As we revealed in our last article, most economic pundits reckon that Spain’s gradual move into financial wellness, relates to a change of strategy of its businesses. The more inspired and aware CEO’s realized that their home market had shrunk disastrously and there was no alternative but to sell their products and services overseas…
A prime example of this is Pretty Ballerinas, a Menorcan family owned shoe manufacturer that still produces all its goods on the pretty island. Thanks to setting up a fast growing chain of stores around the world, revenues grew by 20% in the period of economic crisis – 2008 to 2012.
Exports now account for 63% of their business, and their bosses just give a Hispanic shrug and declare there was no other way of surviving and succeeding in such a dire economic climate with a plunging home market.
For innumerable Spanish firms, and for the country’s economy overall, exports have emerged as the bright light in a land ravaged by rocketing unemployment, with demand from consumers business and the Government, falling like a stone.
Today, overseas sales of car parts, Rioja wine, textiles, machinery, construction materials, and sophisticated computer software all appear high on the list of exporting successes, and the figures fuel the optimism that Spain can export its way to economic stability.
Exports from Spainwill grow by 4.1% this year according to the European Commission. That’s the greatest increase of any EU country and is much superior to that of the European Champions of Exporting – Germany.
Prime Minister Mr Mariano Rajoy and his advisors argue that the export surge has been aided by the austerity and structural reform measures, implemented despite such widespread criticism. The reforms made it cheaper for firms to reduce workforce levels, and easier to agree wage deals at factory level. The Government claims this made it possible to lower wages.
Mr Jaime Garcia – Legaz, the Secretary of State for Trade in the Economy Ministry, has stated "Spain has been able to regain the competitiveness it lost during the property boom years. Over the past year we have seen the achievement of dramatic competitiveness gains due to wage moderation.” He also said "while many of Spain’s best run companies have long enjoyed success abroad, others saw little need to focus on exports during the boom years. Companies were so comfortable just selling their goods and services to the domestic market that they were not interested in external markets. That has changed dramatically. Spanish companies have realized that to survive they have to look for other markets.”
This attitude change is illustrated by Inditex, the group that owns the Zara fashion chain. Last year in the middle of Spain’s crisis it hiked up net profits by over 20% through store openings in other countries. By contrast, the number of retail outlets in Spain fell, for the first time ever, and no new Spanish openings are planned for next year.
A deep change in philosophy can also ,be seen at Acciona, one of Spain’s construction sector leaders. In 2007 (the boom to bust year), the home market provided no less than 76% of their order book. Now, some half of its backlog of construction and engineering orders comes from outside of Spain.
However, the successful management of Pretty Ballerinas warns that it’s not easy for a business with no history and experience of exporting. Somehow, Government has to make available expertise and financial muscle to support even more small businesses and get them on the export road