Success factors for German longevity companies

  The Foundation for Family Businesses (Foundation for Family Businesses) is an association that represents the interests of family businesses. Not long ago, for family businesses, the Foundation for Family Businesses released a national ranking based on geographical factors. In this list, Germany ranks 16th, Japan, Italy, France and other countries rank behind Germany, while the United Kingdom and the United States rank ahead of Germany. Obviously, the United Kingdom and the United States have implemented de-industrialization in traditional industries, which also makes them not in obvious competition with traditional German family businesses. In the long run, these geographical factors will balance with other competitiveness factors.
  Generally speaking, in order to determine those factors that have special effects, people need a benchmark to facilitate peer comparison. In the topic we are discussing, this benchmark is the average of each country.
  Indeed, Germany is one of the countries with the highest labor costs, second only to small countries such as Switzerland or Sweden, but Germany’s per capita output level is undoubtedly the highest. This is because, for German companies, they have many options and ways to avoid or hedge against high local costs, such as purchasing materials from suppliers in Eastern Europe or their own subsidiaries in Eastern Europe-as we all know, Poland, Hungary and even further away The cost level in the eastern region of China is competitive with that in China; alternatively, companies headquartered in Germany can also establish production facilities in their main export markets. We will no longer conduct specific analysis on this point. We try to go beyond the scope of regional economic factors in the usual sense, such as wages, taxes and other factors. We do not observe the influence of the advantages and disadvantages of the regional economy, but from the perspective of a company’s senior management team-the company is active in an industrialized country Analysis and interpretation of German companies in all major regions of
  German engineered products & industrial cluster area
  in Germany is a highly industrialized country is an indisputable fact. Among the employed population in Germany, the proportion of employees in industry is relatively high, accounting for nearly 20% of the 44 million employed population. Taking into account the higher productivity, the proportion of industrial products in the GDP is even higher, about 25%. Among them, the main industries that have contributed to the industrial sector are: the
  automotive industry and its sub-suppliers;
  Machine tool industry and manufacturing equipment industry that have close ties with automobile and supplier companies;
  chemical industry;
  electronic product industry.
  These four industries are important not only because they have a large scale of business in Germany, but also because the leading German companies in these industries are also leaders in their respective world markets.
  At the same time, we can also see that there are still some areas where Germany does not occupy a leading position in the world market. These industries include financial services and banking-the United States, the United Kingdom, and Switzerland have leading positions in these industries, as well as the fashion, apparel and electronics industries. Hardware and software industry.
  From the perspective of engineered products, generally speaking, German companies in the B2B field and the automotive market are very strong, and these industries mainly provide “engineered” products. The so-called “engineering design product” refers to the design by engineers (not artists), and manufacturing according to the wide range of customer needs, and in the manufacturing process, ensuring quality is very important.
  According to the modern strategy analysis method of “Resource-Based View”, the success of a company depends on its specific resources. This principle also applies to the economy and its various industries integrated by enterprises. Among them, the human resources necessary for these successful industries depend on the development of local engineering disciplines and natural sciences.
  The “complex” engineering design products and their transformation application products produced by German companies are manufactured and assembled by highly skilled workers. These workers enter society after receiving education and training under the German dual vocational training system. The western and southern regions of Germany are dense clusters of industries related to these engineering design products. These regions provide support for the accumulation and development of specific resources required by industrial clusters. In terms of a larger industrial cluster, this region of Germany, together with neighboring regions such as northern Italy, eastern France, the Czech Republic and Austria, has formed a unique industrial cluster in the world. It can be said that everything needed for a large industrial center anywhere in the world can be found in this region.
  People may wonder if Germany’s industrial strength is based on special government support? In fact, Germany has never experienced the stage of “nationalization” of large companies-except of course in East Germany after World War II. State-owned enterprises once existed in industries such as railways, postal services, telecommunications and aviation. However, most of these enterprises were privatized later, so it can be said that the current industrial structure is the achievement of private industry. Of course, the German government has also formulated some exceptional policies, such as policies that not only subsidize farmers, but also subsidize coal mining and shipbuilding industries. But this is an important exception to the liberal economic policy, and therefore the German economy has formed the concentration of the steel industry and the large-scale migration of textile and shoe companies.
  Excellent education and vocational training system
  had a survey Germans are disappointed that this study of European countries 10-year-old student performance are compared in the survey, Germany was not ranked in the forefront. Obviously, German industry and all walks of life expect the government to further invest in improving and building a good education system. But at present, from an average level, the German education system is relatively good. Among them, the level of higher education in Germany is higher than this average. For a long time, Germany has maintained such a tradition: 5% of the best students will be PhD students, and in order to write a doctoral dissertation, they need to spend another three years in research. At the same time in Germany, the corresponding education expenditure is affordable for every talented student.
