The World’s Largest Enterprises: Five things we can learn from Fortune’s Global 500 Rankings

Each year, Fortune ranks the largest enterprises in the world by total revenue. The first ranking was published in 1955. There are now several lists published annually including the US 500, the US 1000 and the Global 500. These rankings include publicly held companies, as well as privately held companies for which revenues are publicly available. 

Fortune offers the data for individual years, but does not sell an integrated database of multiple years, making it difficult to track changes over time and understand largest patterns of change. Insights can be gained by integrating and scrubbing the data for multiple years. Here I look changes in the rankings since 2011. Five trends stand out:

Size and Scale

The scale of the companies represented in the Global 500 is impressive, with the total revenue of these companies clocking in at US $30T. Some companies such as Wal-Mart and China’s State Grid have very large annual revenues, US $500B and US $349B respectively in 2017. The overall average is approximately US $60B.  

Companies on the Global 500 also employ a large number of people – in 2017, these companies had direct employment of 68 million people. Given the size, scale, complexity and position as market leaders, these companies attract many of the best and brightest. The companies on the list hail from many different countries. As shown in Figure 1, the most recent ranking includes companies from 33 different countries. 

Financials

Collectively, ranking companies generated US $1.9T in profits. The US and China constitute the majority with 53% of total profits in 2017.  However, the split is not equal. US companies collectively capture 35% of the profit while Chinese companies only capture 18%.

Figure 2 shows the breakout of profit and revenue for US companies arranged by KPMG industry. Consumer & Retail, with 26 companies, ranks first in total revenue (US $1.9T) but fourth in total profits (US $92B). Financial services by contrast is much more profitable. It has approximately the same number of companies (27) as retail and close to the same revenue at US $1.64T, but profits of US $156B. 

Profits are, of course, not guaranteed for any company. In fact, since 2011, an average of 52 companies or about 10 percent of the companies that make up the list as a result of the size measured by revenues post negative profits.  Over the past seven years, an average of nine companies each year make it to the global Fortune rankings but post negative profits.   Figure 3 shows the number of these companies by region.  Every region has large companies that struggle with profitability.  When we look further to the sector level, we find that energy sector companies have faced particular challenges. While things have improved since 2015, a third of the energy & utility companies that ranked had negative profits in that year. However, it is not only energy. Every sector from retail to technology has at least one company posting negative profits.

Entry and Exit

One might think of the Global 500 as stable with little change. In fact, the list is quite dynamic. Over the past seven years, 655 companies have appeared in the rankings at least once. For a company to make the rankings, it must have revenue of at least US $23B on average. There are 352 companies that have hit this revenue level consistently over the past seven years.  

A number of well-known companies fell off the rankings in 2017 such as Alcoa, Sears Holdings, and McDonald’s.  Indeed, there are 120 US companies that have appeared at least once in the past seven years but did not rank in 2017. The US is not alone. There are other countries that have been represented on the list but failed to rank in 2017. China had 87 such companies over the past seven years, Japan had 44 and Britain had 41. 

Some companies new to the rankings in recent years are Progressive, Kraft Heinz, DXC Technology, Tencent Holdings, Yankuang Group, Medtronic, Altice and Adidas. Looking over the past seven years, we find that the churn rate (exit and entry) runs at an average of 7.8%. 

Industries

Looking at the rankings by industry provides another lens to view underlying trends. Companies rolled up by KPMG’s industry designations show that Industrial Manufacturing is the largest industry with a total revenue of US $8T (see Figure 4). This is followed by Financial Services (US $6.7T), Energy & Utilities (US $6.2T), Consumer & Retail (US $3.6T), Technology (US $1.9T) and Media & Telecom (US $1.4T). The smallest industries are Healthcare and Life Science, followed by Pharma and Professional Services.  

Digging a bit deeper, we find that the industry groupings are not static. The Energy & Utilities sector has seen the biggest change from a revenue perspective. The fall in oil prices has contributed to sector revenue (made up of an average of 105 companies) declining from US $8.5T in 2011 to US $5.1T in 2016.  Since the 2015-2016 time period, the industry has been recovering. In 2017, Energy & Utilities posted collective revenues of US $6.2T in 2017. Manufacturing, by contrast, has seen the collective revenue of the 133 companies in that sector grow from US $6.9T to US $8T over the same period. Financial services has also experienced a kick, with the 68 companies in that sector growing revenue from US $6.2T to US $6.7T.

Geography

The Global 500 also provides insight into geographic shifts. Companies from 33 countries ranked in 2017. As might be expected, the US and China dominate the list. Collectively, the two countries have 237 companies on the list, or 47% of the total. While the US has the most with 126, China has been catching up quickly. China has grown from 73 companies in 2011 to 111 companies in 2017. On the other end of the spectrum, there are a number of countries that no longer have companies in the rankings. Austria, Chile, Colombia, Hungary, Israel and Venezuela have all seen their companies that once ranked fall off. 

There are also some interesting contrasts. Switzerland, with a population of just 8.4 million, has consistently had between 12 and 15 companies rank. On the other hand, India, despite its massive population of 1.3 billion, has less than half as many companies in the rankings. Indeed, instead of adding companies as we have seen with China, India has seen their relatively small number of companies that rank fall from eight to seven. This suggests that India-based companies continue to struggle to gain scale.  

Shifts can also be seen on a regional basis (see Figure 5). Between 2011 and 2017, Asia added 28 companies whereas Europe lost 16. Asia would have performed even better had it not been for the loss of Japanese companies. Over the past seven years, 16 Japanese companies have fallen from the rankings, including household names like Fujifilm, Kobe Steel, Sharp and Mitsubishi Motors.

Conclusion

The ranking of the world’s 500 companies is highly dynamic.  The list is continually changing with new companies joining the rankings and others falling off.  While each company often has their own unique story, patterns emerging when these companies are examined as a group. One is the continue rise of large companies in Asia and decline in Europe.  Another is that size is not a guarantee of profitability, a challenge that is seen across all industry sectors.  

Given the competitive pressures and a constantly changing business and regulatory environment, the largest companies need not only growth but also to invest in value preservation services including – risk assurance, risk analytics, operations risk, cyber security, emerging technology risk. And last, but certainly not least, they must continually innovate to keep pace with the changing landscape of disruptive technologies.  While the largest companies many not be the source of new technology inventions, they are clearly instrumental to what innovations achieve global commercial scale.   

I would like to extend my appreciation to Kinda King and Amy Congalton for their support in preparing this analysis.    Photo by: <a >Zürich Prime Tower</a> by Wendelin Jacober