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European-American Topics - Business - German business

Doing business in Germany
By Stephen D. McLaughlin

In 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.

This 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.

  • CUSTOMER SERVICE: 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. Instead:

    Be Prepared ... 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.

    Have it ready ...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.

    Be confident! 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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