German SME’s Common Sense Approach To Exports
Many people admire Germany, the German Government and how they work to make German Economy so prosperous. They compare how Pakistani Government is not supporting its own businessmen.
There are, however, other ways of looking at Germany, and that is to see the character and the DNA of the German Businessmen. It is important to see these phenomena because the real strength of the German economy is in the ambition, passion, initiative, foresight, marketing skills, and distribution skills of its average businessman since SME’s(family businesses) comprise almost 75% of the German economy.
German family businesses dominate the world, in products ranging from Board Markers to Aspirin, to Candles, Honey, Heavy Machinery. When one looks around, there are many famous brands, like Grohe, Langanese, Adidas, Menck, virtually, in every walk of life and meeting many kinds of demand.
Among the top 500 family firms in Germany, 170 have sales of more than €1 billion ($1.14 billion). The best known include Volkswagen, Aldi, Henkel, and Bertelsmann.
One finds German family businesses dominating the world stage for a long time and continuing their life in the face of competition from the likes of JAPAN, KOREA, SINGAPORE, TAIWAN, and CHINA; and these companies continue to flourish and dominate the world scene.
Let’s see how they do it.
1- Products manufactured by the German businessmen are created on a basis that they go beyond being a commodity. Usually, the products bring a very high level of specialization and certain attention to detail and a certain amount of extra benefits for the customers from the point of quality, taste or ease of using it. This puts it a step higher than the rest of the crowd and then the product is continuously updated with the emerging technologies around in the world; be the product itself, or be its packaging or be it just opening the can, for example. To stay ahead of the competition, Germans pay great attention to all the details of their products.
2- Continuously adding more technology to the product is the hallmark of the German industry. Usually, SMEs collaborate with their universities and try to link up with knowledgeable professionals in their fields. Collaboration is, also, in fields surrounding their core processes. For example, if there is a food product, the industry may be working together with a research institute, agriculture university or with a design school for creating the right logo, the right container or the new dispenser. Technology is regularly upgraded through interaction with the surrounding knowledge platforms until most German companies are already way ahead in adopting Industry 4.0!
3- Global Marketing: Companies aim to fill their order book in a way that their marketing and sales push creates an order book, based on some simple principles and the conviction that the whole world is their market!
3.1 The first one is to create inquiries which are around three times higher than their capacity to fulfill. If there are a large number of inquiries, this places them in the position of a seller’s market. In such a situation, they don’t need to reduce prices. While German products are not the cheapest on the market, exporters usually don’t reduce prices. On account of quality, and their excellent marketing and sales techniques, they are able to generate enough sales to be in a position where they don’t need to reduce prices to make sales.
3.2 Marketing is King: Such success happens because German SME’s put in a lot of effort into their marketing department. A typical German company seeks to export to a minimum of 70 countries. Most of them sell to all five continents, or more, through their good marketing techniques. This happens because German companies do not consider Germany alone as a market. Germans consider the world as their market.
3.3 Export strategies are created and maintained on a professional basis in all companies. There is a deep understanding of German society how global exports work, and this is not just theory.
3.4 German universities and institutes produce graduates who know how to handle various aspects of the export trade. Business schools teach, not only the theory of international trade but also the skills needed at every step of the export process. While starting their careers, German business graduates have some hands-on skills on the processes, and they are also ready to pack up their bags and travel around the world as salespeople. From this role, they grow into sales executive, sales managers and later, into global sales directors. As a result of this systematic grounding, they are being able to train their own staff as well as the staff of their distributors, worldwide.
3.5 Organised for Export: Quite often, marketing departments are well stocked with appropriately skilled people. Within the marketing department, print media, IT, social media, and print media are attended by different sections or adequately outsourced.
3.6 German companies divide the World into four or five territories with one executive looking after a whole continent. The executive has help from an equally good assistant who looks after the territory from the desk while the executive is traveling to different distributors in his territory.
3.7 Germans seem to have mastered the art of worldwide distribution of their products. Distributors are carefully selected, properly trained and kept motivated. An export to each group of countries is attended by an export manager. He works hard to find good distributors in his territory. German companies have a knack of finding good and “hungry” distributors. Once these are found, a permanent relationship is built with them and the distributor is never short-changed; no direct sales are made in his territory, so as to ensure that the distributor also makes a reasonable profit.
3.8 Training seminars for distributors are held, regularly, both in Germany as well as the Gulf countries. At these seminars, an additional benefit is that distributors are brought together also to learn from each other. Specialized product training and marketing support are also provided to their distributors.
3.9 The distributor is treated as an important part of the family and his interest is always kept in mind. With patience, the distributor is nurtured into a profitable entity, who depends on the company’s products for making sales and a good livelihood in his own country. Even if there are direct inquiries coming from the same country, direct sales are never made and the distributor’s interest is always looked after.
All these results in having a profitable operation and the profits coming in the operation usually will go back into developing the company further. Unlike Pakistan, where people blow their profits into plazas and building real estate German companies grow the strength of their manufacturing and marketing so has to be poised for future competition and they stay ahead of the competition because of this and they rule the worlds.
Interestingly, social values in Germany have been cultivated in a way that the businessman is the hero and he is treated like Pakistanis treat their sons-in-law! The government and the society look after the businessmen to create the economy to create economical leadership for Germany this results in a situation where young people want to grow up and become a businessman. Some of these grow to become captains of the national economy.
Germans enjoy building their companies as well as their life. Most business people enjoy their life with the style, which wealth gives them, but retain the personal discipline required to provide leadership, foresight, and initiative to these enterprises.
There is a lot to learn from German SMEs. If Pakistan is to emerge on the global scene, its businessmen will need to come out of their comfort zone and its public servants will need to change their belligerent attitude towards the private sector, get out of the way and reduce the cost of doing business!
(The author is Ex CEO EDB (2004-20070) and CBI Engineering Sector Expert for Pakistan)
