With Good Company

Which are the great Mallorcan companies? Great in terms of size, profit or renown? Go on - name them. Outside of Mallorca, the Balearics or Spain, you might be hard pushed. Yet there are some. Which company is the most profitable (for the year to the end of 2006 anyway)? Iberostar, a hotel chain with an international presence and generally a byword for immaculate quality. Its profits in 2006 were skewed somewhat by the sale of various businesses, such as the Viajes Iberia travel agencies, but it stands some distance ahead of the second placed concern, the energy company GESA. Another hotel business - Riusa - occupies third place.

There may be problems at Spanair, but the airline registered the highest sales figures for a single company, though the three business comprising Globalia, which include Air Europa, were ahead of them. Yet another hotel chain, Sol Meliá, employed the most people.

These then are the crème of the Mallorcan corporate crème. You can add some other names, such as Barceló, also a hotel organisation, and in so doing a pretty clear picture emerges. Hotels and airlines - tourism. It is not exactly surprising for islands that are built on tourism and built with hotels that such businesses should be at the top of the pile. But a strength can as easily be a weakness; wealth-creation within the economy as a whole is dependent on a clutch of companies performing well. If there is a downturn, they just go to emphasise where the weakness resides in that whole economy. Spanair is a current example.

Strip away the hotels and airlines (and it is perhaps interesting that construction firms do not register at the very top) and, internationally at any rate, Mallorca and the Balearics are virtual non-players. I say virtual, as there are other businesses that have forged something of an international reputation - the Inca-based Camper shoes company is an example. Leather is a not unimportant sector of the Mallorcan economy but one often overlooked.

But to come back to construction. This sector is littered with companies, most of them family concerns. Many grew on the back of the drive towards modernisation and tourism. They were the vital suppliers of skills to creating the Mallorca of today, one far removed from the tracks and decrepit infrastructure of the sixties. Yet their proliferation is, in the current climate, something of an anachronism. Just as businesses pass through life cycles, so do whole sectors of business. The Mallorcan construction industry is well into its mature phase, but it is still structured as though it were in its youth. The sector could do with some rationalisation, which means (or can mean) merger and takeover. A trimmed-down, leaner to use the business term, construction industry may be able to take advantage of size and economies of scale. As importantly, perhaps, this may lead to governance that can help to prevent the mess that the sector is currently in. There is rationalisation by default, caused by bankruptcy, but this is not how to manage a business, an industry sector or an economy. Company collapse is a kind of Malthusian principle of population applied to business. For Malthus, war, famine and the rest were inevitable and necessary forms of correction. There is no such inevitability, or need not be, in a soundly functioning economy. Rationalisation through combination is an antidote to the Malthusian apocalypse.

The Balearic president, Francesc Antich, is due to announce measures to support and stimulate the economy. There needs to be some blue sky amongst the short-term. Recently, there was a suggestion that the tourism sector will be able to absorb the job losses in the construction industry. How? Especially in winter. More fundamentally though, we just seek the comfort of the mother industry to see us through the dark nights. It cannot continue indefinitely. Antich is being pressed to demand more handouts from Madrid. There may indeed be the hand of parsimony when it comes to those central funds, but a deserving request for more simply helps to paper over the cracks of the half-built properties and other faultlines in the local economy - or it would were the monies to be forthcoming. A quick glance at those company-performance figures tells all that is needed to be known. The economy is top heavy. And that is its weakness.


QUIZ
Yesterday's title - Justin Timberlake - http://www.youtube.com/watch?v=FKXm3Qg7sBo. Today's title - you couldn't probably get further away from Justin Timberlake than this folk musician: Scottish and "incredible".

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