Topics - Business
business in Germany
By Stephen D. McLaughlin
the past decade, more and more American businesses have
expanded their markets into other countries. Once the
exclusive province of the conglomerate giants and multi-national
corporations, with the advent of increased communications
and internet accessibility many medium sized and even
small companies are now doing business overseas. While
there are as many options for your company’s expansion
as there are world nations, Germany should certainly
be considered as a prime candidate.
While the West German economy has been strong since
the mid-1960’s, the re-united Germany, since the fall
of the Berlin wall, has evolved into one of the world’s
economic powerhouses. With an estimated population of
82.4 million and the third
largest economy in the world (after the United States
and Japan), the German Gross Domestic Product accounts
for roughly 33% of the entire European GDP. Germany
enjoys one of the highest median incomes in the world,
and its people rank equally highly in disposable income
for all world economies.
Whether you are looking to do business with an established
German corporation or a relatively new commercial endeavor,
it is necessary to understand that the German culture
is many centuries old; and that culture has a direct
influence on the way German companies and consumers
do business. While Germany is certainly one of the most
modern, technologically advanced nations in the world
that mirrors the United States in many areas, it is
crucial that any company considering expansion into
the German market place be fully cognizant of what is
important to the German customer – whether that customer
be corporate or consumer.
Business focuses and strategies that are successful
in the United States will often be less successful in
the German market place due to the difference in importance
the German customer places on a variety of factors when
deciding where and how to spend their Euros. Here are
just a few factors that are important to keep in mind.
PRICE versus QUALITY:
In the American business paradigm, cost – for the most
part – is king when appealing to the majority of consumers.
The average American consumer, in most cases, is willing
to sacrifice quality to save money. Why, we ask, should
we spend $500 for a top-of-the-line product from a manufacturer
when we can spend $299 for a slightly inferior quality
product at a discount price? American businesses, while
there are certainly some exceptions, tend to follow
the same pattern of buying. We view a large number of
the products we purchase as a society as disposable,
and in the majority of transactions, price is far more
important than quality.
is not case with German consumers, either individual
or corporate. In the vast majority of instances, quality
is by far a much more important consideration than is
price. The German market demands that the goods
they purchase perform reliably as expected, and that
they are built to last. They expect the services they
purchase to do exactly what is promised, on time, every
time. The German consumer is, for the most part, willing
to spend more to purchase a higher quality good or service
than is their counterpart in the United States. To appeal
to the German consumer or business customer and compete
in their market, stress quality over price.
We have done this many times with a client in the manufacturing
industry when advising them to shift their product lines.
This produced increased sales and profits for the client.
Going hand in hand with product quality in the German
business culture is Customer Service. While in the
United States consumers have grown used to spending
considerable amounts of time on “HOLD” when calling
customer service departments, waiting days or weeks
for simple repairs or problem resolution and, in some
cases, accepting inferior replacements for malfunctioning
products, this simply will not fly in Germany. This
is particularly true in business-to-business transactions
of either goods or services. German businesses will
expect you to stand behind your product completely,
resolve any problems quickly and thoroughly and, in
far more instances than is the norm in the United
States, never do business with your company
again if their expectations are not met satisfactorily
every time. German businesses rarely offer
excuses to their customers, and even more rarely except
them from their venders. This should not be misinterpreted
as meaning that German businesses are unreasonable
... quite the contrary. It is rare that a German business
will expect you to do anything more than you promised
by way of customer service while you were negotiating
your contract – but they will expect you to completely
and efficiently live up to your agreements, every
time. When negotiating contracts in Germany, never
promise more than you are certain you can deliver
by way of customer service. You might win an initial
contract this way, but it will be the last business
with that firm you will be likely to do.
SEALING THE DEAL:
Negotiation is an important part of any business deal
and clear, effective negotiating tactics are crucial
no matter what new market you may be considering expanding
into. In Germany, however, negotiating your deal is
more than merely important – it is crucial. German
business people are flat out some of the best negotiators
in the world. They do not assume anything, and they
do not make promises they aren’t prepared to keep.
When negotiating with Germans, you shouldn’t either.
... because they will be. You should go into any
negotiation with a German business understanding that,
in all likelihood, they know as much – if not more
– about what it is your company does and how you do
it as most of your midlevel executives do. They are
going to expect that you have spent a similar amount
of time learning about their organization. Wasting
time and conversation on simple, rudimentary points
of what one or the other company is or can do is a
sign of poor preparation, and a harbinger of doom
to almost any negotiation.
...time frames, delivery dates, fulfillment costs
– anything and everything they might ask you about,
be ready to answer right then and there.
“I will get that answer for you,” or “Let me get back
to you on that,” is rarely acceptable. The Germans
you are dealing with will know their business inside
and out, and you will need to as well.
German business people respect and admire a strong,
confident counterpart in negotiations and are far
more willing to transact business when your attitude
is “Can do,” as opposed to “We might be able to ...”
Respect and trust are very important components of
the German business system, and you must earn theirs
if you hope to succeed.
The above tips are certainly by no means an exhaustive
list of what is important to understand before attempting
to expand your business into the German markets. On
the contrary, it is just the tip of the iceberg. However,
the examples I have given here point out the importance
of understanding the culture into which you are looking
to expand, and what is important to them in any transaction.
Never simply assume that the tactics and strategies
you use to succeed in Philadelphia or Des Moines are
going to be successful in Berlin, or Wiesbaden ... or
any other city or nation in Europe. Do your homework
and understand who you are dealing with, and what they
want. The potential profits are well worth it!
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