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How to do Business with Europe’s Largest Economy: Bridging the gap between the USA and Germany
Overview:
• Facts & Figures• Available Resources• Taking the Plunge• Communicating Across Cultures
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Facts & Figures - Germany:
• Social Market Economy made up of 16 States• The capital is Berlin but the financial center is Franfurt• GDP = 2,423 billion (2007);per sector: Services (51.3%),Industry and
Construction (30%), trade (17.8%), agriculture 0.9%)• Exports: EUR 893 billion (2006)• Imports: EUR 734 billion (2006)• Neighboring countries: Austria, Belgium, Czech Republic,
Denmark, France, Luxembourg, Netherlands, Poland, Switzerland
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Facts & Figures – USA & Germany:
• U.S.-German relations have been and continue to be joined at the hip. There continues to be an increasing economic integration and interdependence on one another.
• This is evident by ongoing growth in transatlantic trade, foreign affiliates, M&A activity and direct investments.
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Facts & Figures – USA & Germany:
• Well over $100 billion in trade between the U.S. and Germany• U.S. companies are members of German boards and vice versa• German companies provide more then 1 million jobs in the U.S.• Sales by German affiliates in the U.S. are 4 x greater then German
exports to the U.S.• U.S. affiliates employ over 800,000 Germans• Manufacturing workforce of those companies is double that of U.S.
affiliates in China ( 2003)
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Resources:
• Empire State Development – http://www.empire.state.ny.us• German American Chamber of Commerce – www.gacc.com• U.S. Chamber of Commerce – http://www.uschamber.com• Invest in Germany - http://www.invest-in-germany.com/homepage/• SBA's Office of International Trade: http://www.sba.gov/oit/• U.S. Government Export Portal- http://www.export.gov
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Resources:
• American Chamber of Commerce in Germany http://www.amcham.de• EU center at Syracuse University –
http://www.maxwell.syr.edu/gai/programs/euc.htm
• Kiebach Center at Syracuse University – [email protected] • US Commercial Services
-http://www.buyusa.gov/germany/en/practices.html
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Doing Business with Germany:
• The German economy is the worlds third largest• Germany is the U.S. largest European trading partner and the sixth
largest market for U.S. exports.• With 82 million people it’s the largest consumer market in the EU• Tremendous amount of worldwide trade happens in Germany at
some of the worlds largest trade events it hosts: CeBit, Medica,, Hannover Fair Automechanika…
• Sits in the heart of Europe making it an ideal base to build your European and WW expansion strategies
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Doing Business with Germany:
• Engineering/Performance/PrecisionGermans love innovation and hi-tech (i.e. computers, computer software, electronic components, healthcare, medical devices, synthetic materials and automotive technology).
• High standard levels that apply beyond Germany to EU• Testing/Certification• Laws: Germany represents 50% of the worlds laws (Have a good
lawyer with cross-border transaction experience)
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Doing Business with Germany:
• Expect a higher cost in doing business with Germany, however,…– High levels of productivity– Highly skilled labor force– Quality engineering– Great infrastructure– Location in the heart of Europe
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Doing Business with Germany:
• Price will not necessarily be the determining factor for a German buyer. Quality is extremely important to them.
• Location: North vs. South– Strong regional differences exist which can impact your business
• Experienced representation is critical– You are competing with local firms with established presence
• U.S. can compete by offering quality product at competitive pricing with local support (sales and technical)
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Doing Business with Germany:
• Distributor or Agent – Pros and Cons
For U.S. companies it may seem like the path of least resistance but the payoff may not be quite as good as establishing a permanent presence or partnering with an existing OEM
– Cons: not as much control over product placement, sales & marketing and service.*
– Service is key to success in Germany. Customers expect to be able to pick up the phone and have parts available immediately
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Doing Business with Germany:
• Distributor or Agent – Pros and Cons
Pros: minimal to no overhead costs, human resource, infrastructure, etc.
U.S. companies should consider having multiple distributor agreements and if they do agree to an exclusive with one then they better be large enough to service the entire market you are looking to sell your products too.
