 pwc expertise Fiscal system: Urgent need for reform! Switzerland is well advised to preserve its low tax rates and friendly tax climate. 27 Eastern European market. Romania, Bulgaria Enterprise value: The simulation software and Ukraine. Three countries on the Decision Programming Language (DPL) helps to determine assets more precisely. move. A report on Europe’s future expansion eastwards, its opportunities and risks. 30 38 Money market: Do you know your creditors? Debt trading is becoming more important in Switzerland. 33 5 minutes: Business information and research by PricewaterhouseCoopers. 34 The revised Law of Foundations: Donating will be somewhat more attractive. 36 Service: Events, publications and research. Subscriptions and addresses. Leader. European Masters, Crans-Montana: 37 How the golf event specialists Yves Mittaz and Gaston Barras are ensuring that the tills ring in the Valais mountain village of Crans. Global partnership. Pricewaterhouse- Coopers acts for the Global Fund in 46 Moldova, the first successor country to the Soviet Union to combat HIV/AIDS and tuberculosis with free anti-retroviral therapy. 50 ceo/contents 05 forum1. focus/diversify James J. Schiro, CEO of Zurich Financial Services: Sustainable profitable growth will be achieved best by sharply focusing on the core. US-born James J. Schiro (59) was appoint- We have made the group not only more across all country and business units. It ed Chief Executive Officer of Zurich Finan- competitive and efficient, but also better draws upon the capabilities and expertise of cial Services in May 2002. Under his leader- governed. We instilled financial discipline, all employees to enhance focused perform- ship Zurich achieved a financial turnaround, improved internal controls, and promoted ance toward one common goal. By ensuring pursuing a strategy of profitable growth transparency. All functions essential for the best practices in local markets on both based on a well-diversified portfolio of life success of our businesses are now centrally sides of the Atlantic, the Zurich Way and general insurance businesses. coordinated. A group of our size and with enhances our position as a global player. our exposures must manage its risks across Our recovery has been built on operational As a relative newcomer to insurance I all boundaries on a global scale. improvements. The Zurich Way is our continue to be amazed by how much the Yet insurance regulation continues to stop method to ensure that these improvements success of our business depends on exter- at the border of each country. To be sure, are engrained in our culture and replicated nal factors. Insurers are not only exposed to regulators are talking to each other, and the around the world. No company can save catastrophes and other large-scale random European Union has established the prin- itself to prosperity. It must invest in the events, their balance sheets – and hence ciple of a lead regulator in dealing with enti- future and work smarter. That is why our their profitability – are also subject to the ties domiciled in countries outside the EU. operational improvements are increasingly ups and downs of financial markets. Other But the international regulatory landscape is driven by contributions from technical challenges include regulatory scrutiny, pros- still fragmented. This opens room for regu- areas. Our emphasis is on generating ecutorial attention and legislative interven- latory arbitrage, which undermines one of sustainable earnings, not on mere cost tions.