The bustling Port of Hamburg is a microcosm of Germany’s economic prosperity. After the global financial crisis erupted in 2008, Europe’s economy stagnated and even fell into a debt crisis. However, Germany was the first to emerge from the quagmire with its stable economy. It stood out with a GDP growth of 3.6 percent in 2010, accounting for 60 percent of the entire Eurozone’s GDP growth, compared to just 10 percent in 2000. The country eventually led the G7 industrial nations and saw its unemployment rate drop to 6.9 percent.
An article in Financial Breakfast once reported that during a press conference, a foreign journalist asked the president of Siemens, “Why does Germany, with a mere 80 million people, have over 2,300 world-renowned brands?”
The president replied: “The German craftsmanship spirit pays great attention to every production detail. They bear the responsibility of producing top-notch products and providing excellent after-sales service. That’s why the country has successful companies like Mercedes-Benz, BMW, Audi, Bosch, BASF, SAP, Adidas, PUMA, DHL, Merck, Bayer, Continental, and Siemens, to name a few.”
The journalist countered, “Isn’t the ultimate goal of a company to maximize profits? Why bother with obligations?” The president responded, “No, that’s Anglo-American economics. We Germans have our economics. German economics pursues harmony and safety in the production process and the practicality of high-tech products. This is the soul of enterprise production, not profit maximization. Running a business is not just for economic gain. Adhering to corporate ethics and striving for excellence in product manufacturing is an innate duty and obligation of German enterprises!”
Indeed, whether it’s running a business or solving trivial matters in life, Germans can ingeniously use various mechanical inventions, like peeling food, inventing vacuum leaf blowers for cleaning autumn leaves, automatic rice transplanters for quick planting, and automatic hedge trimmers for gardening.
Germans pursue not only advanced technology, but also absolute high quality. For example, a motorcycle produced in 1928 can still start if appropriately maintained, and a residential house can stand for 120 years without collapsing.
Characteristics of successful German manufacturing
An article from the public account National Asset Report shares three essential principles that make German manufacturing remarkable.
- Quality over speed and size: A significant business principle in Germany is that there can be slow and small companies, but rarely bad companies, and never fake companies. Many world-renowned companies have not become rich overnight; they have accumulated quality over time. For instance, a winery has been around for nearly 400 years; Continental Tire was founded in 1871; even the relatively younger Adidas has over 90 years of history.
- Customer-centric approach: The country’s companies often go against commercial norms. While businesses generally aim to make as much money as possible from consumers, German companies strive to make money from customers only once in a lifetime, ensuring they speak highly of the product and recommend it to others. For example, a cast-iron pan can last 100 years. Some might wonder how Germans profit from such long-lasting products. They answer that once a pan is sold, everyone discovers its quality, creating a reputation and leading more people to buy their pans. With 8 billion people worldwide, billions of potential markets still await them.
- Value over price: Many believe consumers love value for money, but Germans never buy into this. They always feel that if a product is beautiful, it shouldn’t be cheap. However, despite high prices, businesses don’t pocket all the profits but reinvest them to improve after-sales service and product technology. Moreover, businesses never engage in price wars or compete with peers, believing it would lead the entire industry into a vicious cycle. Ensuring essential profits and earning money is enough; more importantly, they consider long-term development. So, you can negotiate prices with the Japanese, but not a penny can be bargained with Germans. Their manufacturing advantage lies in quality, proprietary technology, and excellent after-sales service.
Apart from these three characteristics, Global Business Classics shares additional insights, one of which is noteworthy:
- Skilled and loyal workforce: Long-time residents in Germany, Du Dan and Kou Li, say another crucial reason for the success of the country’s enterprises is having a highly qualified workforce rooted in the country’s vocational education system that follows the “apprenticeship system.” Workers must go through apprenticeships to be employed by companies. Due to comprehensive, practical, and professional training, German blue-collar workers’ average hourly wages are higher than those in the UK, France, the U.S., and Japan.
Vision Tool, a small company with fewer than 30 employees, specializes in renting, selling, and distributing performance equipment. The owner, Stephan Schlueter, started as an apprentice and successfully founded two companies from scratch. From Schlueter’s words, we hear “know-how,” meaning proprietary technology or technical know-how. In the eyes of German business owners, employees with know-how are extremely valuable, holding the company’s critical intangible assets.
During the financial crisis, unlike American layoffs, most German companies retained excess labor by reducing work hours or profits. In the most challenging year, 2009, Schlueter neither laid off employees nor cut salaries. That year, everyone in the company earned the same, only his profits decreased. But he didn’t regret saying: “Letting employees go, you lose a lot of experience.”
The emphasis on know-how makes loyalty the most anticipated quality German business owners expect from employees. They hope that in tough times, company employees will stick with the enterprise. It’s common to find employees who have worked at a company for a lifetime.
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