strengths of german smes

Organised by the Gujarat Industrial Development Corporation at Mahatma Mandir, Gandinagar 11-13.01.2011

Vibrant Gujarat Global Business Summit 2011

Strengths of German SMEs

Presentation at the

SME Convention January 13th, 2011at Mahatma Mandir,

Gandhinagar, Gujarat, India

Prepared by

Dr. Abdelmoneim IssaFrankfurt Main, Germany

[email protected]

December 2010



Contents of Presentation

(1) Structure and economic potential of SMEs in Germany

(2) Success factors of German SMEs

(3) Innovative German SMEs / products

(4) German SMEs and the international finance crises



(1) Structure and economic potential of SMEs in Germany



SMEs in Germany 2008 (EU Statistics) (Value added: Euro = black, USD = blue); 1 € = 1,32 US$ (15.12.2010)

Source: Eurostat, 2008

254

316

294

865

774

1640

/$



SMEs in Germany, 2007 / 2008 (German Statistics)(Euro = black, USD = blue); 1 € = 1,32 US$ (15.12.10)

Total Number SMEs Share

Enterprises (2008) 3.63 million 3.62 million 99,7 %

Turnover (2007) € 5 148 billion$ 6 826 billion

€ 1 932 billion$ 2 562 billion

37,5 %

Employment (2007) 30.01 million 21.15 million 70,5 %

Value Added (2007) 47,3%

Source: Statistisches Bundesamt: Ausgewählte Ergebnisse für KMU 2007, Wiesbaden 2010 (Federal Statistical Office)

2007 Total Number SMEs Share

Enterprises 1.824 million 1.811 million 99,3 %

Turnover€ 4 593 billion$ 6 090 billion

€ 1.545 billion$ 2 048 billion

33,6 %

Employment 22.259 million 12.967million 58,3 %

Value Added € 1 230 billion$ 1 631 billion

€ 556 billion$ 737 billion 45,2%

Source: Institut für Mittelstansforschung (Institute for SME-Research), Bonn 2010, Germany Trade and Invest, Köln 2008



(2) Success factors of German SMEs



R&D expenditures of business enterprises 2002 – 2008 in millions of Euro/USD(Euro = black; USD = blue); 1 € = 1,32 US$ (15.12.2010)

Source: Stifterverband Wissenschaftsstatistics 2008

(819)

(12 424)

(2 250)(3 038) (3 075)

(6 386)

(8 846)



R&D expenditures of the Federal Government and the Federal States in millions of Euro/USD (Euro = black; USD = blue); 1 € = 1,32 US$ (15.12.2010)

Source: Federal Report on Research and Innovation 2007/2008

(10 717)

(12 086)

(13 440)

(15 912)(14 727)

(11 018)

(12 336)

(10 613)

(11 971)

(10 246)

(11 752)

(10 507)

(12 037)

(10 681)



Innovation activities of enterprises, 2004 - 2008

Source: ZEW: Innovation in Germany, 2007



Innovation expenditure of enterprises, 1992 – 2008 in billions of Euro/USD (Euro = black; USD = blue) 1 € = 1,32 US$ (15.12.2010)


(77.4)

(109.8)

(119.8)

(12.9)

(8.4)

(29.3) (30.5)

(10.6) (9.7)



German enterprises with marketing and organizational innovations, 2006




R&D and Innovation activities as prerequisites for a successful participation in the international market

Internationalization Potentials

Internationalization Competence

Successful International Market

Access

Systematic planningStrategic disposition



Internationalization Potentials:- Size of company- Degree of specialization- Financial situation- Knowledge and R&D capabilities- Management international orientation- Market position in the national market- Quality of product

Internationalization Competence:- Qualification of personnel- Language capabilities- Degree of knowledge of the international market- Marketing and strategic competence- Conceptual and planning capabilities

Determinants of International Market Access of German SMEs Internationalization Potentials / Internationalization Competence



Potential analysis

Personnel structure and

capacityStructure and

capacity

Quality of product

Number and Qualification of

personnel:Language and international experience

Management and financial capacity

Organizational structure

Innovation potential

Determinants of International Market Access of German SMEs Systematic Planning – Analaysis of the company´s internationalization capacities



