Germany’s Economic Backbone

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When people talk about German companies they usually point out global players such as BMW, Deutsche Bank, BASF, Allianz, Beiersdorf, Volkswagen, Lufthansa, Siemens, SAP, among others.

But have you ever heard about Flexi, Delo, Belfor, Gottschalk, Gartner or Smiths Heimann? These companies belong to the so called German Mittelstand – Germany’s economic backbone. There is no clear definition of a Mittelständler, but you can say that a typical Mittelständler is a family-owned business with up to 500 employees. These companies operate worldwide, are well competitive and have found their market niche. Milton Kotler, President of the Kotler Marketing Group, claims in his blog that the German Mittelstand companies employ about 70 % of German workers. Moreover he states that they contribute to approximately half of the GDP.

Angela in Wunderland

Angela_MerkelI often read that about a decade ago economists throughout the world referred to Germany as the “sick man of Europe”. What about this?! Britain’s The Economist published on June 3rd 1999 an article, The sick man of the euro, in which they stated the following: “Thus the biggest economic problem for Europe today is how to revive the German economy.” 12 years later they report about “Angela in Wunderland” and refer to “Germany’s new Wirtschaftswunder”.

Germany has managed the crisis way better than their European fellows. Thanks to resolute decisions of the Merkel administration (e. g. car scrappage program) companies were not forced to dismiss a large number of their employees when they faced a sharp decline in orders. Also short-time working was applied. These measurements and a strong capital-asset ratio led to the fact that Mittelständler made it through the rough years and are nowadays even stronger than before.

Riding the Revenue Roller Coaster

David Wroe, author of The Local, refers in his article, The family secret behind the boom, to the German company Alfred H. Schütte – a leading manufacturer of machine tools. According to the general manager Carl Martin Welcker the company was faced with a drop in orders of about 90 % in 2008. “I went to the guys and said, ‘We’ll go through it together and we are not laying anyone off” Welcker says. Just two years after the company’s overall sales climbed by 200 %. “As fast as it went down, it’s gone back up again” Welcker continues. Alfred H. Schütte is just one example and stands for hundreds of other great Mittelständler that contribute to what Germany can call itself today – Europe’s locomotive!

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