It set up its euro project planning team as long ago as 1995 and has been at the forefront of initiatives to encourage other firms to get ready for the single currency.

Beating the competition

Gerard Gent, Euro project director for Siemens in the UK, is optimistic the euro will be good for business.

He says: "We see the introduction of the euro as a very positive step towards improving economic conditions in Europe and the global competitiveness of the region.

"Those companies who realise the opportunities and maximise them early will be able to undercut rivals and establish a competitive edge."

Siemens employs 416,000 people worldwide and around 12,000 at different sites across the UK.

Siemens has been hit by the slump in the market for computer chips

That figure is set to fall as a result of a huge shake-up in which several businesses worth $10bn will be offloaded.

One of Siemen's plants in Newcastle is also scheduled for closure.

However currently the company buys 42bn Deutschmarks ($25bn) worth of goods and services from suppliers across the world and around 60% of its goods are sold in its home market of Europe.

Getting down to basics

The company's first step towards preparing for the euro was to set up a series of special working groups across the company to consider the impact of monetary union.

Siemens believes it is vital to cash in on the euro early

They tackled a variety of business areas including treasury and payments, taxes and legal, strategy, business transactions and procedures, purchasing, accounting and controlling, human resources and data processing.

They even addressed the question of payslips and how people would react once they see their wages priced in euros as opposed to their old national currency.

Mr Gent said: "Their wages may look less although they are actually worth the same. In eurozone countries like Germany, we will introduce Euro payslips from October 1, 1999. Key payslip information such as net monthly pay will for the time being also be shown in brackets in Deutschmarks to get people used to the idea."

Costly business

Siemens says it is impossible to pinpoint the exact cost of all its preparations but IT investment alone is in the region of 100m Deutschmarks ($60m).

Mr Gent said: "Generally we estimate the cost of converting to the euro will be repaid within the next three years."

Siemens is looking to recoup that money in several ways.

• There are the obvious savings that come from dealing with one currency instead of 11 eurozone currencies.
• There will be less administration and less of a need to hedge against the risk of currency fluctuations.
• There should also be less delays in payment transactions.

But it also means that manufacturers will be under pressure to remain competitive - because it will be easier for their customers to compare prices across Europe and vote with their feet if they are not happy. Mr Gent said: "Using information technology such as the Internet, customers will be able to see what the prices of a product are around Europe, so trade will be less constrained by geographic boundaries."

Encouragement not compulsion

Siemens is confident that it can respond to that challenge.

It became the first company in the United Kingdom to open a bank account in euros in readiness for the launch of the new currency on January 1, 1999. In order to encourage suppliers and key customers to also plan ahead, Siemens also ran a series of forums to explain the implications of the euro.

Many firms are worried about the cost of adapting to euro trade

But the company's strategy towards its own customers and suppliers in the UK is strictly 'no compulsion, no prohibition.' Mr Gent said: "Our policy towards the companies we deal with in the eurozone is obviously one of encouragement to deal in euros.

"However we are not forcing our suppliers in the UK to use the euro and will remain flexible on payment, as long as pricing is competitive. But there is obviously a trend towards doing business in euros and firms ignore that at their own peril."

Even though the UK government has said it will not enter Europe's monetary union in the first wave - British companies will feel the impact of the euro regardless.

Mr Gent said: "Whether the UK is in or not, if UK companies are not prepared to quote in euros, they will lose out long-term if their competitors are prepared to quote in euros.

"It will be easier for companies dealing in euros to deal with other companies who are doing the same. UK companies will also have to try even harder to be competitive without the cost savings that eurozone countries are likely to enjoy."

And if Siemens' example is anything to go by, the sooner the planning starts, the better.