  It is worth mentioning that the training of skilled workers in Germany has a unique feature: in Germany, a student can only become a skilled worker after three years of vocational training. This is the “Dual Vocational Training” (Dual Vocational Training). The so-called “dual system of vocational training” means that all young people who do not go to school after receiving nine years of general compulsory education must receive three years of compulsory vocational education before employment. Because this vocational training is jointly implemented by private enterprises and public vocational schools (focused on enterprises), it is named “dual system.”
  We have repeatedly emphasized that the “dual system of vocational training” is of great significance not only for the general skilled labor force, but also for the highly skilled labor force in the manufacturing industry. A skilled worker can become a “master” (master) after entering his career. But in the process, he needs to further study technical education and business administration courses. In Germany, senior technicians are highly qualified and highly respected. Usually, senior technicians also strengthen their higher education in engineering.
  Therefore, if the government does provide support to enterprises in Germany, it is to use the above-mentioned methods, and the focus of support is private enterprises and family businesses. In addition, there are many institutions and organizations that provide regular support to small and medium-sized enterprises in Germany. One of the most worth mentioning is the German Bank KfW (KFW), a government-owned policy banking institution that manages support for large and medium-sized enterprises. Various financing projects useful for family businesses.

  In Germany, the role of trade unions is undoubtedly a positive factor in the development of German industry. Traditionally, trade unions in Germany have no ideological basis and are committed to safeguarding the interests of workers, especially skilled workers. After the Second World War, German trade unions were organized almost exclusively by enterprises. As a result, every company has only one strong union. The union’s policy is to require real wage increases and other benefits. Therefore, they also believe that increasing productivity is essential, and they will not prevent continuous improvement in productivity and overall cost reduction measures.
  Germany pursuit of business continuity and adaptability rather than revolutionary
  in Germany, private companies funded by equity, ie retained earnings and bank financing. Compared with American companies or British companies, the importance of financing in the stock and bond markets is much smaller in Germany.
  If we further study the way the American economy develops, we will find that it is more of a model of radical change. In the United States, the ownership of industrial companies is mainly in the hands of financial investors in the stock market. If a company is in a strategic dilemma, investors will sell their stocks. The company was subsequently merged or closed down. In the United States, ancient industries such as steel and paper are no longer favored by investors and are declining. This situation is considered normal and reasonable, because it may be a prerequisite for the rise of emerging industries such as Silicon Valley.
  In Germany, these phenomena do not exist. The development of German companies is completely different from that of American companies. First, in Germany, listed companies that are widely held are usually just a small number of very large companies. Secondly, due to various reasons, the family company has a higher loyalty to its original industry. The reason is that first: such a company does not have enough funds to finance a full-scale acquisition; second: family business owners will avoid investing most of their wealth in areas where they do not have technical expertise.
  The resulting model is that even established companies have a solid technical foundation from beginning to end. However, it is crucial that this technical continuity is combined with the willingness to adapt to changing challenges and seize new opportunities. This adaptability is usually built on the basis of internal organic development promoted by new proprietary technologies, and is more of a gradual evolution process. For German companies, if such an opportunity arises, they will make the necessary investment without calculating the rate of return on investment.
  At the same time, the continuous updating of the foundation of German companies’ proprietary technology has also been supported by a closely-connected university network. In Germany, in addition to universities, there are institutions specializing in research: Max Planck Institutes (Max Planck Institutes) are engaged in various basic research; Fraunhofer Institutes (Fraunhofer Institutes) is a joint application-based Research center for R&D projects; the Helmholz Society has also established various specialized research institutions… Germany may have a smaller budget for military basic research than the United States, but the number of researchers dedicated to industrial research And the budget for industrial research, Germany must surpass most other countries.
  Germany entrepreneurship
  can be said that the German company has always been committed to the continuity and adaptability of balance, and balance development and exploration. In the study of German entrepreneurship, we found two basic directions that German entrepreneurs pay attention to:
  one is to use the profit potential of specific business activities, such as the business activities required by the “Shareholder-Value-Doctrine” (Shareholder-Value-Doctrine);
  The second is to explore new opportunities, such as gaining large-scale “unicorn” companies through entrepreneurial activities.
  German family companies are using the continuity of their successful business sectors to find a balance. Of course, this continuity is not driven by the pursuit of profit, but by the pursuit of excellence and stability. In the past, most industrial sectors were able to combine this strategy with technology upgrades and extensive exploration to conquer new application areas. Combining these two abilities is a move to strike a balance between direction and timing. In the automotive industry where innovation is extremely important, balance is the key to success.
  Translation / Heroult
  columnist
  after Helmut Coleman (Hermut Kormann) professor retired as CEO of a German family business, in German universities Zeppelin (Zeppelin University) teaching and study of family business strategy and governance. In addition, he has served on the boards of dozens of companies and is currently active on the boards of six family companies. He often communicates with Chinese family business research institutions and holds regular discussions with Chinese entrepreneurs.
  Dr. Mingyue Su has 20 years of experience as the general manager and director of family businesses and private companies, including 13 years in the subsidiaries of multinational companies in China and private companies in China. Now living in China, teaching EMBA courses.