• Be prepared for a long-term commitment to market development and sales support.
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Doing Business with Germany:
• Advertising, Marketing and Trade Shows
Historically this has been a major point of differentiation between the U.S.A and Germany.- U.S.A. = very marketing driven (advertising, premiums, sales promotions, etc.) We are focused on building the brand and conveying a certain message to our intended target audience which in turn should help support the sales function.- Germany = very sales driven and reliance on product specs. Reputation is important but it has traditionally been built up as a result of superior products backed by superior service. Hence marketing has not been viewed as an important driver.
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Doing Business with Germany:
• Advertising, Marketing and Trade Shows
- Common marketing practices that are acceptable in the U.S. are not even permisable in Germany (i.e. premiums). Food and drink are accepable which is why you’ll see lots of beer, bratwurst and baked goods at German Trade Fairs.
- Trade shows in Germany are quite different compared to the U.S.A. This may have something to do with the fact that the concept of Trade Fairs originated in Germany during the Middle Ages. They are larger (more exhibitors) and attract more buyers from around the world. As a result a lot of business transactions can and do take place on the trade show floor.
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Doing Business with Germany:
• Poor planning can lead to big problems: 2006 World Cup in Germany and Budweiser
FIFA awards Budweiser official beer sponsor for World Cup and exclusive marketing rights.Germans along with Bitburger Bier (official partner for German Football Assoc.) are outraged that they won’t be able to get German beer at the World Cup!
- 2001 court ruling bans Budweiser from using Bud because of similarity to Bit.- Budweiser can’t use long form of name because of Czech Brew: Budweiser Budvar.- Budweiser caves to public and political pressure = allows Bitburger Bier to be sold at events in plane cups. In return “Bud” brand name is permitted in advertisements
during the World Cup.
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Communicating Across Cultures:
• 70% of all international business ventures fail due to repeated miscommunication between players of different cultures.
• Cultural upbringing impacts communication, expectations and working styles• Whether exporting your products to Germany or Importing their products, services
or IP into the U.S., there are some common denominators:
– German English is not American English – certain general terms don’t always have the same meaning (i.e. Food waste = Plate waste)
– Out-of-sight out-of-mind; face-to-face is always better– Contract Negotiations
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Communicating Across Cultures:
• Negotiations:– Germans are serious, thorough, no-nonsense, play by the rules negotiators.
They will look at ever angle of the business relationship, once, twice, three times and more.
– Present everything in writing ahead of meeting, preferably in German to avoid any potential misunderstandings.
– Like presentations to be structured and organized.– Review terms of relationship and or agreement in person.– If you don’t speak German have someone with you who does to help facilitate
the conversation.
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Communicating Across Cultures:
• Negotiations:– Be patient. Germans like to take their time.– Germans look to find a way to make the terms more favorable for them
especially wnen it comes to payment. Stand your ground!– In many cases decisions are made by committee not one individual– Consensus building is critical.– Long-term commitment– Final contract should be in German and English to avoid any
misunderstandings.
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Communicating Across Cultures:
• Customs:– Punctuality – 15 minutes late could equal kiss of death– Formality
• Jacket & Tie – No country club casual• Mr. Smith not Bob
– Plan ahead (i.e. make appointments for most things)– Preferred times for appointments – 10:00am to 1:00pm and 3:00pm to 5:00pm– NO working lunch
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Communicating Across Cultures:
• Customs:– Avoid scheduling appointments on Friday afternoons– Not big on small talk – get down to business– Literal vs. Superficial (Wie geht es Ihnen?)– Compliments = awkward or embarrassing– No need to flatter.– Good house warming gifts (German wine and flowers).
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Communicating Across Cultures:
• Learn the language, customs and cultural nuances and you’ll get further then those who don’t.
• Developing a strong business relationship can also lead to personal relationships which translates into a customer for life!
• Germans work hard but they play hard. Know when to do business and then focus on pleasure. Mixing the two is tabu.
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