Overall assessments of potential target

markets

OfferDemand

CompetitorSituation

Social development

Economic development

Political development

Determinants of International Market Access of German SMEs Strategic disposition – Overall analysis



Strategic decision process: Assessment of the international

competitiveness

Pre-selection of target markets (long list)

Specific analysis on selected markets (short list)

In-depth analysis on the selected target market

Assessment of political situation

Assessment of legalframework

Determinants of International Market Access of German SMEsStrategic disposition - Specific analysis

General analysis on potential target markets



Political and legal situation in the target

market

Legal framework Political situation

Law and economic order

Taxation system

Governm ent inter-vention in economy

Protection intellecualmaterial property

Stability of Government

Stability of economic order

Stability of social order

War,revol-ution, terrorism

Strategic disposition - Analysis of the political and legal framework

Determinants of International Market Access of German SMEs



Cooperation Representation License/Franchising

Direkt investment

Definition of company’s objectives in target market

Stipulation of personnel ressources

Acquisition of market-specific Information

Decision on market access form

Preparation of feasibility studies

Determinants of International Market Access of German SMEs Strategic disposition - Final decision on the market and products



36%29%

57%

57%

50%

36%

64%

29%

79%

71%

71%

7%

7%

14%

43%

36%

21%

29%

29%

29%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85%

International project references

National project references

International experience of personnel

Professional qualification of personnel

Professional and financial reputation

Technological specialization

Adapting client demand

Quality of technical proposal

Very important

Important

Less important

Not important

Success factors in international markets - internal factors (companies´view)




64%

43%

57%

50%

50%

43%

50%

7%

64%

36%

21%

36%

7%

7%

21%

50%

36%

43%

21%

21%

36%

50%

50%

36%

14%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70%

Develop relations with local authorities

Initiate and develop of businessrelations with the private sector

Knowledge of mentality

Acceptance of mentality and culture

Knowledge of business culture

Language capability

Complementarities of objectives

Technological complementarities of business partner

Reliability of the business partner

Very important

Important

Less important

Not important


Success factors in international markets - external factors (companies´view)



7%

7%

57%

57%

50%

21%

43%

29%

36%

79%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85%

Increase turnover

Create new working places

Economic Growth of company

Access to new markets

Very positive

Positive

Less positive

Not positive

Determinants of International Market Access of German SMEsGeneral Motivation for Internationalization (companies´view)



Enhancement of company’s economic

performance

Internal motivation for Internationalization

Marketing of technology-

oriented products

Improvement of personnel

qualification

Expansion of company’s

position in the sector

Secure and stabilization of

exports

Specific internal motivation for internationalization (companies´view)Determinants of International Market Access of German SMEs



Diversification and increase of sales

potentials

External Motivation forInternationalization

Economic stabilization of company through

international investment

Opening new markets for company’s own

products

Substantial increase of turnover

Specific external motivation for Internationalization (companies´ view)




(3) Innovative German SMEs / Products



Environmental technology

Optical technologies

Biotechnology

Nanotechnology

Lithium-ion battery

Innovative technological areas



Innovative research areas for the coming decades

Climate protection, resources conservation, energy

Mobility

Security Health

Prospective areas of research and development



(4) German SMEs and the international finance crises.



The Economic Stimulus 2008 – 2010

• Stabilisation of the finance market: 480 billion Euro (636.5 billion US$), October 2008 Finanzmarktstabilisierungsfonds (SoFFin)

• First Stimulus Programm I (Konjunkturprogramm I): 50 billion Euro (66.3 billion US$), November 2008

• Second Stimulus Package II (Konjunkturpaket II): 50 billion Euro (66.3 billion US$), February 2009



The Economic Stimulus 2008 – 2010

• Euro 900 million (1 193 million US$) have made available for the Central Innovation Programme for SMEs (ZIM)

• Euro 8.66 billion (11.48 billion US$) are being currently invested in education and science

• Euro 500 million (663 million US$) are being invested in application-oriented research

• Euro 500 million (663 million US$) are being made available for the basic renovation and energy-oriented modernisation of buildings

• Euro one billion (1.32 billion US$) for the intensified training of employed persons and job-seekers The Federal Employment Service will receive these funds



Thank you for your attention