ANALYSIS OF ADVANCED BUSINESS SERVICE S WITHIN THE CONTEXT OF CENTRAL EUROPEAN CITIES Michal Němec March 2011 Analysis of Advanced Business Services within the Context of Central European Cities, 2011 City Development Authority Prague, Strategic Planning Department Author: Michal N ěmec, E-mail: [email protected] Translation: Petr Gibas, MSc. CONTENT 1. Introduction ...................................................................................................................... 4 2. Analysis of selected branches of advanced business services within the context of central European cities ................................................................................................... 5-12 2.1 Law services ................................................................................................................. 6 2.2 Advertising and marketing services ............................................................................. 7 2.3 Engineering services .................................................................................................... 7 2.4 Management consultancy ............................................................................................. 8 2.5 Accountancy and auditing services .............................................................................. 9 2.6 Banking and financial services ................................................................................... 10 2.7 Insurance industry ...................................................................................................... 11 3. Conclusions – overall ranking of monitored cities ................................................. 13-15 3.1 Comparison of the conclusions with the outcomes of GaWC ................................... 15 4. References ....................................................................................................................... 16 Appendix: Location of the analysed companies in the area of the capital city of Prague .. 17 1. Introduction The segment of advanced business services has recently been developing vigorously and its influence on the economies of advanced countries and regions has been rising consequently. Employing advanced business services has become one of the core elements of increasing the competitive advantage of modern economies. Typical of advanced business services is that to a great degree they cluster in important cities with a strongly diversified economic base and reported growth. The segment also requires highly qualified working force. One of the key factors for the development and expansion of advanced business services is a sufficient offer of business spaces. The size of the city together with its function (position in the hierarchy of settlements) and transport accessibility are all fundamental localizing factors. Advanced business services encompass quite a wide range of specialised and knowledge services such as law services, advertising and marketing services, services in IT and communication technologies, architectonical and engineering services, management consultancy, accountancy and budget consultancy, nonbank financial services, insurance industry, etc. Within the Czech Republic, progressive tertiary sectors have been developing since the transformational processes after the 1989. The capital city of Prague has met all the requirements needed for the advancement of the progressive tertiary and thus has become the most attractive city for the advanced business services companies in the country. The capital city of Prague has a strong and diversified economic as well as knowledge base, high rate of graduates, favourable geographical location and improving transport accessibility. The office spaces market has been evolving and currently the offer of modern office spaces can be assessed as sufficient. The dominant position of Prague fulfilling the role of the Czech centre for all advanced business services is undeniable. Clear majority of important foreign progressive tertiary companies that have their business representation in the Czech Republic reside in Prague. The main aim of the presented study is to analyse whether Prague, so dominant in the Czech Republic, represents also an important site for global companies in the field of advanced business services. We thus compare the occurrences of Prague business representation of the most prominent companies with their representations in nine important cities of the Central Europe region. 4 2. Analysis of selected branches of advanced business services within the context of central European cities One of the ways how to evaluate and compare the significance of cities or regions concerning advanced business services is to identify there the number of branches of prestigious global companies. In our analysis, we thus compare the count of branches of important globally operating companies of advanced business services in ten key central European cities. For the purpose, we selected the capital cities of the Visegrad group (Prague, Bratislava, Budapest, Warsaw), Vienna, the capital of Austria, three biggest German cities of Berlin, Hamburg and Munich, and Frankfurt am Main as an important economic centre of Germany. From the same reason we included also Zurich, which functions in Switzerland similarly to Frankfurt in Germany. The geographical location of analysed cities can be seen on the map no 1. Map no 1: analysed central European cities Map base source: Seznam.cz, JSC; modification Strategic Planning Department/City Development Authority Prague (SPD/CDAP) Further, we defined seven branches of advanced business services to be analysed. These are law services, advertising and marketing services, engineering services, management consultancy, accountancy and auditing services, insurance industry, and banking and financial services. Within these we identified 100 notable global companies showing highest profit or highest market value (sporadically also other criteria were used). A necessary condition for including a company in the analysis is its global scope (i.e. physical presence in at least two continents) as well as the presence of a company’s branch in at least one of the selected cities. For determining a physical presence of a company’s branch (or its absence) in a given city, the information stated at the company’s official internet pages by the time of our analytical work (fourth quarter of 2010) was authoritative. 5 2.1 Law services For the purpose of analysing the branch of law services, we selected 15 global law companies that in 2007 recorded highest profit 1. Based on this criterion, the strongest global law companies are British Clifford Chance, Linklaters, and Freshfields. It must be noted, that all fifteen companies are of either British, or US origin. It is not surprising then that within the European continent the most prominent city concerning the concentration of global law companies is London. Our analysis evidenced that business representation of the most notable worldwide operating law companies in central European cities is far from commonplace. This is demonstrated in the table no 1 where red colour symbolizing the absence of a given company’s branch dominates. Global law companies are most numerously represented in Frankfurt and Munich where thirteen or twelve of the fifteen selected companies have their branches. In other important central European cities, fewer than a half of the companies have their branches, which is true also for Prague where six prominent global law companies have their business representation. The lowest number of branches was identified in Zurich (two companies) and in Bratislava (three companies), which is generally rather unattractive for companies from the sector of advanced business services (see below). Table no 1: Representation of global law companies in analysed cities Name of the company (alphabetically ordered) Berlin Bratislava Budapest Zurich Frankfurt Hamburg Munich Prague Warsaw Vienna Allen & Overy Baker & McKenzie Clifford Chance DLA Piper International Freshfields Greenberg Traurig Jones Day Kirkland & Ellis Latham & Watkins Linklaters Mayer Brown Sidley Austin Skadden Arps Weil, Gotshal & Manges White & Case The number of branches of law 5 3 5 2 13 5 12 6 7 4 companies Source: SPD/CDAP (Note: green = company has its business representation in a given city; red = company does not have a business representation in a given city) 1 Source: http://en.wikipedia.org/wiki/List_of_100_largest_law_firms 6 2.2 Advertising and marketing services US companies dominate the market with marketing services, which is among others attested by the data on incomes. The list of “top ten” advertising and marketing companies ranked according to incomes in 2008 presents that seven of the ten companies are of US origin. The first four places are occupied exclusively by US advertising or marketing agencies BBDO, McCann-Ericsson, DDB, and TBWA 2. Table no 2 clearly indicates that the most prominent global advertising and marketing agencies are quite numerously represented in important central European cities. Two strongest global advertising agencies BBDO and McCann-Ericsson can even be found in any of the monitored cities. Table no 2 also confirms the fact that global advertising and marketing agencies are most strongly represented in Prague, Warsaw, and Vienna, where identically thirteen of the fifteen most important companies offer their services in advertising and marketing. By contrast, in Berlin only a third of the monitored companies