The World's Most Admired Companies
Who's got respect? General Electric tops the All-Star list again, Toyota moves up to No. 2, and Apple makes its debut in the top ten.
(FORTUNE Magazine) - The world economy was awash in uncertainty last year. Corporate profits set records everywhere, but rising energy prices, huge trade imbalances, and political instability put a damper on any celebrations. In such a climate, stability is a virtue. And FORTUNE's ninth annual survey of the World's Most Admired Companies bears that out: General Electric (Research), the world's most reliable performer, ranks No. 1 again this year, as it has for six of the past eight years. Eight of last year's top ten returned to that select group--blue chips like Procter & Gamble (Research) (up three places to No. 3), FedEx (Research) (up four to No. 4), and Microsoft (Research) (down two to No. 6). But there was also change. And companies whose products and ideas captivated consumers were most handsomely rewarded. Consider Toyota (Research), maker of the world's best-selling hybrid car. It jumped three places to No. 2, dislodging Wal-Mart (Research), to become the highest-ranked company outside the U.S. to make the All-Star list. (For more on how Toyota developed the Prius, see "How Toyota Does It.") Or consider Apple Computer (Research) (No. 9). Last year, Apple wasn't big enough to qualify for consideration. But the success of the iPod added enough revenue to make it eligible--and enough respect among businesspeople around the world to earn it a spot in the top ten along with tech giants Microsoft and Dell (No. 7). "What do Apple and Toyota have in common?" asks Mark Royal, a senior consultant at Hay Group, the management-consulting firm that has conducted the Most Admired Companies survey for FORTUNE since 1997. "They have both delivered strong performance when many other companies in their sectors have struggled." Any company voted onto the All-Star list by the 8,645 executives, corporate directors, and analysts in 23 countries who participated in the survey is doing something right. But for a non-U.S. company, selection is a special achievement. Only 18 of the top 50 have headquarters outside the U.S., one more than last year. In some industries, such as auto manufacturing, airlines, and telecommunications, non-U.S. companies have come to dominate. In addition to Toyota, both BMW (No. 13) and Honda (No. 31) made the list, although both lost ground from the previous year. No U.S. car company achieved All-Star status. In the telecom sector, Finland's Nokia (up six places to No. 20) expanded its lead over Cisco Systems (No. 26). And Singapore Airlines, which doubled its profits last year, to $1.3 billion, despite rising fuel prices, was the only airline to make the grade, moving up nine places to No. 19. "Our prudence in hedging exposure to fuel-price volatility paid off," says Singapore Airlines CEO Chew Choon Seng. "SIA's premium positioning in the market enabled us to improve passenger and cargo uplifts without resorting to price discounting." The downside of admiration is that it can quickly turn to mimicry. Take Wal-Mart, which dropped from No. 2 to No. 10. It may have perfected low-price, big-box retail, but imitators like Target (No. 12) and Costco (No. 17) in the U.S., and Tesco (No. 43) in Britain, have all adopted that basic model--and all have gained market share. They've also gained on Wal-Mart in the ranks of the most admired: All three rose on this year's list. The biggest loser on the All-Star list was Sony, which fell 19 places, to No. 34, and trailed imitator and archrival Samsung Electronics of South Korea for the first time. Samsung, which rose 12 places to No. 27, expanded its global market share in flat-panel televisions and memory chips. "At Samsung, we strive to become not just a company of success but also a company of value," says CEO Jong-Yong Yun. "We think every day about how to do this better." Even in a profit-rich business like oil, innovation still matters. Exxon Mobil may rank first in financial soundness, long-term investment, and asset management in voting by industry, but it has a mediocre innovation rating and ranks No. 25 overall on the All-Star list, behind BP, which had the best innovation score of any company in the petroleum industry. Across all industries, Apple was ranked No. 1 in innovation, overtaking last year's leader, FedEx. Other attributes also had new leaders. Walt Disney replaced Texas Instruments as No. 1 in quality of products and services. And Switzerland's Nestlé, with factories in 83 countries, overtook aluminum giant Alcoa to become most admired for operating globally. Procter & Gamble was the top company in the U.S., based on voting by industry peers on all nine attributes, as it was last year. Toyota was again Japan's most admired company, and BASF kept the top spot in Germany. But some countries had new leaders: France's new No. 1 is L'Oréal, the world's biggest cosmetics company, and Tesco replaced BP in Britain. Which is the world's least-admired company? By attribute rankings, that dishonor belongs to UAL, parent of United Air Lines, which had the lowest score of any company in the survey. United went bankrupt in 2002 and has since shed 250,000 jobs and 107 planes in addition to defaulting on its pension liabilities. Italian automaker Fiat had the second-worst score. China didn't fare well in the rankings this year. Not one of its companies made the All-Star list, and the one with the best composite score, Shanghai Baosteel, ranked only 227th out of the 351 companies surveyed. That may change over time as newcomers like computer maker Lenovo grow big enough to be included, but for now China will have to settle for admiration being directed elsewhere. [This article contains 3 table. Please see hardcopy of magazine or PDF. 2006 ALL-STARS FORTUNE selects its All-Star list based on voting across industry lines. NATIONAL LEADERS Britain's Tesco, France's L'Oréal, and South Korea's Samsung Electronics reached the top of their national rankings. Shanghai Baosteel Group was the best of the China companies rated. WINNERS AND LOSERS How the companies are ranked FORTUNE created a list of 351 companies in 30 industries with revenues greater than $8 billion. Hay Group sent surveys to 8,645 executives and directors at those companies, as well as to analysts. Respondents were asked to rate companies in their industry on nine attributes, on a scale of 0 (poor) to 10 (excellent); the average of those scores was used for country and industry rankings. Respondents were also asked to rank their top ten companies across all industries. The All-Star list is based on that result. For company profiles, country-by-country rankings, and the complete America's Most Admired Companies list, visit www.fortune.com/ mostadmired. Find out what top executives and financial analysts in your industry think. For the key drivers of corporate reputation in each industry, visit www.fortunedatastore.com/reputation. HAY GROUP Hay Group, which has conducted the research for the World's Most Admired Companies list since 1997 and for America's Most Admired since 2001, is a global human resources and organizational consulting firm with 78 offices in 43 countries. For information about Hay Group's services, go to |
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