Understand the wisdom behind Germans’ approach to running businesses!

Thread Content

Germany is **one of the countries with the most hidden champions**; the vast majority of businesses there are private companies, accounting for over 95% of all enterprises, with only a very small number of companies having shares, such as the German Federal Railways. Why does the Federal Railroad have a **shareholding? The reason is simple: this company is not profitable. Why isn’t it making money? Due to Germany’s well-developed air transport and efficient road networks, which feature no speed limits or tolls, people generally choose to drive when traveling. But why insist on continuing railway operations under these circumstances? This is social fairness. In any society, there are always people who cannot drive, do not know how to drive, or do not have a car; they rely on railways for long-distance travel. Therefore, **the trains must keep running, even at a loss; this is** a public service that must be provided. German companies are indeed very strong. How can we tell? First, let’s take a look at Germany’s economy. Since the outbreak of the global economic crisis in 2008, the European economy has not recovered well. Nevertheless, the German economy has performed well: it grew by 3.6% in 2010 and 3% in 2011; even in 2012, during the most difficult times, it still experienced growth of 0.8%, with an economic recovery expected of 1.8% in 2013. Don’t underestimate the growth rate of the German economy; although the figures may not seem high, the quality cannot be ignored. Germany’s 3% growth rate is at least equivalent to 10% of China’s economic growth. Therefore, without Germany’s pivotal role, the European debt crisis would spread further. The reason why the German economy is so strong is, of course, because German companies are powerful. Secondly, Germany is **one of the countries with the most hidden champions in the world**. What are hidden champions? There are three criteria: First, the product’s market share must be first or second in the world, or first in Europe ； Second, the annual turnover is between 50 million and 1 billion dollars ； Third, little-known. In Germany alone, there were 1,130 such enterprises in 2006. There is another criterion for saying that German companies are strong: their lifespan. On the Chinese mainland, the lifespan of small and medium-sized enterprises is roughly between 2.5 and 3 years, whereas German companies last at least 12 years or more; as a result, Germany is full of century-old businesses. That’s the gap. What’s even more frightening is the pricing power of German companies. What is pricing power? It’s the price I’ve set, and the buyer cannot negotiate. According to statistics, around the world, more than 3,000 German products enjoy a dominant pricing power that allows them to generate high profits; people have no choice but to buy them, as these German products offer features that others do not possess or, if they do, are superior in quality. Without compromising quality or price – German companies are so strong; what is the underlying motivation? Adhere to the strategy of high quality and high prices without wavering; German products are of high quality and, at the same time, come at a high price. It’s not easy to achieve this, because even if the product quality is excellent, many buyers tend to be deterred by high prices. However, German companies remain unwavering in their commitment to both high product quality and high prices. Take the German company Bosch as an example; this company produces auto parts and car repair tools, such as electric drills. As we all know, if the quality of car parts and repair tools is too high, it means that these parts and tools are not easy to replace. For example, the electric drill bits produced by Bosch may last for a long time, while those made by other companies break down quickly. The products being so durable was not a good thing for Bosch; as a result, the company faced operational difficulties for some time. The options are either to reduce quality or to lower prices. At this time, the board of directors discusses the company’s strategy. As a result of the discussion, all directors opposed reducing product quality, while the majority of directors opposed lowering prices. What should I do? The company has decided not to lower either the quality or the price, but rather to find new markets. This market is the United States. Why? Because American cars are bulky and clumsy, and they also break down easily. By focusing on the United States, Bosch managed to recover quickly and regain its vitality. Later, as the Chinese automobile market developed, Bosch had greater market opportunities. The fundamental reason for the strength of German companies lies in talent. In a company, the most important person is the leader. German leaders possess many excellent qualities, among which a sense of urgency is one that goes unnoticed. For example, Germany has a company that is among the world’s top 500 companies, named Schenker Global Logistics. Mr. Portatius, the company’s chairman, sold all his shares as soon as the subprime mortgage crisis in the United States broke out, because the economic crisis would inevitably lead to a sharp decline in freight volume. He has now purchased Germany’s largest education group, which owns 66 vocational colleges, three **accredited universities, and 3 continuing education institutes. At first glance, what Mr. Portatius did seems unremarkable, but upon closer examination, his decision was remarkable. Why? The U.S. subprime mortgage crisis evolved into a U.S. financial crisis, which in turn developed into a global financial crisis. But who could have predicted that at the time and deduced it through logic? This sense of concern is actually a form of forward-looking perspective. The sense of urgency among German leaders is also evident in other aspects. For example, as early as the late 1960s and early 1970s, there were concerns about the future of the Ruhr industrial region; some even claimed that the Ruhr was on the verge of dying. Why? This is because the Ruhr region relies on the coal and steel industries for its survival, and the coal and iron mines are almost depleted. What should I do? As a result, business leaders began to consider the transformation and upgrading of their companies. Large companies such as Krupp decided to abandon the rough processing of steel and shift to producing high-value-added steel products. For example, Krupp’s seamless steel pipes are the best in the world; even Japan, with its skill at imitation, is unable to produce products of such quality. This is the case for large companies, but what about small ones? Similarly, many small and medium-sized enterprises that provide supporting services are also undergoing transformation and upgrading. They focus on improving their products and technologies in order to create either products that are unique in the world or the most advanced manufacturing processes. This is the core competitiveness of German companies. Today, the Ruhr region is not only alive but also thriving; numerous small and medium-sized enterprises are showing great vitality. Furthermore, Germany places great emphasis on education, which is the key factor behind the sustained success of German companies. Higher education in Germany is largely free, providing businesses with a steady supply of high-quality management and marketing professionals. Meanwhile, Germany’s unique vocational education system offers the most reliable support for its technical experts. Source: Internet