The Global 500: No borders, no boundariesJuly 9, 2012: 6:26 AM ET
Despite financial turmoil in Europe and disasters in Japan, the world's largest corporations had record profits and revenue in 2011. Where on earth will the growth come from next?
Editor's Note: An earlier version of this story quoted Daniel Yergin saying a decade ago the developed world consumed twice as much energy as the developing world. In fact, he meant to say the developed world consumed twice as much oil.
By Richard McGill Murphy
FORTUNE -- Even the most turmoil-tested modern business executive would agree that 2011 was a painful year for the global economy. Oil prices soared amid fears of a shooting war in the Persian Gulf over Iran's nuclear program. In March, Japan's Fukushima Daiichi nuclear plant suffered major damage after an earthquake and tsunami disabled its cooling systems, disrupting global supply chains for everything from automobiles to silicon wafers.
Crop failures around the world drove commodity prices to record heights. Food prices soared across Asia and Latin America, pushing local governments to cool their economies in a bid to head off social unrest. In Europe a festering bank crisis inflicted pain on consumers across the continent, drove a number of European companies off the Global 500, and put the future of European integration in doubt.
Given those headwinds, you might expect the companies of the Global 500 to have trimmed their sails a bit. In fact, 2011 was a pretty good year for the world's largest corporations. They posted record revenues of $29.5 trillion, up 13.2% over 2010. Total profits rose 7%, to $1.6 trillion, roughly equal to the gross domestic product of India.
Oil companies, with their massive scale, have always occupied many of the top slots on the Global 500, and last year was no exception: Eight of the top 10 companies on our list are in the energy business. They got an extra boost last year as average oil prices reached their highest inflation-adjusted level since the 1860s (not long after Col. Edwin Drake launched the modern oil era by sinking his first well in Titusville, Pa.). Led by Royal Dutch Shell, which displaced Wal-Mart as the world's largest company by revenue last year, oil refining generated north of $5 trillion in sales, or 17% of Global 500 revenues.
Emerging markets also played a role in bolstering the financial sector last year. Despite a climate of slower loan growth, low interest rates, and higher capital requirements, commercial banks wound up as the second-largest industry on the Global 500, thanks largely to lending in new markets. Citigroup (No. 60) offset lackluster performance in North America with growth in Latin America, parts of Europe, the Middle East, and Africa, where consumer loan yields can be twice what Citi realizes from its North American consumer portfolio.
In third place, the auto industry posted $2.4 trillion in total sales, up 14.6% over 2010. The luxury market performed well, especially in China, according to Jochen Gehrke, a European automotive analyst at Deutsche Bank. German automakers drive 75% of global luxury sales. German luxury brands posted profit margins of about 11%, led by BMW (No. 69) and Audi, owned by German automotive giant VW (No. 12). Industry leader Toyota (No. 10) increased its revenue by 6.1%, to $235.4 billion, although profits fell sharply because of the impact of the Fukushima disaster, which disrupted Toyota's supply chain for several months.
Corporations around the world continue to be adept at wringing productivity out of their workers. Total employment at the Global 500 grew by just 4.9%, to 60.7 million, but revenue per worker grew at almost twice that rate, climbing to $463,212, up from $428,970 in 2010. "Higher efficiency is not just a U.S. story," says Morningstar economist Bob Johnson. "We're seeing it all over the world."
The Global 500 list is most useful, at the end of the day, for what it tells us about emerging trends in the world economy. One of the more remarkable shifts has been in the number of Chinese companies on the list. In 2002 there were 11 Chinese firms on the Global 500. This year 73 Chinese companies made our list. They range from state-controlled resource giants like China National Petroleum (No. 6) to emerging consumer brands like computer manufacturer Lenovo (No. 370) and carmaker Zhejiang Geely Holding Group (No. 475), which boosted revenue by 126% last year after acquiring Volvo from Ford.
Companies like Lenovo and Geely cut their teeth selling "good enough" products at low prices to middle-class Chinese consumers. After studying (and, increasingly, buying) Western competitors and exploiting Chinese manufacturing efficiencies, they are now poised for global market gains.
For that reason, China business expert George F. Brown of Blue Canyon Partners describes them as "second mouse" companies, from the adage that the second mouse gets the cheese. "The hallmark of the second mouse is to develop a China-wide presence and then look elsewhere, first to emerging markets and then to Western markets," says Brown.
In a world of increasingly scarce resources, it's reasonable to expect that big energy companies will continue to dominate the upper reaches of the Global 500 in coming years. But so will companies that find ways to help their customers use resources efficiently. (For more about the trends that will shape the Global 500 companies of the future, click here.)
Through it all, there are sure to be unexpected winners and losers. Just a few years ago no one would have imagined a Global 500 list without telecom equipment titan Alcatel- Lucent or Research in Motion. Yet they've fallen off, while rivals Huawei (No. 351, up from No. 397 on the list in 2010) and Apple (No. 55, up 56 spots this year) march up the ranks. Executives can count on even more turmoil in the next decade -- they may even look back on 2011 as the year that prepared them for the coming storm.
This story is from the July 23, 2012 issue of Fortune.